Have a look at this interview with Tax Specialist and CPA Dave Moja about the options available for small schools with HEERF funds.
If your school is recording the distribution of CARES Act funds to your students, the best way to do so is by using a financial aid disbursement. We recommend following the process described below, which will let you record the disbursements, prevent them from being applied to student charges, and allow them to be easily "refunded" to students receiving these funds.
In determining the steps in this process, we have referred to NASFAA's COVID-19 Reference Page. Some notes:
- The funds "are not Title IV aid" and must be paid "directly to students". Schools "may not apply the grants toward outstanding institutional charges". This workflow is designed to help your school stay within the bounds put on these funds.
- Running these transactions through Populi gives you an easily-accessible record that the funds were distributed to students.
- What's more, it may save you a lot of time and headaches down the road. According to NAFSAA, "Department of Education (ED) guidance on the use of Higher Education Emergency Relief Fund (HEERF) funds is changing on an almost daily basis." Should these funds be required to be reported on, say, the 1098-T, the following method will likely lay the best foundation for doing so.
1. Create an award type
First, you'll create an aid award type.
- Go to Financial Aid > Settings > Award Types.
- Follow the instructions for adding a new award type.
- Make sure you select the following settings:
- Type: Grant
- Source: Institution
- Need-based and Affects need: Un-check both of these
- IRS 1098-T: Scholarship for non-eligible fees (Report in Box 5 only). Please see the note about this, below.
Note: An earlier version of this instruction (per the NAFSAA guidance available as of May 7, 2020) advised you to set the 1098-T field to Tuition discount (Do Not Report). Since that writing, NACUBO "recommends that institutions report the amounts for the emergency grants to students in Box 5 on IRS Form 1098-T, as the grants were administered and processed by the institution." Please see the section called "Taxability Update" in this article.
If you followed our previous guidance, simply change the 1098-T setting to the Scholarship... Box 5 option. This will automatically update records for all students to whom you've disbursed CARES/HEERF funds in Populi.
2. Make sure award won't auto-apply to invoices
As mentioned above, the funds must be paid "directly to students and may not apply the grants toward outstanding institutional charges". Because aid awards frequently apply to invoiced charges automatically, you need to take special care that this doesn't happen with these awards.
- Just before running the disbursement batch, go to Financial Aid > Settings > General.
- Under Manually apply financial aid to invoices, select Yes.
After refunding the unapplied aid payments (see #5, below), make sure to return here and change this setting back.
3. Set up disbursements
Next, schedule disbursements for students who will be receiving these funds.
- Go to the student's Profile > Financial > Financial Aid view.
- Follow the instructions for adding an aid award and disbursement provided in this article.
- Repeat these steps for each affected student.
- Create a unique disbursement batch for these awards.
4. Run the disbursement batch
The purpose of this step is to create an unapplied aid payment that can be then refunded to students. It also creates part of the audit trail that shows that the funds you received were distributed to the students.
Follow the instructions for running a disbursement batch provided in this article.
5. Refund the unapplied aid payments
This step provides a crucial part of the audit trail, showing that your school actually distributed these funds to affected students. This workflow requires attention to a particular setting before you proceed:
- In Financial Aid > Settings > General, make sure that the Allow Student Billing users to refund aid credit balances setting is set to Yes.
- If you do not see this setting, then it is already set to Yes—you may proceed with the refund process!
Here's how to issue refunds in bulk:
- Go to Billing > Current > Student Balances.
- Click Actions and select Issue Refunds (this option will only be available if you've set up check templates).
- For the Refund Source, select the award type you created for these funds.
- After attending to the other details of the refund, click Issue.
You can also issue refunds individually, going student-by-student and using the Refund Credit Balance action on Profile > Financial.