What the Coronavirus Stimulus Means for Higher Education Funding

Congressional lawmakers have passed their third and most comprehensive piece of legislation designed to provide economic relief to individuals, corporations, and nonprofit entities impacted by the coronavirus.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides budgetary relief to higher education institutions through numerous provisions. It also provides tax relief and student aid support.

Education Stabilization Fund 

One of the most notable items for higher education is the creation of a nearly $31 billion Education Stabilization Fund. These funds primarily will be split into three buckets:

• $13.2 billion for Department of Education grants to K-12
• $13.95 billion for Department of Education grants to colleges and universities
• $2.95 billion for grant aid given to states to award to K-12 and higher education institutions, mostly at the governor’s discretion

Separate allotments are made within the Education Stabilization Fund to provide additional funds to tribal colleges and designated minority-serving institutions. Additionally, about $349 million is reserved expressly for schools hit particularly hard by the virus, with priority going to small schools that receive less than $500,000 in the larger pool of ED grants, as well as to minority-serving institutions that have remaining unmet need.

ED Grants to Colleges and Universities 

Of the $13.95 billion ED will award to colleges and universities, 90 percent of the funds will be distributed directly to schools via the Title IV distribution system. Each institution’s allotted amount will be determined by a formula, which ED has yet to finalize but which will be based on full-time equivalent enrollment of Pell Grant recipients at an institution (75 percent of the calculation) and using full-time equivalent enrollment of non-Pell students (25 percent of the calculation). Schools with the highest number of low-income students will likely see comparatively higher aid awards. The calculation will not include students who were completing their education exclusively online prior to the coronavirus outbreak.

Institutions must use 50 percent of their allotment for direct emergency aid to students, including but not limited to “grants to students for food, housing, course materials, technology, health care, and childcare.”

Institutions have fairly broad discretion in how they use remaining funds. The legislation states that funds can be used to “defray expenses for institutions of higher education,” which can include supplementing lost revenue, and technology costs associated with a transition to distance education. Funds may not be used for endowments, athletic or religious facilities, or enrollment recruitment contractors. The legislation also requires that institutions that receive the funding must retain their current employees to the “maximum extent practicable.”

ED Grants to States for Education 

The Department of Education will also provide $2.95 billion in grants to states to assist in supporting K-12 and higher education institutions. Each state will receive an amount based primarily on its population between the ages of 5-24 (60 percent of the calculation) and the number of primary and secondary school-age children who reside there (40 percent of the calculation). Governors may provide these funds to both public and private institutions within the state, but are not required to award a set percentage to either K-12 or postsecondary education. Governors have discretion to allocate the funds based on their determinations of schools “most significantly impacted” by the coronavirus.  

When applying for these funds, states must include assurances of their financial support for higher education for FY20, FY21, and the three preceding fiscal years, and cannot count funds given for capital projects, research and development, or tuition and fees paid by students.

The bill requires ED to issue a notice inviting applications for these grants within 30 days of the bill’s passage, and to approve or deny all applications within 30 days of receipt.

Additional Education Assistance

Historically black colleges and universities that have taken out Title III loans now may receive a loan payment deferment during the crisis period. ED will make the principal and interest payments on these capital financing loans during the deferment, but terms will be set for repayment upon the loan’s full closing. The legislation also allows ED to waive certain provisions regarding the distribution and uses of grant funding for minority-serving institutions, including graduate programs at HBCUs. 

Additional funds have been made available to federal research and arts agencies to supplement grant awards to institutions and spur further research efforts. While the National Institutes of Health, the National Science Foundation, and NASA received the largest amounts of funding, all the major grant awarding agencies should be receiving an influx of funds to aid their response efforts.

Other important provisions for higher education in the legislation include tax relief and student aid support.

While Congress is adjourned through April, lawmakers are already discussing the potential for another coronavirus response package of legislation. NACUBO will continue advocating for federal support for higher education in this time of crisis. Stay up to date on our coronavirus advocacy relief efforts as well as COVID-19 guidance for higher education.