[Federal Register Volume 60, Number 126 (Friday, June 30, 1995)]
[Rules and Regulations]
[Pages 34428-34433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16209]
[[Page 34427]]
_______________________________________________________________________
Part VII
Department of Education
_______________________________________________________________________
34 CFR Parts 600, 667, 668, and 674
Institutional Eligibility Under the Higher Education Act of 1965, as
Amended; Final Rule
Federal Register / Vol. 60, No. 126 / Friday, June 30, 1995 / Rules
and Regulations
[[Page 34428]]
DEPARTMENT OF EDUCATION
34 CFR Parts 600, 667, 668, and 674
Institutional Eligibility Under the Higher Education Act of 1965,
as Amended; State Postsecondary Review Program; Student Assistance
General Provisions; Federal Perkins Loan Program
AGENCY: Department of Education.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: The Secretary amends the following regulatory provisions to
correct minor technical errors and to conform with self-implementing
statutory provisions: the institutional eligibility regulations
contained in Part 600, Subparts A and C; the allotment formula and
funding procedures regulations contained in Part 667, Subpart B of the
State Postsecondary Review Program regulations; the student eligibility
regulations contained in Part 668, Subpart A of the Student Assistance
General Provisions regulations; the standards for participation
regulations contained in Part 668, Subpart B; the student consumer
information regulations contained in Part 668, Subpart D; the
verification regulations contained in Part 668, Subpart E; the fine,
limitation, suspension, and termination proceedings regulations
contained in Part 668, Subpart G; the cash management regulations
contained in Part 668, Subpart K; and the Federal Perkins Loan Program
regulations contained in Part 674, Subpart A.
EFFECTIVE DATE: July 31, 1995.
FOR FURTHER INFORMATION CONTACT: Rachael Sternberg, U.S. Department of
Education, 600 Independence Avenue, S.W., Regional Office Building 3,
Room 3053, Washington, D.C. 20202. Telephone: (202) 708-7888.
Individuals who use a telecommunications device for the deaf (TDD) may
call the Federal Information Relay Service (FIRS) at 1-800-877-8339
between 8:00 a.m. and 8 p.m., Eastern time, Monday through Friday.
SUPPLEMENTARY INFORMATION: The following sections are amended for
clarification and consistency throughout the title IV, HEA programs,
and to correct technical errors and omissions in the text of the final
regulations:
Section 600.7 is amended to address an omission from current
regulations addressing the effect of a bankruptcy filing on the
institution's eligibility. Current regulations address the effect of
filing for relief in bankruptcy on institutional eligibility, but omit
explanation of the effect of an involuntary petition filed against the
institution or its affiliates. In filing an involuntary petition,
creditors seek a judicial ruling that an entity is in such financial
straits that it must be treated, for the benefit of the creditors, like
an entity that needs and voluntarily seeks protection in bankruptcy.
Section 600.7 is therefore amended to clarify that an institution is
subject to the statutory exclusion from eligibility only after the
institution or its affiliate voluntarily files for relief in bankruptcy
or there has been an order for relief entered as a result of an
involuntary petition for relief against the institution or its
affiliate.
Section 600.30(a) describes the events that an institution must
report to the Secretary; as recently published, paragraph (a)(7) would
have the institution report the ``exercise'' of substantial control by
an individual or entity that previously lacked such control. This
appeared to change prior requirements that the institution report the
acquisition of substantial control by such an individual, rather than
the first exercise of such control. This change was not intentional,
and the provision is revised to continue the requirement that the
institution report the acquisition of substantial control by one who
did not have that power.
Section 600.31 is revised to correct inadvertent errors in the
percentages of ownership interest that would be deemed to constitute
control of a closely-held corporation; paragraph (c)(1)(ii) of this
section describes a 50% interest as sufficient to give control over
such a corporation; this should read ``greater than'' a 50% interest.
Similarly, current regulations refer to a change ``of'' ownership and
control, yet many of the changes addressed in this section are really
changes within the current ownership of an institution, and section 498
of the HEA itself refers to changes ``in'' ownership and control. The
regulatory references are revised here to refer to changes ``in''
ownership and control, in order to more accurately reflect this fact.
