CARES Act Provides Aid and Regulatory Relief to Students and Educational Institutions

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Authors: John R. Przypyszny , Jonathan D. Tarnow , Cindy Irani , Sarah L. Pheasant

On Friday, March 27, 2020, the President signed into law a $2 trillion stimulus package to combat the coronavirus pandemic and its systemic effects. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is the largest emergency aid package in the nation’s history. In addition to provisions regarding sick leave, unemployment assistance, health insurance coverage, and health care system support, the Act also provides regulatory and financial relief for students, schools, state and local educational agencies, and for institutions of higher education.

Among other things, during a qualifying emergency (QE) relating to COVID-19, the Act temporarily relaxes certain regulatory requirements of the Title IV federal student financial aid programs that are dictated by statutory provisions of the Higher Education Act of 1965 (HEA), and also grants to the Department of Education (ED) discretionary authority regarding other HEA provisions. The Act also allocates a total $30.75 billion to higher education institutions, state educational agencies and K-12 schools through an Education Stabilization Fund. As described herein, the majority of the Education Stabilization Fund will be allocated by formula pursuant to criteria set forth in the Act or existing law, with lesser amounts reserved for ED discretionary awards. A smaller portion of the Fund will go directly to the states to distribute, the awards of which will be allotted subject to the discretion of the Governors. The Act also includes certain provisions relating to health professions workforce programs, including expanded funding for advanced nursing education and training programs. The Act’s key provisions specific to students and educational institutions are summarized below.

Regulatory Modifications Affecting Students and Institutions

Provisions Relating to Student Borrowers and Grantees

Temporary Relief for Federal Student Loan Borrowers Through September 30, 2020

For any borrower currently making payments on a Federal Direct Loan, or on a Federal Family Educational Loan (FFEL) held by the ED, payments are suspended and no interest shall accrue until after September 30, 2020. (This does not apply to FFEL program loans that are currently held by private party lenders under the former FFEL Program.) Borrowers may voluntarily continue making payments toward principal during this period.
For purposes of consumer credit reporting, loan forgiveness or loan rehabilitation, all suspended payments shall be treated as having been made during this period.
Involuntary collection efforts, including wage garnishment, tax refund reduction, or the reduction of other federal benefit payments otherwise owed to the borrower, shall be suspended for this period.
To the extent necessary to carry out the above provisions, ED may waive certain administrative requirements otherwise applicable, including compliance with HEA’s master calendar publication deadlines and negotiated rulemaking requirements.
ED must notify affected borrowers within 15 days of the Act’s enactment, and shall notify borrowers of their upcoming renewed repayment obligations no fewer than six (6) times beginning August 1, 2020.

Repayment Relief and Eligibility Extensions for Withdrawing Students

For any student who dropped out of an educational program due to this QE, the pertinent academic period of enrollment shall be excluded from the student’s lifetime Pell Grant eligibility or lifetime subsidized federal student loan eligibility. In addition, ED will not require a return of any Pell Grant funds, nor Title IV student loan proceeds, associated with the applicable period.

Provisions Relating to Institutions

Institutional Flexibility for Leaves of Absence, Return to Title IV (R2T4) and Other Matters

For students wishing to take a leave of absence due to this QE, an institution may approve such leave without requiring that student to return to the same point in the academic program at which the leave of absence began, if the student returns within the same semester or its equivalent.
For an institution whose student withdraws due to this QE, the institution need not conduct an R2T4 recalculation for that student (except that it must do so for any Perkins Loan funds). The institution must report to ED the number of students, and amount of loan or grant assistance applicable to each student, for which the institution has not returned the accumulated Title IV funds. The Act does not specify a due date for such reporting.
When calculating Satisfactory Academic Progress (SAP), institutions may exclude any attempted credits that a student did not complete due to this QE, without requiring an appeal.
Institutions may make Federal Work Study payments to applicable students, even if those students were unable to complete their work, in whole or in part, due to this QE.
Institutions may use Supplemental Educational Opportunity Grant (SEOG) funds as emergency aid for students with unexpected expenses or unmet financial need due to this QE. In addition, institutional matching requirements for campus-based aid are waived for the 2019-2020 and 2020-2021 award years, and institutions may utilize such funds for supplemental student grants. (Federal Work Study matching requirements for private for-profit organizations employing students under private sector employment agreements are not waived, however.) The Act further provides that ED may modify the required and allowable uses for certain other institutional grant programs found in Titles III, IV, V or VII of the HEA, as applicable, at the request of the institution for the duration of this QE.

