On March 27, Congress passed the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest economic package ever approved in U.S. history. The bill includes one-time payments of $1,200 or less per adult and $500 per child (the amount is based on earnings between $75,000 and $99,000), $367 billion for small businesses, $500 billion for loans to larger industries, $130 billion for hospitals, and $600 more per week for four months in unemployment benefits for those out of work.
Thanks to the tireless efforts of many higher education advocacy groups, such as the National Association of Independent Colleges and Universities (NAICU) and the American Council on Education (ACE), and Oregon’s congressional delegation, the CARES Act will provide $14 billion for the higher education sector. Although this will not fully meet the needs of the private, nonprofit higher education community, it is a significant step forward and higher education advocacy organizations will work to secure more assistance in future relief packages.
Key Points of the CARES Act for Higher Education Institutions:
- Of the $14 billion for all sectors of higher education, half will go to institutions to support the costs of shifting classes online and the other half must be used to provide direct emergency aid to students for food, housing, technology, and other purposes. Allocated amounts will be based 75% on an institution’s Pell FTE enrollment and 25% on an institution’s overall FTE enrollment relative to the national total, except that students who were enrolled exclusively online prior to the pandemic outbreak will not be in the count. Funds will be distributed through the Title IV system to institutions so the money can get disbursed as quickly as possible.
- $1 billion will go to Historically Black Colleges and Universities (HBCUs), Tribal Colleges and Universities (TCUs), and Minority Serving Institutions (MSIs).
- $349 million will be set aside for grants to institutions that were particularly hard hit by costs associated with the virus. Priority for these grants will be given to those institutions that did not receive at least $500,000 in the basic distribution formula described above.
- Includes a requirement that states not cut any previous support to institutions of higher education or need-based grant programs for students, unless the Secretary gives them a waiver for extraordinary economic loss.
- Includes a number ofimportant provisions for regulatory relief for the student aid programs, including in such areas as campus-based aid, institutional refunds, satisfactory academic progress, lifetime limits on Pell Grants and student loans, and National Service and Teach Grant service requirements.
- Includes a six-month suspension of federal student loan payments. Payments will not have to be made and interest will not accrue on federal student loans until September 30, 2020. Any payments borrowers make during this time will go directly toward the reduction of outstanding principal. (On a related note, on March 25, Secretary DeVos directed the Department of Education to stop wage garnishment and collections actions for student loan borrowers and to refund approximately $1.8 billion to students and families.)
- Provides an expansion of incentives for charitable contributions and a suspension of donor limitations for the 2020 tax year. More specifically, it includes an above-the-line deduction (universal or non-itemizer deduction that applies to all taxpayers) for total charitable contributions of up to $300. The incentive applies to contributions made in 2020 and would be claimed on tax forms next year. The bill also lifts the existing cap on annual contributions for those who itemize from 60% of adjusted gross income to 100% and, for corporations, the bill raises the annual limit from 10% to 25%.
- Provides a one-year expansion, for 2020, of tax code Section 127to allow employers to offer up to $5,250 in annual assistance to employees to cover student loan expenses. (This expansion has been a long-standing tax priority for NAICU and is a major victory in and of itself.)
ACE has prepared a great summary of the CARES Act, which is available here.
In addition to the higher education specific provisions explained above, there are a number of provisions that will affect colleges as employers. NAICU is working with a team of higher education specialty organizations and employment experts to analyze and assess the opportunities this might provide for private, nonprofit colleges and universities. We will keep the Alliance community updated as NAICU releases more information.
Other provisions of the bill that may be useful for Alliance institutions include:
- Employee Retention Payroll Tax Credit: Creates a refundable payroll tax credit of up to $5,000 for wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose operations were “fully or partially” suspended due to government orders related to COVID-19. The credit is available to private nonprofit colleges and universities and their related entities if they are organized as 501(c)(3)s. Employers that receive a Small Business Loan (see below) are not eligible to receive the credit.
- Small Business Association (SBA) Loans: Expands eligibility for SBA loans to entities with 500 or fewer employees (currently, this includes student workers), removes many of the credit criteria, streamlines the application process, and raises the cap on the amount that can be borrowed to $10 million. It includes loan forgiveness provisions if entities do not lay off employees or reduce salaries for those making less than $100,000 during the eight-week period after the loan is received. Funds can be used for payroll and associated costs (e.g. health insurance premiums), facilities costs (e.g. mortgage, rent, utilities), and debt service.
- Assistance for Mid-Sized Businesses: Instructs the Treasury Secretary, through the Federal Reserve, to ensure that nonprofit organizations and businesses between 500 and 10,000 employees have access to a specific loan facility with loans not higher than 2% per year and no payments due for the first six months. In order to qualify, the eligible borrower must self-certify, among other things, that the loan is necessary to support the borrower’s ongoing operations, the borrower will retain 90% of its workforce until September 30, 2020, and the borrower will not outsource or offshore jobs for a period of time ending two years after repayment of the loan.
- Economic Injury Disaster Loans (EIDL): Eliminates creditworthiness requirements and appropriates an additional $10 billion to the EIDL program so that eligible nonprofitsand other applicants can get checks for $10,000 within three days.
Finally, although the CARES Act does not address Financial Responsibility Standards, NAICU (with the support of many of their members and ACE) sent a letter to Education Secretary DeVos asking her to suspend the rules for three years. NAICU and their member associations also sent a letter to NC-SARA asking them to take similar action and, on March 26, NC-SARA responded with this message. Related to this, the White House announced on March 24 that there is going to be a six-month extension for Single Audit submissions, which will extend to the eZ Audit upon which Financial Responsibility Ratios are calculated. An announcement from the Department of Education is expected soon.
The Alliance would like to extend a heartfelt thank you to Oregon’s Senators and House Representatives for their efforts to prioritize financial support for students and institutions of higher learning in the CARES Act. Senator Merkley organized and Senator Wyden signed this letter to the U.S Senate Leadership advocating for funding to protect students from financial aid disruptions and for emergency stop-gap funding for colleges and universities. Congresswoman Bonamici led her colleagues in requesting that the Department of Education support student loan borrowers during the COVID-19 crisis. Please join us in thanking Oregon’s entire congressional delegation for their efforts to identify the needs of and provide relief to the higher education sector and all Oregonians.