Section 668.7 is also amended as a result of recent changes set
forth in the Bankruptcy Reform Act of 1994 (Pub. L. 103-394). The
Bankruptcy Reform Act of 1994 prohibits a school, lender, guarantor, or
the Department of Education from denying an applicant eligibility for
title IV, HEA program assistance on the grounds that the applicant
failed to repay a debt that was discharged or dischargeable in
bankruptcy. This amendment took effect on October 22, 1994, the date of
enactment of the law, and superseded those provisions of Sec. 668.7(f)
that provided that a borrower was considered to remain in default on a
title IV, HEA program loan discharged in bankruptcy and therefore was
ineligible for new loan assistance unless the borrower made
satisfactory arrangements to repay the debt. Section 668.7(f) is
therefore amended here to conform with existing law: a student whose
loan or grant overpayment is discharged or determined to be
dischargeable qualifies for new title IV, HEA grant, loan, and work
study assistance without regard to the prior default on that loan or
unpaid status on that grant overpayment.
Bankruptcy law establishes a number of exceptions to discharge that
can apply to student loans and grant overpayments, but the most
pertinent of these, found in 11 U.S.C. 523(a)(8), addresses the
dischargeability of student aid debts in particular. The legislative
history of 11 U.S.C. 523(a)(8) and cases interpreting that provision
make clear that this provision of bankruptcy law, which is unaffected
by the new amendments, makes title IV, HEA student aid debts
presumptively non-dischargeable in bankruptcy until the borrower files
a complaint in the bankruptcy proceeding and obtains a court decision
that the debt qualifies for discharge under either of the two
exceptions in 11 U.S.C. 523(a)(8). An applicant for student aid who
claims that a defaulted prior student loan or an unpaid grant
overpayment obligation is dischargeable or was discharged in bankruptcy
must provide the institution with the appropriate documentation to
prove that claim.
To reduce unnecessary burden on potential title IV, HEA applicants,
the regulation as revised permits the holder of the debt to accept what
it deems to be satisfactory proof that the debt would qualify for a
determination of dischargeability under 11 U.S.C. 523(a)(8)(A) based on
the fact that the debt first became due for the requisite period--
currently seven years--prior to the filing of the petition in
bankruptcy. The holder of the loan or grant obligation can typically
determine the duration of the repayment with reliability from its own
records. If the holder of the loan or grant obligation is satisfied
that these records establish that the debt was in repayment for the
requisite period, there is no need to require the applicant to secure a
judicial determination of that fact. It has been a common practice to
accept this showing as sufficient to consider a title IV, HEA program
debt to be dischargeable, and this regulation reflects and incorporates
that practice. However, where the duration of the repayment period is
in
[[Page 34429]]
dispute, where the applicant asserts that repayment would constitute an
undue hardship so as to be dischargeable under 11 U.S.C. 523(a)(8)(B),
or where the dischargeability of the debt is in question on other
grounds, such as failure to schedule the debt properly, the applicant
must obtain a specific judicial determination that the debt is
dischargeable.
Section 668.15 is amended by adding paragraph (b)(7)(i)(C),
revising paragraphs (c)(1)(ii), and (e)(3)(ii), and by adding a new
paragraph (e)(3)(iii). Paragraph 668.15(b)(7)(i)(C) is a continuing
requirement that was inadvertently omitted in the November 29, 1994
Final Regulations. The Secretary is revising Sec. 668.15(c) to clarify
that an institution may rebut a finding of not meeting financial
responsibility standards due to the past performance of its owners by
showing that any prior liabilities are in repayment. Section
668.15(e)(3) has been modified to include a reference to the Office of
Management and Budget Circular for use by state and local governments.
Section 668.16 is amended to allow schools to appeal FFEL cohort
default rates under all FFEL appeal criteria. Under the current
regulations, appeal is allowed only under paragraph Sec. 668.17(d):
erroneous data under mitigating circumstances. This exclusion was
unintentional.
Section 668.22 is corrected to clarify that the federal refund by
an institution to a student attending that institution is based upon
all the institutional charges assessed the student by the institution,
not just tuition charges. This section is also corrected to clarify
when the administrative fee of the lesser of 5% or $100 is applicable.
Section 668.47 is amended to clarify that, in paragraph (a)(6)(i),
all statistics concerning the occurrence on campus of the stated
criminal offenses, whether reported to the local police or to an
official of the school, must be included in the annual security report
published and distributed by September first of each and every year
starting with September 1, 1992. Paragraph (a)(8) is corrected and
redesignated to eliminate reference to the Hate Crimes Statistics Act;
that act does not apply to the crimes listed in this paragraph.