Continuity of Programs via Distance Education for Foreign Institutions

For foreign institutions whose home government declares a public health emergency, major disaster, or national or other emergency, ED may allow programs otherwise eligible for Title IV participation to be offered via distance education.
This provision applies retroactively from March 1, 2020 and continues for the duration of the QE.
Foreign institutions offering a program through distance education pursuant to this provision must inform ED that they are doing so.
- For the 2019-2020 award year, an institution must report to the Secretary by June 30, 2020.
- For any subsequent award year, such report must be made no later than 30 days after the institution avails itself of this provision.
- The Secretary shall report each such foreign institution to Congress at six-month intervals.
During this QE and for the payment period immediately following, the Secretary may allow a foreign institution to enter into a written arrangement with a Title IV-participating domestic institution, such that the foreign institution’s student borrower may continue her education domestically.
- If the foreign institution is public or non-profit, such arrangements must be made with other public or non-profit domestic institutions.
- A foreign institution that is a for-profit graduate medical school, or a nursing or veterinary school, may enter into such written arrangements with either for-profit or non-profit domestic institutions.
- Foreign institutions entering into such written arrangements under this provision must report to the Secretary. As above, reports must be made no later than June 30, 2020 for the 2019-2020 award year, and within 30 days for any subsequent award year.
- The Secretary shall report to Congress, at six-month intervals, each such foreign institution entering into a written arrangement pursuant to this provision.

Provisions for Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions (MSIs)

For HBCUs, ED may defer capital financing payments during this QE, with up to $62 million appropriated specifically for the enactment of this provision. ED must report to Congress each institution receiving deferments in this manner.
For HBCUs and other MSIs, ED may waive certain reporting, eligibility data, and other requirements, and shall report to Congress each institution that receives a waiver or modification of this type.

Waivers of Elementary and Secondary Education Act (ESEA) Requirements

For K-12 schools, in addition to various specific waivers provided in the Act, ED is broadly authorized to waive other provisions of ESEA as “necessary and appropriate” due to this QE, except that civil rights provisions of the ESEA may not be waived.

Additional Provisions for Regulatory Flexibility or Relief

Teachers seeking Teacher Loan Forgiveness, or who are TEACH Grant recipients, shall be considered to have fulfilled required service obligations for the period of time in which their teaching service has been temporarily interrupted due to this QE.
Funds received by local workforce development boards under the Workforce Innovation Opportunity Act (WIOA) may be used more flexibly, including to fund administrative costs and online educational resources. WIOA funds held by state governors may be used to support “rapid response activities” required in connection with this QE.
Individuals serving in the Corporation for National and Community Service shall receive the full educational award to which they were previously entitled, regardless of whether their service has been limited or suspended due to this QE.

Provisions Directing Financial Relief to Educational Institutions

Education Stabilization Fund

The Act makes available $30.75 billion, available through September 30, 2021, for an Education Stabilization Fund, which is divided as follows:

Approximately $14.25 billion to postsecondary institutions through the Higher Education Emergency Relief Fund.
Approximately $13.5 billion to states through the Elementary and Secondary School Emergency Relief Fund.
Approximately $3 billion to states through the Governor’s Emergency Education Relief Fund.
Approximately $300 million to states with the highest coronavirus burden to support activities under the direct educational relief provisions in the Act pursuant to an application and approval process.
Approximately $300 million for programs operated or funded by the Bureau of Indian Education and to certain rural communities.

The Act contains additional provisions, including those regarding funding to non-public schools, continued payment to employees or contractors of Education Stabilization Fund recipients, additional funds for specific educational institutions, and other purposes.

Higher Education Emergency Relief Fund

The Higher Education Emergency Relief Fund generally may be used by institutions to cover costs associated with significant changes to the delivery of instruction due to the coronavirus. However, it cannot be used for endowments; for capital outlays associated with facilities related to athletics, sectarian instruction or religious worship; or for payments to contractors that provide pre-enrollment recruitment activities. Institutions receiving funds must use at least 50% of the monies to provide emergency financial aid grants to students for certain expenses related to the disruption of campus operations due to coronavirus (including items that are considered eligible educational expenses under the HEA, such as food, housing, course materials, technology, health care and child care). The $14.25 billion Higher Education Emergency Relief Fund must be allocated by ED as follows:

90% (approximately $12.8 billion) will be directly apportioned to institutions by the following methodology, using the same funds distribution system through which institutions receive Title IV federal student aid under the HEA:
- 75% according to the relative share of full-time enrollment of Pell Grant recipients who are not exclusively enrolled in distance education courses prior to the coronavirus pandemic.
- 25% according to the relative share of full-time enrollment of non-Pell Grant recipients who are not exclusively enrolled in distance education courses prior to the coronavirus pandemic.
7.5% (approximately $1 billion) for additional awards pursuant to the HEA’s Historically Black Colleges and Universities and Hispanic-Serving Institutions programs.
2.5% (approximately $356 million) for institutions that ED determines to have the greatest unmet needs related to coronavirus.
- This percentage of funds may be used to defray expenses (including lost institutional revenues, expenses already incurred, technology costs associated with transitioning to distance education, faculty and staff trainings, and payroll) and for grants to students for any component of their eligible cost of attendance under the HEA.
- In awarding this 2.5% of the Higher Education Emergency Relief Fund, ED must give priority to any institution that does not receive at least $500,000 through the other elements of the Fund ad which demonstrates significant unmet needs related to expenses associated with coronavirus.

