[Federal Register Volume 60, Number 231 (Friday, December 1, 1995)]
[Rules and Regulations]
[Pages 61796-61817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29180]
[[Page 61795]]
_______________________________________________________________________
Part VII
Department of Education
_______________________________________________________________________
34 CFR Part 668, et al.
Higher Education Act of 1965; Student Financial Assistance Programs;
Federal Regulatory Review; Final Rule
Federal Register / Vol. 60, No. 231 / Friday, December 1, 1995 /
Rules and Regulations
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[[Page 61796]]
DEPARTMENT OF EDUCATION
34 CFR Parts 668, 674, 675, 676, 682, 685, and 690
RIN 1840-AC20
Student Assistance General Provisions, Federal Perkins Loan
Program, Federal Work-Study Programs, Federal Supplemental Educational
Opportunity Grant Program, Federal Family Education Loan Programs,
William D. Ford Federal Direct Loan Program, and Federal Pell Grant
Program
AGENCY: Department of Education.
ACTION: Final regulations.
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SUMMARY: The Secretary amends the regulations governing the student
financial assistance programs authorized under title IV of the Higher
Education Act of 1965, as amended (title IV, HEA programs). These
programs include the campus-based programs (Federal Perkins Loan,
Federal Work-Study (FWS), and Federal Supplemental Educational
Opportunity Grant (FSEOG) programs), the Federal Family Education Loan
(FFEL) programs, the William D. Ford Federal Direct Loan (Direct Loan)
programs, the Federal Pell Grant Program, and the State Student
Incentive Grant (SSIG) program. These amendments, which eliminate
unnecessary regulations and improve the existing regulations, are part
of a planned series of regulatory reform and relief measures for the
title IV, HEA programs. The Secretary is making these changes in
response to the President's Regulatory Reform Initiative.
The title IV, HEA programs support the National Education Goals by
enhancing opportunities for postsecondary education. The National
Education Goals call for increasing the rate at which students graduate
from high school and pursue high quality postsecondary education, and
for supporting life-long learning.
EFFECTIVE DATE: These regulations take effect on July 1, 1996.
FOR FURTHER INFORMATION CONTACT: Harold McCullough or Rachael
Sternberg, U.S. Department of Education, 600 Independence Avenue SW.,
Regional Office Building 3, Room 3053, Washington, D.C. 20202, (202)
708-7888; or
1. For the Student Assistance General Provisions: Claude Denton,
Student Eligibility and Verification Section, General Provisions Branch
at (202) 708-7888;
2. For the Federal Perkins Loan Program: Sylvia R. Ross, Campus-
Based Loan Programs Section, Loans Branch at (202) 708-8242;
3. For the FWS and FSEOG programs: Kathy S. Gause, Campus-Based
Programs Section, Grants Branch at (202) 708-4690;
4. For the FFEL Programs: Ralph Madden, GSL Programs Section, Loans
Branch at (202) 708-8242;
5. For the Direct Loan Programs: Doug Laine, Direct Loan Policy
Group at (202) 708-9406; and
6. For the Federal Pell Grant Program: Mike Oliver, Pell and State
Grant Section, Grants Branch at (202) 708-4607. 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 a.m. and 8
p.m., Eastern time Monday through Friday.
SUPPLEMENTARY INFORMATION: On March 4, 1995, the President directed
every Federal agency to review its rules and procedures to reduce
regulatory and paperwork burden, and directed Federal agencies to
eliminate or revise those regulations that are outdated or otherwise in
need of reform. Responding to the President's Regulatory Reform
Initiative, the Secretary announced plans to eliminate or revise 93
percent of the Department's regulations. To launch the Department's
reinvention effort, the Secretary published a notice in the May 23,
1995 Federal Register (60 FR 27223-27226) eliminating more than 30
percent of the Department's regulations, primarily in areas not related
to student financial assistance.
The Secretary is conducting a page-by-page review of all student
financial assistance regulations to identify those that should be
eliminated or improved. The Secretary is also considering developing
proposals for statutory amendments to eliminate unnecessary
administrative burden.
As part of his response to the President's regulatory reinvention
initiative, on September 21, 1995 the Secretary published a Notice of
Proposed Rulemaking (NPRM) for parts 668, 674, 675, 676, 682, 685, and
690 in the Federal Register (60 FR 49114). The NPRM included a
discussion of the proposed changes that will not be repeated here. The
following list summarizes those changes and identifies the pages of the
preamble to the NPRM on which the discussion can be found.
Part 668--Student Assistance General Provisions
Subpart A--General
The Secretary proposed to remove and reserve Sec. 668.7 ``Student
Eligibility,'' and move the ``eligible student'' provisions to a
revised subpart C of 34 CFR 668 (page 49114).
Subpart B--Standards for Participation in Title IV, HEA Programs
The Secretary proposed to allow institutions to obtain information
from the National Student Loan Data System (NSLDS) that would otherwise
be found on a financial aid transcript, once the Secretary publishes a
notice in the Federal Register informing institutions that the NSLDS
can be used to satisfy this purpose (pages 49114-49115).
Subpart C--Student Eligibility
The Secretary proposed to expand the data match with the Social
Security Administration (SSA), starting in the 1996-97 award year, in
order to confirm claims of U.S. citizenship by applicants for title IV,
HEA program assistance on the Free Application for Federal Student Aid
(FAFSA) (page 49115).
The Secretary proposed to allow students to satisfy the requirement
of filing a Statement of Educational Purpose with the institution by
completing the FAFSA, which will include this statement starting with
the 1996-97 award year.The Secretary's proposal did not affect current
FFEL requirements with regard to this statement on loan applications
(page 49115).
The Secretary proposed to eliminate the model Statement of
Educational Purpose. A model statement would be duplicative because the
statement will appear on the FAFSA (page 49115). The Secretary proposed
to eliminate the Statement of Registration Status. A male student's
Selective Service registration status is now confirmed through a data
match with the Selective Service System. This data match eliminates the
need for the collection of a separate statement (page 49115).
The Secretary proposed to amend and reorganize the provisions under
which a student who owes a debt under the HEA or to the United States
may nevertheless be eligible to receive title IV, HEA program
assistance. The Secretary also proposed to conform the regulations to
existing statutory requirements pertaining to bankruptcy (pages 49115-
49116).
[[Page 61797]]
Subpart I--Immigration Status Confirmation
The Secretary proposed to amend Sec. 668.133(b) to remove the
requirements for requesting secondary confirmation from the Immigration
and Naturalization Service for a student if (1) the student presents
documents to his or her institution verifying his or her immigration
status that are identical to documents presented to that institution in
a previous year, (2) that institution determined the student to be an
eligible noncitizen using secondary confirmation of those same
documents in a previous award year, and (3) the institution does not
have conflicting information or reason to doubt the student's claim of
eligible noncitizen status (page 49116).
Subpart K--Cash Management
The Secretary proposed to amend Sec. 668.164(a)(2) to eliminate the
UCC-1 filing requirement for institutions that (1) disclose clearly in
the name of the account in which Federal funds are deposited that
Federal funds are maintained in that account, or (2) are backed by the
full faith and credit of a State (page 49116).
The Secretary proposed to modify Sec. 668.165(b)(1) to provide an
institution with as much flexibility as possible with respect to how it
notifies a student or parent borrower that FFEL or Direct Loan program
funds have been credited to the student's account. That flexibility
allows an institution to provide notification electronically or through
the use of telecommunication devices (page 49116).
The Secretary proposed to amend Sec. 668.165(b)(1) and (3) to
provide that under certain circumstances, and with the student's
permission, an institution may use current year title IV, HEA program
funds to pay for minor charges from a prior year (pages 49116-49117).
Parts 674, 675, and 676--Campus-Based Programs
The Secretary proposed to eliminate the duplicative definitions of
``full-time graduate or professional student'' and ``full-time
undergraduate student from Secs. 674.2(b), 675.2(b), and 676.2(b), as
applicable, and instead incorporate the definition of ``full-time
student'' set forth in Sec. 668.2(b) for all three of the campus-based
programs (page 49117).
The Secretary proposed to eliminate the provisions of
Secs. 674.17(a), 675.17, and 676.17 which provide that title IV, HEA
program funds are held in trust for the Secretary and intended student
beneficiaries and cannot be used or hypothecated for any other purpose,
because these very provisions are included in Sec. 668.161(b) of the
Student Assistance General Provisions regulations (page 49117).
The Secretary proposed to amend Secs. 674.19(e)(4)(v),
675.19(c)(3), and 676.19(c)(3) to allow institutions the additional
flexibility of using optical disk technology in complying with record
retention requirements (page 49117).
Part 674--Federal Perkins Loan Program
The Secretary proposed to amend the definition of ``making of a
loan'' under Sec. 674.2(b) by removing the reference to a borrower
signing for each advance of funds (page 49117).
The Secretary proposed to eliminate the requirement under
Sec. 674.16 that a student sign for each loan advance, and require
instead that the institution simply must obtain the borrower's
signature on a promissory note for each award year before it disburses
any loan funds under that promissory note for that award year (page
49117).
The Secretary proposed to amend Sec. 674.31(a) to indicate that the
Secretary will provide sample promissory notes to institutions, and
that institutions may add items to the sample notes so long as the new
items do not alter the substance of these sample notes (page 49117).
The Secretary proposed to amend Sec. 674.33(a)(2) by allowing
institutions to combine the last scheduled Federal Perkins loan payment
with the next-to-the-last payment if the last payment is $25 or less
(page 49117).
The Secretary proposed to amend Sec. 674.47(g) to allow an
institution to cease collection activity on a defaulted account with a
balance of less than $25, while continuing to require the institution
to consider the loan as in default for purposes of calculating its
cohort default rate. The Secretary further proposed to amend
Sec. 674.47 by adding a new paragraph (h) to allow institutions to
cease collection activity and write off loan accounts with a balance of
less than $1, including outstanding principal, accrued interest,
collection costs, and late fees (pages 49117-49118).
Part 675--Federal Work-Study Programs
Appendix B--Model Off-Campus Agreement
The Secretary proposed to eliminate this sample agreement as an
appendix to the FWS regulations. The Secretary will include a model
off-campus agreement in the Federal Student Financial Aid Handbook
(page 49118).
Parts 682 and 685--Federal Family Education Loan Program and Direct
Loan Program
The Secretary proposed to expand the pool of borrowers under
Secs. 682.201 and 685.200 of the Federal PLUS and Federal Direct PLUS
programs, respectively, to include the spouse of a student's parent if
that parent remarried (page 47118).
The Secretary proposed to eliminate Sec. 682.600 (a) through (c)
because they duplicate provisions in 34 CFR part 600 or 668. The
provisions of Sec. 682.600(d) that deal with foreign schools, however,
are necessary and the Secretary proposed to include those provisions in
a new section, Sec. 682.611 (page 49118).
The Secretary proposed to eliminate the provisions contained in
Sec. 682.602 that deal with students enrolled in correspondence
programs, because those students are not eligible to receive FFEL
program funds unless they are enrolled in a program that leads to an
associate, bachelor's, or graduate degree (page 49118).
Part 690--Federal Pell Grant Program
Subpart A--Scope, Purpose and General Definitions
The Secretary proposed to revise Sec. 690.7 by deleting paragraph
(a)(1) because the provisions contained in that paragraph duplicate
provisions in 34 CFR part 600 or 668 (page 49118).
Subpart G--Administration of Grants Payments
The Secretary proposed to eliminate the last sentence in
Secs. 690.71, 690.72, 690.73, and 690.74, respectively, because they
duplicate provisions contained in 34 CFR part 668 (page 49118).
The Secretary proposed to revise Sec. 690.83 by consolidating in
one paragraph the procedures that allow institutions to receive payment
or credit for Federal Pell Grants they previously disbursed if that
situation is disclosed by an initial audit or program review (page
49118).
Substantive Changes to the NPRM
The following discussion reflects substantive changes made to the
NPRM in the final regulations. The provisions are discussed in the
order in which they appear in the proposed rules.
Student Assistance General Provisions
Subpart C--Student Eligibility
The proposed subpart C is further reorganized to clarify the
difference between what the general provisions for student eligibility
are, and how each of
[[Page 61798]]
those elements of student eligibility are established.
Subpart I--Immigration-Status Confirmation
Section 668.133 Conditions Under Which an Institution Shall Require
Documentation and Request Secondary Confirmation
Currently, in the absence of a data match with the Immigration and
Naturalization Service (INS) confirming a student as an eligible
noncitizen, institutions are required to use the secondary confirmation
process to determine if a student is an eligible noncitizen in
accordance with section 484(a)(5) of the HEA. Secondary confirmation
requires institutions to mail requests for immigration status
information to the INS and to use INS responses (also by mail) in
determining the student's noncitizen eligibility. This determination
has been required for each award year that the student applies for
title IV, HEA assistance. The NPRM proposed to delete secondary
confirmation requirements, in most cases, if the student produces
immigration status documents that are identical to documents received
by the institution in a previous award year. In response to comments
received, this section is further revised to eliminate the need for the
student to produce immigration status documents in subsequent award
years if the documents previously submitted by the student remain
valid.
Subpart K--Cash Management
Section 668.163 Requesting Funds
The Secretary amends this section to require that for any request
for cash, an institution must identify the title IV, HEA program under
which it requests funds by its Catalog of Federal Domestic Assistance
(CFDA) number and the total amount of funds for each CFDA number
included in that request.
Section 668.164 Maintaining Funds
In response to public comment, this section is revised to exclude
all public institutions from the UCC-1 filing requirement.
Section 668.165 Disbursing Funds
In response to public comment, this section is revised to clarify
that if an institution provides an electronic notice to a student or
parent that title IV, HEA loan program funds were credited to the
student's account, it must request confirmation from the student or
parent of the receipt of that notice and maintain a record of that
confirmation. In addition, this section is revised to provide that an
institution may consider prior-year charges that do not exceed $100 to
be minor charges.
Federal Perkins Loan Program
Section 674.5 Definitions
The definition of ``satisfactory arrangements to repay the loan''
for purposes of the Federal Perkins Loan Program will be amended to
include those loans that are ``paid in full.'' This change allows an
institution to exclude a defaulted loan that has been paid in full from
the institution's cohort default rate.
Section 674.31 Promissory Note
The proposal to provide ``sample'' Federal Perkins loan promissory
notes to participating institutions has been removed. A national
promissory note will be maintained for the Federal Perkins Loan
Program. Institutions may make only nonsubstantive changes to these
notes.
Section 674.47 Costs Chargeable to the Fund
The September 21, 1995 NPRM offered a proposal to allow an
institution to cease collection activity on a defaulted account with a
balance of less than $25. In an effort to reduce administrative burden
on institutions that are handling defaulted accounts with balances
larger than $25, the cessation of collection activity provision has
been modified. Institutions will be allowed to cease collection
activity on a defaulted account with a balance of less than $200, if
all due diligence has been performed in attempting to collect the
defaulted account and there has not been any activity on the account
for at least four years.