Paragraph (b)(1) is corrected to clarify that the paragraph applies
only to distribution to current students and employees, as distribution
requirements for prospective students are covered in a separate
paragraph (paragraph (b)(2)).
Section 668.57 is corrected to clarify that the signature of the
independent applicant need not be accompanied by the signature of the
applicant's spouse for the purpose of verifying household size and the
number of family members enrolled in a postsecondary educational
institution. This correction conforms with the signature requirements
on the 1995-1996 Free Application for Federal Student Aid (FAFSA).
Section 668.59 is amended to include the applicant's income earned
from work in the use of the $400 tolerance option provided in the final
regulations for Student Assistance General Provisions that were
published in the Federal Register on November 29, 1994. This option
authorizes an institution to disburse assistance under these programs
without recalculating the applicant's award. If the net difference in
dollar items for Adjusted Gross Income (AGI), untaxed income, and U.S.
taxes paid is $400 or less, the Secretary has determined that the $400
tolerance in Sec. 668.59(a)(2)(ii) and (c)(2)(ii) should also be
applicable to income earned from work reported by individuals who are
not required to file a tax return.
The language of Sec. 668.83 is revised to correct the description
of the roles of the respective officials with regard to emergency
actions, and the consequences of certain actions taken by those
officials on pending emergency actions. The show-cause official, in
ruling on objections raised to an emergency action, may continue,
modify, or revoke a pending emergency action. A revocation by the show-
cause official disposes of the action on the stated grounds with
prejudice to its reinitiation on those same grounds. The initiating
official may continue or modify a pending action, or may withdraw that
action prior to its expiration. In contrast to revocation by the show-
cause official, withdrawal by the initiating official of a pending
emergency action is without prejudice to emergency action being
reinitiated on the same grounds.
Sections 668.162, 668.165 and 668.166 are amended to clarify how
the cash management regulations pertain to the provisions of the PLUS
Loan program. Section 668.165 is also amended to clarify, in accordance
with statute, that in order to disburse Federal Direct Student Loan
program funds to a student, an institution must credit that student's
account if the institution uses student accounts.
Section 668.163 is revised to clarify the individual steps required
under the reimbursement funding method.
Section 668.164 is amended to clarify that FFEL program funds are
excluded from the bank account and interest recovery requirements of
this section. An institution that receives FFEL Program funds through
electronic funds transfer or by master check must meet the requirements
described in Sec. 682.207(b).
Section 674.16(d) is amended to restore the provision allowing an
institution to advance funds to a student while studying abroad,
without obtaining the student's signature for the advance of funds. The
December 1, 1994 Student Assistance General Provisions final
regulations inadvertently amended this section of the November 30, 1994
final Campus-based regulations.
Waiver of Notice of Proposed Rulemaking
In accordance with section 437 of the General Education Provisions
Act, 20 U.S.C. 1232, and the Administrative Procedure Act, 5 U.S.C.
553, it is the practice of the Secretary to offer interested parties
the opportunity to comment on proposed regulations. However, the
regulatory changes in this document are necessary to correct minor
technical errors and to implement mandatory statutory provisions. The
changes in this document do not establish any new policies. Therefore,
the Secretary has determined that publication of a proposed rule is
unnecessary and contrary to the public interest under 5 U.S.C.
553(b)(B).
Paperwork Reduction Act of 1980
These regulations have been examined under the Paperwork Reduction
Act of 1980 and have been found to contain no information collection
requirements.
Regulatory Flexibility Act Certification
The Secretary certifies that these regulations will not have a
significant economic impact on a substantial number of small entities.
Small entities affected by these regulations are small institutions of
higher education. These regulations contain technical amendments
designed to clarify and correct current regulations. The changes will
not have a significant economic impact on the institutions affected.
Assessment of Educational Impact
The Secretary has determined that the regulations in this document
would not require transmission of information that is being gathered by
or is available from any other agency or authority of the United
States.
List of Subjects
34 CFR Part 600
Administrative practice and procedure, Colleges and universities,
Consumer protection, Education, Grant programs--education, Loan
programs--
[[Page 34430]]
education, Reporting and recordkeeping requirements, Student aid.
34 CFR Part 667
Administrative practice and procedure, Colleges and universities,
Education, Grant programs--education, Loan programs--education,
Reporting and recordkeeping requirements, States, Student aid.
