The global pandemic caused by COVID-19 has had an immense impact on almost all aspects of American life and society, including the nation’s higher education system. Signed into law on March 27, the CARES Act is a historic $2 trillion relief and stimulus package intended to address the economic effects of the pandemic. Through this package, the federal government will provide $14.2 billion in aid to institutions of higher education. The below summarizes the impact of the CARES Act on American colleges and universities.
The CARES Act creates a Higher Education Emergency Relief Fund totaling $14.2 billion, which will include the following:
- $12.81 billion (90% of total Higher Ed funds) for institutions to prevent, prepare for and respond to COVID-19. Of this amount:
- 75% of what each college or university receives will be based on its relative share of full-time equivalent (FTE) students who are Pell Grant recipients
- 25% of what each institution receives will be based on its relative share of FTE students who are not Pell Grant recipients
- $1.07 billion (7.5% of total Higher Ed funds) for minority-serving institutions.
- $355 (7.5% of total Higher Ed funds) for institutions with the greatest unmet need related to COVID-19.
Institutions are instructed to use these provisions “to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus” and must use at least 50% of funds for emergency financial aid grants to students due to the disruption on campus caused by COVID-19.
In addition to direct aid to institutions, the CARES Act provides regulatory relief including waivers for funds received as part of Federal Work Study programs, the ability to modify allowable use of funds and matching requirements for other federal programs (allowing institutions to use these funds to respond to COVID-19) and exceptions on time limits for federal subsidized loans and Pell Grants.
Compared to the $14 billion in aid provided to higher education, leaders in the sector call for federal funds of $50 billion to respond to the breadth of issues caused by COVID-19. Describing the financial landscape for institutions in a memo on the need for federal assistance, the American Council on Education highlighted how campus operations such as housing must be taken into account when considering aid to institutions:
“Colleges and universities are uniquely vulnerable to the impact of the COVID-19 pandemic, as our educational and research missions necessitate regular interactions in lecture halls, classrooms, dormitories, theaters, and stadiums… Partial refunding of tuition and fees by schools that have closed, and partial refunding of other charges—on- campus housing and meal plans, for example—for those who have moved their instructional programs wholly online is ongoing. Some schools have kept campus housing operational for students that did not have anywhere to go, which also carries financial implications. But these actions will concurrently constrain the near-term cash flows that undergird institutions’ day-to-day operations. Unlike for-profit businesses, non-profits and public institutions cannot make up these losses from future revenues.”
The CARES Act is the third and largest supplemental appropriations package enacted by the federal government in response to the COVID-19 pandemic, and additional packages are expected in the coming months.
Stay up-to-date with Scion Advisory Services on how any additional federal stimulus and other COVID-19 developments will impact colleges and universities.