Analysis of Comments and Changes
In response to the Secretary's invitation in the NPRM, 74 parties
submitted comments on the proposed reform and relief regulations. An
analysis of the comments and of the changes in the regulations since
publication of the NPRM follows. Major issues are discussed under the
section of the regulations to which they pertain. Technical and other
minor changes--and suggested changes the Secretary is not legally
authorized to make under applicable statutory authority--are not
addressed.
Comments and Responses
Regulatory Reform and Relief Effort
Comments: Numerous commenters indicated support for the Secretary's
efforts to eliminate unnecessary regulations and to improve the
existing regulations. However, some commenters stated that more needs
to be done to streamline the regulations for the title IV, HEA
programs.
Discussion: The Secretary is encouraged by the expression of
support from the public for the reform and relief regulation activities
that are part of the Department's reinvention effort. The Secretary
realizes that additional amendments to the regulations for the title
IV, HEA programs are possible. The amendments in this regulatory
package represent only one part of a planned series of regulatory
reform and relief amendments for the student financial assistance
regulations. The Secretary restates his plans to propose additional
reform and relief regulatory changes for the title IV, HEA programs in
the upcoming months.
Changes: None.
Part 668--Student Assistance General Provisions
Subpart B--Standards for Participation in Title IV, HEA Programs
Section 668.19 Financial Aid Transcript
Comments: Most commenters supported the Secretary's proposal to
allow use of the National Student Loan Data System (NSLDS) in lieu of
the financial aid transcript when the NSLDS becomes operational. A few
commenters were concerned about the accuracy of the NSLDS and urged the
Secretary to fully test the system before requiring its use and
suggested the National Student Loan Clearinghouse as an acceptable
alternative while the testing takes place. One commenter requested
sufficient notice before the NSLDS is placed into operation to allow
institutions with limited computer resources to obtain the necessary
equipment and expertise. One commenter questioned the frequency with
which the Secretary would require institutions to access the NSLDS, and
expressed concern that NSLDS inquiries would be required at the time of
each disbursement. Several commenters suggested that the terms ``loan
period or period of enrollment for which the loan is made'' be used in
lieu of ``award year'' as it pertains to FFEL and Direct Loans because
annual loan limits are not based on award years. They also suggested
that annual loan limits could be affected by loans made in the
preceding award year, and that the financial aid transcripts should
include this information. One commenter was concerned about obtaining
information from institutions that are unable to use, or fail to meet
requirements for providing information to, the NSLDS. One commenter
asked whether an
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institution could assume, if the NSLDS contains no financial data on a
particular student, that the student did not receive aid from any
previously-attended institution, or if no data appears for a given
institution, that the student did not receive aid from that particular
institution. One commenter inquired as to whether the NSLDS will
provide data regarding the student's receipt of title IV, HEA
assistance at a closed institution, and whether the NSLDS will provide
notice that the institution is closed. One commenter expressed concern
that institutions would not be able to ascertain from the NSLDS that a
student transferred during the current award year. One commenter
questioned why paragraph (a)(3) continues to address the withholding or
limited disbursement of title IV, HEA assistance pending receipt of
financial aid transcripts, but does not address those issues for the
NSLDS, and whether the Secretary intends to provide for limited
disbursements in the event the NSLDS becomes temporarily inoperative.
The same commenter suggested that the Secretary provide regulatory
instructions with regard to how the institution should proceed when
NSLDS data conflicts with other information available to the
institution.
Discussion: With regard to the concerns expressed about the
accuracy of NSLDS data, the Secretary notes that the NSLDS underwent
extensive testing of its executable programs and support functions and
successfully passed those initial test reviews prior to becoming
operational in November, 1994. The National Student Loan Clearinghouse
would not be an acceptable alternative because it serves only a few of
the institutions currently participating in title IV, HEA programs, and
because it contains information pertaining to students who are not
title IV, HEA recipients in addition to those who are. The
Clearinghouse also does not include any financial aid history
information but only enrollment data.
With regard to the concern about limited computing resources at
some institutions, the Secretary specifically designed the NSLDS to
require minimal computer equipment. The NSLDS can be accessed using a
personal computer with 486 megahertz of processing power, eight
megabytes of random access memory, and 50 megabytes of hard disk
storage space. In addition, the NSLDS will be available as an
alternative to, not as a replacement for, the paper financial aid
transcript, so that institutions with insufficient computer equipment
can continue to use the paper financial aid transcript. An institution
receiving a paper financial aid transcript request will continue to be
required to complete and return it to the requesting institution, in
accordance with 34 CFR 668.19.
With regard to the comment concerning required frequency of access,
the Secretary has taken steps to include NSLDS financial aid history
information in the Student Aid Report/Institutional Student Information
Record (SAR/ISIR). The SAR/ISIR will, at a minimum, inform the
institution as to whether the student previously received title IV, HEA
financial aid. If there is no financial aid history, the institution
will not be required to obtain a financial aid transcript or access the
NSLDS since it can be assumed that the student either did not attend
another school or attended but did not receive any title IV aid. With
regard to the comments that suggested that the proposed financial aid
transcript does not provide the necessary information on FFEL loan
history to compute annual loan limits, the Secretary agrees with these
commenters' concerns and will reinstate provisions requiring inclusion
of ``period of enrollment'' or ``loan period'' and loans made in
preceding award years under the FFEL as well as the Direct Loan
programs. With regard to the concern about institutions who are unable
to use, or fail to meet requirements for providing information to, the
NSLDS, the Secretary assures the commenter that complete guidance to
institutions will be provided in using the NSLDS, and that compliance
with regular reporting requirements will be monitored and enforced.
With regard to closed institutions, the NSLDS contains the cumulative
loan history of title IV, HEA aid recipients, including aid awarded at
institutions that are closed at the time of inquiry. The NSLDS will
not, however, provide specific notification that any particular
institution has closed. With regard to the concern about whether
institutions will be able to determine from the NSLDS that a student
has transferred during the current award year, the Secretary assures
the commenter that the NSLDS will receive information on current year
awards from guaranty agencies, the Direct Loan servicers, and from
institutions. However, the Secretary notes that the flexible reporting
requirements of data providers does present a problem with so called
``mid-year transfers'' and is committed to keeping any burden related
to the accessing of financial aid history for such students to a
minimum. With regard to the applicability of the withholding and
limited disbursement provisions to the NSLDS, the Secretary believes
that the provisions of Sec. 668.19 are applicable only to the paper
financial aid transcript process. If the NSLDS becomes temporarily
inoperative, the paper financial aid transcript process could be used
and these provisions would apply. However, the Secretary believes that
any such ``downtime'' of the NSLDS would be brief and encourages
institutions to re-query the NSLDS as soon as it is available. If NSLDS
data conflicts with other information available to the institution, the
conflict must be resolved before any title IV, HEA disbursement can be
made.
Changes: Paragraph (c) is revised to provide that a financial aid
transcript must include the loan period covered by each loan made under
the FFEL and Direct Loan programs, and the loan history must also
include information concerning loans made in preceding award years.
Paragraph (a)(2)(ii) is revised to clarify that in a Federal Register
Notice, the Secretary will inform institutions both when, and under
what conditions, the NSLDS may be used.
Subpart C--Student Eligibility
Comments: Many commenters expressed support for the proposal to
move the student eligibility regulations to subpart C.
Discussion: The Secretary appreciates the favorable comments
received regarding the reorganization of the student eligibility
provisions. After further examination, the Secretary believes that
additional refinements are warranted to minimize any confusion that may
be caused by the proposed organization. In particular, the Secretary
believes that the basic requirements for establishing a student's
eligibility for title IV, HEA assistance (formerly Sec. 668.7(a))
should be clearly separated from requirements placed on institutions
(formerly Sec. 668.7(b)) for assessing the student's compliance with
these requirements.
Changes: The Secretary has made technical revisions that establish
a general student eligibility section, followed by sections addressing,
in detail, how each of the elements of student eligibility are
established.
Section 668.32 Student Eligibility--General (Section 668.33 in NPRM)
Compulsory School Attendance
Comments: Several commenters noted that the Secretary has removed
provisions requiring students to be above the age of compulsory school
attendance to be eligible for title IV, HEA assistance. One commenter
[[Page 61800]]
questioned the wisdom of allowing very young students to borrow these
funds. Another commenter expressed concern that the removal of these
provisions would increase the potential of abuse in the use of title
IV, HEA funds.
Discussion: In proposing this deletion of regulatory language, the
Secretary had no intention of removing the policy regarding compulsory
school attendance. Since the definitions of ``institution of higher
education'' in Sec. 600.4 and ``proprietary institution of higher
education'' in Sec. 600.5 include provisions containing this
requirement, the Secretary believes there is no reason to duplicate the
requirement in the student eligibility regulations.
Changes: None.
Statement of Educational Purpose
Comments: Most commenters supported the Secretary's proposal to
provide a Statement of Educational Purpose on the Free Application for
Student Aid (FAFSA) that satisfies Sec. 668.33(e) requirements for
filing the Statement of Educational Purpose. One commenter suggested
that the regulations specifically authorize use of the FAFSA in this
manner.
Discussion: The Secretary prefers to use non-specific regulatory
language to minimize the potential of redrafting regulations each time
the application delivery system changes.
Changes: None.
Section 668.33 Citizenship/Residency Requirements U.S. Citizenship
Match
Comments: Several commenters expressed support for the proposed
enhancement of the existing social security match to include matching
on U.S. citizenship data. They predicted that this enhancement would
improve the integrity of the title IV, HEA application process by
making it more difficult to avoid checking eligibility status with the
INS. Other commenters, however, expressed concern that the proposed
enhancement represents an additional unjustified burden caused by the
need to collect evidence of U.S. citizenship. These commenters
suggested that the Secretary should provide data to support the claim
that misreporting of U.S. citizenship is a significant problem. If
misreporting exists, one commenter questioned whether detection of a
few such cases justifies the additional burden that would be imposed on
the many applicants who complete this item truthfully. Another
commenter questioned the accuracy of the Social Security Administration
(SSA) data to be used for this matching program in light of information
received by the commenter that citizenship data has only been collected
by SSA since the early 1980's. Several commenters expressed concern
that a student's U.S. citizenship status that was not confirmed would
also prevent or delay that student from receiving confirmation of the
accuracy of the student's social security number, or that such
interference could also occur in reverse order.
Discussion: The Secretary disagrees with the comments portraying
the U.S. citizenship match as an unjustified burden. On September 9,
1994, the Department's Office of Inspector General issued an audit
report indicating that, during the 1992-1993 award year, 45,000 Federal
Pell Grant awards were made to students claiming U.S. citizenship on
their applications for federal student assistance who were not
confirmed as U.S. citizens by the Social Security Administration (SSA).
Since SSA records do not contain alien registration numbers, it is
virtually impossible to track the status of these 45,000 individuals to
determine whether they were naturalized citizens or eligible
noncitizens at the time they applied. However, if even only 10% of the
45,000 applications were completed by ineligible aliens, the savings
more than offset the expense of matching, and will provide additional
grant funds for eligible students. The Secretary disagrees with the
commenters who are concerned about additional burden being placed on
students who will be required to provide evidence of U.S. citizenship.
The vast majority of students will be confirmed by SSA as U.S.
citizens, and no further action will be required. Many noncitizens who
falsely claim U.S. citizenship will provide alien registration numbers,
and their applications will be processed using the INS data match in
the same manner as other noncitizen applications. Undocumented illegal
aliens will tend to drop out of the application process without burden
to the institution. For the most part, the Secretary believes that only
naturalized citizens who have not kept their records updated with SSA
are likely to be affected by this new requirement. With regard to the
commenter's concern that SSA has only collected citizenship data since
the early 1980's, the Secretary confirms this fact. However, SSA has
collected ``place of birth'' data for many years, and the match will
access both ``place of birth'' and ``citizenship'' data elements before
issuing match results. With regard to concerns about delays and other
impacts of U.S. citizenship matching on social security number
matching, the Secretary wishes to assure the commenter that there will
be no impact of one match on the other. Social security numbers and
U.S. citizenship status are generated from separate data fields within
the SSA data base, and will generate separate messages.
Changes: None.
Section 668.35 Student Debts Under the HEA and to the U.S. (Section
668.34 in NPRM)
Comments: One commenter suggested that the Secretary reverse the
order of proposed paragraphs (b)(2)(i) and (b)(2)(ii) to prevent the
possibility of a student making six consecutive monthly payments on a
defaulted loan before approaching a lender to make satisfactory
repayment arrangements. Another commenter noted that the definition of
``satisfactory repayment arrangement'' in Sec. 682.200 already provides
for six consecutive monthly payments, and that the language proposed in
paragraph (b)(2) could be interpreted as requiring twelve consecutive
monthly payments. One commenter suggested that proposed paragraph
(d)(1)(ii) be revised to include the phrase ``satisfactory to the
holder'' instead of ``satisfactory to the institution,'' which the
commenter believes is inappropriate for the FFEL and Direct Loan
programs. Several commenters urged the Secretary to reinstate
references in proposed paragraph (d)(2) to the specific title IV, HEA
programs for which overpayments are applicable, asserting that such a
correction would alleviate confusion concerning the relevance of
overpayments to the FFEL and William D. Ford Federal Direct Loan
programs.
Discussion: The Secretary agrees with the commenters' concerns with
regard to the order of proposed paragraphs (b)(2)(i) and (b)(2)(ii).
Although the phrase ``makes arrangements, satisfactory to the holder''
used in this paragraph is not identical to the phrases used in the
individual title IV, HEA loan programs, the Secretary emphasizes that
those specific provisions that govern how a defaulted borrower can
regain eligibility are found in the individual title IV, HEA loan
program regulations. The Secretary also agrees with the comment
suggesting that proposed paragraph (d)(1)(ii) be revised to require a
student who has received a grant or loan overpayment to make
arrangements, satisfactory to the holder of the overpayment debt, to
pay the overpayment. With regard to the comment requesting
reinstatement in proposed paragraph (d)(2) of the specific programs for
which overpayments are applicable, the Secretary agrees and has
[[Page 61801]]
included specific references to the Federal Perkins Loan Program to
eliminate any confusion.
Changes: The Secretary reverses the order of proposed paragraphs
(b)(2)(i) and (b)(2)(ii) and revises proposed paragraph (b)(2)(i) to
clarify that the six consecutive monthly payments are to be
incorporated as part of satisfactory arrangements to repay the loan
balance, and that those arrangements are to be made in accordance with
the individual title IV, HEA loan program. Proposed paragraph
(d)(1)(ii) is revised to clarify that a student who receives a grant or
Federal Perkins loan overpayment is to make arrangements, satisfactory
to the holder of the overpayment debt, to repay the overpayment.
