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.

Education Stabilization Fund

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:

• Grants to K-12 schools and IHEs to provide education services to students and to support ongoing functionality.
• Grants to K-12 schools, IHEs, and other education-related entities for emergency educational services to students such as child care, early childhood education, and activities authorized under various federal education statutes.

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.

Key Higher Education Provisions

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

• Suspends certain student loan payments, as well as accrual of interest.
• Suspends collection proceedings, garnishments, etc. for unpaid student loans.
• Cancels loan obligations for the current semester if the student does not complete the semester.
• Provides that subsidized loans will not count against a borrower’s lifetime limit if they do not complete the semester.

Federal Student Grant Aid

• Pell Grants received during the emergency will not count against the student’s lifetime limit, if the student did not complete the semester.
• IHEs and students will not be required to return their federal student aid for this semester if the student does not continue in their studies due to the emergency.
• IHEs may use Supplemental Educational Opportunity Grant (SEOG) funds to provide emergency grants to undergraduate and graduate students that would otherwise not be eligible.
• IHEs may continue to make Federal Work-Study payments to students who are cannot fulfill their work-study obligations for up to one academic year.

Institutional Supports and Flexibilities

• Provides flexibility to waive Satisfactory Academic Progress (SAP) requirement to allow students to continue to qualify for financial aid.
• Permits IHEs to offer distance learning for programs that would not otherwise be eligible during the emergency and the next payment period.
• Allows the Secretary of Education to defer required payments on loans to HBCUs to support capital projects.

Employer Payments of Student Loans

• Employers may pay up to $5,250 annually of an employee’s student loan payments without the payment being counted toward employee income.

Other Key Education-Related Provisions

• Project SERV: The Act provides $100 million in funding to help K-12 schools and IHEs clean and disinfect affected schools and assist in counseling and distance learning.
• USDOE Administrative Funding: The Act increases funding for the USDOE to assist with administering the provisions of the Act.
• Health Departments: The Act provides funding to state health departments related to cleaning and disinfecting schools and day-care facilities.

What to Expect Next

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.

If you have any questions or would like assistance in navigating your institution’s response to COVID-19, please contact Nina Gupta, Lexi Trumble, or any members of the Nelson Mullins Education Team.