34 CFR Part 668
Administrative practice and procedure, Colleges and universities,
Consumer protection, Education, Grant programs--education, Loan
programs--education, Reporting and recordkeeping requirements, Student
aid.
34 CFR Part 674
Education loan programs--education, Student aid.
Dated: June 27, 1995.
David A. Longanecker,
Assistant Secretary for Postsecondary Education.
(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal
Supplemental Education Opportunity Grant Program; 84.032 Federal
Stafford Loan Program; 84.032 Federal PLUS Program; 84.032 Federal
Supplemental Loans for Students Program; 84.033 Federal Work-Study
Program; 84.038 Federal Perkins Loan Program; 84.063 Federal Pell
Grant Program; 84.069 Federal State Student Incentive Grant Program;
84.268 Federal Direct Student Loan Program; and 84.272 National
Early Intervention Scholarship and Partnership Program.)
The Secretary amends Parts 600, 667, 668, and 674 of Title 34 of
the Code of Federal Regulations as follows:
PART 600--INSTITUTIONAL ELIGIBILITY UNDER THE HIGHER EDUCATION ACT
OF 1965, AS AMENDED
1. The authority citation for Part 600 continues to read as
follows:
Authority: 20 U.S.C. 1088, 1091, 1094, 1099b, 1099c, and 1141,
unless otherwise noted.
2. Section 600.7 is amended by revising paragraphs (a) introductory
text, (a)(1) introductory text, (a)(1)(iv), and (a)(2) to read as
follows:
Sec. 600.7 Conditions of institutional eligibility.
(a) General rule. For purposes of title IV of the HEA, an
educational institution that otherwise satisfies the requirements
contained in Secs. 600.4, 600.5, or 600.6 nevertheless does not qualify
as an eligible institution under this part if--
(1) For its latest complete award year--
* * * * *
(iv) Fifty percent or more of its regular enrolled students had
neither a high school diploma nor the recognized equivalent of a high
school diploma, and the institution does not provide a four-year or
two-year educational program for which it awards a bachelor's degree or
an associate degree, respectively;
(2) The institution, or an affiliate of the institution that has
the power, by contract or ownership interest, to direct or cause the
direction of the management of policies of the institution--
(A) Files for relief in bankruptcy, or
(B) Has entered against it an order for relief in bankruptcy; or
* * * * *
3. Section 600.30 is amended by revising paragraph (a)(7)
introductory text to read as follows:
Sec. 600.30 Institutional notification requirements.
(a) * * *
(7) A persons ability to affect substantially the actions of the
institution, if that person did not previously have this ability. The
Secretary generally considers a person to have this ability if the
person--
* * * * *
4. Section 600.31 is amended by revising paragraphs (a)(1), (a)(2)
introductory text, (c)(1), (c)(2), (c)(3) introductory text, (c)(4),
and (e) introductory text, to read as follows:
Sec. 600.31 Change in ownership resulting in a change of control.
(a) General. (1) An institution that undergoes a change in
ownership that results in a change of control ceases to qualify as an
eligible institution upon the change in ownership and control. A change
in ownership that results in a change in control includes any change by
which a person who has or thereby acquires an ownership interest in the
entity that owns this institution or the parent corporation of that
entity, acquires or loses the ability to control the institution.
(2) In order to reestablish eligibility and to resume participation
in the title IV, HEA programs, the institution must demonstrate to the
Secretary that after the change in ownership and control--
* * * * *
(c) Standards for identifying changes in ownership and control--(1)
Closely-held corporation. A change in ownership and control occurs
when--
(i) A person acquires more than 50 percent of the total outstanding
voting stock of the corporation;
(ii) A person who holds an ownership interest in the corporation
acquires control of more than 50 percent of the outstanding voting
stock of the corporation; or
(iii) A person who holds or controls 50 percent or more of the
total outstanding stock of the corporation ceases to hold or control
that proportion of the stock of the corporation.
(2) Publicly-traded corporation required to be registered with the
Securities and Exchange Commission (SEC). A change in ownership and
control occurs when a change of control of the corporation takes place
that gives rise to the obligation to file a Form 8K with the SEC
notifying that agency of the change in control.
(3) Other corporations. A change in ownership and control of a
corporation that is neither closely-held nor required to be registered
with the SEC occurs when--
* * * * *
(4) Partnership or sole proprietorship. A change in ownership and
control occurs when a person who has or acquires an ownership interest
acquires or loses control as described in this section.
