Exclusive: DeVos’ COVID-19 Formula Shorted NC’s Public College Students

A Cardinal & Pine investigation found for-profit beauty schools got double to triple what NC’s public higher education schools got per student.

Stephanie Mount, a second-year student in pharmacy tech at Stanly Community College, was living out of her car when she completed her exams this spring.

Mount, 28, also works at Atrium Health’s Carolinas Medical Center, Charlotte’s largest hospital. Mount moved out of the home she shared with her grandmother after concerns she might bring the novel coronavirus home from work and infect her grandmother.

She took her tests in a McDonald’s parking lot. With the Albemarle school shuttered by the coronavirus, it was the best place to get WiFi. 

“I wasn’t not going to finish school,” she said. “School’s always been my first priority.”

Mount is one of the many public university and community college students that expected to benefit this year when Congress gave President Donald Trump’s Department of Education $14 billion in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. 

Federal education data shows that, as of mid-June, $437 million went to higher education institutions in North Carolina to help struggling students, universities, and colleges. Colleges were required to give half of their allotments directly to students. 

But a Cardinal & Pine review of the federal grants reveals that, because of quirks in the funding formula crafted by US Secretary of Education Betsy DeVos’ agency, coronavirus relief didn’t necessarily go to the neediest North Carolina students— like Mount.

It instead went to some unexpected places.

For-profit cosmetology schools, for instance, were among the biggest winners in the US Department of Education’s dispensation of millions in federal COVID-19 relief money in North Carolina.

Beauty schools in North Carolina received almost twice as much money per student as the state’s public universities and more than three times what community colleges took in. 

DeVos’ agency, in general, was more generous to some private and for-profit institutions both inside and outside North Carolina. 

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Critics of DeVos are questioning why small religious colleges, elite private colleges, and trade schools are ending up with substantial shares of the federal stimulus money. 

Indeed, Ben Miller, vice president for postsecondary education at the Center for American Progress, has called for a separate pot of money for public and community colleges, as well as restrictions on further relief to for-profit institutions.

“The statute wasn’t written to give a bunch of seminaries that serve a few dozen students a world-class IT department while community college students starve,” Miller told Inside Higher Ed in May.

Prior to her involvement in the Trump administration, DeVos was a Michigan-based backer of private and faith-based schools over public schools. Her background was a major point of contention during DeVos’ confirmation hearings.

Asked to explain the disparities, a federal education department spokesperson would only say  that allocations were “weighted in part based on how many Pell-eligible students attend an institution.” Pell Grants are used by low-income students in undergraduate programs, including trade schools.

In other words, the higher a school’s ratio of lower-income, full-time undergraduates, the bigger its grant would be. The federal formula also favored full-time students that were taking classes in person rather than online.

The state’s ten public and private historically Black colleges and universities (HBCUs) also did well under this formula, receiving approximately $2,816 per student. 

But, outside of historically Black colleges and universities, the state’s remaining 11 public colleges and universities only received about $640 per student. 

Community colleges took in even less — $358 on average per student, according to a C&P analysis of federal Department of Education data. 

Meanwhile, eight for-profit cosmetology schools in North Carolina, serving a combined 2,600 students, took in $3.1 million in federal funding. That amounts to about $1,200 per student, nearly twice as high as the average for public higher ed institutions in the state. 

Federal officials also initially allocated $6.7 million to Durham’s private Duke University. With its top-20 endowment in the US, Duke joined other elite private universities in rejecting the federal money in April. 

How Beauty Schools Cleaned Up

Cosmetology schools depend on students that attend full-time, in-person instruction and predominantly qualify for Pell Grants to operate. Those three factors ended up being the key determinants for COVID relief under DeVos’ approach.  

Beyond that, many cosmetology schools got an extra lift in the recent COVID-19 relief formula because they run on a calendar-year schedule and not a traditional academic year. That means those schools got enrollment credit for two graduating classes even though only one was affected by COVID-19.

By contrast, community colleges enroll high numbers of online and part-time students, putting them at a disadvantage in the federal formula. 

And while public universities rely on in-person classes, their large numbers of graduate students are not eligible for Pell Grants, giving them lower scores on that measure.

Some schools got more than double that amount because of their short program length, allowing more than one class to enroll and graduate within the same year. 

