How the CARES Act Supports Higher Education
Passed on Friday, March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was a necessary first step to get relief to students, workers, and families with low incomes. The roughly $2 trillion stimulus package responded to the shutdown of businesses and schools nationwide, as well as millions of job losses - with more to follow - as shelter-in-place orders continue across the country. Considering college students were among the first affected by campus closures, and many college students, as tax dependents, are barred from receiving the $1,200 stimulus check, what does the CARES Act do for students with low incomes and higher education, overall?
Education Stabilization Fund. Under the CARES Act, the Education Stabilization Fund provides approximately $30 billion in fiscal support to states, K-12 schools, and higher education.
- Governors receive about $3 billion through this fund to use at their discretion for K-12 schools or higher education institutions that have been impacted most by COVID-19.
- $14 billion of the fund is dedicated to colleges and universities, with 90 percent of these funds going directly to institutions. Colleges and universities must use at least 50 percent of their allotment for direct emergency aid to students.
- $1 billion is set aside for Historically Black Colleges & Universities (HBCUs) and Minority Serving Institutions (MSIs), and $349 million in grants to institutions hit the hardest.
- The U.S. Department of Education must allocate three-quarters of these institutional funds to colleges and universities based on their enrollment of Pell grant students. Therefore, institutions that enroll greater numbers of students with low incomes should receive more emergency grant aid.
- Under the CARES Act, governors can’t cut higher education spending in order to receive this emergency funding. A waiver is allowed, but only for states with “precipitous decline in state revenue.”
How CARES Benefits Higher Ed Students
Emergency aid to students. At least 50 percent of the institutional funds must go directly to emergency financial aid or grants to students to cover basic needs such as “food, housing, course materials, technology, health care, and child care.” This money has already been allocated and distributed to colleges.
Suspension of student loan payments. The majority of student loan borrowers will get temporary relief because payments on federally held student loans, involuntary collections, interest accrual, wage garnishments, and tax refund offsets will be suspended through September 30. Borrowers enrolled in repayment plans like Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) also qualify for these suspended payments.
Regulatory flexibilities and incentives to help students through COVID-19. CARES allow colleges to support students as long as possible through these federal programs and funding streams:
- Federal Supplemental Educational Opportunity Grants (SEOG) to provide emergency aid to students.
- Work-study payments, which will continue even if students can no longer work on-site.
- Pell Grants, financial aid, and loans originated for this term, which students who have had to leave college campuses will not have to pay back. Moreover, none of this aid will count against students’ financial aid lifetime limits.
- Waiving Satisfactory Academic Progress requirements will help to ensure that students do not lose academic standing and the ability to receive federal financial student aid.
- Tax credits that incentivize employers to help pay for student loans.
While these provisions are providing support to states, institutions, and students, the CARES Act doesn’t go far enough for many students and borrowers with low incomes and has concerning implications regarding transparency and oversight. While states and governors need flexibility to disburse money quickly, the Department of Education must implement accountability measures so that money is allocated equitably to the students who need it most and predatory institutions aren’t able to misuse stimulus funds. Most importantly, without increased investments in future economic stimulus packages, students with low incomes and students of color will be left without relief or support.