Late on Friday, May 15, the U.S. Department of Education (“Department”) released updated guidance on a host of issues arising from interruptions in institutional operations related to the COVID-19 national emergency. This new 11-page document, along with an accompanying Q&A, provides important information to supplement and extend earlier guidance that the Department provided on March 5, March 20 and April 3 and that we discussed in our March 20 Client Alert and April 6 Client Alert. Below we summarize key elements of the new guidance, which institutions are encouraged to review carefully.

Distance Education

The Department extended its earlier guidance allowing an institution to convert programs of study to a distance learning format. The emergency approval for such conversions now covers any payment period that overlaps March 5, 2020, or that begins on or between March 5 and December 31, 2020. The Department also is waiving for payment periods that begin no later than December 31, 2020, the requirement that an institution offering more than 50% of a program through distance education be specifically accredited for distance education by an accrediting agency recognized by the Secretary to approve distance education.

Financial Statements, Compliance Audits and Financial Composite Score

The Secretary extended the deadline by which an institution must file its annual audited financial statements and compliance audit by six months. The May 15 announcement did not condition this extension in any way.

The Department also announced how it intends to treat the Paycheck Protection Program (“PPP”) loans in its calculation of an institution’s financial composite score. If the institution’s audited financial statements for the fiscal year in which the PPP loan was received include an indication of the actual or estimated amount of PPP loans that will be forgiven and such amount is attested to by the institution’s independent auditor, the Department will remove this amount from total liabilities and increase equity or net assets by this amount when it calculates the composite score.

Changes of Ownership

The Secretary extended by six months the deadline by which an institution that undergoes a change of ownership must submit certain documents in order to maintain its eligibility while the Department reviews the change of ownership application. That deadline otherwise requires an institution to file state and accreditor approvals and a same-day audited balance sheet by the end of the month following the month in which the transaction occurred.

Medical College Admissions Test (MCAT)

The Secretary is waiving the MCAT requirement for foreign graduate medical school admissions in an admissions year when the MCAT was not available due to the COVID-19 emergency.

Verification of High School Completion

The Department is permitting an institution for verification purposes through December 31, 2020, to rely on documentation in its files or to accept a signed certification from a student attesting to the student’s completion of high school or the equivalent and the approximate date of such completion. The Department also is allowing an institution that has an internal policy requiring receipt of an official high school transcript as a condition of enrollment or to verify a student’s Title IV eligibility to accept a signed certification from the student if the institution is unable to obtain the official transcript after making a reasonable effort.

The Department notes that this waiver does not relieve an institution of its obligation to comply with any state or accreditor requirement regarding proof of high school graduation. The Department, however, also granted temporary authority for accrediting agencies to modify policies regarding verification of high school completion.

PPP and Higher Education Emergency Relief Fund (“HEERF”)

The Department confirmed that an institution must not count Federal Work Study (“FWS”) students as employees when determining PPP eligibility and must exclude FWS payroll costs when calculating its PPP loan amount. The Department also relayed information from the Internal Revenue Service announcing that HEERF emergency student grant funds are not included in a student’s gross income.

FWS and Federal Supplemental Educational Opportunity Grant (“FSEOG”)

The CARES Act waived the institutional share requirements in the FWS and FSEOG programs for award years 2019-2020 and 2020-2021. The Department announced that an institution may reimburse itself from its FWS allocation for the institutional portion of wages paid to students and from its FSEOG allocation for the institutional portion of FSEOG awards, in each case for payments or awards made on or after March 13, 2020. Up to 100% of any unexpended FWS allocation can be transferred to FSEOG, and any amount of the FSEOG allocation may be used to make emergency grants to students for unexpected expenses and unmet financial need in accordance with guidance provided by the CARES Act.

Leaves of Absence (“LOA”)

The Department issued several waivers regarding LOA requirements in order to provide institutions and students with more flexibility. An institution that previously did not have a formal LOA policy may adopt one, even temporarily.

Return of Title IV Funds (“R2T4”)

The Department provided specific instructions to implement the CARES Act language that waives R2T4 requirements for any student who began attendance in a payment period or period of enrollment that began on or includes March 13, 2020, and who subsequently withdrew as a result of the COVID-19 emergency. In such cases where funds have already been returned, the institution is directed to re-disburse the funds, update COD, credit the student ledger, and request funds from G5. If the institution has not yet returned funds for the withdrawn student, the institution must perform the typical R2T4 calculation but make no adjustments to COD or to the student ledger.

The Department also waived grant overpayments caused by R2T4 calculations for students who withdrew due to COVID-19. An institution applying this waiver must document the student file.

The waiver of R2T4 requirements and the application of institutional refund policies may create large Title IV credit balances on some student accounts that must be paid out to students within 14 days. The Department permits an institution to change its refund policies so long as the change applies to all students and the institution can document that it disclosed the change to students, but such a change is likely to be prohibited by law in many states.

For each student for whom R2T4 is waived, the institution is required under the CARES Act to report specific information. The Department has not yet determined how this information will be reported, but it has determined which information the institution must provide once the reporting mechanism is announced, which we quote below:

• Identifying information for each student for whom R2T4 was waived under the CARES Act.
• The payment period “begin” and “end” dates for the period that the student did not complete as a result of the COVID-19 emergency.
• 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.
• 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.

It is important to note that the R2T4 waiver applies only to students who were enrolled in a payment period or period of enrollment that includes March 13, 2020, and who withdrew due to the COVID-19 emergency. The Department determined that an institution that transferred students from ground-based instruction to online delivery, closed campus housing or other facilities, or had other disruptions in instruction “may consider all withdrawals from students enrolled in ground-based instruction during the covered period to have been the result of circumstances related to the COVID-19 national emergency.” An institution that did not change its delivery methods or campus operations must obtain a written attestation from the student that explains why the student’s withdrawal was caused by the COVID-19 emergency in order to qualify for the R2T4 waiver. The same attestation is required from a student who withdrew from an online program in order to receive the R2T4 waiver. The Department provided several examples of acceptable COVID-19 impacts.

Satisfactory Academic Progress (“SAP”)

The CARES Act provides for the exclusion from the quantitative element of the SAP calculation any credits that a student attempted but could not complete due to the COVID-19 emergency. Prior to exercising this exclusion, the institution must make a reasonable determination that the student failed to complete the credits as a result of the emergency, and the Department provided examples of circumstances that could support this determination.

Teacher Education Assistance for College and Higher Education (“TEACH”) Grant

The CARES Act provides certain flexibility regarding the rules of the TEACH Grant program. The Department will allow TEACH Grant recipients to receive credit for a full year of service if that service was interrupted due to the COVID-19 emergency.

Maynard is a full-service firm with attorneys experienced in all regulatory and operational aspects of higher education, including federal and state oversight, accreditation, employee and benefits issues, and real estate concerns. We invite institutions to review the resources our attorneys have assembled to help our clients deal with the challenges created by the COVID-19 emergency.

Roger Swartzwelder advises regionally and nationally accredited institutions of higher education regarding legal, administrative, regulatory and accreditation matters.

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