* * * * *
(e) Excluded transactions. A change in ownership and control
otherwise subject to this section does not include a transfer of
ownership and control upon the retirement or death of the owner, to--
* * * * *
PART 667--STATE POSTSECONDARY REVIEW PROGRAM
5. The authority for Part 667 continues to read as follows:
Authority: 20 U.S.C. 1099a through 1099a-3, unless otherwise
noted.
6. Section 667.12 is amended by revising paragraph (c)(2)(iii)
introductory text, and (c)(2)(iii)(A) to read as follows:
Sec. 667.12 Application for funds.
* * * * *
(c) * * *
(2) * * *
(iii) A SPRE may establish the lowest review priority for an
institution if--
(A) The institution is referred to the SPRE for a reason described
in Sec. 667.5(b)(6) concerning the timely submission of an audit report
or Sec. 667.5(b)(9) concerning a change in ownership that results in a
change of control; and
* * * * *
[[Page 34431]]
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
7. The authority citation for Part 668 continues to read as
follows:
Authority: 20 U.S.C. 1085, 1088, 1091, 1092, 1099c, and 1141,
unless otherwise noted.
8. Section 668.7 is amended by removing paragraph (b)(1)
introductory text ``Before admission--'', revising paragraph (f), and
revising the authority citation to read as follows:
Sec. 668.7 Eligible student.
* * * * *
(f) Effect of bankruptcy relief on title IV, HEA program
eligibility. The Secretary does not consider an unpaid title IV, HEA
program loan to be in default nor an unpaid title IV, HEA program grant
overpayment to be owed for purposes of determining eligibility for
assistance under a title IV, HEA program if the student applicant--
(1) Has obtained a judicial determination that the debt has been
discharged or is dischargeable in bankruptcy, or
(2) Demonstrates to the satisfaction of the holder of the debt
that--
(i) At the time the applicant filed the petition for relief the
loan or demand had been outstanding for repayment of the grant
overpayment, for the period required under 11 U.S.C. 523(a)(8)(A),
exclusive of applicable suspensions of the repayment period for either
debt of the kind defined in 34 CFR 682.402(m), and
(ii) The debt otherwise qualifies for discharge under applicable
bankruptcy law.
* * * * *
(Authority: 20 U.S.C. 1070a-1070c-1, 1077, 1078, 1078-1-3, 1082,
1085, 1087a, 1087cc, and 1091; 28 U.S.C. 3201; 42 U.S.C. 2753;
section 9 of Pub. L. 100-369; and 11 U.S.C. 523 and 525)
9. Section 668.13 is amended by revising paragraphs (c)(2)(ii) and
(c)(2)(iii) to read as follows:
Sec. 668.13 Certification procedures.
* * * * *
(c) * * *
(2) * * *
(ii) Not later than the end of the third complete award year
following the date on which the Secretary provisionally certified the
institution under paragraphs (c)(1)(ii), (iii), (iv) or (e)(2) of this
section; and
(iii) If the Secretary provisionally certified the institution
under paragraph (c)(1)(v) of this section, not later than 18 months
after the date that the Secretary withdrew recognition from the
institutions nationally recognized accrediting agency.
* * * * *
10. Section 668.15 is amended by adding new paragraph (b)(7)(i)(C),
revising paragraphs (c)(1)(ii), and (e)(3)(ii), and by adding a new
paragraph (e)(3)(iii) to read as follows:
Sec. 668.15 Factors of financial responsibility.
* * * * *
(b) * * *
(7) * * *
(i) * * *
(C) Had, for its latest fiscal year, a positive tangible net worth.
In applying this standard, a positive tangible net worth occurs when
the institution's tangible assets exceed its liabilities. The
calculation of tangible net worth shall exclude all assets classified
as intangible in accordance with the generally accepted accounting
principles; or
* * * * *
(c) * * *
(1) * * *
(ii) That person, family member, institution, or servicer does not
demonstrate that the liability is being repaid in accordance with an
agreement with the Secretary; or
* * * * *
(e) * * *
(3) * * *
(ii) Office of Management and Budget Circular A-133, ``Audits of
Institutions of Higher Education and Other Nonprofit Organizations;''
or
(iii) Office of Management and Budget Circular A-128, ``Audits of
State and Local Governments.''
* * * * *
11. Section 668.16 is amended by removing the letter ``(d)'' from
the cross-reference in the last sentence of paragraph (m)(2)(ii).
