Colleges Get Government Lifeline With New Loan Guidelines

(Bloomberg) -- New federal guidelines that clarify how student workers are treated under a popular stimulus program for businesses may help small colleges struggling with financial losses from the coronavirus pandemic.

Students in federal or state work-study programs should be excluded from employee headcount, according to Paycheck Protection Program rules posted Tuesday by the U.S. Treasury Department and the Small Business Administration.

At issue is whether students working part-time on campus are counted because they would put many schools over the limit of 500 employees to qualify for loans of as much as $10 million. More than 40 members of Congress asked for the exemption last month, and federal officials agreed, saying this week that including the students would cause anomalies.

“It would prevent some small educational institutions from receiving PPP loans due solely to their provision of financial aid to students in the form of work study,” the guidelines say. “It would result in the exclusion of small educational institutions whose part-time work study headcount dwarfs their full-time faculty and staff.”

Colleges sent students home in March to keep the virus from spreading. Schools are losing revenue from refunded room and board, endowment declines and canceled summer programs. Public universities expect cuts from state allocations because of reduced tax revenue. Small colleges, with modest enrollments and cash reserves, are particularly vulnerable.

Colleges Roiled by Pandemic Costs Find Federal Loan Aid Elusive

“This new guidance clarifies that federal or state work-study students are excluded, which will certainly help a number of our institutions,” said Greta Hays, a spokeswoman for the Council for Christian Colleges & Universities, a trade group representing more than 140 U.S. schools.

Another college trade group, National Association of Independent Colleges and Universities, said the move is of limited help.

“Most institutions have far more students working on campus who are not funded by federal or governmental grants,” said spokesman Pete Boyle. “So, while it will help some institutions, it does not solve the larger problem of including student workers in the eligibility requirements.”

Under the program created to help small businesses contend with economic losses from the pandemic, enterprises can qualify for loans that become grants if used for payroll and other approved expenses for two months to keep workers employed. Companies must have 500 or fewer employees or meet SBA's size standards covering certain industries.

The initial $349 billion in funding ran out in 13 days and the program relaunched April 27 with an additional $320 billion.

The new guidance will help Covenant College. The Georgia school had qualified and received a loan of about $3.2 million but was later uncertain if it could use the money because of unclear guidelines. Excluding its 129 students in a federal work-study program enables Covenant to qualify, said President Derek Halvorson.