Update March 31, 2020: President Donald Trump signed the CARES Act into law on Friday, March 27.
After a series of long negotiations that spanned through the weekend and into early this week, the Senate passed the third COVID-19 relief package early Thursday morning by a vote of 96-0. The bill, dubbed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, represents a compromise between Senate Republicans and Democrats, both of whom have introduced COVID-19 legislation in recent weeks that address student aid.
The $2 trillion bill includes roughly $30 billion in an Education Stabilization Fund, of which about $14 billion will be allocated to higher education, and includes multiple provisions related to student aid.
“The government has shut down the economy for the public health, so the Senate is responsible for taking steps to help families, workers and business who have been hurt by the outbreak of COVID-19," said Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, in a statement. "... [T]he bill will help improve our health care capability and provide relief to schools and students who have had their education disrupted."
The House is expected to approve the measure by the end of the week before heading to the White House where President Donald Trump is expected to sign it into law. Below are the major provisions related to student aid.
Emergency Aid to Institutions and Students
Of the nearly $14 billion allocated to higher education in the Emergency Stabilization Fund, 90%, or $12.5 billion, will be allocated to institutions based 75% on the enrollment of full-time equivalent (FTE) Pell Grant recipients and 25% on enrollment of FTE non-Pell Grant recipients. Students who were enrolled exclusively in online, distance education courses prior to the COVID-19 emergency will be excluded from this calculation. The bill also allocates an additional $1 billion to minority-serving institutions and roughly $350 million to help colleges most affected by the crisis.
Fifty percent of the $14 billion in emergency funds received by institutions must go directly to students in the form of emergency financial aid grants for expenses related to the disruption of campus operations due to coronavirus. Emergency grants to students can be used for eligible expenses under a student’s cost of attendance such as food, housing, course materials, technology, health care, and child care. Institutions may use remaining emergency funds not given to students on crisis-related expenses such as lost revenue, reimbursement for expenses already incurred, technology costs associated with transitioning to distance education, faculty and staff training, and payroll. The bill stipulates that the funding will be distributed by the Secretary in the same manner that other Title IV aid is distributed.
Under the CARES Act, the non-federal share requirements of the Federal Work-Study (FWS) and Federal Supplemental Educational Opportunity Grant (FSEOG) programs would be waived for the 2019-20 and 2020-21 award years in cases where the non-federal share is paid by the institution. The bill would also allow institutions to transfer up to 100% of FWS funds into FSEOG during a period of a qualifying emergency.
Institutions would also be allowed to use any portion of their FSEOG allocation to award emergency financial aid grants to assist undergraduate or graduate students for unexpected expenses and unmet financial need as the result of a qualifying emergency. Standard FSEOG awarding rules would be waived, and institutions would determine eligibility for this new emergency grant. The maximum award amount under the “emergency FSEOG” would be the maximum Pell Grant for the award year ($6,195 for the 2019-20 award year) and any FSEOG awarded under this emergency provision would not be treated as estimated financial assistance (EFA). In determining eligibility for emergency aid grants, institutions may contract with a scholarship-granting organization designated for the sole purpose of accepting applications from or disbursing funds to students, if the organization disburses the full allocated amount provided to the institution to the recipients.
The bill also codifies the current flexibility offered by the Department of Education (ED) allowing FWS students unable to work to continue to be paid during a qualifying emergency, not to exceed one academic year, either in installments or a lump sum payment.
Increased Flexibility for Institutions
The bill grants ED the authority to exclude from subsidized loan usage calculations any portions of the Direct Loan period that the student is unable to complete due to a qualifying emergency, in this case the COVID-19 outbreak. It also allows the Secretary to exclude from a student’s Pell Grant Lifetime Eligibility Used (LEU) any Pell Grant amounts received during a period that the student is unable to complete due to this qualifying emergency. Both exclusions would apply only if they could be administered by ED in a manner that limits complexity and burden on students.
The CARES Act also allows ED to waive the return of Title IV funds (R2T4) requirements for schools or students to return unearned grant or loan assistance for students who withdrew because of a qualifying emergency. The bill would provide loan cancelation for the portion of a Direct Loan associated with a payment period which the student did not complete due to a qualifying emergency. Each institution who uses a waiver under this section must report to ED the number of recipients who received waivers, the amount of grant or loan assistance associated with each recipient, and the total amount of grant or loan assistance that the institution has not returned under Title IV.
The proposal allows institutions to exclude from Satisfactory Academic Progress (SAP) calculations any attempted credits that were not completed due to a qualifying emergency, without requiring an appeal from the student. It also broadens authority for schools to give students an approved Leave of Absence (LOA) that does not require the student to return at the same point in the academic program that they began the LOA, if the student returns within the same semester (or the equivalent).
The bill also grants Title IV-participating foreign institutions, which are currently excluded from providing distance education to U.S. students not enrolled in a study abroad program, the ability to offer distance education for the duration of a declared emergency and the following payment period. ED is also granted authority to permit a Title IV-participating foreign institution to enter into a written arrangement with a U.S. institution that participates in the Direct Loan program, for purposes of allowing a borrower at a foreign institution to take courses from the U.S. institution, for the duration of a qualifying emergency and the following payment period.
Relief for Federal Student Loan Borrowers
The bipartisan proposal would suspend payments and interest accrual on federal Direct Loans and Federal Family Education Loans (FFEL) held by ED until Sept. 30, 2020. The bill would also count each month of suspended loan payments as if the borrower had made a payment for the purpose of income-driven repayment plan loan forgiveness or Public Service Loan Forgiveness, as well as for loan rehabilitation purposes. Suspended payments are to be reported to consumer credit reporting agencies as regularly scheduled payments made by the borrower.
Involuntary collections such as wage garnishment, tax refund reductions, and reductions of federal benefits like Social Security benefits would also be suspended until Sept. 30, 2020.
The bill requires ED, within 15 days of enactment, to inform borrowers of the temporary suspension and of their option to continue to make payments. The bill also requires ED to send six notices to borrowers, beginning on Aug. 1, 2020, informing them that the temporary suspension period is ending, and reminding them of their obligation to resume repayment. Those notices would be required to include information about income-driven plans.
Related to repayment, the bill also provides a tax break for large employers who contribute to an employee’s student loan payment. Under the measure, employers could pay up to $5,250 in payments for employees tax-free.
For more information and resources on how the spread of the novel coronavirus is impacting student financial aid, please refer to NASFAA's COVID-19 Web Center.
Publication Date: 3/25/2020