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By Kaitlin Mulhere
May 13, 2020
Kiersten Essenpreis for Money

College students are finally starting see their share of more than $6 billion in federal funds set aside for emergency financial aid grants.

Six weeks after Congress passed its massive coronavirus relief bill, the money has been slow to reach students and won’t be enough to help all those who could use it, experts say.

The CARES Act provides $14 billion for colleges and universities, many of which are facing an existential financial threat with the coronavirus. Nearly half of that money must be given directly to students to help them deal with expenses brought on by the spread of COVID-19.

The University of Pittsburgh is one of the colleges that said last week that it had distributed its emergency grants—sending most of its $10.6 million in aid to more than 11,000 students. Other colleges, meanwhile, have posted applications with deadlines later this week to determine how they’ll distribute the grant aid.

Many institutions only received their portion of the money from the government in past week or so. As of Monday, the Education Department says it has issued $5.6 billion, about 90% of the total.

One thing students should keep in mind: The grants are intended to cover expenses caused by campus disruptions due to coronavirus-related closures. But they are not meant to help fill new financial need due to coronavirus if, say, students or their parents lost jobs.

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While the law does say colleges have to give out the money only to students who faced expenses because of campus closures, it doesn’t require students to submit proof of those expenses, says Justin Draeger, president of the National Association of Student Financial Aid Administrators. So a college could decide, for example, that any student who had to move off campus unexpectedly incurred an expense, he says.

Eligible costs may include include food, housing, transportation, course materials, technology to take courses online, health care and childcare. While colleges have a year to spend the money, most are trying to get it to students as soon as possible, Draeger says.

Schools face tough choices as the money falls short of the need

Money was given to colleges according to a formula outlined in the CARES Act. The amount was based on two factors: a college’s enrollment of full-time Pell grant-eligible students and a college’s overall full-time enrollment.

While that emphasized sending more money to colleges that serve many low- or moderate-income students, criticism of the formula has been widespread. Some complained about wealthy colleges receiving millions of taxpayer-funded dollars and pressured those colleges to give the money back. (Many have, though it’s unclear whether that money now will be redistributed to colleges that need it.)

A more problematic issue, experts say, is that because the formula focused on full-time enrollment, colleges that serve a large number of part-time students got a disproportionately small amount of money.

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In fact, community colleges educate nearly 40% of postsecondary students, yet they only received 27% of CARES Act money, according to a paper from Ben Miller, vice president of postsecondary education at the left-leaning Center for American Progress.

What’s more, many colleges had to backpedal and change their distribution plans after the Education Department came out with guidance at the end of April saying students had to be eligible to receive federal financial aid (meaning they are U.S. citizens who meet adequate academic progress and other requirements) to get the special coronavirus aid. That rule excludes international students and undocumented students—two populations that tend to have significant financial need—as well as any student who had not filed a FAFSA. This week, California’s community colleges sued the Education Department saying the rules exclude some 800,000 of their students.

While about 1,475 colleges received at least $1 million each to give to their students, it’s still a drop in the bucket of what may be needed. The full $6.25 billion works out to about $280 per college student, according to an analysis from the Century Foundation.

“Schools are going to be stuck with really unfortunate rationing choices,” Miller says. Colleges will either have to spread the money as thinly as possible to reach more students, or they’ll have to send larger, more substantial help, to a small number of students.

“Neither is a great option,” he says.

To help fill the gap, 70% of colleges told the National Association of College and University Business Officers they planned to offer additional emergency grant funding outside of the money from the government, often from fundraising.

Colleges have wide latitude in determining eligibility requirements

Aside from the Education Department’s stipulation that students must be eligible for federal financial aid to receive the grants, colleges were given wide latitude in deciding how to disburse the money. Officials at the University of Pittsburgh deemed undergraduates eligible if they received a Pell grant in 2020 or had unmet financial need on their Free Application for Federal Student Aid (FAFSA). The university deemed graduate students eligible if they had unmet need for the spring term or lost their summer stipend, as well as some student employees if they lost jobs or access to meal plans.

Other colleges, including the University of Denver and Boston University, have developed simple online forms students have to fill out to certify they’ve experienced expenses due to coronavirus campus closures. More than half of colleges in a recent poll said they’d require an application.

At California State Polytechnic University-Pomona, officials divided students into groups to dole out the aid. The first two groups received automatic payments based on financial need, as determined by their estimated family contribution on the FAFSA. Students in the second two groups have to submit a form that lists eligible expenses and file a FAFSA if they hadn’t already. Payments range from $200 to $1,000, depending which group students fall into and whether they attended full- or part-time during the spring term.

Loyola University New Orleans had a similar hybrid model, in which about 1,400 students with the highest demonstrated need received automatic payments of about $900. Students outside that group had to fill out an online form to indicate they’d experienced eligible expenses.

There’s no upper limit on the size of the emergency grants, though the Education Department has suggested colleges cap them at the same amount as a federal Pell grant, about $6,300. Several colleges contacted by Money said their average grants would be much smaller, often around $1,000.

Once students receive the money, there are no rules for how they can spend it. The awards aren’t taxable, but the IRS said last week if students use their grants to pay tuition, they can’t also claim a tax-deduction on that tuition payment.

Many colleges reported students applying for or claiming money as soon as they were able. Five hundred students at the Catholic University of America in Washington, D.C. submitted an application in the first 48 hours it was available. The university expects to give grants to between 600 and 700 students. At Amherst College, within three hours of emailing eligible students, 50% had responded to claim their grants.

Officials at Cal Poly-Pomona wanted to emphasize transparency and speed, clearly explaining to students who would receive what and issuing payments as soon as possible, says Jessica Wagoner, senior associate vice president for enrollment management. Her team emailed all students to explain the university’s process, then organized a live online forum and set up a hotline for students to ask questions.

About 65% of the 27,000 students will receive some aid, including at least 14,000 students who already received automatic grants based on their financial need. If there’s any aid left over after the initial disbursals, the university plans to redistribute that to additional students, Wagoner says.

“We’re going to exhaust every penny of the $15 million, Wagoner says.

More from Money:

Interest Rates for Federal Student Loans Set To Drop to Record Lows This Year

Can College Students Qualify for Unemployment Benefits? It May Be Easier Now, Thanks to the CARES Act

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The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

Earning your trust is essential to our success, and we believe transparency is critical to creating that trust. To that end, you should know that many or all of the companies featured here are partners who advertise with us.

Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

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