DEPARTMENT OF EDUCATION
Federal RegisterJun 22, 1994
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SUMMARY: The Secretary proposes to amend the regulations governing the
campus-based programs (Federal Perkins Loan, Federal Work-Study (FWS),
and Federal Supplemental Educational Opportunity Grant (FSEOG)
programs). These amendments are needed to implement changes made to the
Higher Education Act of 1965, as amended (HEA). The Secretary also
proposes to reduce the administrative burden imposed on applicants for
student financial assistance and educational institutions resulting
from the verification requirements by amending the verification
regulations contained in subpart E of the Student Assistance General
Provisions, 34 CFR part 668.
DATES: Comments must be received on or before August 22, 1994.
ADDRESSES: All comments concerning these proposed regulations should be
addressed to: Susan M. Morgan, Chief, Campus-Based Loan Programs
Section, Loans Branch, Division of Policy Development, Student
Financial Assistance Programs, Office of Postsecondary Education, U.S.
Department of Education, 400 Maryland Avenue SW. (Regional Office
Building 3, room 4310), Washington, DC 20202-5447.
A copy of any comments that concern information collection
requirements also should be sent to the Office of Management and Budget
at the address listed in the Paperwork Reduction Act section of this
preamble.
FOR FURTHER INFORMATION CONTACT:
1. For the Federal Perkins Loan program: Sylvia R. Ross, Campus-Based
Loan Programs Section, Loans Branch on 202-708-8242;
2. For the FWS and FSEOG programs: Kathy S. Gause, Campus-Based
Programs Section, Grants Branch on 202-708-4690; or
3. For the General Provisions: Lorraine Kennedy, Student Eligibility
and Verification Section, General Provisions Branch on 202-708-7888.
Individuals who use a telecommunications device for the deaf (TDD)
may call the Federal Information Relay Service (FIRS) at 1-800-877-8339
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.
SUPPLEMENTARY INFORMATION: The Student Assistance General Provisions
regulations implement requirements that are common to the student
financial assistance programs under title IV of the Higher Education
Act of 1965, as amended, (title IV, HEA programs). The title IV, HEA
programs include the Federal Pell Grant, Federal Family Education Loan
(FFEL), Federal Direct Student Loan, State Student Incentive Grant
(SSIG), Federal Perkins Loan, Federal Work-Study (FWS), and Federal
Supplemental Educational Opportunity Grant (FSEOG) programs.
On February 21, 1992, a notice was published in the Federal
Register requesting public comments on statutes and regulations that
substantially impede economic growth, are no longer needed, or
otherwise impose unnecessary costs or burdens. The proposed change to
the Student Assistance General Provisions regulations results from the
public comments received in response to that notice.
These proposed amendments also revise the existing campus-based
program regulations. The campus-based programs are authorized as
follows: Federal Perkins Loan--20 U.S.C. 1087aa-1087hh and 20 U.S.C.
421-429; FWS--42 U.S.C. 2751-2756b; FSEOG--20 U.S.C. 1070b-1070b-3.
These proposed regulations would implement provisions of the Crime
Control Act of 1990 (Pub. L. 101-647), enacted November 29, 1990, the
National and Community Service Act of 1990 (Pub. L. 101-610), enacted
November 16, 1990, the Higher Education Amendments of 1992 (Pub. L.
102-325), enacted July 23, 1992 (Amendments), and the Higher Education
Technical Amendments of 1993 (Pub. L. 103-208), enacted December 20,
1993 (Technical Amendments). A description of the major proposed
changes follows. The proposed changes that pertain to more than one
program are described first followed by descriptions of provisions that
pertain to only a specific program. The Federal student financial
assistance 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.
Summary of Proposed Changes
Student Assistance General Provisions
Section 668.57(c) Acceptable Documentation
The verification regulations contained in subpart E of the Student
Assistance General Provisions regulations (34 CFR part 688) govern
verification of the information that is used to calculate an
applicant's expected family contribution (EFC) as part of determining
an applicant's need for student financial assistance. The EFC is the
amount that an applicant and the applicant's family reasonably can be
expected to contribute toward the applicant's cost of attendance at an
institution of higher education.
Currently, dependent applicants are required to provide the
signature of both parents when verifying the number of family household
members enrolled in postsecondary institutions. The Secretary is
proposing to amend Sec. 668.57(c) to require the signature of one
parent instead of both parents. If only one parent's income is
considered in the title IV, HEA aid awarding process, that is the
parent who must sign. Otherwise, either parent may sign. This amendment
is being proposed in an effort to reduce the administrative burden
imposed on applicants and institutions by the verification
requirements.
