Q&A Related to ED Relief as a Result of the Covid-19 National Emergency

By Michael T. Wherry, CPA | March 31, 2020

Note: The U.S. Department of Education (ED) has not issued any guidance related to provisions in the CARES Act. We anticipate ED will issue further guidance.  This summary is for general guidance and informational purposes only, and should not be relied upon for regulatory compliance. Situations specific for your institution should be discussed with your regulatory counsel and professional advisors.


  • ED has provided guidance for interruptions of study related to the Coronavirus.  More information can be found here.
  • To date, ED hasn’t waived any of the Cash Management provisions in the Q&As which it has issued (March 5, 2020 and March 20, 2020) nor the CARES Act. Thus, all aspects of cash management including drawdowns under HCM1 and the requirements surrounding student Title IV credit balances still in place.
  • On March 27, 2020, ED waived the requirement to implement the Annual Student Loan Acknowledgment previously known as the Informed Borrower Confirmation process. ED is delaying the requirement that borrowers complete the Annual Student Loan Acknowledgment prior to the 2020/21 award year. The process will be delayed one year and implemented before a borrower receives the 1st disbursement of the 1st loan the borrower receives starting with loans associated with the 2021/22 award year.
  • In the CARES Act Congress did not grant broad powers to the Secretary to provide for statute and regulatory relief. As such, the audit deadlines have not been delayed.


Section 3503

Q. This section waives the non-federal share matching requirements for both SEOG and FWS for both 2019-20 and 2020-21.  In addition, an institution can move up to 100% of unexpended FWS to SEOG, but not the other way around. Does this mean we can pay 100% of 2019-20 FWS with Federal Funds?  If so, this could potentially put schools in a position where they overspent their federal allocation.  Currently (July 1, 2019-present), the institution had initially planned for a 75/25 split for SEOG

A. M&A agrees in that the non-federal share is waived so potentially the entire amount of FWS paid and SEOG granted is from federal funds. The exception is section 443(c)(3) which relates to FWS employed in the private section (for-profit non-school businesses) as the matching requirement for these entities has not been waived (M&A is in process of confirming this item). As institutions await guidance from ED, they should consider leaving any 2019/20 match which has been made.

Section 3504

Q. This section provides the ability to move unexpended FWS to SEOG.  Any funds moved into SEOG can be awarded on an ad-hoc basis, and not follow an institution’s normal awarding guidelines for the initial SEOG allocations. These funds can be awarded to a student up to the maximum PELL award. Is this each student’s maximum fulltime Pell award or the maximum fulltime Pell award for the award year?

A. M&A concurs that the need calculation is waived for providing the emergency grant. However, we believe the emergency grant can be up to the maximum Federal Pell Grant for the applicable award year not the student’s individual limitation.

These grants should be for students who have unexpected expenses and unmet financial need as a result of a qualifying emergency, and that your determination of need should be documented in the student’s file. Institutions should develop a specific form to document and support the awarding of these emergency grants.

These emergency grants can be for undergraduate and graduate students. Thus, M&A believes the students who receive the emergency grants do not have to be Pell eligible.

Sections 3506 & 3507

Q. For students who withdraw due to COVID-19, any loans or PELL received for that semester/term will be eliminated from both SULA and Pell LEU. How will this be calculated by COD and NSLDS as they do not know why students withdraw.

A. M&A agrees that these disbursements will not impact the student’s SULA or Pell LEU limitations. However, ho guidance has been issued by ED as to how this will be reported in COD & NSLDS. We expect this will be part of future ED guidance.

Section 3508

Q. Does a qualifying emergency pertain to all students that withdraw during the period of the National Emergency?

A. No. See section 3508 of the Act clearly indicates that the student withdrawal is a result of a qualifying emergency.

Q. Does the student that withdrawals need to provide the College written notification they are withdrawing due to the Coronavirus?

A. Currently, no guidance has been provided by ED. M&A recommends obtaining the reason via email or phone, if possible, and to maintain this documentation. An institution should document its decision and any judgments which we made as we await further guidance.

Q. If the refund calculation states to refund the portion of the unearned Pell Grant or Direct Loan disbursements, does the College retain those funds and document that the student withdrew as a result of a qualifying emergency?

A. Yes. M&A recommends completing all aspects of the refund process until the point of making the actual refund. This would include completion of the student status form, Pell recalculation, R2T4 calculation, and any state or institutional refund policy. We recommend that the student’s account card / ledger card is updated for these transactions. Institutions can then make entries to remove the refund from the student’s account card / ledger card and record them as other income to reflect refunds not made. As a best practice, institutions may want to setup a new other income account solely to track these refunds whose return were waived by ED. This will enable institutions to track the income received from refunds not made for future analysis instead of leaving this “income” as part of tuition and fees.

In addition, if students withdraw who owe the institution a balance, institutions may want to consider what collection efforts, if any, will be pursed during this period of time.

This provision raises a question which is not considered in the statute. If an institution applies their institutional refund policy and this creates an additional refund, then to whom are these funds sent? We would be surprised if the intent of Congress was to enable an institution to maintain funding in excess of the actual earned institutional charges. In the absence of further ED guidance, this additional refund would appear to be a credit balance due to the student. As noted above, since the cash management regulations have not been waived, we believe it would need to be sent to the student within 14 days. 

Q. The refund calculation in our system will not match since no funds will be refunded. Does this present an issue?

A. It does not. However, institutions will have to report the number of such recipients, amount of grant or loan assistance associated with each recipient, and the total amount of grant or loan assistance for which each institution has not returned. We suggest creating this listing as each withdrawal occurs to ensure a fully documented “paper trail” exists for reporting and for future federal and non-federal audits. In conjunction with #6, the institution should have appropriate documentation and the records well organized.

Q. The institution assumes refunds do not get sent to COD, correct?

A. We agree and see above. We believe that all refunds (Pell, SEOG, and FDL) are not required to be made.

Q. Due to externships closing down, we may have to withdraw an entire class. Do you see any problem with that?

A. An institution may provide an approved leave of absence that does not require the student to return at the same point in academic program that the student began the leave of absence if the student returns with the same semester (or the equivalent). M&A would interpret this to be the same payment period for a nonterm institution.

In ED’s March 5, 2020 guidance (updated as of March 20, 2020), a clock hour institution can put a student on an approved leave of absence if the coursework is interrupted as a result of Covid-19. This guidance applies if there is a reasonable expectation that institution will be able to resume the coursework and find a placement for this student within 180 days. If this criterion can’t be met, then the student must be considered withdrawn and an R2T4 calculation performed. (See above for the CARES Act impact on R2T4 calculation refunds). While not specifically indicated in the CARES Act, M&A believes that this guidance would extend to a credit hour institution based upon the previous paragraph.

In addition, ED’s March 5, 2020 guidance provided flexibility to extend the length of the spring term and even allow it to overlap with the summer term without compromising the standard term structure. 

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