CARES Act Educational Stabilization Fund — Provisions for Higher Ed
The novel coronavirus is exacting tremendous strain on campuses across the country. Students are experiencing unprecedented disruption, and colleges and universities are confronting financial and operational upheaval. The resulting revenue losses could adversely impact institutional ability to sustain pay and benefits for faculty and staff.
In light of this crisis, the American Council on Education asked Congress to provide between $50 and $60 billion to support higher education in the recently passed third economic stimulus package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. While the bill as a whole included roughly $2 trillion in emergency funding, it unfortunately did not come close to providing adequate support for higher education.
The CARES Act creates an Educational Stabilization Fund to support K-12 schools and colleges and universities during the COVID-19 national emergency. The Educational Stabilization Fund includes a total of roughly $30 billion in relief divided into three separate pools: 1) funds to K-12; 2) funds to higher education; and 3) funds to governors. Colleges and universities are eligible for funding under the latter two pools.
Roughly 46 percent of the Education Stabilization Fund is allocated to the higher education pool for a total of $13.953 billion. The Department of Education (ED) will disburse 90 percent of those funds, about $12.558 billion, directly to institutions through the Title IV distribution system. The ED is tasked with implementing the bill’s formula to calculate institutional awards, which will largely be based on the number of full-time equivalent enrollment of Pell students and the number of full-time equivalent enrollment of non-Pell students at a given institution.
At least 50 percent of the funds, or about $6.279 billion, awarded to institutions must be used exclusively to provide direct emergency aid to students. The bill provides that such emergency aid includes “grants to students for food, housing, course materials, technology, health care, and child care.” Institutions may use their portion of the funds on a broadly defined basis. Allowable uses include defraying expenses for institutions of higher education, such as lost revenue and technology costs associated with a transition to distance education. Notably, the bill stipulates that recipients of these funds must retain current employees to the “maximum extent practicable.”
Additionally, 7.5 percent of the higher education pool, or about $1.047 billion, is reserved for minority-serving institutions. The bill also allocates 2.5 percent, or roughly $349 million, for grants to institutions particularly impacted by COVID-19. Under this subset of funding, the ED will give priority to smaller institutions receiving less than $500,000 under the aforementioned formula that still have significant unmet need.
The bill allocates roughly 9.8 percent of the Education Stabilization Fund, or $2.953 billion, for direct disbursement to governors. A state may use this funding to support their K-12 schools and colleges and universities based on need. These funds are not restricted to public institutions within the state.
The CARES Act also creates an employee retention credit for employers subject to closure due to COVID-19. The credit is available to businesses and nonprofit organizations, including private nonprofit institutions. A refundable payroll tax credit of up to $5,000 for wages paid by employers to employees during the COVID-19 emergency is available to eligible employers whose operations were fully or partially suspended due to a COVID-19 related shut-down order. It does not appear that student workers are covered employees for purposes of this provision, as the credit is linked to payment of payroll, or FICA, taxes, and students are currently exempt under the student FICA exemption.
It is widely believed that Congress will need to consider and pass additional emergency funding packages in the coming weeks and months. While the CARES Act provides important funding to support colleges and universities during this difficult time, more must be done to provide relief to students and campuses across the country. CUPA-HR will continue to work with the rest of the higher education community to secure adequate relief for institutions and will keep members informed of developments as they occur.