Section 668.36 Social Security Number Verification (Section 668.33
NPRM)
Comments: One commenter supported the change to proposed
Sec. 668.33(d)(3)(iii) which clarifies that the student bears primary
responsibility for reporting corrected social security numbers to the
Secretary. In addition, the commenter also expressed support for the
change to proposed Sec. 668.33(d)(4), which relaxes the prohibition
from disbursing or certifying aid if the student fails to meet the
institution's deadline for submission of a correct social security
number. The commenter suggested that the Secretary provide similar
``waiver'' authority to institutions in regulations governing the other
data matches.
Discussion: As explained in the discussion regarding the selective
service match, the Secretary is amending regulatory sections governing
data matches to consistently implement provisions of the Computer
Matching and Privacy Protection Act of 1988. In particular, the revised
provisions will clarify the Secretary's policy with respect to the 30-
day due process standard and the setting of deadlines by institutions
for students submitting documents in order to contest match results.
Changes: Proposed paragraph (b)(2) is revised to provide that the
institution must give a student at least 30 days from the date the
institution is notified of the results of the data match, or until the
end of the award year, whichever is later, to produce evidence of an
accurate social security number.
Section 668.37 Selective Service Registration (Sections 668.33(b) and
668.36 in NPRM)
Statement of Registration Status
Comments: One commenter requested a clarification concerning
whether the Statement of Registration Status may be necessary if the
Selective Service data match does not confirm the student's status, or
if some other statement is required. Two commenters suggested that
proposed Sec. 668.33(b)(1) be corrected to remove the unintended
requirement that a student must provide evidence of exemption from the
selective service registration requirement when the student's output
document already confirms the student's exemption status. Another
commenter requested that the model Statement of Registration Status be
retained as an efficient way of collecting information concerning a
student's exemption from selective service registration.
Discussion: The Secretary envisions no circumstances in which the
Statement of Registration Status would continue to be required. If the
student's claim to have registered with Selective Service is not
confirmed by the Selective Service data match, the student bears
responsibility for submitting evidence to the institution that he
registered, or is exempt from registration. The institution may consult
the Federal Student Financial Aid Handbook to determine if this
evidence is valid, or it may require the student to obtain a Status
Information Letter from Selective Service to further clarify the
student's status. Instructions for interpreting Status Information
Letters are also available in the Handbook. Given the thorough
procedures in place for verifying evidence of registration or
exemption, the Secretary does not wish to retain vestiges of an earlier
system based primarily on self-certification, and would prefer to
completely eliminate the Statement of Registration Status. The
Secretary finds little validity to the commenter's concern that the
regulations would require students, confirmed as exempt from
registration requirements by the data match, to nevertheless provide
evidence of exemption. The data match is designed to automatically
screen out certain applicants who are clearly exempt from these
requirements. An output document containing a message attesting to the
applicant's exemption is quite sufficient to establish that ``the
student is not, or was not required to be, registered with Selective
Service,'' as provided in proposed Sec. 668.33(b)(2)(i).
Changes: None.
Selective Service Data Match
Comments: One commenter noted that the Secretary has changed
proposed paragraph (b)(2) with regard to the time period for providing
documentation of Selective Service registration status. As currently
worded, the student has 30 days from the date the institution is
notified of the results of the data match or the end of the award year,
whichever is later, to provide such documentation. The commenter noted
that this language differs from Sec. 668.33(b)(2), which does not
provide the ``end of the award year'' option.
Discussion: In practice, the ``end of the award year'' option is
not new. The institution can set its deadline for receiving
documentation of Selective Service registration status on any date, as
long as it allows the student the statutorily-required minimum of 30
days to produce the documents. By rephrasing the requirement in this
manner, the Secretary is clarifying that institutions need not impose
arbitrary deadlines that prevent the student from establishing
eligibility later in the award year and receiving title IV, HEA
assistance for that award year, if the institution's overall policy
would not normally set such deadlines for all students. The Secretary
is aware that the phrasing of this requirement is inconsistent among
the various regulatory provisions governing the data matches, and will
revise all applicable sections to resolve this inconsistency.
Changes: The Secretary is revising sections that govern data
matches to include the requirement that the student must provide
evidence of his or her eligibility, within 30 days from the date the
institution is notified of the results of the data match, or until the
end of the award year, whichever is later.
Subpart I--Immigration Status Confirmation
Section 668.133 Conditions Under Which an Institution Shall Require
Documentation and Request Secondary Confirmation
Comments: Many commenters supported the Secretary's proposal to
limit secondary confirmation requirements. Many also suggested that the
Secretary should take the additional step of waiving collection of
immigration status documents if the documents collected in a previous
award year remain valid.
Discussion: The Secretary agrees with commenters who questioned the
need for students to present immigration status documents in subsequent
award years if they had been confirmed as eligible noncitizens in a
previous award year. The Secretary cautions institutions, however, that
some eligible noncitizen statuses are subject to expiration and that
institutions should consult the student's file from that previous award
year to determine if the
[[Page 61802]]
student's immigration status remains valid.
Changes: Section 668.133(b) is revised to delete the provision
requiring a student to present evidence of immigration status in years
subsequent to an award year in which secondary confirmation with INS
was used to confirm the student's eligible noncitizen status.
Subpart K--Cash Management
Section 668.163 Requesting Funds
Comments: None. Proposed rulemaking waived under 5 U.S.C. 553
(b)(A).
Discussion: The Secretary amends Sec. 668.163, which describes the
procedures under which institutions request and receive title IV, HEA
program funds The amendment requires an institution to include in any
request for cash (1) the Catalog of Federal Domestic Assistance (CFDA)
number identifying the source of program funds, and (2) the amount of
funds for each CFDA number included in that request. Under current
practice, an institution reports its expenditure of title IV, HEA
funds, by program, on a quarterly basis. However, to monitor the
expenditure of Federal appropriations, the Department of the Treasury
and the Office of Management and Budget require the Department of
Education to report on a monthly basis the amount and source of program
funds provided to participating institutions. Obviously, the Secretary
cannot provide to Treasury and OMB an accurate and timely report of the
Department's use of appropriated funds, unless institutions identify
the title IV, HEA funds by program and amount when those funds are
requested.
The Secretary will use the information provided by this new report
format not only to give more timely reports of amounts provided to
institutions, but will consider whether this information can be used to
reduce the number of expenditure reports institutions would otherwise
be required to make. Moreover, this minor procedural change poses
almost no additional burden on institutions.
In accordance with this subpart and the procedures contained in the
Recipients Guide for the Department of Education Payment Management
System, under the advance payment method, an institution must first
determine its immediate disbursement needs before submitting a request
for cash; under the reimbursement payment method, an institution
requests funds for specific students whom the institution demonstrates
to the satisfaction of the Secretary are eligible to receive the
requested amount of program funds. In either case, the institution will
know both the program for which it seeks funds and the amount needed to
make disbursements to students. This change merely requires the
institution to disclose that information on a standardized form.
Changes: Section 668.163(a)(2) and (3) are amended to require that
in any request for cash, an institution must identify the title IV, HEA
program under which the institution requests funds by its appropriate
Catalog of Federal Domestic Assistance (CFDA) number and the total
amount of program funds for each CFDA number included in the request.
Section 668.164 Maintaining Funds
Comments Regarding UCC-1 Filings
Comments: Most of the commenters agreed with the proposal to
eliminate the UCC-1 filing requirement for institutions that are backed
by the full faith and credit of a State, and for bank accounts that do
not contain the phrase ``Federal funds'' in their name.
One commenter writing on behalf of business officers opined that
the term ``backed by the full faith and credit of the State'' is a poor
designator of institutional control, estimating that about one-half of
all public institutions would not meet this requirement due to the
diversity of governing arrangements for State-supported institutions.
According to the commenter, these State-supported institutions pose no
greater risk to Federal funds than other public institutions that
technically satisfy the proposed requirement. One other commenter
echoed these sentiments, adding that a UCC-1 filing is not appropriate
for government agencies. Another commenter expressed concern that many
State auditors and offices of general counsel are interpreting the
phrase ``backed by the full faith and credit of the State'' quite
literally and concluding that it does not apply to State schools. All
of these commenters recommend that the Secretary modify the proposed
requirement to exempt all public institutions from having to file UCC-1
statements.
One commenter writing on behalf of business officers stated that a
UCC-1 filing is unnecessary for any institution because institutions
are otherwise required to provide written notification to their bank of
the accounts that contain Federal funds.
Discussion: The commenters have convinced the Secretary that for
the purpose of protecting Federal funds, a UCC-1 filing is not
necessary for public institutions, regardless of whether these
institutions are backed by the full faith and credit of the State.
The Secretary disagrees with the commenter that written
notification to the bank in which the account is maintained provides
sufficient protection of Federal funds. The abuse cited by the
Secretary in the final regulations for the cash management regulations
(see, 59 FR 61724), that certain institutions have used or
misrepresented Federal funds to obtain a loan or secure credit, may
continue to occur where an institution seeks to obtain a loan or credit
from a bank other than the bank to which it provided written
notification. It is this situation where a UCC-1 filing provides an
additional safeguard because it serves to alert other banks or
potential creditors that the institution's account contains Federal
funds.
Changes: Section 668.164(a)(2) is revised to exempt all public
institutions from filing a UCC-1 statement.
Section 668.165 Disbursing Funds
Comments Regarding Electronic Notification of Student and Parent
Borrowers
Comments: Most commenters supported the proposal under which an
institution could notify a student or parent borrower that his or her
account was credited with Direct Loan or FFEL Program funds
electronically or through the use of telecommunications devices. Two
commenters contended that the ``return receipt'' requirement for
documenting notifications transmitted via electronic mail (e-mail), as
discussed in the preamble to the proposed rules, departs from and
exceeds the documentation requirements for written notifications
delivered by regular mail. The commenters saw no reason why a return
receipt should be required for e-mail transmissions when no
corresponding proof of delivery is required for notifications sent by
regular mail.
For the following reasons, one commenter writing on behalf of a
student legal services organization strongly urged the Secretary to
delete the proposed electronic notification provisions. First, the
commenter contended that electronic notification would allow schools
short on time or resources to cut corners on notice to students,
thereby diminishing a borrower's rights. At worst, it would open the
door to abuse by unscrupulous schools or individuals who want to
minimize borrower knowledge about his or her control over loan funds.
Given the increasing use of electronic funds
[[Page 61803]]
transfers (EFT), the commenter contended that students have lost their
key means of control over loan proceeds, i.e., their power to refuse to
endorse the loan check. Amplifying this point, the commenter asserted
that when the EFT process is used, timely, clear notice that the loan
proceeds have been credited to the student's account is the equivalent
of requesting a check endorsement--it triggers the student's ability to
refuse the loan in whole or part. Thus, the commenter concluded that
adequate, verifiable notice of receipt of loan proceeds has serious
legal and financial implications for borrowers. Moreover, the commenter
implied that adequate and verifiable notice is notably absent in the
proposed rules, despite the preamble explanation that the Secretary
expects schools to ``have a means of documenting that the student or
parent received this information.'' According to the commenter, the
reality is that schools will use, or purport to use, telephone or in-
person conversations as the means of notification and document that
notification with notes to a borrower's file. Armed with only notes of
such alleged contacts, the Secretary would be hard pressed to prove
violations of the disclosure rule. The commenter concluded by saying
the minimal requirement that schools notify a student in witting that
his or her account has been credited--implicit notice that the
borrower's legal liability for loan has begun--should not be abandoned.
Discussion: The Secretary disagrees that requiring a ``return
receipt'' for e-mail transmissions expands any documentation
requirements. In fact, the Secretary believes the opposite is true.
As a general rule, in the absence of any documentation specified by
the Secretary to satisfy a particular requirement, an institution must
be able to document that it satisfied that requirement. Thus, the
Secretary believes that the burden and cost of documenting that a
written notification was mailed to a student far exceed the burden and
cost of a receipted e-mail notification.
With regard to whether e-mail should be subject to a return receipt
requirement because there is no corresponding proof of delivery for
notices sent by regular mail, the Secretary notes that the courts have
developed a presumption that mail deposited with the U.S. Postal
Service is actually received (See, Cook v. Providence Hospital, 820
F.2d 176,n.3 (6th Cir. 1987); and McPartlin v. Commissioner, 653 F.2d
1185, 1191 (7th Cir. 1981)). The same presumption does not apply to e-
mail messages.
In response to the comment by student legal services, the Secretary
disagrees that the proposed change minimizes borrower rights. Rather,
in recognition of the less burdensome and more cost effective methods
afforded by electronic technologies, the Secretary sought only to
expand the means by which an institution may notify a student or
parent. That the notice may now be provided by additional, equivalent
means has no bearing on borrower rights.
The purpose of the notice, whether that notice is provided in
writing or electronically, is to remind students of their loan
obligation and to give students the opportunity to replace credited
loan proceeds with other funds thereby reducing their loan when an
institution return the loan proceeds. The Secretary wishes to make
clear that an institution cannot be compelled to return loan proceeds
that were properly disbursed or delivered to the student solely at the
request of a student.
On the other hand, the Secretary agrees that telephonic and in-
person conversations are not adequate and verifiable methods of
providing notice.
The Secretary did not propose that this requirement apply to
Federal Perkins Loan Program funds because under that program the
student had to sign for each loan advance. However, since the Secretary
has decided to eliminate this Federal Perkins Loan Program requirement,
this section is amended to provide that an institution must also notify
a borrower that his or her account was credited with Federal Perkins
loan funds.
Changes: Section 668.165(b)(1) is amended to clarify that an
electronic notice must be the equivalent of a written notice by
incorporating the NPRM preamble statement that if an institution
notifies a student or parent electronically, it must request a return
receipt and maintain a record of that receipt. In addition, the phrase
``by other means'' is removed to preclude the use of telephone or in-
person conversations as the sole means by which an institution may
notify a student. Also, this section is revised to include notification
to Federal Perkins Loan Program borrowers.
Comments Regarding Prior-Year Charges
Comments: Most of the commenters supported the proposal allowing an
institution, under limited circumstances and with a student's
permission, to use a student's current year title IV, HEA program funds
to pay for minor prior year charges. A few of these commenters, mostly
business officers, stated that the current prohibition on the payment
of prior-year charges has created difficulties for many students and
institutions, resulting in increased transaction costs. These
commenters believed that the proposed change will allow for smoother
processing of student accounts and expedite the registration process.
