Colleges Have Been Waiting for Guidance on How They Can Send Stimulus Money to Students. Here It Is.

Over the past few weeks, college administrators have been grappling with how to distribute coronavirus stimulus money to their students. On Tuesday, they got some clarity — as well as some new complications.

In newly released guidance, the U.S. Department of Education informed administrators that they are only allowed to issue funds to students who are eligible for Title IV financial aid. That cuts out international students and undocumented immigrants — including those receiving Deferred Action for Childhood Arrivals (DACA) protections — from receiving any of the roughly $6 billion that the Cares Act allocates directly to emergency student aid.

Those limitations came even as the stimulus law itself made no mention of eligibility for federal student aid to qualify for the emergency money. In addition, the formula Congress used to allocate the money included all students, not just those who can receive the Title IV dollars. Some higher-education associations questioned whether the department had made a reasonable interpretation of the legislation.

“There’s nothing in the law that seems to preclude these funds from going to students who are not eligible for Title IV,” said David Baime, senior vice president for government relations and policy analysis at the American Association of Community Colleges. “We’re disappointed at an extremely narrow interpretation of the statute,” he said.

In response to questions surrounding the new guidance, the Department of Education said in a statement, “The Cares Act makes clear that this taxpayer-funded relief fund should be targeted to U.S. citizens, which is consistently echoed throughout the law.”

As of Monday, only a small percentage of colleges had received any stimulus from the department, and about three-quarters of eligible colleges had not filed the paperwork needed to receive it, Politico reported. The department blamed colleges for “dragging their feet” in applying for the aid, while others quoted by the outlet characterized that as unfair, given that there were unanswered questions regarding what colleges were allowed to do with the money.

While Tuesday’s guidance answered questions, it also left some administrators concerned about the “financial stability” of many international and undocumented students, said Tom Harnisch, vice president for government relations at the State Higher Education Executive Officers Association.

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Justin Draeger, president of the National Association of Student Financial Aid Administrators, said because of the way language in the department’s guidance is worded, it could be difficult, maybe impossible, for any student that has not yet filed a Free Application for Federal Student Aid (Fafsa), to apply.

Under the guidance, students eligible to receive funds need to be a citizen or an eligible noncitizen and have other records such as a Social Security number, a selective service registration, and a high-school diploma or a GED — information colleges may not have unless a student submitted a Fafsa, Draeger said.

“The lengths the department will go through to exclude DACA students will hurt all sorts of students,” Draeger said. “In all practical purposes, I don’t know how an institution would document those things without a Fafsa.”

The new guidance could delay the aid distribution further since some colleges will likely now need to modify the plans they used to determine which of its students would receive the funds, Draeger said. And it has already raised additional questions, he added.

The guidance also does not allow students to apply any of the funds to pay off outstanding balances to their college. Colleges that distributed their own Covid-19 emergency funds to students before March 27 are not allowed to reimburse themselves using the Cares Act funds. And students can receive funds either by cashing a check or depositing it into their debit account.

On Tuesday, the department also announced that the other large chunk of the Cares Act money earmarked for higher education — about $6 billion meant to help institutions with their operating costs — was available. But institutions are required to apply for the student-focused money first, the department said. About half of eligible institutions had applied for the student-focused funding as of Tuesday, the department said.

Baime, with the community-college association, said the release of the money that would go directly to institutions was a bright spot. “The good news,” he said, “is that colleges can use that money to reimburse themselves for refunds they made and technology they purchased.”

Eric Kelderman contributed reporting.