Students in Need Missing Out 

Mount’s school, Stanly Community College, received an average of $150 per student in COVID-19 relief money. But Mount didn’t notice an email about how she could get direct help as she dealt with her own personal upheaval and temporary homelessness. The federal government had initially required schools to disburse the initial grants by April 16. 

But the full-time, in-person requirements put in place by the federal education department left only a third of Stanly’s 2,500 students eligible for COVID-19 aid. 

The school, as of July 7, had given out its entire $366,000 allocated for individual grants, an average of $759 each to 482 students, according to information put out by the college. 

The college’s president, John Enamait, acknowledged the limitations but stressed that any aid was welcomed. 

“Anything we can get is certainly better than nothing,” Enamait said.

“Community college students are living paycheck to paycheck, if they’re working at all. They’re relying on what little aid they can get. The financial stress they’re facing is very real.”

John Enamait, president of Stanly Community College

Enamait said Stanly wasn’t able to help most of its enrolled students because so many are part-time or were already taking their classes online before the pandemic and therefore ineligible for the relief funding. That’s despite the fact that some may now be without jobs or housing as a result of COVID-19. 

“We were able to help a little,” Enamait said. “It’s a little disappointing, how the community colleges have been treated and how our perspective has not been heard.”

Unmet Needs as Federal Officials Distribute Money 

Stories like these capture the turmoil of the coronavirus aid process for higher education as overseen by DeVos’ office.

COVID-19 relief funds have helped some schools shift to online education. They also partially refunded students for costs like room and board, that may be used to pay for rent, childcare or groceries. For many students, these grants function like an unemployment benefit because unless students were working in 2019, they wouldn’t have a basis for an unemployment claim.

But the program and its funding formula have been vexed by controversy, as colleges and universities across the nation have been frustrated by a changing set of rules and inconsistent distribution of the relief money. 

Private trade schools benefit from the federal formula because their students are full-time, on-campus, and tend to be from lower-income households.

The formula was reportedly intended to funnel aid toward federal Pell Grant recipients, but the Education Department acknowledged some of the formula’s flaws and indicated it would hold back $50 million to help those schools that were shortchanged. 

The agency also temporarily nixed a rule levied by Education Secretary Betsy DeVos budgeting a flat $500,000 for smaller schools whose enrollment figures dictated a smaller number. 

Why DeVos’ Formula Helped Beauty Schools

Cosmetology schools fared better in the federal formula because the students are full-time, learning in classrooms, and generally qualify for Pell Grants. 

They also got a leg up because they don’t have any graduate students diluting their Pell Grant populations and annual enrollments are larger than any point-in-time headcount.

Even those who run these cosmetology schools were surprised at the disparity. 

“I don’t know why they gave private trade schools more money,” Paul McAlister, the co-owner of a Paul Mitchell beauty school in Fayetteville, told C&P. “It doesn’t make any sense.”

The nine beauty schools benefiting from the formula include Winston-Salem Barber School; Alexander Paul in Greenville; separately-owned Paul Mitchell franchises in Fayetteville, Gastonia and Raleigh; Mitchell’s Academy in Wilson and Raleigh; Pinnacle Institute of Cosmetology in Mooresville; Aveda Institute of Chapel Hill; and Beyond Measure Barbering Institute in Mebane. 

Another five beauty schools were promised an additional half million dollars, but federal records show they haven’t yet received it. In all, the 14 cosmetology schools were allocated $4.6 million.

These trade schools are largely ten to 12-month programs costing $10,000 to $20,000 in tuition, for which students can use federal student aid including Pell Grants. Like most colleges, these schools moved online from March through May as a result of the pandemic. That meant additional delays in students’ essential on-the-job salon training because of special COVID safety requirements applying to personal-care facilities. 

At over $2,600 per student, one of the biggest grants went to the Alexander Paul Institute of Hair Design in Greenville. That’s because enrollments at cosmetology schools stagger across a traditional academic year, so that daily headcount might be half of the total number of students who come through a school in the year that’s being counted. 

The same amount of money intended to serve more students ends up being spread around to fewer. 

“If a school of any type received a higher proportion of funding, it means that the school is serving a higher proportion of students with financial need,” wrote Alex Naoum, the Institute of Hair Design’s co-founder,  in an email. 

Students say the grant helped them pay basic bills like rent and utilities. 