One commenter, writing on behalf of a higher education association,
suggested that a student be asked to approve a specific amount of funds
that an institution could use to pay for prior-year charges when the
institution obtains the student's permission. The commenter believed
that this would protect the student's need to have sufficient current
year funds to pay for living and other necessary expenses. Another
commenter suggested that after this provision is tested, some room for
refinement may become evident, such as whether it is necessary to
actually credit funds for current year charges before identifying that
funds will be left over to pay prior year balances. Still another
commenter questioned the role and authority of an aid officer in
determining whether the payment of ``minor prior-year charges'' would
hamper a student's ability to satisfy current year obligations,
particularly when the aid officer and the student are not in agreement
as to the amount of funds needed for current obligations.
While the majority of commenters appreciated that the Secretary did
not specify a dollar amount for minor prior-year charges, a few
commenters lamented this lack of specificity. One of these commenters
argued that the small dollar amount involved in most cases where this
provision would apply does not warrant the administrative burden
associated with obtaining a student's permission. Instead, the
commenter suggested that the Secretary define minor prior-year charges
as falling between $250 to $500 and not require written permission from
the student.
Two commenters argued that the cost and burden imposed by this
proposal on students and institutions is unwarranted since any
outstanding balance must be paid before a student is allowed to enroll
or continue at an institution. These commenters suggested that the
Secretary either simplify the process under which prior-year charges
may be paid or, notwithstanding the concerns expressed by the Secretary
in the NPRM, allow these charges to be paid without restriction.
One commenter writing on behalf of a student legal services
organization contended that schools should not be allowed to control
student credit
[[Page 61804]]
balances (particularly if those balances contain loan proceeds) in this
manner even with the student's permission. The commenter's contention
was based on the following reasons.
The commenter's first reason was based on the Secretary's failure
to specify a dollar amount of prior-year charges. As a result, the
commenter believed that fly-by-night schools, whose motivation is to
maximize profits rather than maintain credibility with the Department,
would take advantage of this provision. The commenter indicated that
while a university might define a ``minor charge'' as up to $10 in
library fines, a high-cost trade school could define it as several
hundred dollars of overpriced vocational equipment. The commenter
warned that the Secretary will be left to assess the reasonableness of
school practices in program reviews, i.e., after the fact and after the
student's loan proceeds have been used.
The commenter's second reason was that prior-year charges may have
been unpaid because they were contested by the student. The commenter
saw no valid reason to allow the school to determine the validity of
the charges and then use loan proceeds to cover them. The commenter
asserted that the fact that the borrower has to give permission for
these sorts of charges provides little comfort since the authorization
will probably be a generic, blanket authorization given at the
beginning of the term with a sheaf of other forms before specific
charges are ever incurred.
Further, the commenter noted that in order to accommodate this
change in the regulation, Sec. 668.165(b)(1) has also been amended to
delete the current generic bar on applying title IV, HEA program funds
``to any charges assessed the student in a prior award year or period
of enrollment.'' Thus, it appeared to the commenter that the proposed
rules open the door to using current year funds to pay for prior year
tuition, room, board, or other miscellaneous charges. For these
reasons, the commenter urged the Secretary to leave the regulation as
currently written.
Discussion: The Secretary offers the following guidance with
respect to the comments dealing with student authorizations. An
authorization must contain an explanation of the provisions regarding
the activities that an institution seeks to perform on behalf of a
student. This does not mean that the authorization must detail every
aspect pertaining to an activity. On the other hand, the Secretary does
not consider acceptable a blanket authorization which only identifies
the activities to be performed.
Regarding the comment that an institution must first credit a
student's account with title IV, HEA program funds before the
institution may use any balance that remains to pay for prior-year
charges, the Secretary notes that while this is technically correct, it
has broader implications. The proposed language ``provided that a
student has or will have a title IV, HEA program credit balance'' was
intended to extend the benefits of this provision to institutions that
draw down funds after a student starts classes. These institutions
would have the assurance that agreed-to prior-year charges will be
paid.
The Secretary has carefully considered the arguments made by
student legal services asking the Secretary to retract the proposed
prior-year charges provisions. The Secretary acknowledges that while it
may be possible for an unscrupulous school to benefit from an abuse of
these provisions, the Secretary notes that prior-year balances occur
mainly at established two- and four-year schools--such schools can not
be characterized as ``fly-by-night.''
In response to comment that the current prohibition on the payment
of prior-year charges has now created problems for students and
institutions, the Secretary reminds institutions that title IV, HEA
program funds have never been permitted to be used to pay prior-year
charges. However, it appears from these comments, and from comments
previously received on the cash management regulations, that some
institutions were either unaware of or ignored this prohibition. The
Secretary does not wish to admonish institutions that otherwise
administer the title IV, HEA programs properly, but believes that had
these institutions structured student billing and accounting systems
that identified and prevented the payment of prior-year charges with
current year funds, they would not now be experiencing difficulties
brought about by the policy change allowing for the payment of these
charges under limited circumstances.
Moreover, the Secretary cannot in these regulations make the
changes that would be necessary to allow institutions to use a
student's funds without restriction. To do so would require changes in
the statutory provisions that limit, without permission, the use of a
student's title IV, HEA program funds to specified allowable charges
and in the Secretary's longstanding interpretation of the precepts
underlying need analysis and award determinations. The proposal to
allow for the payment of prior-year charges under limited circumstances
is consistent with current law and, as a policy matter, was formulated
merely as an administrative convenience to students and institutions in
recognition of a problem that the Secretary believes should not occur
with regularity or involve large sums of money. The Secretary did not
intend to take sides in disputes between students and institutions
regarding the legitimacy of prior-year charges. In putting forth this
proposal, the Secretary was mindful of the need to protect student
rights while at the same time meeting the administrative needs of
institutions.
To this end, the Secretary will keep the general prohibition
against using a student's current year title IV, HEA program funds to
pay for prior-year charges. The Secretary will allow for payment of
minor prior-year charges as proposed, but with one modification. The
modification addresses the comments regarding whether a student may
authorize in advance a specific amount of funds to pay for prior-year
charges and whether the Secretary will establish a dollar amount for
these charges. The Secretary believes that it would be difficult to
determine in advance what the specific amount should be, and whether
the payment of that amount in a future period would create financial
problems for a student. Such a determination should be made in view of
the student's circumstances when the situation arises. However, an
institution may consider prior-year charges that do not exceed $100 to
be minor without making this determination and may obtain a student's
authorization in advance to pay for these charges should they occur.
Changes: Section 668.165(b)(1) is revised to reinstate the general
prohibition that a student's current year title IV, HEA program funds
may not be used to pay for prior-year charges. This section is also
amended by removing proposed paragraph (b)(3)(iv)(C) and adding a new
paragraph (e) that provides that an institution may use a student's
current year funds to pay for minor prior-year charges if the student's
current year institutional charges are satisfied and the institution
obtains the student's permission. In addition, an institution may
consider prior-year charges that do not exceed $100 to be minor. To pay
prior-year charges for amounts over $100, an institution must determine
if that payment would prevent the student from paying for his or her
educational expenses.
[[Page 61805]]
Campus-Based Programs
Sections 674.2, 675.2, and 676.2 Definitions
Comments: Two commenters expressed their support for the proposal
to delete the duplicative definitions of the terms ``full-time graduate
or professional student'' and ``full-time undergraduate student'' from
Sec. 674.2(b) and Sec. 675.2(b) and the term ``full-time undergraduate
student'' from Sec. 676.2(b). One commenter felt clarification was
needed in the ``full-time student'' definition in Sec. 668.2 of the
Student Assistance General Provisions regulations to distinguish a
full-time course load for undergraduate students from that of graduate/
professional students.
Discussion: The Secretary believes that the definition of ``full-
time student'' in the Student Assistance General Provisions regulations
adequately addresses the determination of a full-time course load for
both undergraduates and graduate/professional students. As stated in
Sec. 668.2, in the definition of a ``full-time student,'' ``* * *
academic workload (other than by correspondence) as determined by the
institution under a standard applicable to all students enrolled in a
particular educational program. The student's workload may include any
combination of courses, work, research, or special studies that the
institution considers sufficient to classify the student as a full-time
student.'' This part of the definition provides the institution with
the discretion to determine a full-time course load for all
classifications of students. The definition then proceeds to provide
minimum standards for an undergraduate student.
Changes: None.
Sections 674.17, 675.17, and 676.17 Federal Interest in Allocated
Funds
Comments: Several commenters supported the proposal to delete the
provisions in Sec. 674.17(a), Sec. 675.17, and 676.17 that provide that
Federal Perkins Loan, FWS, and FSEOG program funds are to be held in
trust for the intended students and the Secretary and cannot be used or
hypothecated for any other purpose. The commenters agreed that the
elimination of these sections reduces redundancy since this provision
is contained in the Student Assistance General Provisions regulations,
Sec. 668.161(b).
One commenter, while agreeing that regulations should not be
repetitive, pointed out that Sec. 668.161(b) of the General Provisions
regulations only excepts funds used for administrative expenses,
whereas Sec. 675.17 of the FWS Program regulations, includes other
allowable uses besides awards to students, such as use of funds for
establishment of a Job Location and Development (JLD) Program.
The commenter also observed that under the Federal Perkins Loan
Program regulations certain collection costs may also be charged to the
fund; these charges are outside of the administrative expense
allowance. The commenter further indicated that Sec. 674.17(a) also
reinforces the requirement that funds received by the institution
includes repayments on loans. The commenter suggested clarifying
Sec. 668.161(b) to include other uses of campus-based funds.
Discussion: Federal Perkins Loan Program. The Secretary does not
agree with the comment that Sec. 668.161(b) needs clarification if
Sec. 674.17(a) is deleted. Section Sec. 668.161(b) provides for uses of
title IV, HEA allocated funds. Once loans are made and students begin
making repayments, the repayments on these loans become part of the
Federal Perkins Loan Program Fund (Fund). Also the charges for certain
costs incurred in collecting a loan, when not paid by the borrower, are
to be made against the Fund. Uses of the Fund are provided for in other
sections of the Federal Perkins Loan Program regulations.
Federal Work-Study Program. The Secretary agrees with the commenter
that Sec. 668.161(b) excepts only funds used for administrative
expenses, whereas Sec. 675.17 allows funds allocated under the FWS
Program to also be used for establishment of a Job Location and
Development Program; and that if Sec. 675.17 is deleted,
Sec. 668.161(b) needs clarification.
Changes: The Secretary is amending the language of this provision
in Sec. 668.161(b) to incorporate the uses of allocated FWS funds for
certain activities under the Job Location and Development Program.
Sections 674.19, 675.19 and 676.19 Fiscal Procedures and Records
Comment: Several commenters commended the Secretary for the
proposal to allow institutions the additional flexibility of using
optical disk technology in complying with recordkeeping requirements.
The commenters viewed this as additional proof of the Department's goal
to simplify and modernize the regulations, and they commended the
Secretary on his recognition of the importance of paper reduction. One
of these commenters stated that this change will greatly enhance their
ability to comply with the regulations to maintain records while
utilizing their personnel and physical spaces more efficiently.
One commenter, while recognizing the benefit to schools in reducing
the paper they have to retain, expressed concern of the danger for
borrowers and the Department in having records that are more difficult
to read or use as proof in legal cases. This commenter pointed out the
fact that forgeries and alterations are not likely to be discernible
under these alternative formats. The commenter recommended against
allowing alternative forms of record retention for key Federal Perkins
loan documents, such as promissory notes.
Discussion: The Secretary appreciates the commenters' support for
new technology for the maintenance of records. However, the Secretary
recognizes that he needs to allow for future technologies that provide
an actual image of the original document. In response to the one
commenter who was concerned about alternative forms of record
retention, it has never been the Secretary's intention to allow
alternative means of recordkeeping for key documents. Section
674.19(e)(4)(i) of the Federal Perkins Loan Program regulations
provides that institutions must keep the original promissory notes and
repayment schedules in a locked, fireproof container. These provisions
remain and are not affected by the addition of the use of optical disk
technology for maintaining other records.
Changes: The Secretary is amending this provision to provide for
additional optical imaging technology.
Federal Perkins Loan Program
Section 674.2 Definitions
Comments: The commenters supported the Secretary's proposal to
redefine the term ``making of a loan.'' However, several commenters
requested that the Secretary clarify when a Federal Perkins loan is
made, because the date on which the student signs the promissory note
and the date on which the funds are disbursed may differ.
Discussion: In response to the commenters' clarification requests,
under the provisions of this regulation, the Secretary considers that a
Federal Perkins loan has been ``made'' when two events have occurred:
the borrower has signed the Federal Perkins loan promissory note and
the institution makes the first disbursement of loan funds to the
borrower under that note. This new definition represents a significant
departure from long-standing Federal Perkins Loan Program policy,
because under the old policy, each
[[Page 61806]]
disbursement of a Federal Perkins loan to a borrower was considered a
separate Federal Perkins loan.
Changes: The Secretary is modifying the definition of ``making of a
loan'' to state that a Federal Perkins loan is ``made'' when the
borrower has signed the promissory note and the first disbursement of
loan funds has occurred.
Section 674.16 Making and Disbursing Loans
Comments: Many commenters strongly supported the Secretary's
proposal to eliminate the requirement that a student sign for each loan
advance. Most commenters agreed that this was the single most important
proposal to reduce burden in the administration of the Federal Perkins
Loan Program. One commenter strongly objected to the elimination of the
requirement that a student sign for each loan advance. This commenter
stated that signing for each advance reinforced in the students' minds
the amounts they borrowed. This commenter was also concerned that,
without the borrower's signature authorizing each loan advance, the
institution may not be able to obtain a judgment or assign the loan
without incurring additional legal costs to prove that the student had
actually borrowed the total amount owed on the loan.
Discussion: The Secretary appreciates the support the community has
shown for this regulatory effort. The Secretary respects the
commenter's concern for the integrity of the Federal Perkins Loan
Program. However, the Secretary believes that the value of the
borrower's signing for each advance is outweighed by the burden this
requirement imposes on institutions and borrowers. On the other hand,
under the regulations, an institution may choose to continue to require
that the borrower sign for each advance. Moreover, the Secretary
disagrees with the commenter that the failure to obtain a signature for
each advance will preclude the institution from assigning the note or
obtaining a judgment against the borrower.
The Secretary notes that Sec. 668.165(b)(1) is being amended to
require an institution to notify a student that a disbursement of
Federal Perkins loan funds is being credited to the student's account.
Changes: None.
Section 674.31 Promissory Note
Comments: While many commenters supported the proposal to allow the
Secretary's promissory note under the Federal Perkins Loan Program to
be used as a sample note, thereby allowing institutions to add items to
the note as long as the substance of the note remains unchanged, many
also requested clarification of this provision. Commenters asked
whether changing the ``substance'' of the note meant changing the
format of the note. Several commenters asked the Secretary to define
``substance.'' Several commenters asked whether new items on the
promissory note that imposed additional requirements, penalties, or
benefits were acceptable to the Secretary, and if not, what was an
acceptable additional item. One commenter recommended that the
Secretary not make the proposed change. This commenter stated that
other federal loan programs use a national note that requires no
additions by the schools. This commenter felt strongly that the
language and provisions used in the Federal Perkins Loan Program
promissory notes should be consistent across the Program and urged the
Secretary to maintain Sec. 674.31 unchanged.