Based on the language of the Act and the above allocation methodology, it would appear that only 2.5% of the Higher Education Emergency Relief Fund (that final portion described above relating to “greatest unmet needs”) will be subject to a specific application and evaluation process with ED, although it is likely that ED will require institutional reporting with respect to the other emergency funding streams to ensure that those funds are used for the Act’s designated purposes.

Elementary and Secondary School Emergency Relief Fund

The Act allocates approximately $13.5 billion for State educational agencies in the same proportion as set forth in the Elementary and Secondary Education Act of 1965 (ESEA). Within 30 days of enactment of the Act, ED must issue a notice inviting applications from state educational agencies for relief under this fund, and it must approve or deny each application within 30 days of receipt. Each state educational agency receiving these emergency funds:

must award at least 90% in sub-grants to local education agencies (including charter schools) in the same proportion as set forth in the ESEA.
may reserve up to 0.5% for administrative costs.
may reserve the remainder for emergency needs as determined by the state educational agency to address coronavirus-related issues.

Permissible uses for funds include, but are not limited to: existing purposes under the ESEA, the Individuals with Disabilities Education Act (IDEA) and other laws; preparedness coordination among government agencies; addressing the needs of certain disadvantaged students; training regarding sanitation and infectious diseases; mental health services; sanitation supplies; educational technology services and training; and summertime and afterschool education resources.

Governor’s Emergency Education Relief Fund

The Act allocates about $3 billion to Governors of States that apply for and are approved for relief, based on the following allocation:

60% on the basis of the state’s relative population of individuals aged 5-24.
40% on the basis of the state’s relative number of children counted under the ESEA.

These funds will be distributed at the discretion of the Governors of each State. Permissible uses of these funds include:

providing emergency support through grants to local educational agencies that the state educational agency deems have been most significantly impacted by coronavirus to support the ability of such local educational agencies to continue to provide educational services to their students and to support the on-going functionality of the local educational agency.
providing emergency support through grants to institutions of higher education serving students within the state that the Governor determines have been most significantly impacted by coronavirus to support the ability of such institutions to continue to provide educational services and support the ongoing functionality of the institution.
providing support to any other institution of higher education, local educational agency, or education related entity within the state that the Governor deems essential for carrying out emergency educational services to students for authorized activities under certain provisions of the ESEA, the IDEA, the Perkins Act, or the HEA, as well as for childcare services, early childhood education, social and emotional support and protection of education-related jobs.

Health Care Workforce Amendments to the Public Health Service Act

The Act includes several amendments to Title VIII of the Public Health Service Act (PHSA) as specifically related to nursing education and training programs administered by the Department of Health and Human Services (HHS). Among other things, the Act:

Expands advanced nursing education funding under Title VIII of the PHSA to additionally support accredited non-degree nursing schools, clinical nurse specialist programs and nurse-managed health clinics.
Directs that grants and contracts under Title VIII of the PHSA should be competitively awarded to projects and activities needed to address national nursing needs, including:
- addressing challenges, including through supporting training and education of nursing students, related to the distribution of the nursing workforce and existing or projected nursing workforce shortages in geographic areas that have been identified as having, or that are projected to have, a nursing shortage.
- increasing access to and the quality of health care services, including by supporting the training of professional registered nurses, advanced practice registered nurses, and advanced education nurses within community-based settings and in a variety of health delivery system settings.
- addressing the strategic goals and priorities identified by HHS.
Enhances career ladder programs for individuals including licensed practical nurses, licensed vocational nurses, certified nurse assistants, home health aides, diploma degree or associate degree nurses, and other health professionals, such as health aides or community health practitioners certified under the Community Health Aide Program of the Indian Health Service, to become registered nurses with baccalaureate degrees or nurses with graduate nursing education.
Funds grants and contracts with eligible entities to develop and implement internships, accredited fellowships, and accredited residency programs in collaboration with one or more accredited schools of nursing, to encourage the mentoring and development of specialties.
Permits the awarding of certain grants and contracts to for-profit entities, as determined appropriate by HHS, notwithstanding the general Title VIII requirement for grantees and contract parties to be public or private nonprofits.

In addition, the Act amends Section VII of the PHSA, which addresses health professions workforce programs other than nursing, by:

Making specific appropriations in excess of $23 million for each of fiscal years 2021-2025, with specific priority for awardees that that train medical residents in rural areas, including in tribal communities, or in the disciplines of maternal health, child health or geriatrics. The Act includes a reporting and planning mechanism that seeks to “improve preventive medicine, health promotion and disease prevention, or access to and quality of health care services in rural or medically underserved communities.”
Mandating a strategic plan for primary care medical training, dentistry and graduate medical education, in coordination with the relevant HHS advisory committees.
Enhancing geriatrics workforce programs, including with respect to clinical and interdisciplinary medical professional training, and prioritizing programs that aid rural or medically underserved communities.

We anticipate that ED will be issuing guidance in the near future regarding its implementation of the CARES Act and the various components of the Education Stabilization Fund. In the meantime, we encourage you to review the Act for its potential application to any aspect of your institution or the students you serve. Should you have questions regarding this matter, or other educational regulatory matters, please do not hesitate to contact any member of our Education team, or your usual contact at Faegre Drinker.