12. Section 668.22 is amended by revising paragraph (d)(1) to read
as follows:
Sec. 668.22 Institutional refunds and repayments.
* * * * *
(d) Federal Refund. (1) ``Federal refund,'' as used in this
section, means a refund by an institution to a student attending that
institution of not less than the portion of institutional charges
(tuition, fees, room, board and other charges assessed the student by
the institution) to be refunded as follows--
(i) The institution must refund 100 percent of institutional
charges, if a student withdraws from the institution before the first
day of classes for the period of enrollment for which the student was
charged;
(ii) The institution must refund 100 percent of institutional
charges, less an administrative fee, if any, as described in paragraph
(d)(2) of this section, if a student withdraws on the first day of
classes for the period of enrollment for which the student was charged;
(iii) The institution must refund at least 90 percent of
institutional charges, less an administrative fee, if any, as described
in paragraph (d)(2) of this section, if a student withdraws at any time
after the first day of classes for the period of enrollment for which
the student was charged up to and including the end of the first 10
percent (in time) of that period of enrollment;
(iv) The institution must refund at least 50 percent of
institutional charges, less an administrative fee, if any, as described
in paragraph (d)(2) of this section, if the student withdraws at any
time after the end of the first 10 percent (in time) of the period of
enrollment for which the student was charged up to and including the
end of the first 25 percent (in time) of that period of enrollment; and
(v) The institution must refund at least 25 percent of
institutional charges, less an administrative fee, if any, as described
in paragraph (d)(2) of this section, if the student withdraws at any
time after the end of the first 25 percent (in time) of the period of
enrollment for which the student was charged up to and including the
end of the first 50 percent (in time) of that period of enrollment.
* * * * *
13. Section 668.47 is amended by revising paragraphs (a)(6)(i),
(a)(8), (b)(1) introductory text, and (b)(1)(i) to read as follows:
Sec. 668.47 Institutional security policies and crime statistics.
(a) * * *
(6) * * *
(i) Statistics concerning the occurrence on campus of the following
criminal offenses reported to local police agencies or to any official
of the institution who has significant responsibility for student and
campus activities:
(A) Murder.
(B) Rape (prior to August 1, 1992) or sex offenses, forcible or
nonforcible (on or after August 1, 1992).
(C) Robbery.
(D) Aggravated assault.
(E) Burglary.
(F) Motor-vehicle theft; and
* * * * *
(8) Statistics concerning the number of arrests for the following
crimes occurring on campus:
(i) Liquor-law violations.
[[Page 34432]]
(ii) Drug-abuse violations.
(iii) Weapons possessions.
* * * * *
(b) * * *
(1) Current students and employees by appropriate publications and
mailings, through--
(i) Direct mailing to each individual through the U.S. Postal
Service, campus mail, or computer network; or
* * * * *
14. Section 668.57 is amended by revising paragraphs (b), (c)(1)
introductory text, and (d)(3)(i) to read as follows:
Sec. 668.57 Acceptable documentation.
* * * * *
(b) Number of family members in household. An institution shall
require an applicant selected for verification to verify the number of
family members in the household by submitting to it a statement signed
by the applicant and one of the applicant's parents if the applicant is
a dependent student, or the applicant if the applicant is an
independent student, listing the name and age of each family member in
the household and the relationship of that household member to the
applicant.
(c) * * *
(1) Except as provided in Sec. 668.56(b), (c), (d), and (e), an
institution shall require an applicant selected for verification to
verify annually information included on the application regarding the
number of household members in the applicant's family enrolled on at
least a half-time basis in postsecondary institutions. The institution
shall require the applicant to verify the information by submitting a
statement signed by the applicant and one of the applicant's parents,
if the applicant is a dependent student, or by the applicant if the
applicant is an independent student, listing--
* * * * *
(d) * * *
(3) * * *
(i) A statement signed by the applicant and one of the applicant's
parents in the case of a dependent student, or by the applicant in the
case of an independent student, certifying the amount of child support
received; and
* * * * *
15. Section 668.59 is amended by revising paragraphs (a)(2)(ii) and
(c)(2)(ii) to read as follows:
Sec. 668.59 Consequences of a change in application information.
(a) * * *
(2) * * *
(ii) No dollar amount in excess of $400 as calculated by the net
difference between the corrected sum of Adjusted Gross Income (AGI)
plus untaxed income minus U.S. taxes paid and the uncorrected sum of
Adjusted Gross Income (AGI) plus untaxed income minus U.S. taxes paid.
