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May 19, 2020

U.S. Department of Education Expands COVID-19 Regulatory Flexibilities for Higher Education Institutions

On May 15, 2020, the U.S. Department of Education (ED) issued updated and expanded flexibilities with respect to Title IV federal student aid program requirements in light of the continuing COVID-19 pandemic. This latest electronic announcement follows earlier guidance issued on March 5, 2020 that was supplemented on April 3, 2020. The new guidance also provides additional information about provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act that modify certain statutory requirements of Title IV federal student aid program participation.

While encouraging institutions to review the guidance and its accompanying Q&A document in full, below is a summary of its major provisions:

  • Distance education: ED is extending its broad approval for the use of distance education to include payment periods that overlap March 5, 2020 or that begin on or between March 5, 2020 and December 31, 2020.
  • Accrediting agency site visits and scope of recognition: Accrediting agencies may continue to conduct virtual evaluation visits through December 31, 2020; provided, that an on-site visit must follow a virtual site visit, in a timeframe that is reasonably practicable. The on-site visit may be performed by staff or a trained site visitor and need not repeat the full review. In addition, for payment periods that begin before or on December 31, 2020, ED is waiving the requirement that an institution offering a distance education program be accredited by an accrediting agency that has distance education within its scope of recognition from ED.
  • Audited financial statements and compliance audits: The usual deadlines for institutions to submit audited financial statements and independent compliance audits to ED are temporarily extended by six (6) months.
  • Changes in ownership: For institutions undergoing a change in ownership or control, the usual deadline to provide state and accreditor approvals of the change in ownership of control, and the required audited same day balance sheet, is temporarily extended by six (6) months.
  • Financial responsibility: Where an institution has received a loan through the Paycheck Protection Program (PPP) that may be forgiven by meeting certain continuing employment requirements, as long as an institution’s audited financial statements reflect an estimate of the amount of PPP loan forgiveness the institution expects to earn, or the actual amount of loan forgiveness provided is identified on an institution’s audited financial statements for the year in which the loan was received, and attested to by the institution’s auditor, ED will exclude that portion of the PPP loan from total liabilities and increase the institution’s equity or net assets by that amount in calculating the institution’s composite score.
  • Leaves of absence: The CARES Act waived the requirement for term-based programs that a student returning from an approved leave of absence (LOA) must resume training at the same point in the academic program that he or she began the LOA. Under this ED guidance, the tuition and fees component of the cost of attendance (COA) for any subsequent term or award year in which a student returns from the approved LOA may not include the tuition costs for coursework he or she was taking when the LOA began. However, the COA for a subsequent term or academic year may include living expenses even if the student is enrolled in no additional credits. Credits associated with the coursework a student is completing upon return from an approved LOA may count toward that student’s enrollment status. Additionally, institutions that have not previously had a formal written policy regarding approved LOAs may adopt one, even on a temporary basis. The policy must require all requests for leaves of absence to be submitted in writing and include the reason for the student’s request. Normally, such requests are expected to be received and approved prior to the student beginning any LOA. However, for all leaves of absence granted as the result of COVID-19 related circumstances, an institution may approve, and students may begin, a leave of absence prior to submitting a written request for an LOA (LOA requests must be obtained subsequently).
  • Return of Title IV Funds (R2T4): Pursuant to the CARES Act, institutions are not required to return Title IV funds for any student who begins attendance in a payment period or period of enrollment that began on or included March 13, 2020, and subsequently withdraws from the period due to COVID-19 related circumstances. Institutions are, however, still required to perform and document R2T4 calculations in such cases even though funds need not be returned.  The guidance from ED provides these further instructions for implementing this partial waiver of R2T4 requirements:
    • In the case of withdrawn students for whom no returns have been made, the institution should:
      1. Perform an R2T4 calculation in order to determine the amount of Title IV funds that would otherwise have to be returned.
      2. Make no adjustments to COD as a result of the withdrawal.
      3. Make no adjustments (as the result of the withdrawal) to the amount of Title IV aid credited to the student’s ledger account.
    • Institutions are required to report to ED regarding each student withdrawal and accompanying R2T4 waiver. Although the specific reporting mechanism remains pending from ED, it will require the following to be included in those reports:
      1. Identifying information for each student for whom R2T4 was waived under the CARES Act.
      2. The payment period “begin” and “end” dates for the period that the student did not complete as a result of the COVID-19 emergency.
      3. The amount of Title IV grant or loan assistance (other than Federal Work Study funds) that each such student received for the payment period in which he or she withdrew.
