For Some Financial Aid Offices the Latest Round of Federal Aid Was Not Worth the Political Headache

By Hugh T. Ferguson, NASFAA Staff Reporter 

As the Department of Education (ED) continues to dole out guidance on how to utilize monies allocated under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, some institutions, facing pressure to abstain from grants due to their general financial well being, took themselves out of consideration for the funds.

While a number of institutions have been applying for and receiving funding from ED, the Trump administration has applied pressure to institutions like Harvard, Princeton, Stanford, and Yale to remove themselves from potentially receiving any funds from the CARES Act. Education Secretary Betsy DeVos applauded a number of institutions that acquiesced and while these institutions are on better financial footing than others, some have argued that they could have more speedily distributed the funds to other schools in need than ED.

Ben Miller, vice president of postsecondary education at the Center for American Progress (CAP) said that ED’s campaign to target certain universities was ill guided.

“It's really disappointing to see institutions giving in to this demagoguery. I don't think that Trump's going after Harvard was motivated by any deep seated sense of fairness and justice in society. It's because they're rich, and it's a cultural thing,” Miller said.

Although there has been an effort to target the distribution of congressional aid to individuals and businesses that need it most, certain businesses have been able to take advantage of loans aimed at protecting small businesses. The funding distribution formula for higher education, however, is more nuanced, particularly since low-income students also attend well-off institutions, and according to Miller could have benefited from these grants. 

Miller said the pressure on certain institutions was inevitable, citing an April 9 letter from DeVos that urged institutions that “do not have significant financial need at this time” to consider giving their allocation to another institution, although she did not provide further instruction on how to do so.

“Given how Congress wrote the law, we are currently assessing our options for redirecting this money that goes either unclaimed or returned by institutions,” said ED Press Secretary Angela Morabito.

While ED continues to work on additional guidance for distributing funds, Miller said that it could be some time before the returned monies are redistributed.

“I would be very surprised if [ED] did anything besides rerun the money through the formula,” Miller said. “I would love to be wrong about that and see them find some way to honor the requests in the press releases, to get them to low-resource areas, but I don't know that they have the legal authority to do it. The law is unclear because there's no reallocation provision in it.”

Additionally, the timing of the redistribution could be delayed because, with a September 30 deadline to apply for funding, ED may be looking to do one reallocation, rather than multiple rounds, according to Miller.

It’s possible, Miller said, that institutions that are not as financially needy in the wake of COVID-19 could have distrubed money more quickly to other schools by utilizing their institutional flexibility.

“To be clear, I don't think [colleges and universities] could have just turned around and donated those exact funds, but money is fungible enough that as long as they did proper bookkeeping they could have made donations elsewhere,” Miller said. “Essentially, [they could] use the federal money to supplant what they might have otherwise spent on students, and spend it elsewhere.”

While certain institutions refrained from applying for this round of funding, Miller said he thinks that could change in a future package if Congress were to appropriate a significantly larger amount of money for higher education — though that package could box out schools with larger endowments.

While COVID-19 continues to impact the economy, Miller worries that overall spending on higher education will not be enough, even if there is a significant increase in additional federal aid.

“I’m just really worried that the amount of money, public colleges in particular, got from the CARES Act was not enough to fill the budget holes they were already getting in March,” Miller said. “And we're gonna need a lot more money if we want to stave off massive problems in our higher education in the fall.”

There are others, though, that think wealthier institutions should fend for themselves. Jonathan Butcher, senior policy analyst at The Heritage Foundation, said universities with sizable endowments should be utilizing their own funds for this ongoing crisis.  

“Now obviously, endowments have certain rules to them saying how much can be spent from year to year, and things like that, but considering what the pandemic has brought on I think that it's a good time to begin looking at sizable sums of money that could be used in emergency,” Butcher said. “I would hope that what these institutions have done is recognized that they are in a better place than some other schools, and so they decided that they don't need what Washington is handing out right now.”

In addition to allocating their own resources to combat the financial strain of the pandemic, Butcher said institutions should use this time to prepare for economic downturns.

“This pandemic may be unique, but economic recessions are not,” Butcher said. “These financial hardships are going to come and schools need to be able to use their spending, wherever it's from, flexibly, so they can meet areas of need.”

Gail Holt, dean of financial aid at Amherst College said that, aside from knowing when funding will come and how it must be distributed, one of the biggest challenges for her office during the COVID-19 outbreak is keeping students informed.

“The financial aid offices seek to provide students clear processes, predictable outcomes, kind of formula-based processes, and we're in such a state of disruption that each day we're clamoring for information to share with the students,” Holt said.

Holt said students are now facing a number of challenges that require additional financial assistance and the funds provided by Congress will help bring certainty to students and help the institution prioritize resources.

“We've got expenses that are being incurred immediately for housing and food, and technology and things like a desk and a chair, and a monitor, because students are trying to participate in zoom,” Holt said. “We're experiencing situations where students are in shared housing arrangements and their roommates are immunocompromised, and they feel like they can't work because of the risk to their roommates. So, I feel like we've seen almost everything under the sun.”

However, Holt said additional guidance — on issues such as the taxability of the emergency student grants — could help her better inform students on their options.

“I feel that we're in an unfortunate place in needing to communicate with students that here's some money for you, but I can't tell you if there are going to be tax consequences,” she said. “I feel an obligation to tell them that, but I hate that I'm not giving them good information.”

And while Holt said her school may not be the most needing financially, she said the ongoing pandemic will damage Amherst’s economic outlook. 

“There's no doubt that all of higher education is being impacted, from Harvard all the way down,” Holt said. “But there certainly are institutions that are in precarious financial positions, and I hope that there is focus on those institutions for support.”


Publication Date: 4/30/2020

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