On May 15, 2020, the U.S. Department of Education (ED) issued guidance that expands on its previously issued March 5, 2020, and April 3, 2020, guidance. The guidance provides long-awaited answers to questions surrounding the Paycheck Protection Program (PPP), taxability of emergency financial aid grants to students and the return of funds process for Title IV funds, as well as other Title IV considerations. In addition, ED released an updated statement regarding student eligibility for Higher Education Emergency Relief Fund (HEERF) grants. Significant topics described in the guidance are summarized below.
Paycheck Protection Program
PPP loans will be excluded from total liabilities and increase the institution’s net assets by that amount for purposes of calculating the composite score as long as both below criteria are met:
- An estimate of the amount of forgiveness of PPP loan funds the institution expects to earn, or the actual amount of loan forgiveness, is identified in the institution’s audited financial statements for the year in which the loan was received
- The amount is attested to by the institution’s auditor (at the current time, it’s unclear what type of attestation is required from the auditor)
Higher education institutions must exclude Federal Work-Study (FWS) students when determining the number of employees for PPP loan eligibility and must exclude payroll costs for FWS students from the calculation of payroll costs used to determine their PPP loan amount.
HEERF – Student Share Eligibility
In prior guidance, ED stated that only students who are eligible to receive Title IV aid qualify for HEERF grants. On May 21, 2020, ED posted an updated statement on its website stating that they won’t initiate any enforcement action on that prior guidance because ED lacks “the force and effect of law.” Note that this updated guidance only relates to the question of Title IV eligibility and stops short of granting eligibility to international students, those enrolled in Deferred Action for Childhood Arrivals and undocumented students.
In an updated release on June 11, ED issued an interim final rule regarding the distribution of HEERF emergency grants. The interim final rule reasserts that the CARES Act makes implicit and explicit references that students receiving HEERF grant aid should be Title IV-eligible. However, this guidance continues to conflict with the May 21 guidance mentioned above, as it remains published and active on their website.
Taxability of HEERF & Emergency Financial Aid Grants to Students
The IRS posted frequently asked questions on this matter stating that emergency financial aid grants including HEERF grants are deemed Section 139 disaster relief payments and are therefore not taxable to the student. Institutions will want to consider the effects, if any, this guidance has on the institution’s reporting and administrative functions related to disbursing these funds.
ED expanded the broad approval for use of distance education granted in the April 3, 2020, guidance to include payment periods that overlap March 5, 2020, or that begin on or between March 5, 2020, and December 31, 2020.
Verification of High School (or Equivalent) Completion Status
For applicants in verification groups V4 or V5, institutions should:
- Use documentation of an applicant’s high school completion status that it may already have obtained for other purposes, or if not available,
- May accept a signed and dated statement from the applicant in which the student truthfully attests to their secondary school completion or the equivalent. This statement must indicate whether a high school diploma or equivalent was obtained and date of completion (or approximate date)
This guidance applies until December 31, 2020, for both the 2019–2020 and 2020–2021 award years.
In addition, institutions that require (as a result of their own policy) an official transcript to verify a student’s eligibility for Title IV participation that are unable to obtain a transcript after making a reasonable effort may accept a signed and dated statement in which the applicant truthfully attests to their secondary school completion.
For the nonfederal portion of FWS and Federal Supplemental Education Opportunity Grants disbursed on or after March 13, 2020, institutions can reimburse themselves from the federal allocation.
Satisfactory Academic Progress (SAP)
Previous guidance has provided flexibility that allows institutions to exclude attempted credits a student was unable to complete as a result of the COVID-19 national emergency from the quantitative component of SAP. The new guidance states that it’s not necessary for a student to file a SAP appeal for an institution to exercise the flexibilities mentioned above. However, an institution must have reasonably determined that the student’s failure to complete those credits was the result of a COVID-19-related circumstance. Allowable circumstances include, but are not limited to:
- Illness of the student or family member
- Need to become a caregiver or first responder
- Economic hardship
- Added work hours
- Loss of child care
- Inability to continue with classes via distance education
- Inability to access Wi-Fi due to closed facilities
Return of Title IV Funds (R2T4)
See flowchart for the updated R2T4 process.
ED has determined that reporting requirements under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) include:
- Identifying information for each student for whom R2T4 was waived under the CARES Act
- The payment period “begin” and “end” dates for the period the student didn’t complete as a result of the COVID-19 emergency
- The amount of Title IV grant or loan assistance (other than FWS funds) that each such student received for the payment period in which he or she withdrew
- The total amount of Title IV grant or loan assistance that each institution hasn’t returned to the Secretary as a result of the CARES Act provisions
ED is developing the process by which institutions will fulfill the reporting requirements described above and will provide additional guidance in the future. In the meantime, compile all data required above and have available for reporting purposes.
For more information, view ED’s recent guidance. As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. Reach out to your BKD Trusted Advisor™ or submit the Contact Us form below if you have questions.