April 7, 2020
On March 27, 2020, the “Coronavirus Aid, Relief, and Economic Security (CARES) Act” was signed into law. The CARES Act provides potentially significant future funding to K-12 school districts, as well as colleges & universities (referred to as “institutions of higher education,” or “IHEs”), in the midst of the COVID-19 pandemic.
Below is a brief overview of the various streams of potential funding. We expect agencies to adopt regulations and provide further guidance as to how to access funds in the future. The Education Team at Nelson Mullins is closely monitoring this legislation and will provide updates as guidance is released.
The CARES Act provides $30.75 billion for an Education Stabilization Fund (ESF), comprised of three accounts — the Governor’s Emergency Education Relief Fund, the Elementary and Secondary School Emergency Relief Fund, and the Higher Education Emergency Relief Fund. Currently, the only condition to receive these funds is that recipients “shall to the greatest extent practicable, continue to pay [their] employees and contractors during the period of any disruptions of closures related to coronavirus.”
Funding is generally divided among three accounts:
1. Governor’s Emergency Education Relief Fund
This fund provides approximately $3 billion to state Governors for the following:
States (through their Governors) must submit an application, which will be made available from the USDOE, to receive funds. Grants will be awarded based upon overall school-age population, as well as Title I population.
2. Elementary and Secondary School Emergency Relief Fund
This fund allocates approximately $13.5 billion to states to help K-12 schools respond to the coronavirus and related school closures. Funding can be used for any activities authorized by federal elementary and secondary education laws such as IDEA, ESSA, Perkins CTE, McKinney-Vento, etc., as well as for myriad other initiatives. Funding awards are calculated based upon the state’s Title I population, with the funds then distributed to schools proportionately. Each state must submit an application to receive funds.
3. Higher Education Emergency Relief Fund
The third ESF account allocates $14.25 billion to IHEs to support the emergency needs of students and to support institutions as they cope with the immediate effects of coronavirus and closures.
While IHEs will have flexibility as to how to use 50% of the funds, they must use at least 50% of their funds for emergency financial aid grants to students for expenses related to the disruption of campus operations due to coronavirus, including eligible expenses such as food, housing, course materials, technology, healthcare, and child care. Additionally, IHEs are prohibited from using funds received to cover payment to contractors for the provision of pre-enrollment recruitment activities; endowments; or capital outlays associated with athletics facilities, sectarian instruction, or religious worship. The Secretary of Education will distribute funds to higher education institutions.
In addition to higher education funding provided in the Education Stabilization Fund, the CARES Act includes several other provisions directly related to higher education funding and administration, particularly with regard to student loans and grants. The following list is not exhaustive.
Federal Student Loans
Federal Student Grant Aid
Institutional Supports and Flexibilities
Employer Payments of Student Loans
Federal agencies will have primary responsibility for implementing the Act, and we expect guidance and grant applications to be issued in the coming days and weeks. Funding authorized by the CARES Act will primarily flow to states; states will then distribute funds at the local level.
Nelson Mullins has established a Coronavirus Resource Page and is updating it continuously as guidance is announced and legislation is enacted. We are continuously monitoring COVID-19 developments, including guidance from the Centers for Disease Control; World Health Organization; various other health officials; and federal, state, and local government authorities.
These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.