Campus-Based Programs
Sections 674.2 and 675.2 Definitions
The current regulations restrict eligibility for Federal Perkins
Loan and FWS assistance for undergraduate students to those who have
not already earned baccalaureate or first professional degrees.
The Amendments changed the Federal Perkins Loan and FWS programs to
provide that a student is not ineligible for assistance because he or
she has previously received a baccalaureate or professional degree.
Therefore, the Secretary proposes to amend the definition of
``undergraduate student'' to delete the restriction from the current
Federal Perkins Loan and FWS regulations. The statutory restriction
remains for the FSEOG program.
Sections 674.4, 675.4, and 676.4 Allocation and Reallocation
The Secretary proposes to amend Secs. 674.4, 675.4, and 676.4 in
accordance with amended sections 413D(e)(2), 422(e)(2), and 462(j)(4)
of the HEA to state that if an institution returns more than 10 percent
of its Federal Perkins Loan, FWS, or FSEOG allocation for an award
year, the institution will have its allocation for the next fiscal year
for that program reduced by the dollar amount returned. The Amendments
established this requirement for the Federal Perkins Loan and FSEOG
programs. The same requirement was provided for the FWS Program by the
Technical Amendments. These statutory provisions authorize the
Secretary to take appropriate measures to ensure effective use of
program funds when an institution fails to expend its allocation. The
Secretary may waive these provisions if enforcement would be contrary
to the interest of the programs. To accomplish the purpose of the
statute, the Secretary expects to find enforcement to be contrary to
the interest of the program in very limited circumstances, such as a
natural disaster.
Sections 674.10, 675.10, and 676.10 Selection of Students
The Secretary proposes to amend Secs. 674.10, 675.10, and 676.10 in
accordance with amended sections 413C(d), 443(b)(3), and 464(b)(2) of
the HEA to state that if an institution's FSEOG allocation, FWS grant,
or Federal Perkins Loan capital contribution is directly or indirectly
based in part on the financial need of less-than-full-time or
independent students and if the need of all of these students exceeds 5
percent of the total need of all students at an institution, then at
least 5 percent of that allotment for FSEOG, 5 percent of that grant
for FWS, or 5 percent of the dollar amount of the loans made for
Federal Perkins must be made available to these students.
Sections 674.14, 675.14, and 676.14 Overaward
A financial aid administratrato may not award or disburse aid from
a campus-based program if that aid, when combined with all other
resources, would exceed the student's need. Before awarding aid from
campus-based programs, the aid administrator must take into account the
aid that the student will receive from other student financial
assistance programs and other resources that the aid administrator
knows about or can reasonably anticipate at the time aid is awarded to
the student. If the student receives additional resources at any time
during the award period that were not considered in determining the
student's eligibility for aid, and these resources combined with the
expected financial aid will exceed the student's need, the amount in
excess of the student's need is considered an overaward.
In the situation in which an institution learns that a student has
received additional resources that were not included in calculating the
student's eligibility for financial assistance, the regulations for the
three campus-based programs currently permit a student's resources to
exceed the student's financial need by no more than $200. Further, the
current regulations allow an institution to continue to employ a
student under the FWS program after the full financial need has been
met until the student's cumulative earnings from both need-based and
non-need-based employment exceed his or her financial need by more than
$200.
Section 443(b)(4) of the HEA has been amended to allow a student
employed under the FWS program to earn up to $300 from need-based
employment in excess of his or her financial need before employment
under the FWS program must be discontinued. In addition, for the
purpose of determining when FWS funds may no longer be used to pay the
student, an institution will not be required to monitor the student's
non-need-based earnings. (However, as in the past, earnings from non-
need-based employment will be counted as income for the following
year.) Therefore, the Secretary is proposing to amend the regulations
for the FWS program in accordance with the statute to provide that a
student employed under the FWS program may continue to receive FWS
funding after the student's full financial need has been met until the
student's cumulative earnings from need-based employment exceed his or
her financial need by more than $300.
The statute does not address the common situation whereby a student
receives a financial aid package consisting of an FWS award in
combination with a Federal Perkins Loan or FSEOG award or both. The
Secretary is proposing to change the current $200 overaward threshold
for this situation. Under the proposed change, if FWS is awarded to a
student by itself or in combination with one or both of the other
campus-based programs, then a $300 overaward threshold will be in
effect. However, under the proposed change, if a student is not
employed under the FWS program but is receiving a Federal Perkins Loan
or FSEOG, the current regulatory $200 overaward threshold will still be
in effect for those programs.
In making awards, an institution may not make campus-based awards
in excess of the amount of the student's need. Although a threshold is
allowed subsequent to the packaging of campus-based aid, the threshold
does not allow an institution deliberately to award campus-based aid
that, in combination with other resources, exceeds the student's
financial need.