Discussion: The Secretary has reevaluated his proposal to amend
Sec. 674.31(a). The Secretary agrees with commenters that the proposed
change allowing institutions to make nonsubstantive additions to the
sample promissory notes is too vague. The Secretary believes that the
addition of provisions to the promissory note that would impose
additional requirements, penalties, or benefits constitutes a
substantive change to the note.
The Secretary agrees with the commenter who recommended that the
promissory note should remain a national note and with consistent
provisions. The Secretary is, therefore, requiring institutions to use
the promissory notes approved by the Secretary, rather than providing
``sample'' promissory notes. An institution may not change the text of
the promissory note or rearrange the order of the text. An institution
may make nonsubstantive changes, such as changing the size or style of
the type or requiring a student to include his or her driver's license
number.
Changes: The Secretary is changing Sec. 674.31(a) to provide that
institutions must use the promissory note provided by the Secretary and
that institutions may only make changes to the notes provided that are
nonsubstantive.
Section 674.33 Repayment
Comments: Commenters unanimously supported the Secretary's proposal
to combine the last scheduled Federal Perkins loan payment with the
next-to-last payment if the last payment is $25 or less, an increase
from $15. One commenter suggested that institutions be allowed to
combine the last scheduled payment with the next-to-last payment if the
last payment is $50 or less.
Discussion: The Secretary's purpose in amending Sec. 674.33 is to
remove administrative burden and to improve an institution's success in
collecting small loan balances. However, the Secretary does not wish to
overly burden student borrowers. The Secretary believes that combining
the last scheduled payment with the next-to-last payment if the last
payment is $50 or less may place a financial strain on student
borrowers, thereby compromising the borrower's ability to pay off his
or her loan.
Changes: None.
Section 674.47 Costs Chargeable to the Fund
Section 674.47 (g)
Comments: Of all the Federal Perkins Loan Program proposals in the
NPRM, the Secretary's proposals related to ceasing collection activity
generated the most comments. Most of these commenters made suggestions
on ways to amend this provision. One commenter felt that, rather than
ceasing collection activity, this provision should be modified to
permit the write-off of defaulted accounts with outstanding balances
between $5 and $25 after sending a first overdue notice. The commenter
further noted that the proposed rule would require institutions to
maintain accounts which would continue to accrue interest and would age
over the years. Thus, loans under $25 would eventually reach $25. At
that point the institution would have to perform due diligence on that
loan under subpart C. The commenter noted that as a result there is no
net gain to the institution in terms of administrative costs.
A commenter applauded the Secretary's attempt to provide relief for
institutions handling defaulted accounts with outstanding balances of
less than $25, but the commenter felt the regulations should reflect a
higher amount, i.e. $100 or less.
Discussion: The Secretary does not agree with the commenter's
suggestion to write off defaulted accounts with outstanding balances
between $5 and $25 because it is inappropriate to write off debts of
that amount. These are borrowers who are in default on a Federal loan.
The borrower owes these amounts and the failure to collect these funds
affects the future level of the Fund. However, the Secretary agrees
with other commenters' suggestions to
[[Page 61807]]
raise the level at which an institution can stop collection efforts on
a loan.
The Secretary agrees with the commenters that it may not be cost
effective for an institution to continue collection efforts on small
loan balances. Therefore, the Secretary will allow an institution to
cease collection activity on defaulted accounts with balances of
between $25 and $200, if the institution carried out the subpart C due
diligence requirements and the account has not had any activity for
four years. The Secretary chose a $200 threshold because $200 is the
level at which an institution must make an annual determination to
litigate a defaulted account.
If an institution chooses this option, these accounts may be
included in its cohort default rate, if applicable. The borrower will
still be in default and ineligible for further title IV, HEA program
funds.
The Secretary agrees with the commenter's point regarding an
institution's election to cease collection efforts on an account under
$25. Therefore, the institution will not have to exercise due diligence
required under subpart C, even though interest will continue to accrue
and may put the account over $25, if it documents that it ceased
collection activity when the account was under $25. However, the
institution would not be able to assign the account to the Secretary
and the borrower will remain responsible for repaying the account,
including accrued interest. In addition, the Secretary notes that these
accounts will still be included in the institution's cohort default
rate, if applicable, and the borrower is still in default and
ineligible for title IV, HEA program funds.
Changes: The Secretary has modified paragraph (g)(1) to reflect the
noted changes.
Comments: One commenter felt that there should be some way for an
institution to use its own funds to pay off larger balance accounts
with outstanding balances as high as $100. The commenter did not feel
it was cost effective to continue to track small amounts as defaults.
Discussion: An institution may pay off loan balances of its
borrowers. However, under section 462(h)(2)(D) of the HEA, any such
loans will be considered in default for purposes of calculating the
institution's cohort default rate.
Changes: None.
Comments: A few commenters wanted a further explanation from the
Secretary regarding proposed Sec. 674.47(g)(2). These commenters did
not understand how a loan which is not closed or paid-in-full could
reduce the assets of the Fund. One commenter felt that this proposal
would not only be counter-intuitive, since loans in this category would
remain as balances due, accruing interest and carrying penalties
associated with default, but would also create a new area of
administrative complexity for this new category of loans ``in limbo.''
These commenters indicated that this change would burden institutions
with additional costs in order to maintain this category of ``due'' but
``non-asset'' loans.
Discussion: The Secretary agrees with the commenters' points and
apologizes for any confusion this proposed provision might have caused.
It was the Secretary's intent to reduce burden in the administration of
the Federal Perkins Loan Program. It was not the Secretary's intent to
burden institutions with additional costs and a new systems design.
Because these accounts are still ``open,'' institutions must include
the amounts of these accounts as assets of the Fund when they choose to
cease collection activities of defaulted accounts. However, when an
institution writes off an account, in accordance with paragraph (h) of
this section, these accounts would not remain an asset of the Fund.
Changes: The Secretary is amending paragraph (g) to remove the
provision that would require an account on which the institution has
chosen to cease collection activity to no longer be considered as an
asset of the Fund.
Section 674.47(h)
Comments: While most commenters appreciated the Secretary's
proposal to allow institutions to write off loan accounts with balances
of less than $1.00, all commenters were unanimously opposed to the
proposed write-off amount. Commenters felt that $1.00 was too
stringent, that it was not cost effective in terms of real
administration and collection costs, and that it would not accomplish
the proposal's intended purpose: to provide relief to institutions in
the administration of the Federal Perkins Loan Program. Commenters
encouraged the Secretary to consider a higher amount, with the
commenters suggesting amounts ranging from $2 to $25. A few commenters
stated that the majority of their accounts with small remaining
balances were $5.00 or less, and that it would be clearly more
effective and efficient to raise the amount to $5.00.
Discussion: The commenters have convinced the Secretary that the
proposed $1 figure was too low. The Secretary has adopted the
commenters' suggestions that the amount be raised to $5. Once these
accounts have been written off, the account is considered as paid-in-
full. The account will no longer be considered as an asset to the Fund,
the account will not be counted in the institution's cohort default
rate, if applicable, and the promissory note will be returned to the
borrower marked as paid-in-full.
Changes: The Secretary is amending 674.47(h) to increase the write-
off threshold to $5.00. The Secretary is also amending paragraph (h) to
provide that an account that has been written off may not be considered
as an asset to the Fund.
Federal Work-Study Programs
Appendix B--Model Off-Campus Agreement
Comments: Four commenters supported the Secretary's proposal to
remove the model off-campus agreement from regulation and include the
agreement in the Federal Student Financial Aid Handbook. They felt that
the Handbook is a more appropriate document and that this will make the
sample agreement more easily accessible by aid administrators. One of
these commenters suggested that the Secretary also include a model
community service agreement in the Handbook.
Discussion: The off-campus agreement in Appendix B is a suggested
model for the development of a written agreement between an institution
of higher education and a federal, state, or local public agency or
private nonprofit organization which employs students participating in
the FWS Program. As stated in the model, institutions and agencies or
organizations may devise additional or substitute paragraphs that are
consistent with the statute or regulations and add any pertinent
information that orients the agreement towards community services.
Therefore, one sample off-campus agreement will be provided in the
Federal Student Financial Aid Handbook for use in the FWS Program.
Changes: None.
Federal Family Educational Loan Program, and Direct Loan Program
Sections 682.201 and 685.200 Eligible Borrowers
Comments: Many commenters supported the proposal in the FFEL and
Direct Loan Programs to allow a student's stepparent to borrow under
the PLUS and Federal Direct PLUS Programs.
One commenter suggested that a stepparent should remain eligible to
borrow on behalf of a stepchild if the
[[Page 61808]]
natural or adoptive parent to whom the stepparent is married, dies. The
commenter indicated that a situation may arise where, if the other
natural parent is still alive, the student will not become an
independent student. The commenter indicated that the student's
relationship with the surviving stepparent may be more akin to a
parental bond than is the student's relationship with the surviving
parent.
Another commenter suggested that the language of the regulations be
amended to provide that a stepparent would be eligible to borrow on
behalf of a stepchild if the stepparent's income was not used to
determine the expected family contribution (EFC) of the stepchild. The
commenter indicated that a parent could marry after the Free
Application for Federal Student Aid (FAFSA) had been filed. The
commenter believed that the new stepparent should be eligible to borrow
a PLUS loan on behalf of the student.
Discussion: The Secretary appreciates the mostly positive comments
he received on his proposal to allow stepparents to borrow under the
FFEL and Direct Loan PLUS programs. While the Secretary agrees that the
situation suggested by the commenter could, on rare occasions happen,
he points out that he would expect that, in most instances, the
financial aid officer would use professional judgement and make the
student independent, while perhaps assessing some amount of untaxed
income to the student as a result of support received from the
stepparent. In this instance the student would be considered eligible
for additional unsubsidized loans to replace whatever PLUS proceeds are
not available. For these reasons, the Secretary does not believe there
is need to make additional changes to the eligibility criteria for
stepparents to borrow under the title IV PLUS programs.
The Secretary acknowledges, as pointed out by the second commenter,
that the proposed language could have been interpreted to exclude
certain stepparents from participation in PLUS Loan Programs because
their income and assets were not taken into account when determining
the student's EFC. Such a condition could exist when the student did
not complete a FAFSA or in the case cited by the commenter when the
natural parent married after the FAFSA was filed. The Secretary will
change the eligibility requirement under which a stepparent may borrow
a PLUS loan to include the income and assets ``that would have been
taken into account'' rather than ``are taken into account'' when
determining the student's EFC.
Changes: Sections 682.201 and 685.200 are changed to allow a
stepparent to borrow under the FFEL and Direct Loan PLUS programs ``if
that spouse's income and assets would have been taken into account when
calculating a dependent student's expected family contribution.''
Section 682.600 Agreement Between an Eligible School and the Secretary
for Participation in the FFEL Programs
Comments: All commenters supported the proposal to eliminate the
provisions of Sec. 682.600 (a) through (c) and to include the
provisions that deal with foreign schools (Sec. 682.600(d)) in a new
Sec. 682.611. One commenter requested clarification of the Secretary's
intent to eliminate Sec. 682.600.
Discussion: The Secretary noted in the preamble of the NPRM (60 FR
49118) that the provisions of Sec. 682.600(a) through (c) are
unnecessary because they duplicate existing provisions found in 34 CFR
Part 600 (Institutional Eligibility Under the Higher Education Act of
1965, As Amended) and 34 CFR Part 668 (Student Assistance General
Provisions). The Secretary also noted that the provisions included in
Sec. 682.600(d) that deal with foreign schools are needed and would be
retained in a new section, Sec. 682.211.
Changes: None.
Section 682.602 Schedule Requirements for Courses of Study by
Correspondence
Comments: All commenters supported the proposal to eliminate the
provisions contained in Sec. 682.602.
Discussion: Commenters agreed with the Secretary that the
provisions of Sec. 682.602 are no longer needed since students enrolled
in correspondence programs are not eligible to receive FFEL Program
loans unless they are enrolled in a program that leads to an associate,
bachelor, or graduate degree.
Changes: None.
Federal Pell Grant Program
Comments: Various commenters expressed support for the proposed
changes to the Federal Pell Grant Program.
Discussion: The Secretary appreciates the commenters' support of
efforts to eliminate duplicative provisions from the regulations.
Changes: None.
Executive Order 12866
These regulations have been reviewed in accordance with Executive
Order 12866. Under the terms of the order the Secretary has assessed
the potential costs and benefits of the regulatory action.
The potential costs associated with the regulations are those
resulting from statutory requirements and those determined by the
Secretary to be necessary for administering the title IV, HEA programs
effectively and efficiently. Burdens specifically associated with
information collection requirements, if any, are identified and
explained elsewhere in the preamble under the heading Paperwork
Reduction Act of 1995.
In assessing the potential costs and benefits--both qualitative and
quantitative--of these regulations, the Secretary has determined that
the benefits of the regulations justify the costs.
The Secretary has also determined that this regulatory action does
not unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
Summary of Potential Costs and Benefits
The potential costs and benefits of these final regulations are
discussed elsewhere in this preamble under the following heading:
Analysis of Comments and Changes.
Regulatory Flexibility 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.
Waiver of Proposed Rulemaking
In accordance with section 431(b)(2)(A) of the General Education
provisions Act, 20 U.S.C. 1232(b)(2)(A), 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 rules
and regulations. However, the Secretary amends Sec. 668.163(a)(2) and
(3) as a final rule to revise the procedure for presenting cash
requests to the Department under the exemption from rulemaking
requirements in 5 U.S.C. 553(b)(A) for rules of agency procedure.
Assessment of Educational Impact
In the NPRM published September 21, 1995, the Secretary requested
comment on whether the proposed regulations in this document would
require transmission of information that is being gathered by, or is
available from, any other agency or authority of the United States.
[[Page 61809]]
Based on the response to the proposed rules on its own review, the
Department has determined that the regulations in this document do 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 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
Loan programs--education, Student aid, Reporting and recordkeeping
requirements.
34 CFR Part 675
Loan programs--education, Student aid, Reporting and recordkeeping
requirements.
34 CFR Part 676
Loan programs--education, Student aid, Reporting and recordkeeping
requirements.
34 CFR Part 682
Administrative practice and procedure, Colleges and universities,
education, Loan programs--education, Reporting and recordkeeping
requirements, Student aid, Vocational education.