      4. The total amount of Title IV grant or loan assistance that each institution has not returned to the Secretary as a result of the CARES Act provisions.
    • Institutional refund policies and the federal waiver of R2T4 requirements may result in sometimes significant credit balances. ED suggests that institutions may want to consider amending their tuition refund policies for all students or a group of students, if permitted under applicable state law.
  • Satisfactory Academic Progress: Institutions may exclude from the quantitative component of a student’s satisfactory academic progress (SAP) calculation attempted credits that a student was unable to complete as a result of the coronavirus emergency; provided, that the institution has reasonably determined that the student’s failure to complete those credits was a result of a pandemic-related circumstance. Additionally, courses that are taken on a pass/fail basis count as attempts for SAP purposes.
  • Verification: Until December 31, 2020, and as applied to both the 2019-2020 and 2020-2021 award years, institutions may accept a signed and dated statement from an applicant in which he or she truthfully attests to his or her secondary school completion or the equivalent for purposes of certain eligibility verification requirements. In addition, institutions that require (as a result of their own policies) an official transcript to verify a student’s Title IV eligibility that are unable to obtain a transcript after making a reasonable effort to do so institutions may accept a signed and dated statement from the applicant in which he or she truthfully attests to his or her secondary school completion. Similarly, for applicants that do not pass the Selective Service database match, the applicant or the institution’s financial aid administrator (FAA) may use the Selective Service System website to register or to verify prior registration. An FAA may also determine that the student did not knowingly nor willfully fail to register for the selective service, as outlined in the Federal Student Aid Handbook.
  • Campus-based aid waivers: As provided by the CARES Act, the institutional share (match) requirement associated with the Federal Work Study (FWS) and Federal Supplemental Educational Opportunity Grants (FSEOG) programs is waived for award years 2019-2020 and 2020-2021. An institution may reimburse itself from the FWS allocation for the nonfederal portion of wages paid to students on or after March 13, 2020.  Likewise, an institution may, for all disbursements of FSEOG made on or after March 13, 2020, reimburse itself from the FSEOG allocation for the nonfederal portion of FSEOG awards contributed through a fund-specific match. Additionally, an institution may transfer up to 100 percent of its unexpended FWS allocation to FSEOG.
  • FSEOG Emergency Aid Grants: Institutions may use any amount of their FSEOG allocation (including funds transferred from FWS) to award Emergency Aid Grants to Title IV eligible students, which must adhere to the same parameters for Emergency Aid Grants established in the CARES Act and ED’s related implementing guidance. Institutions also may contract with scholarship-granting organizations for the purpose of accepting applications from or disbursing FSEOG Emergency Aid Grants to students, provided students receive the entire amount of the grant with no FSEOG funds used to pay for such contracts. Further, such FSEOG Emergency Aid Grants are no considered Estimated Financial Assistance for other Title IV program purposes.
  • TEACH Grant Service Periods: Pursuant to the CARES Act, a TEACH Grant recipient who was performing qualifying service that was interrupted due to the COVID-19 national emergency will receive credit for a full year of his or her service obligation.
  • Foreign graduate medical schools: ED is waiving the MCAT examination requirement for foreign graduate medical school admissions for students admitted to medical school during an admissions year in which the MCAT was unavailable to students for some period of time during that year due to COVID-19 related interruptions.
  • Tax treatment of HEERF emergency grants to students: The guidance references a recent Internal Revenue Service determination that emergency grants to students by institutions under the CARES Act’s Higher Education Emergency Relief Fund do not create taxable income to the students.
  • Student workers and PPP eligibility: ED reiterates Treasury Department regulations that student workers generally count as employees for PPP eligibility, except when the applicant is an institution of higher education and a student worker’s services are performed as part of a Federal Work Study program or similar state or local program. Institutions must also exclude Federal Work Study payroll costs when determining total payroll costs for purposes of their PPP loan amount.
  • Recordkeeping and Data Security: Although ED is providing flexibility to institutions regarding how they can collect certain documentation during the national emergency, it may not exempt institutions from record retention or data security requirements. If an institution determines that it can securely use email or other electronic means to accept, for example, photographs or scanned documents via smartphone, the institution must properly preserve those documents and other items as they would in the usual course of business. This may require the preservation of electronic records, such as text messages, and the subsequent retention of hard copies or notarized documents upon the resumption of normal operations.

We are continuing to closely monitor developments from ED and other education regulatory authorities related to the coronavirus pandemic. Should you have questions regarding this matter, or other educational regulatory matters, please do not hesitate to contact any member of our Education team, or your usual contact at Faegre Drinker.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

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