Corinthia Woodford, who’s studying cosmetology at the Greenville hair design school, said her $1,300 grant allowed herself, her fiance and 3-year-old son to move into a two-bedroom apartment. The family also used the cash to pay bills and buy a new mattress for the toddler. 

“It cost us almost $500 to turn our utilities on,” she said, primarily because of deposits and activation fees. “It was crazy.”

Woodford started her ten-month program in January and had just begun working with clients in the school’s public salon when COVID-19 lockdowns stopped her progress. 

“You spend the first two months in the back classroom then go out on the salon floor. It’s kind of a rite of passage,” she said.  “We literally were on the floor for a week and then we got shut down.” 

Winston-Salem Barber School, which has 111 students, received a grant of $320,870, nearly $3,000 per student. The school’s grant, however, was based off of the 2017-18 school year when the school had an enrollment of 200. 

The payout allowed the barber school to give students $1,500 to $2,000 each.

The school’s president, Tom McGuinn III, said he was prepared to return money if need be. 

“The funds left over will be returned back to the government promptly,” McGuinn said. “The schools did not request these funds nor did we decide on the allocation.” 

Historically Black Colleges Got Boost

Historically Black colleges and universities, both public and private, benefited from the federal distribution. North Carolina’s ten HBCUs received about $123 million covering about 44,000 students. 

That includes $77 million from a special fund for Minority Serving Institutions (MSI), which more than doubled their regular CARES act allocations. Those were already relatively high because the formula favored students with high levels of financial need.

But state funding for HBCUs has long been disproportionately low, even with a 2018 study finding every $1 million spent by an HBCU generates 13 off-campus jobs and another $420,000 in local and regional spending. 

“We exist in a society that already doesn’t fund education in the way that it needs to,” said Michael Spencer,  the HBCU outreach program manager for Common Cause NC, a democracy advocacy group. “Added to that, this is a society that very structurally disenfranchises brown folks or Black people. Situations like (the pandemic) only exacerbate issues like that or bring them to light.”

Elizabeth City State University in northeastern NC gave its students $300 to $1,000 grants, and used another nearly $4 million to reimburse housing and cafeteria pre-payments, pay its staff, transition to virtual learning and buy COVID-related supplies. 

Elizabeth City received $3,156 per student to cover the individual grants and institutional costs. Altogether, the average per-student allocation for HBCUs in NC was $2,806. 

Spencer said his students, at campuses like Shaw or St. Augustine’s colleges in Raleigh and Durham’s NC Central University, each received about $1,200 in individual grants. 

The grants were a huge help. 

“If you’re a student who was working a federal work-study job or working on campus, you have lost income,” he said. “It probably didn’t go as far as many students needed it to go. Something’s better than nothing.”

Undergrads Favored

The Pell Grant-based formula favors schools that are predominately for undergraduates, as only those students are eligible for the federal financial-aid program. 

As a result, some small, private colleges, less likely to offer masters or doctoral degrees, actually received far more in per-student aid than did the state’s public universities. 

For example, Mars Hill University in Western North Carolina received $1.8 million at a per-student rate of about $1,300 and has distributed grants to students ranging from $250 to $1,500. 

In a statement, the university said 61% of its students qualify for Pell Grants and stressed that the formula did not consider public or private status or religious affiliation. 

In the eastern part of the state, the Methodist-affiliated Louisburg College and the Baptist-affiliated Chowan University each received nearly $2,000 per student. 

Some  school leaders had hoped for more help, as was the case with the Charlotte Christian College and Theological Seminary. The school is small, with less than 200 students, but its student population tends to be lower-income and in need of help during this unprecedented public health crisis, said Eddie Grigg, president of Charlotte Christian College and Theological Seminary in Charlotte. 

Because of financial aid programs like Pell, low-income students are able to attend either private or public institutions. At the individual level, their needs are real, whether or not that can be fairly captured in a federal funding formula. 

“Many of our students are on the lower income and social status, and they struggle hard,” said Grigg. 

Mount, the Stanly County Community College student, got word of a  CARES Act grant of $450 three months to the day after she left her grandmother’s house for her car. 

She hopes to use the $450 to move out of her parents’ house soon.

“I’m just thankful that I have somewhere to stay,” she said. “I’m thankful that I have a job.”