34 CFR Part 685
Administrative practice and procedure, Colleges and universities,
education, Loan programs--education, Reporting and recordkeeping
requirements, Student aid.
34 CFR Part 690
Grant programs--education, Reporting and recordkeeping
requirements, Student aid.
(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal
Supplemental Educational Opportunity Grant Program; 84.032
Consolidation 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 William D. Ford
Federal Direct Loan Program; and 84.272 National Early Intervention
Scholarship and Partnership Program.)
Dated: November 24, 1995.
Richard W. Riley,
Secretary of Education.
The Secretary amends parts 668, 674, 675, 676, 682, 685, and 690 of
title 34 of the Code of Federal Regulations as follows:
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
1. The authority citation for part 668 continues to read as
follows:
Authority: 20 U.S.C. 1085, 1088, 1091, 1092, 1094, 1099c, and
1141, unless otherwise noted.
Sec. 668.2 [Amended]
2. In Sec. 668.2, paragraph (b) is amended by revising paragraph
(1) of the definition of ``Payment period'' and by adding a sentence to
the end of the definition of ``Federal Perkins Loan Program'' to read
as follows:
Sec. 668.2 General definitions.
* * * * *
Federal Perkins Loan Program: * * * Unless otherwise noted, as used
in this part, the Federal Perkins Loan Program includes the National
Direct Student Loan Program and the National Defense Student Loan
Program.
* * * * *
Payment period: (1) With respect to the Federal Pell Grant Program,
a payment period as defined in 34 CFR 690.3;
* * * * *
Sec. 668.7 [Removed and Reserved]
3. Section 668.7 is removed and reserved.
4. Section 668.19 is revised to read as follows:
Sec. 668.19 Financial aid transcript.
(a) (1) An institution shall determine whether a student who is
applying for assistance under any title IV, HEA program has previously
attended another eligible institution.
(2) Before a student who previously attended another eligible
institution may receive any title IV, HEA program assistance the
institution the student is, or will be, attending--
(i) Must request each eligible institution the student previously
attended to provide to it a financial aid transcript; or
(ii) May use information it obtains from the National Student Loan
Data System (NSLDS) to satisfy the requirements of paragraphs (a)(1)
and (a)(2)(i) of this section, after the Secretary informs institutions
through a Notice in the Federal Register that the NSLDS is available
for this purpose, and information on how the NSLDS can be used.
(3) Except as provided in paragraph (b)(5) of this section, if an
institution requests a financial aid transcript from any institution a
student previously attended, until the institution receives each
requested financial aid transcript; the institution--
(i) May withhold payment of Federal Pell Grant and campus-based
funds to the student;
(ii) May disburse Federal Pell Grant and campus-based funds to the
student for one payment period only;
(iii) May decline to certify the student's Federal Stafford Loan
application or the parent's Federal PLUS application under the FFEL
Program;
(iv) May decline to originate the student's Federal Direct Stafford
Loan or the parent's Federal Direct PLUS under the Direct Loan Program;
(v) May not deliver Federal Stafford or disburse Federal Direct
Stafford Loan proceeds to a student; and
(vi) May not deliver Federal PLUS or disburse Federal Direct PLUS
proceeds to a parent or student.
(4) (i) An institution may not hold Federal Stafford or Federal
PLUS loan proceeds under paragraph (b)(3) of this section for more than
45 days. If an institution does not receive all required financial aid
transcripts for a student within 45 days of the receipt of such
proceeds, the institution shall return the loan proceeds to the
appropriate lender.
(ii) An institution that certifies a Federal Stafford or Federal
PLUS loan application before receiving all required financial aid
transcripts shall return to the lender the appropriate amount of any
Federal Stafford or Federal PLUS proceeds if it receives a financial
aid transcript indicating that the student is not eligible for all, or
a part, of the loan proceeds.
(5) An institution may disburse title IV, HEA program funds to a
student without receiving a financial aid transcript from an eligible
institution the student previously attended if the institution the
student previously attended--
(i) Has closed, and information concerning the student's receipt of
title IV, HEA program assistance for attendance at that institution is
not available;
(ii) Is not located in a State; or
(iii) Provides the disbursing institution with the written
certification described in paragraph (b)(2)(ii) of this section.
(b) Upon request, each institution located in a State shall
promptly
[[Page 61810]]
provide to the institution that requested a financial aid transcript--
(1) All information in its possession concerning whether the
student in question attended institutions other than itself and the
requesting institution; and
(2) (i) A financial aid transcript for that student, if the student
received or benefitted from any title IV, HEA program assistance while
attending the institution; or
(ii) A written certification that--
(A) The student did not receive or benefit from any title IV, HEA
program assistance while attending the institution; or
(B) The transcript would cover only years for which the institution
no longer has records and is no longer required to keep records under
the applicable title IV, HEA program recordkeeping requirements.
(c) An institution must disclose on a financial aid transcript for
a student--
(1) The student's name and social security number;
(2) To the extent the institution is aware, whether the student is
in default on any title IV, HEA program loan;
(3) To the extent the institution is aware, whether the student
owes an overpayment on any title IV, HEA program grant or Federal
Perkins Loan;
(4) For the award year for which a financial aid transcript is
requested, the student's Scheduled Federal Pell Grant and the amount of
Pell Grant funds disbursed to the student;
(5) The aggregate amount of loans made to the student under each of
the title IV, HEA loan programs for attendance at the institution;
(6) For the award year in which a financial aid transcript is
requested, the total amount of Federal Perkins loan funds disbursed to
the student;
(7) Whether the student owed an outstanding balance on July 1, 1987
on either a National Direct Student Loan made for attendance at the
institution;
(8) Whether the student owed an outstanding balance on October 1,
1992 on either a Federal Perkins loan or a National Direct Student Loan
made for attendance at the institution; and
(9) The amount of, and period of enrollment for, the most current
loan made to the student under the FFEL, and Direct Loan programs for
attendance at the institution.
(d) (1) A financial aid transcript must be signed by an official
authorized by the institution to disclose information in connection
with title IV, HEA programs.
(2) An institution must base the information it includes on
financial aid transcripts on records it maintains under the title IV,
HEA programs recordkeeping requirements.
(Approved by the Office of Management and Budget under control
number 1840-0537)
(Authority: 20 U.S.C. 1091, 1094)
5. The heading for Sec. 668.21 is revised to read as follows:
Sec. 668.21 Treatment of Federal Perkins Loan, FSEOG, and Federal Pell
Grant program funds if the recipient withdraws, drops out, or is
expelled before his or her first day of class.
6. Section 668.22 is amended by removing paragraph (h)(1)(i) and
redesignating paragraphs (h)(1)(ii) through (xiii) as paragraphs
(h)(1)(i) through (xii), respectively; and by revising paragraph
(d)(1)(i) to read as follows:
Sec. 668.22 Institutional refunds and repayments.
* * * * *
(d) * * *
(1) * * *
(i) If a student withdraws, drops out, or is expelled from the
institution before the first day of classes for the period of
enrollment for which the student was charged, the institution must
follow the provisions under Sec. 668.21 for the treatment of Federal
Perkins Loan, FSEOG, and Federal Pell Grant Program funds, the
provisions under Sec. 682.604(d)(3) or (4) for the treatment of FFEL
Program funds, and the provisions under Sec. 685.303(b)(3) for the
treatment of Direct Loan Program funds, as appropriate;
* * * * *
7. Subpart C is revised to read as follows:
Subpart C--Student Eligibility
Sec.
668.31 Scope.
668.32 Student eligibility - general.
668.33 Citizenship and residency requirements.
668.34 Satisfactory progress.
668.35 Student debts under the HEA and to the U.S.
668.36 Social security number.
668.37 Selective Service registration.
668.38 Enrollment in telecommunications and correspondence courses.
668.39 Study abroad programs.
Subpart C--Student Eligibility
Sec. 668.31 Scope.
This subpart contains rules by which a student establishes
eligibility for assistance under the title IV, HEA programs. In order
to qualify as an eligible student, a student must meet all applicable
requirements in this subpart.
(Authority: 20 U.S.C. 1091)
Sec. 668.32 Student eligibility--general.
A student is eligible to receive title IV, HEA program assistance
if the student--
(a)(1) (i) Is a regular student enrolled, or accepted for
enrollment, in an eligible program at an eligible institution;
(ii) For purposes of the FFEL and Direct Loan programs, is enrolled
for no longer than one twelve-month period in a course of study
necessary for enrollment in an eligible program; or
(iii) For purposes of the Federal Perkins Loan, FWS, FFEL, and
Direct Loan programs, is enrolled or accepted for enrollment as at
least a half-time student at an eligible institution in a program
necessary for a professional credential or certification from a State
that is required for employment as a teacher in an elementary or
secondary school in that State;
(2) For purposes of the FFEL and Direct Loan programs, is at least
a half-time student;
(b) Is not enrolled in either an elementary or secondary school;
(c)(1) For purposes of the Federal Pell Grant, FSEOG, and SSIG
programs, does not have a baccalaureate or first professional degree;
and
(2)(i) For purposes of the Federal Perkins Loan, FFEL, and Direct
Loan programs, is not incarcerated; and
(ii) For purposes of the Federal Pell Grant program, is not
incarcerated in a Federal or State penal institution;
(d) Satisfies the citizenship and residency requirements contained
in Sec. 668.33 and subpart I of this part;
(e)(1) Has a high school diploma or its recognized equivalent;
(2) Has obtained within 12 months before the date the student
initially receives title IV, HEA program assistance, a passing score
specified by the Secretary on an independently administered test in
accordance with subpart J of this part; or
(3) Is enrolled in an eligible institution that participates in a
State ``process'' approved by the Secretary under subpart J of this
part;
(f) Maintains satisfactory progress in his or her course of study
according to the institution's published standards of satisfactory
progress that satisfy the provisions of Sec. 668.16(e), and, if
applicable, the provisions of Sec. 668.34;
(g) Except as provided in Sec. 668.35--
(1) Is not in default, and certifies that he or she is not in
default, on a loan made under any title IV, HEA loan program;
(2) Has not obtained loan amounts that exceed annual or aggregate
loan limits made under any title IV, HEA loan program;
(3) Does not have property subject to a judgment lien for a debt
owed to the United States; and
(4) Is not liable for a grant or Federal Perkins loan overpayment.
A student
[[Page 61811]]
receives a grant or Federal Perkins loan overpayment if the student
received grant or Federal Perkins loan payments that exceeded the
amount he or she was eligible to receive; or if the student withdraws,
that exceeded the amount he or she was entitled to receive for non-
institutional charges;
(h) Files a Statement of Educational Purpose in accordance with the
instructions of the Secretary, or in the case of a loan made under the
FFEL Program, with the lender;
(i) Has a correct social security number as determined under
Sec. 668.36, except that this requirement does not apply to students
who are residents of the Federated States of Micronesia, Republic of
the Marshall Islands, or the Republic of Palau;
(j) Satisfies the Selective Service registration requirements
contained in Sec. 668.37, and, if applicable, satisfies the
requirements of Sec. 668.38 and Sec. 668.39 involving enrollment in
telecommunication and correspondence courses and a study abroad
program, respectively; and
(k) Satisfies the program specific requirements contained in--
(1) 34 CFR 674.9 for the Federal Perkins Loan program;
(2) 34 CFR 675.9 for the FWS program;
(3) 34 CFR 676.9 for the FSEOG program;
(4) 34 CFR 682.201 for the FFEL programs;
(5) 34 CFR 685.200 for the Federal Direct Student Loan programs;
(6) 34 CFR 690.75 for the Federal Pell Grant program; and
(7) 34 CFR 692.40 for the SSIG program.
(Authority: 20 U.S.C. 1091, 28 U.S.C. 3201(e))
Sec. 668.33 Citizenship and residency requirements.
(a) Except as provided in paragraph (b) of this section, to be
eligible to receive title IV, HEA program assistance, a student must--
(1) Be a citizen or national of the United States; or
(2) Provide evidence from the U.S. Immigration and Naturalization
Service that he or she--
(i) Is a permanent resident of the United States; or
(ii) Is in the United States for other than a temporary purpose
with the intention of becoming a citizen or permanent resident;
(b) (1) A citizen of the Federated States of Micronesia, Republic
of the Marshall Islands, or the Republic of Palau is eligible to
receive funds under the FWS, FSEOG, and Federal Pell Grant programs if
the student attends an eligible institution in a State, or a public or
nonprofit private eligible institution of higher education in those
jurisdictions.
(2) A student who satisfies the requirements of paragraph (a) of
this section is eligible to receive funds under the FWS, FSEOG, and
Federal Pell Grant programs if the student attends a public or
nonprofit private eligible institution of higher education in the
Federated States of Micronesia, Republic of the Marshall Islands, or
the Republic of Palau.
(c) (1) If a student asserts that he or she is a citizen of the
United States on the Free Application for Federal Student Aid (FAFSA),
the Secretary attempts to confirm that assertion under a data match
with the Social Security Administration. If the Social Security
Administration confirms the student's citizenship, the Secretary
reports that confirmation to the institution and the student.
(2) If the Social Security Administration does not confirm the
student's citizenship assertion under the data match with the
Secretary, the student can establish U.S. citizenship by submitting
documentary evidence of that status to the institution. Before denying
title IV, HEA assistance to a student for failing to establish
citizenship, an institution must give a student at least 30 days notice
to produce evidence of U.S. citizenship.
(Authority: 20 U.S.C. 1091, 5 U.S.C. 552a)
Sec. 668.34 Satisfactory progress.
(a) If a student is enrolled in an program of study of more than
two academic years, to be eligible to receive title IV, HEA program
assistance after the second year, in addition to satisfying the
requirements contained in Sec. 668.32(f), the student must be making
satisfactory under the provisions of paragraphs (b), (c) and (d) of
this section.
(b) A student is making satisfactory progress if, at the end of the
second year, the student has a grade point average of at least a ``C''
or its equivalent, or has academic standing consistent with the
institution's requirements for graduation.
(c) An institution may find that a student is making satisfactory
progress even though the student does not satisfy the requirements in
paragraph (b) of this section, if the institution determines that the
student's failure to meet those requirements is based upon--
(1) The death of a relative of the student;
(2) An injury or illness of the student; or
(3) Other special circumstances.
(d) If a student is not making satisfactory progress at the end of
the second year, but at the end of a subsequent grading period comes
into compliance with the institution's requirements for graduation, the
institution may consider the student as making satisfactory progress
beginning with the next grading period.
(e) At a minimum, an institution must review a student's academic
progress at the end of each year.
(Authority: 20 U.S.C. 1091(d))
Sec. 668.35 Student debts under the HEA and to the U.S.