If no Federal Income Tax Return was filed, income earned from work may
be used in lieu of Adjusted Gross Income (AGI).
* * * * *
(c) * * *
(2) * * *
(ii) No dollar amount in excess of $400 as calculated by the net
difference between the corrected sum of Adjusted Gross Income (AGI)
plus untaxed income minus U.S. taxes paid and the uncorrected sum of
Adjusted Gross Income (AGI) plus untaxed income minus U.S. taxes paid.
If no Federal Income Tax Return was filed, income earned from work may
be used in lieu of Adjusted Gross Income (AGI).
* * * * *
16. Section 668.83 is amended by revising paragraphs (f)(2) and (g)
to read as follows:
Sec. 668.83 Emergency action.
* * * * *
(f) * * *
(2) Until a final decision is issued by the Secretary in a
proceeding described in paragraph (f)(1) of this section, any action
affecting the emergency action is at the sole discretion of the
initiating official, or, if a show- cause proceeding is conducted, the
show-cause official.
* * * * *
(g) The expiration of an emergency action, or its modification or
revocation by the show-cause official, does not bar subsequent
emergency action on a ground other than one specifically identified in
the notice imposing the prior emergency action. Separate grounds may
include violation of an agreement or limitation imposed or resulting
from the prior emergency action.
* * * * *
17. Section 668.162 is amended by revising paragraph (1)(iii) under
the definition of Disburse to read as follows:
Sec. 668.162 Definitions.
* * * * *
Disburse. * * *
(1) * * *
(iii) Dispensing cash for which an institution obtains a signed
receipt from the student, or in the case of a PLUS Loan from the parent
borrower; or
* * * * *
18. Section 668.163 is amended by revising paragraph (a)(3) to read
as follows:
Sec. 668.163 Requesting funds.
(a) * * *
(3) Reimbursement payment method. (i) The Secretary has sole
discretion in determining whether to place an institution on the
reimbursement payment method. Before an institution on reimbursement
submits a request for cash, the Secretary requires the institution to--
(A) Identify the students for whom the institution is seeking
reimbursement that will be included in the institution's request for
cash;
(B) Document properly that each student included in the request for
cash satisfies all applicable title IV, HEA program requirements and
that the disbursements the institution will make to these students are
for the correct amounts; and
(C) Credit appropriately the account of each student included in
the request for cash.
(ii) Along with an institution's request for cash, the Secretary
requires the institution to submit for review any documentation
necessary for determining that the institution has complied with the
requirements described in paragraphs (a)(3)(i)(B) and (a)(3)(i)(C) of
this section and with any other requirements specified by the
Secretary. The amount of the institution's request for cash may not
exceed the amount of the disbursements the institution will make to
students included in that request. When the institution receives the
funds, it must disburse the funds immediately and only to the students
identified in the institution's request for cash.
(iii) The Secretary approves the institution's request for cash and
transfers electronically the amount of that request into a bank account
designated by the institution if the Secretary determines that the
institution has complied with all of the requirements described in
paragraphs (a)(3)(i) and (a)(3)(ii) of this section.
* * * * *
19. Section 668.164 is amended by revising paragraph (a) to read as
follows:
Sec. 668.164 Maintaining funds.
(a) General. (1) Except for the requirement described in paragraph
(f) of this section, this section does not apply to funds that an
institution receives under the FFEL programs. An institution that
receives FFEL program funds through electronic funds transfer or by
master check must maintain those funds as provided under
Sec. 682.207(b).
(2)(i) For funds an institution receives under the Federal Pell
Grant, Campus-based, SSIG, and FDSL programs, an institution must
maintain a bank
[[Page 34433]]
account that meets the requirements under paragraphs (b) or (c) of this
section into which the Secretary transfers or the institution deposits
Federal funds that the institution receives from the title IV, HEA
programs. Except as provided in paragraph (e) of this section, an
institution is not required to maintain a separate account for title
IV, HEA program funds.
(ii) An institution must--
(A) Notify the bank of the accounts that contain Federal funds and
retain a record of that notice in its recordkeeping system; or
(B) Ensure that the name of the account discloses clearly that
Federal funds are maintained in that account; and
(iii) File with the appropriate State or municipal government
entity a UCC-1 statement disclosing that the account contains Federal
funds and maintain a copy of that statement in its records.
