Distributing CARES Act/HEERF Funds to Students

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." While this article provides what we believe to be a prudent way to record your handling of these funds, we recommend you also consult the official guidance from the IRS.

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.

1. Review the built-in CARES Act HEERF award type

Populi includes a built-in CARES Act HEERF aid award type. (A previous version of these instructions directed you to create your own award type for these purposes. If you have done so, edit that award, set the Source field to Federal, and select the built-in CARES award from the Report As drop-down).

The award type is programmed with these settings according to the guidance from NACUBO that "recommends that institutions report the amounts for the emergency grants to students in Box 1 on IRS Form 1098-T, as the grants were administered and processed by the institution" in the section called "Taxability Update" in this article, as well as the guidance provided in this article:

• Type: Grant
• Source: Federal
• Need-based and Affects need: No
• IRS 1098-T: Treat as payment (Report in Box 1 Only)

For your own accounting purposes, make sure to edit the award type and select the liability account to which you wish to connect it.

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.

1. Just before running the disbursement batch, go to Financial Aid > Settings > General.
2. 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.

1. Go to the student's Profile > Financial > Financial Aid view.
2. Follow the instructions for adding an aid award and disbursement provided in this article.
3. Repeat these steps for each affected student.
4. 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:

1. Go to Billing > Current > Student Balances.
2. Click Actions and select Issue Refunds(this option will only be available if you've set up check templates).
3. For the Refund Source, select the award type you created for these funds.
4. 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.

Have a look at this interview with Tax Specialist and CPA Dave Moja about the options available for small schools with HEERF funds.