(a) A student who is in default on a loan made under a title IV,
HEA loan program may nevertheless be eligible to receive title IV, HEA
program assistance if the student--
(1) Repays the loan in full; or
(2) (i) Makes arrangements, that are satisfactory to the holder of
the loan and in accordance with the individual title IV, HEA loan
program regulations, to repay the loan balance; and
(ii) Makes at least six consecutive monthly payments under those
arrangements.
(b) A student who is not in default on a loan made under a title
IV, HEA loan program, but has inadvertently obtained loan funds under a
title IV, HEA loan program in an amount that exceeds the annual or
aggregate loan limits under that program, may nevertheless be eligible
to receive title IV, HEA program assistance if the student--
(1) Repays in full the excess loan amount; or
(2) Makes arrangements, satisfactory to the holder of the loan, to
repay that excess loan amount.
(c) A student who receives an overpayment under the Federal Perkins
Loan Program, or under a title IV, HEA grant program may nevertheless
be eligible to receive title IV, HEA program assistance if the
student--
(1) Pays the overpayment in full; or
(2) Makes arrangements, satisfactory to the holder of the
overpayment debt, to pay the overpayment.
(d) A student who has property subject to a judgement lien for a
debt owed to the United States may nevertheless be eligible to receive
title IV, HEA program assistance if the student-
(1) Pays the debt in full; or
(2) Makes arrangements, satisfactory to the United States, to pay
the debt.
(e) (1) A student is not liable for a Federal Pell Grant
overpayment received in an award year if the institution can eliminate
that overpayment by adjusting subsequent
[[Page 61812]]
Federal Pell Grant payments in that same award year.
(2) A student is not liable for a FSEOG or SSIG overpayment or
Federal Perkins loan overpayment received in an award year if the
institution can eliminate that overpayment by adjusting subsequent
title IV, HEA program (other than Federal Pell Grant) payments in that
same award year.
(f) A student who otherwise is in default on a loan made under a
title IV, HEA loan program, or who otherwise owes an overpayment on a
title IV, HEA program grant or Federal Perkins loan, is not considered
to be in default or owe an overpayment if the student--
(1) Obtains 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) When the student filed the petition for bankruptcy relief, the
loan, or demand for the payment of the overpayment, had been
outstanding 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. 1091 and 11 U.S.C. 523 and 525)
Sec. 668.36 Social security number.
(a) (1) Except for residents of the Federated States of Micronesia,
the Republic of the Marshall Islands, and the Republic of Palau, the
Secretary attempts to confirm the social security number a student
provides on the Free Application for Federal Student Aid (FAFSA) under
a data match with the Social Security Administration. If the Social
Security Administration confirms that number, the Secretary notifies
the institution and the student of that confirmation.
(2) If the student's verified social security number is the same
number as the one he or she provided on the FAFSA, and the institution
has no reason to believe that the verified social security number is
inaccurate, the institution may consider the number to be accurate.
(3) If the Social Security Administration does not verify the
student's social security number on the FAFSA, or the institution has
reason to believe that the verified social security number is
inaccurate, the student can provide evidence to the institution, such
as the student's social security card, indicating the accuracy of the
student's social security number. An institution must give a student at
least 30 days, or until the end of the award year, whichever is later,
to produce that evidence.
(4) An institution may not deny, reduce, delay, or terminate a
student's eligibility for assistance under the title IV, HEA programs
because verification of that student's social security number is
pending.
(b) (1) An institution may not disburse any title IV, HEA program
funds to a student until the institution is satisfied that the
student's reported social security number is accurate.
(2) The institution shall ensure that the Secretary is notified of
the student's accurate social security number if the student
demonstrates the accuracy of a social security number that is not the
number the student included on the FAFSA.
(c) If the Secretary determines that the social security number
provided to an institution by a student is incorrect, and that student
has not provided evidence under paragraph (a)(3) of this section
indicating the accuracy of the social security number, and a loan has
been guaranteed for the student under the FFEL program, the institution
shall notify and instruct the lender and guaranty agency making and
guaranteeing the loan, respectively, to cease further disbursements of
the loan, until the Secretary or the institution determines that the
social security number provided by the student is correct, but the
guaranty may not be voided or otherwise nullified before the date that
the lender and the guaranty agency receive the notice.
(d) Nothing in this section permits the Secretary to take any
compliance, disallowance, penalty or other regulatory action against--
(1) Any institution of higher education with respect to any error
in a social security number, unless the error was the result of fraud
on the part of the institution; or
(2) Any student with respect to any error in a social security
number, unless the error was the result of fraud on the part of the
student.
(Authority: 20 U.S.C. 1091)
Sec. 668.37 Selective Service registration.
(a) (1) To be eligible to receive title IV, HEA program funds, a
male student who is subject to registration with the Selective Service
must register with the Selective Service.
(2) A male student does not have to register with the Selective
Service if the student--
(i) Is below the age of 18, or was born before January 1, 1960;
(ii) Is enrolled in an officer procurement program the curriculum
of which has been approved by the Secretary of Defense at the following
institutions:
(A) The Citadel, Charleston, South Carolina;
(B) North Georgia College, Dahlonega, Georgia;
(C) Norwich University, Northfield, Vermont; or
(D) Virginia Military Institute, Lexington, Virginia; or
(iii) Is a commissioned officer of the Public Health Service and/or
a member of the Reserve of the Public Health Service who is on active
duty as provided in section 6(a)(2) of the Military Selective Service
Act.
(b) (1) When the Secretary processes a male student's FAFSA, the
Secretary determines whether the student is registered with the
Selective Service under a data match with the Selective Service.
(2) Under the data match, Selective Service reports to the
Secretary whether its records indicate that the student is registered,
and the Secretary reports the results of the data match to the student
and the institution the student is attending.
(c) (1) If the Selective Service does not confirm through the data
match, that the student is registered, the student can establish that
he--
(i) Is registered;
(ii) Is not, or was not required to be, registered;
(iii) Has registered since the submission of the FAFSA; or
(iv) Meets the conditions of paragraph (d) of this section.
(2) An institution must give a student at least 30 days, or until
the end of the award year, whichever is later, to provide evidence to
establish the condition described in paragraph (c)(1) of this section.
(d) An institution may determine that a student, who was required
to, but did not register with the Selective Service, is not ineligible
to receive title IV, HEA assistance for that reason, if the student can
demonstrate by submitting clear and unambiguous evidence to the
institution that--
(1) He was unable to present himself for registration for reasons
beyond his control such as hospitalization, incarceration, or
institutionalization; or
(2) He is over 26 and when he was between 18 and 26 and required to
register--
(i) He did not knowingly and willfully fail to register with the
Selective Service; or
(ii) He served as a member of one of the U.S. Armed Forces on
active duty
[[Page 61813]]
and received a DD Form 214, ``Certificate of Release or Discharge from
Active Duty,'' showing military service with other than the reserve
forces and National Guard.
(e) For purposes of paragraph (d)(2)(i) of this section, an
institution may consider that a student did not knowingly and willfully
fail to register with the Selective Service only if--
(1) The student submits to the institution an advisory opinion from
the Selective Service System that does not dispute the student's claim
that he did not knowingly and willfully fail to register; and
(2) The institution does not have uncontroverted evidence that the
student knowingly and willfully failed to register.
(f) (1) A student who is required to register with the Selective
Service and has been denied title IV, HEA program assistance because he
has not proven to the institution that he has registered with Selective
Service may seek a hearing from the Secretary by filing a request in
writing with the Secretary. The student must submit with that request--
(i) A statement that he is in compliance with registration
requirements;
(ii) A concise statement of the reasons why he has not been able to
prove that he is in compliance with those requirements; and
(iii) Copies of all material that he has already supplied to the
institution to verify his compliance.
(2) The Secretary provides an opportunity for a hearing to a
student who--
(i) Asserts that he is in compliance with registration
requirements; and
(ii) Files a written request for a hearing in accordance with
paragraph (f)(1) of this section within the award year for which he was
denied title IV, HEA program assistance or within 30 days following the
end of the payment period, whichever is later.
(3) An official designated by the Secretary shall conduct any
hearing held under paragraph (f)(2) of this section. The sole purpose
of this hearing is the determination of compliance with registration
requirements. At this hearing, the student retains the burden of
proving compliance, by credible evidence, with the requirements of the
Military Selective Service Act. The designated official shall not
consider challenges based on constitutional or other grounds to the
requirements that a student state and verify, if required, compliance
with registration requirements, or to those registration requirements
themselves.
(g) Any determination of compliance made under this section is
final unless reopened by the Secretary and revised on the basis of
additional evidence.
(h) Any determination of compliance made under this section is
binding only for purposes of determining eligibility for title IV, HEA
program assistance.
(Authority: 20 U.S.C. 1091 and 50 App. 462)
Sec. 668.38 Enrollment in telecommunications and correspondence
courses.
(a) If a student is enrolled in correspondence courses, the student
is eligible to receive title IV, HEA program assistance only if the
correspondence courses are part of a program that leads to an
associate, bachelor's, or graduate degree.
(b) (1) For purposes of this provision, the Secretary considers
that a student enrolled in a ``telecommunications course'' is enrolled
in a correspondence course unless the total number of telecommunication
and correspondence courses the institution provides is fewer than 50
percent of the courses the institution provides during an award year
and the student is enrolled in a program that leads to an associate,
bachelor's, or graduate degree.
(2) In making the determination required under paragraph (b)(1) of
this section, the institution shall use its latest complete award year,
and shall calculate the number of courses using the provisions
contained in 34 CFR 600.7(b)(2).
(Authority: 20 U.S.C. 1091)
Sec. 668.39 Study abroad programs.
A student enrolled in a program of study abroad is eligible to
receive title IV, HEA program assistance if--
(a) The student remains enrolled as a regular student in an
eligible program at an eligible institution during his or her program
of study abroad; and
(b) The eligible institution approves the program of study abroad
for academic credit. However, the study abroad program need not be
required as part of the student's eligible degree program.
(Authority: 20 U.S.C. 1091(o))
8. Section 668.133 is amended by revising paragraph (b) to read as
follows:
Sec. 668.133 Conditions under which an institution shall request
documentation and request secondary confirmation.
* * * * *
(b) Exclusions from secondary confirmation. (1) An institution may
not require the student to produce the documentation requested under
Sec. 668.33(a)(2) and may not request that INS perform secondary
confirmation, if the student--
(i) Demonstrates eligibility under the provisions of Sec. 668.33
(a)(1) or (b); or
(ii) Demonstrated eligibility under the provisions of
Sec. 668.33(a)(2) in a previous award year as a result of secondary
confirmation and the documents used to establish that eligibility have
not expired; and
(iii) The institution does not have conflicting documentation or
reason to believe that the student's claim of citizenship or
immigration status is incorrect.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0650)
9. Section 668.161 is amended by revising paragraph (b) to read as
follows:
Sec. 668.161 Scope and purpose.
* * * * *
(b) Federal interest in title IV, HEA program funds. Except for
funds received by an institution for administrative expenses and for
funds used for the Job Location and Development Program, under the
Federal Work-Study Programs, funds received by an institution under the
title IV, HEA programs are held in trust for the intended student
beneficiaries and the Secretary. The institution, as a trustee of
Federal funds, may not use or hypothecate (i.e., use as collateral)
title IV, HEA program funds for any other purpose.
(Authority: 20 U.S.C. 1094)
* * * * *
10. Section 668.163 is amended by adding a new paragraph
(a)(2)(iii); and by revising paragraph (a)(3)(i)(A) to read as follows:
Sec. 668.163 Requesting funds.
* * * * *
(a) * * *
(2) * * *
(iii) In submitting a request for cash, an institution must
identify the title IV, HEA program under which the institution requests
funds by its appropriate Catalog of Federal Domestic Assistance (CFDA)
number and the total amount of program funds for each CFDA number
included in the request.
* * * * *
(3) * * *
(i) * * *
(A) Identify the students for whom the institution is seeking
reimbursement that will be included in the institution's request for
cash. The institution's request for cash must identify the title IV,
HEA program under which the institution seeks reimbursement by its
appropriate CFDA number and the total
[[Page 61814]]
amount of program funds for each CFDA number included in the request;
* * * * *
11. Section 668.164, paragraph (a)(2)(iii) is revised to read as
follows:
Sec. 668.164 Maintaining funds.
* * * * *
(a) * * *
(2) * * *
(iii) Except for public institutions, 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.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0697)
12. Section 668.165 is amended by revising paragraph (b)(1); and by
adding a new paragraph (e) to read as follows:
Sec. 668.165 Disbursing funds.
* * * * *
(b) Crediting a student's account at the institution (1) General.
An institution may disburse title IV, HEA program funds by crediting
the student's account at the institution. Except as provided in
paragraph (e) of this section, in crediting the student's account with
title IV, HEA program funds, the institution may use those funds only
to satisfy allowable charges described under paragraph (b)(3) of this
section for the current award year or period of enrollment. An
institution must notify expeditiously a student or parent borrower in
writing or by equivalent electronic means that the institution has
credited the student's account with Direct Loan, FFEL, or Federal
Perkins Loan program funds. If an institution notifies a student or
parent electronically, it must request the student or parent to confirm
the receipt of the notice and maintain a record of that confirmation.
* * * * *
(e) Prior-year charges. An institution may use a student's title
IV, HEA program funds to pay minor prior-year institutional charges
if--
(1) The student has, or will have, a title IV, HEA credit balance
as determined under paragraph (b)(2) of this section;
(2) The institution obtains the student's authorization to pay
these charges; and
(3) The prior-year charges do not exceed $100; or
(4) The payment of these charges does not, or will not, prevent the
student from paying his or her current-year education costs.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0697)
PART 674--FEDERAL PERKINS LOAN PROGRAM
13. 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.
Sec. 674.2 [Amended]
14. Section 674.2 paragraph (a) is amended by adding, in
alphabetical order, ``Full-time student''.
15. Section 674.2 paragraph (b) is amended by removing the
definitions of ``Full-time graduate or professional student'', ``Full-
time undergraduate student'', and ``Satisfactory arrangements to repay
the loan'' and by revising the definition of ``making of a loan'' to
read as follows:
Sec. 674.2 Definitions.
* * * * *
(b) * * *
Making of a loan: When the borrower signs the promissory note for
the award year and the institution makes the first disbursement of loan
funds under that promissory note for that award year.
* * * * *
16. Section 674.5 is amended by redesignating paragraph (e) as
paragraph (f), by adding new paragraph (e), and by revising
redesignated paragraph (f) to read as follows:
Sec. 674.5 Federal Perkins loan program cohort default rate and
penalties.
* * * * *
(e) Satisfactory arrangements to repay the loan. The Secretary
considers that the borrower has made satisfactory arrangements to repay
the loan when the borrower has--
(1) Paid the loan in full; or
(2) Executed a new written repayment agreement; and
(3) Made one payment each month for six consecutive months.