* * * * *
20. Section 668.165 is amended by adding paragraph (a)(4) and by
revising paragraphs (a)(1), (b)(1), (b)(2) introductory text,
(b)(2)(i)(C), (b)(4)(i) introductory text, (c)(2), (d)(1)(i) and
(d)(1)(iii) to read as follows:
Sec. 668.165 Disbursing funds.
(a) * * *
(1) An institution must notify a student or, in the case of a PLUS
loan, the student's parent of the amount of title IV, HEA program funds
the institution can expect to receive, and how and when those funds
will be paid.
* * * * *
(4) If an institution uses student accounts, an institution must
disburse a Direct Loan Program Loan by crediting the student's account.
(b) * * *
(1) General. In crediting the student's account with title IV, HEA
program funds, the institution may apply those funds only to allowable
charges described under paragraph (b)(3) of this section, except that
the institution may not apply the student's title IV, HEA program funds
to any charges the institution assessed the student in a prior award
year or period of enrollment. An institution must provide written
notification expeditiously to a student or parent, as applicable, that
the institution has credited the student's account with Direct Loan or
FFEL program funds.
(2) Student account balances. Unless otherwise authorized, by a
student or parent borrower, whenever an institution applies title IV,
HEA program funds to a student's account and determines that an amount
of those funds exceeds, or exceeded, the amount of allowable charges
the institution assessed the student, the institution must pay that
balance directly to the student, or in the case of a PLUS loan to the
parent borrower, as soon as possible but--
(i) * * *
(C) The date the student, or parent borrower rescinds his or her
authorization under paragraph (d) of this section; and
* * * * *
(4) * * *
(i) Except as provided in paragraph (b)(4)(ii) of this section, an
institution, as a fiduciary for benefit of a student, may hold student
funds from the title IV, HEA programs in excess of institutional
charges included in paragraph (b)(3) of this section, if the student,
or in the case of a PLUS loan the parent borrower, authorizes the
institution to retain the excess funds to assist the student in
managing those funds. If an institution chooses to hold excess student
funds, the institution--
* * * * *
(c) * * *
(2) Except as provided in paragraph (c)(3) of this section, the
earliest an institution may directly pay, or credit the account of an
enrolled student with title IV, HEA program funds, or in the case of a
PLUS Loan pay the parent borrower is--
(i) 10 days before the first day of a payment period or period of
enrollment, as applicable; and
(ii) For second and subsequent disbursements of loan funds under
the Direct Loan and FFEL programs, 10 days before the first day of a
semester, term, or other period of enrollment for which that
disbursement is intended.
* * * * *
(d) * * *
(1) * * *
(i) Disburse title IV, HEA program funds by initiating an
electronic funds transfer as provided in paragraph (a)(2) of this
section;
* * * * *
(iii) Hold excess student funds under paragraph (b)(4) of this
section.
* * * * *
21. Section 668.166 is amended by revising paragraph (c)(2)(i) to
read as follows:
Sec. 668.166 Excess cash.
* * * * *
(c) * * *
(2) * * *
(i) Considers the institution to have issued a check on the date
that the check cleared the institution's bank account, unless the
institution demonstrates to the satisfaction of the Secretary that it
issued the check shortly after the institution wrote the check; and
* * * * *
PART 674--FEDERAL PERKINS LOAN PROGRAM
22. The authority citation for part 674 continues to read as
follows:
Authority: 20 U.S.C. 1087aa-1087ii and 20 U.S.C. 421-429, unless
otherwise noted.
23. Section 674.16 is amended by revising paragraph (d) to read as
follows:
Sec. 674.16 Making and disbursing loans.
* * * * *
(d)(1)(i) The institution shall disburse funds to a student or the
student's account in accordance with the provisions of Sec. 668.165.
(ii) The borrower must sign for each advance of funds on the
promissory note, except as provided in paragraph (d)(2) of this
section.
(2)(i) In the case of a borrower enrolled in a study-abroad program
approved for credit by the home institution in which the borrower is
enrolled, the borrower may not be required to sign for any advance of
funds made while the borrower is studying abroad if obtaining the
borrower's signature would pose an undue hardship on the institution.
(ii) The institution shall properly document the reason for not
obtaining the borrower's signature.
* * * * *
[FR Doc. 95-16209 Filed 6-29-95; 8:45 am]
BILLING CODE 4000-01-P
