President Donald Trump last week railed against Harvard University, claiming he would personally ensure the institution, with the largest endowment in the U.S., would turn away millions of dollars in federal coronavirus aid it was due. Education Secretary Betsy DeVos followed suit soon after, publicly urging affluent colleges to reject money from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. 

The political pressure worked. 

At least seven elite colleges and Strategic Education Inc., the parent company of the for-profit Strayer and Capella universities, turned down the relief. Their shares represent less than half a percent of the $12.6 billion in funding for colleges, but the moves meant more than $56 million would go unclaimed, half of which was statutorily mandated to be passed to students as emergency grants.

Many institutions that decided not to take CARES funding, among them Stanford, Yale and Princeton universities, instead pledged they would use their own funds to help students. But the situation has left the rejected money in limbo with no immediate avenue for the U.S. Department of Education to redistribute it. 

Congress constructed the law so colleges get a cut of the aid based on their count of full-time students, weighted heavily toward how many receive federal Pell Grants.

Lawmakers, however, did not develop a contingency for colleges that declined the funding. Nor did the Education Department have a plan in place for redirecting the money. 

The department said it is moving as quickly as possible to disburse the funds, but it is still assessing its options on how to reallocate the money institutions have said they won’t take. Observers, however, are skeptical about its ability to do so expeditiously. 

Some institutions that declined CARES money indicated they’d like the department to give it to struggling colleges located close to them. Two-year colleges, which are typically more cash-strapped than their four-year counterparts, haven’t benefited as much from the relief in part because a high number of low-income students pursue community college on a part-time basis. 

DeVos also called on colleges that determined they had little need for the funding to donate it to their beleaguered neighbors. 

But some observers predict that with the murkiness in the law and in the department’s guidance, the money may remain untouched at a critical time for suffering colleges. A lowball estimate by the American Council on Education (ACE) is that the sector stands to lose nearly $47 billion. 

Given that the administration encouraged well-off schools to give up the funding, "one would have thought that a mechanism for distributing the money to colleges that serve the most needy students would have been developed," said David Baime, senior vice president for government relations and policy analysis at the American Association of Community Colleges (AACC).

Complex restrictions

The CARES funding is divided into two parts: one for disadvantaged students and the other for institutions to pay off their coronavirus-related costs. While higher education associations have said the relief from the CARES Act does not come close to cushioning the financial blow to institutions’ budgets, campus officials have expressed gratitude for the assistance. 

Recently, however, restrictions on the funding have grown more complex. 

One reason colleges may be reluctant to accept the money is the legal strings attached to it. They include a provision that requires colleges "to pay all of its employees and contractors during the period of any disruptions or closures to the greatest extent practicable," meaning that layoffs may infringe on the law, The Chronicle of Higher Education explained recently.

The department also barred colleges from issuing the emergency grants to international students and unauthorized students, including those who are recipients of the Deferred Action for Childhood Arrivals (DACA) program for immigrant students who came to the U.S. illegally as children. The decision drew widespread condemnation, as the latter group is often some of the most financially challenged on a campus, and DeVos has repeatedly stated the money should be provided to those most in need. 

Additional guidance from the department on how colleges can distribute the funding for student emergency grants is expected soon.

"The Department’s efforts to implement the law has created confusion, and due to unneeded complexities, millions of students facing dire financial problems are now ineligible for emergency grants," Pedro Ribeiro, spokesperson for the Association of American Universities (AAU), wrote in an email. AAU represents more than 60 prominent universities in the U.S. and Canada. 

Conflicting messages

Nevertheless, as of Tuesday, about two-thirds of the some 5,100 eligible institutions had applied for the student-centered funding, and the department had given out $4.6 billion of it, according to department spokesperson Angela Morabito. Fewer than 1,500 colleges had applied for the money for their own expenses, she said.

Colleges have until the end of September to seek the funding. Ben Miller, vice president for postsecondary education at the left-leaning think tank Center for American Progress (CAP), believes the department will release the rejected funds close to that date. He said the department has reserved $50 million to account for any incorrect distributions and to account for missing information in the federal database on which the department based its CARES calculations.

The department likely won’t want to give out the rejected money before it knows all the colleges that will turn down their shares, Miller said. And even though DeVos pressed wealthy institutions to donate their money to another college, he said it’s not clear in the law whether they can do so given that they must spend half their allocations on students. Morabito didn’t directly respond to a question about this discrepancy and whether the department believed that colleges could legally give away their share.

Had elite schools wanted to pass on their CARES money, they could have kept it and made a separate, unrestricted donation to a nearby college, Miller said. But accepting the money became politicized and colleges’ legal officers may have been wary of taking that route, Miller added.

"It’s a little bit frustrating," he said of the department telling colleges to donate. "If they wanted to achieve that outcome, they should have provided clear guidance how to do that."