(f) Loan rehabilitation. (1) The Secretary considers that the
borrower has rehabilitated the loan when the borrower has--
(i) Paid the loan in full; or
(ii) Executed a new written repayment agreement; and
(iii) Made one payment each month for 12 consecutive months.
(2) Within 30 days of the date of the rehabilitation, the
institution shall report the rehabilitation to any national credit
bureau.
17. Section 674.16 is amended by revising paragraph (d) to read as
follows:
Sec. 674.16 Making and disbursing loans.
* * * * *
(d)(1) The institution shall disburse funds to a student or the
student's account in accordance with 34 CFR 668.165.
(2) The institution shall obtain the borrower's signature on a
promissory note for each award year before it disburses any loan funds
to the borrower under that note for that award year.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0535)
Sec. 674.17 [Amended]
18. Section 674.17 is amended by removing paragraph (a) and by
redesignating paragraphs (b)(1) introductory text, (b)(1)(i),
(b)(1)(ii), (b)(1)(iii), (b)(2), (b)(3), (b)(4) introductory text,
(b)(4)(i), (b)(4)(ii), and (b)(5) as paragraphs (a) introductory text,
(a)(1), (a)(2), (a)(3), (b), (c), (d) introductory text, (d)(1),
(d)(2), and (e), respectively.
19. Section 674.19 is amended by revising paragraph (e)(4)(v) to
read as follows:
Sec. 674.19 Fiscal procedures and records.
* * * * *
(e) * * *
(4) * * *
(v) An institution may keep the records required in this section on
microforms, optical disk, other comparable imaging technology, or in
computer format. If an institution keeps its records in computer
format, it shall maintain, in either hard copy, microforms, optical
disk, or other comparable imaging technology, the source documents
supporting the computer input.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0535)
20. Section 674.31 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 674.31 Promissory note.
(a) Promissory note. (1) An institution may use only the promissory
note that the Secretary provides. The institution may make only
nonsubstantive changes, such as changes to the type style or font, or
the addition of items such as the borrower's driver's license number,
to this note.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0535)
Sec. 674.33 [Amended]
21. Section 674.33 paragraph (a)(2) is amended by removing ``$15''
and adding in its place ``$25'', by redesignating the second paragraph
[[Page 61815]]
(d)(3) as paragraph (d)(6), by redesignating the second paragraph
(d)(4) as paragraph (d)(7), and by removing ``(d)(2)(i)'' in
redesignated paragraph (6) and adding in its place ``(d)(5)(i)''.
22. Section 674.34 paragraphs (e)(4) and (e)(6)(ii) are amended by
changing the reference to ``(e)(8)'' to read ``(e)(9)''; the
introductory text of paragraph (e)(6) is amended by adding ``or
(e)(5)'' after ``(e)(4)''; paragraph (e)(7) is amended by removing ``or
(4)'' and adding in its place ``(e)(4), or (e)(5)''; and by revising
paragraph (e)(5) to read as follows:
Sec. 674.34 Deferment of repayment--Federal Perkins loans and Direct
loans made on or after July 1, 1993.
* * * * *
(e) * * *
(5) Is working full-time and has a Federal education debt burden
that equals or exceeds 20 percent of the borrower's total monthly gross
income, and the borrower's income minus such burden is less than 220
percent of the amount calculated under paragraph (3) of this section.
* * * * *
23. Section 674.47 is amended by revising paragraph (g) and by
adding a new paragraph (h) to read as follows:
Sec. 674.47 Costs chargeable to the fund.
* * * * *
(g) Cessation of collection activity of defaulted accounts. (1) An
institution may cease collection activity on a defaulted account with a
balance of less than $25, including outstanding principal, accrued
interest, collection costs, and late charges, if the borrower has been
billed for this balance in accordance with section 674.43(a).
(2) An institution may cease collection activity on a defaulted
account with a balance of less than $200, including outstanding
principal, accrued interest, collection costs, and late charges, if--
(i) The institution has carried out the due diligence procedures
described in subpart C of the part with regard to this account; and
(ii) For a period of at least 4 years, the borrower has not made a
payment on the account, converted the account to regular repayment
status, or applied for a deferment, postponement, or cancellation on
the account.
(h) Write-offs of accounts of less than $5. (1) Notwithstanding any
other provision in this subpart, an institution may write off an
account with a balance of less than $5, including outstanding
principal, accrued interest, collection costs, and late charges.
(2) An institution that writes off an account under this paragraph
may no longer include the amount of the account as an asset of the
Fund.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0581)
PART 675--FEDERAL WORK-STUDY PROGRAMS
Subpart A--Federal Work-Study Program
24. The authority citation for part 675 continues to read as
follows:
Authority: 42 U.S.C. 2571-2756b, unless otherwise noted.
Sec. 675.2 [Amended]
25. Section 675.2, paragraph (a) is amended by adding in
alphabetical order, the term ``Full-time student''.
26. Section 675.2, paragraph (b) is amended by removing the
definitions of ``Full-time graduate or professional student'' and
``Full-time undergraduate student''.
Sec. 675.17 [Removed and Reserved]
27. Section 675.17 is removed and reserved.
28. Section 675.19 is amended by revising paragraph (c)(3) to read
as follows:
Sec. 675.19 Fiscal procedures and records.
* * * * *
(c) * * *
(3) An institution may keep the records required in this section on
microforms, optical disk, other comparable imaging technology, or in
computer format. If an institution keeps its records in computer
format, it shall maintain, in either hard copy, microforms, optical
disk, or other comparable imaging technology, the source documents
supporting the computer input.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0535)
Appendix B to Part 675--[Removed]
29. Appendix B--Model Off-Campus Agreement is removed.
PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT
PROGRAM
30. The authority citation for part 676 continues to read as
follows:
Authority: 20 U.S.C. 1070b-1070-3, unless otherwise noted.
Sec. 676.2 [Amended]
31. Section 676.2, paragraph (a) is amended by adding in
alphabetical order, the term ``Full-time student''.
32. Section 676.2, paragraph (b) is amended by removing the
definition of ``Full-time undergraduate student''.
Sec. 676.17 [Removed and Reserved]
33. Section 676.17 is removed and reserved.
34. Section 676.19 is amended by revising paragraph (c)(3) to read
as follows:
Sec. 676.19 Fiscal procedures and records.
* * * * *
(c) * * *
(3) An institution may keep the records required in this section on
microforms, optical disk, other comparable imaging technology, or in
computer format. If an institution keeps its records in computer
format, it shall maintain, in either hard copy, microforms, optical
disk, or other comparable imaging technology, the source documents
supporting the computer input.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0535)
PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
35. The authority citation for part 682 continues to read as
follows:
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
36. Section 682.201, paragraph (b) is amended by removing ``and''
at the end of paragraph (b)(6); redesignating paragraphs (b)(1) through
(b)(6) as paragraphs (b)(1)(i) through (b)(1)(vi), respectively; by
designating the undesignated introductory text following ``(b) Parent
borrower.'' as the introductory text of paragraph (b)(1); by
redesignating paragraphs (b)(7)(i) through (b)(7)(vi) as (b)(1)(vii)(A)
through (b)(1)(vii)(F), respectively, and paragraphs (b)(7)(iii)(A) and
(b)(7)(iii)(B) as (b)(1)(vii)(C)(1) and (b)(1)(vii)(C)(2),
respectively; by redesignating paragraph (b)(8) as paragraph
(b)(1)(viii) and removing the reference to ``(7)(iii)'' and adding, in
its place ``(b)(1)(vii)(C)''; and by adding a new paragraph (b)(2) to
read as follows:
Sec. 682.201 Eligible borrowers.
* * * * *
(b) * * *
(2) For purposes of paragraph (b)(1) of this section, a ``parent''
includes the individuals described in the definition of ``parent'' in
34 CFR 668.2 and the spouse of a parent who remarried, if that spouse's
income and assets would have been taken into account when calculating a
dependent student's expected family contribution.
[[Page 61816]]
Sec. 682.600 [Removed and Reserved]
37. Section 682.600 is removed and reserved.
Sec. 682.602 [Removed and Reserved]
38. Section 682.602 is removed and reserved.
39. A new Sec. 682.611 is added to Subpart F to read as follows:
Sec. 682.611 Foreign schools.
A foreign school is required to comply with the provisions of this
part, except to the extent that the Secretary states in this part or in
other official publications or documents that those schools need not
comply with those provisions.
(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1082,
1088, and 1094)
PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
40. The authority citation for part 685 continues to read as
follows:
Authority: 20 U.S.C. Sec. 1078a et seq., unless otherwise noted.
41. Section 685.200, paragraph (b) is amended by redesignating
paragraphs (b)(1) through (b)(6) as paragraphs (b)(1)(i) through
(b)(1)(vi), respectively; redesignating paragraph (b)(7) as
(b)(1)(vii), paragraphs (b)(7)(i) through (b)(7)(iii) as (b)(1)(vii)(A)
through (b)(1)(vii)(C), respectively, (b)(7)(i)(A) through (b)(7)(i)(C)
as (b)(1)(vii)(A)(1) through (b)(1)(vii)(A)(3), respectively, and
(b)(7)(ii)(A) and (b)(7)(ii)(B) as (b)(1)(vii)(B)(1) and
(b)(1)(vii)(B)(2), respectively; by designating the undesignated
introductory text following ``(b) Parent borrower.'' as the
introductory text of paragraph (b)(1); by removing the references to
``(b)(7)(i)'' in redesignated paragraphs (b)(1)(vii)(B) and
(b)(1)(vii)(C) and adding, in their place ``(b)(1)(vii)(A)''; and by
adding a new paragraph (b)(2) to read as follows:
Sec. 685.200 Borrower eligibility.
* * * * *
(b) * * *
(2) For purposes of paragraph (b)(1) of this section, a ``parent''
includes the individuals described in the definition of ``parent'' in
34 CFR 668.2 and the spouse of a parent who remarried, if that spouse's
income and assets would have been taken into account when calculating a
dependent student's expected family contribution.
* * * * *
PART 690--FEDERAL PELL GRANT PROGRAM
42. The authority citation for part 690 continues to read as
follows:
Authority: 20 U.S.C. Sec. 1070a, unless otherwise noted.
43. Section 690.2 is amended by removing the definition of
``Payment Voucher'' and by adding, in alphabetical order, the
definition of ``Payment Data'' to read as follows:
Sec. 690.2 Definitions.
* * * * *
(b) * * *
Payment Data: An electronic or magnetic record that is provided to
the Secretary by an institution showing a student's expected family
contribution, cost of attendance, enrollment status, and student
disbursement information.
Sec. 690.7 [Amended]
44. Section 690.7, paragraph (a)(1) is removed and paragraph (a)(2)
is redesignated as paragraph (a).
Sec. 690.71 [Amended]
45. Section 690.71 is amended by removing the second sentence.
Secs. 690.72, 690.73, 690.74 [Removed and Reserved]
46. Sections 690.72, 690.73, and 690.74 are removed and reserved.
47. Section 690.83 is amended by revising paragraphs (a) through
(d) to read as follows:
Sec. 690.83 Submission of reports.
(a) (1) An institution may receive either a payment from the
Secretary for an award to a Federal Pell Grant recipient, or a
corresponding reduction in the amount of Federal funds received in
advance for which it is accountable, if--
(i) The institution submits to the Secretary the student's Payment
Data for that award year in the manner and form prescribed in paragraph
(a)(2) of this section by September 30 following the end of the award
year in which the grant is made, or, if September 30 falls on a
weekend, on the first weekday following September 30; and
(ii) The Secretary accepts the student's Payment Data.
(2) The Secretary accepts a student's Payment Data that is
submitted in accordance with procedures established through publication
in the Federal Register, and that contain information the Secretary
considers to be accurate in light of other available information
including that previously provided by the student and the institution.
(3) An institution that does not comply with the requirements of
this paragraph may receive a payment or reduction in accountability
only as provided in paragraph (d) of this section.
(b) (1) An institution shall report to the Secretary any change in
enrollment status, cost of attendance, or other event or condition that
causes a change in the amount of a Federal Pell Grant for which a
student qualifies by submitting to the Secretary the student's Payment
Data that discloses the basis and result of the change in award for
each student. Through publication in the Federal Register, the
Secretary divides the award year into periods and establishes the
deadlines by which the institution shall report changes occurring
during each period. The institution shall submit the student's Payment
Data reporting a change to the Secretary by the end of that reporting
period that next follows the reporting period in which the change
occurred.
(2) An institution shall submit in accordance with deadline dates
established by the Secretary, through publication in the Federal
Register, other reports and information the Secretary requires in
connection with the funds advanced to it and shall comply with the
procedures the Secretary finds necessary to ensure that the reports are
correct.
(3) An institution that timely submits, and has accepted by the
Secretary, the Payment Data for a student in accordance with this
section shall report a reduction in the amount of a Federal Pell Grant
award that the student received when it determines that an overpayment
has occurred, unless that overpayment is one for which the institution
is not liable under Sec. 690.79(a).
(c) In accordance with 34 CFR 668.84 the Secretary may impose a
fine on the institution if the institution fails to comply with the
requirements specified in paragraphs (a) or (b) of this section.
(d) (1) Notwithstanding paragraphs (a) or (b) of this section, if
an institution demonstrates to the satisfaction of the Secretary that
the institution has provided Federal Pell Grants in accordance with
this part but has not received credit or payment for those grants, the
institution may receive payment or a reduction in accountability for
those grants in accordance with paragraphs (d)(4) and either (d)(2) or
(d)(3) of this section.
(2) The institution must demonstrate that it qualifies for a credit
or payment by means of a finding contained in an audit report of an
award year that was the first audit of that award year and that was
conducted after December 31, 1988 and timely submitted to the Secretary
under 34 CFR 668.23(c).
(3) An institution that timely submits the Payment Data for a
student in accordance with paragraph (a) of this section but does not
timely submit to the Secretary, or have accepted by the Secretary, the
Payment Data necessary
[[Page 61817]]
to document the full amount of the award to which the student is
entitled, may receive a payment or reduction in accountability in the
full amount of that award, if--
(i) A program review demonstrates to the satisfaction of the
Secretary that the student was eligible to receive an amount greater
than that reported in the student's Payment Data timely submitted to,
and accepted by the Secretary; and
(ii) The institution seeks an adjustment to reflect an underpayment
for that award that is at least $100.
(4) In determining whether the institution qualifies for a payment
or reduction in accountability, the Secretary takes into account any
liabilities of the institution arising from that audit or program
review or any other source. The Secretary collects those liabilities by
offset in accordance with 34 CFR part 30.
* * * * *
(Approved by the Office of Management and Budget under control
number 1840-0688)
[FR Doc. 95-29180 Filed 11-30-95; 8:45 am]
BILLING CODE 4000-01-P
