As discussed in an earlier alert, the CARES Act’s Higher Education Emergency Relief Fund allocates almost $14 billion to institutions of higher education (IHEs). While this amount is an important and appreciated show of support for higher education, it falls tens of billions of dollars short of the amount needed to address the unprecedented financial crisis created by the COVID-19 pandemic.

The portion of the relief funds to be allocated for emergency financial aid grants for students is expected to be available beginning this week. While there is a desire to drive these funds out to students promptly, IHEs need to plan carefully. There are myriad questions regarding the expenses for which students can use the funds, the vehicles through which IHEs can disburse the funds, and the documentation that the Department of Education will require at the back end for reporting purposes. The lack of clarity on these issues requires that institutions proceed thoughtfully to avoid any challenge to their disbursements. Additionally, the Department is expected to issue guidance regarding the second tranche of relief funding (i.e., the institutional share) in the coming weeks, which could have an impact on IHEs’ decisions regarding their use of the student share. All of this is to say that, while colleges and universities want to provide as much information as possible to students and some are prepared to do so, others might be well-advised to pause before communicating the details of their plans.

While IHEs wrestle with these issues, students and their families are being bombarded with headlines like “New Jersey Colleges, Universities to See $323M Federal Relief Under CARES Act,” “State Schools, Colleges get $200 Million in Federal Stimulus Money,” and “Maryland Colleges, Universities to get $170 Million as Part of Stimulus Package.” Without context, they may be left with the impression that these significant figures are making their IHE whole and wondering why they have not seen financial relief.

IHEs need to counterbalance the headlines by providing information, without rushing important decisions regarding their plans for disbursing funds to students. An initial communication to students regarding the CARES Act dollars could discuss the amount of funding allocated to the institution and the institution’s ongoing efforts to plan for its disbursement in a way that will support students, as a precursor to a communication regarding the institution’s individualized plan. Doing so will:

• help families understand the complexities of the Higher Education Emergency Relief Fund

• demonstrate transparency with respect to the challenges around allocating the limited resources

• convey a message of support

• avoid rushing important financial and programmatic decisions.

Pepper Hamilton’s higher education attorneys are working with colleges and universities as they develop plans for the use and disbursement of the Higher Education Emergency Relief funds. We will continue to report on these evolving topics as the Department prepares to issue guidance on the institutional support portion of the funds and lawmakers look toward possible Phase IV funding.