Section 674.16 Making and Disbursing Loans
Section 676.16 Payment of an FSEOG
The Secretary proposes to allow institutions to disburse a Federal
Perkins Loan or an FSEOG award after a student ceases to be enrolled
under certain circumstances. Currently, the Federal Perkins Loan and
the FSEOG programs do not provide for late disbursements while the
other title IV, HEA programs have provisions for late disbursements.
This proposed change would prevent a student from being penalized
because the student did not receive funds that he or she needed and
expected due to a delay in payment.
The proposal would allow an institution to disburse funds under the
Federal Perkins Loan and FSEOG programs to a student when he or she is
no longer enrolled if the assistance was awarded while the student was
still an eligible student. Further, the institution must determine that
the funds are needed to cover the student's documented educational
costs that are normally included in the student's cost of attendance
under section 472 of the HEA for the payment period for which the loan
or grant was intended and the student was actually enrolled. The
institution would be expected to collect and retain documentation
supporting the amount of and the reason for the late disbursement paid
to the student.
Federal Perkins Loan Program
Program Name Change
The ``Perkins Loan program'' will be known as the ``Federal Perkins
Loan program.''
Section 674.2 Definitions
Section 462(h) of the HEA replaced the dollar-volume ``default
rate'' calculation in the Federal Perkins Loan program with a borrower-
based ``cohort default rate,'' beginning in the 1993-94 award year.
Accordingly, the Secretary proposes to amend Sec. 674.2 to remove the
definition of ``default rate,'' ``defaulted principal amount,'' and
``matured loans,'' which are definitions used in the calculation of an
institution's ``default rate,'' but are not used in the ``cohort
default rate'' calculation. Section 462(h) of the HEA also provides
that any loan on which the borrower has made satisfactory arrangements
to resume repayment is not counted toward an institution's cohort
default rate. ``Satisfactory arrangements to resume payment'' is a term
currently used in the FFEL program. The Secretary proposes to add the
same definition of ``satisfactory arrangements to repay the loan'' to
Sec. 674.2.
The amendments in section 464(c)(2)(A) of the HEA created a new
economic hardship deferment and added a new provision of forbearance in
section 464(e), both of which were also provisions added to the FFEL
program. Negotiated rulemaking in the FFEL program resulted in the
requirement that in order for a borrower to establish eligibility for
an economic hardship deferment or for forbearance of payments, the
borrower would be required to provide certain documentation to the
granting institution, including evidence showing the borrower's most
recent monthly disposable income. The Secretary proposes to add the
same definition of ``disposable income'' as resulted from the
negotiated rulemaking process for the FFEL program.
Section 484 of the HEA now permits borrowers pursuing a second
baccalaureate degree to receive assistance under the Federal Perkins
Loan program. The Secretary is, therefore, proposing to amend the
definition of ``undergraduate student'' in Sec. 674.2 of the Federal
Perkins Loan program regulations.
The specific date on which a loan is made to a borrower as well as
the specific date on which a borrower enters repayment on his or her
Federal Perkins Loan is critical to the determination of eligibility
for certain benefits (for example, deferments, cancellations, exclusion
from an institution's cohort default rate, interest rates, and grace
periods). However, there has been some confusion on the meaning of
these concepts. Therefore, the Secretary proposes to incorporate into
the Federal Perkins Loan program regulations the definitions of the
term ``making of a loan'' and the term ``enter repayment.'' These
definitions are based on common institutional practice.
The Secretary is aware that the term ``Direct Loans'' when used to
mean a ``National Direct Student Loan'' is the same as the term used to
mean the new ``Federal Direct Student Loan'' and will clarify the
distinction between these two terms.
Section 674.4 Allocation and Reallocation
The Secretary proposes to amend Sec. 674.4 to incorporate the
requirements in section 462(j) of the HEA that the Secretary shall
reallocate 80 percent of the available funds to institutions that
participated in the Federal Perkins Loan program in the 1985-86 award
year but did not receive an allocation for the award year for which the
reallocation determination is made. The reallocated amount may not
exceed the institution's fair share shortfall amount.
Section 462(j) of the HEA requires that the remaining 20 percent
must be reallocated in accordance with the regulations. The Secretary
proposes to amend Sec. 674.4 to provide for the flexibility to
reallocate the 20 percent of unexpended funds. This change would allow
the Secretary to assist students who suffer financial harm from a
natural disaster such as a flood or hurricane.
Section 462(e)(2) of the HEA requires the Secretary to establish an
appeals process by which the anticipated collections required in
section 462(e)(1) may be waived for institutions with ``low default
rates'' in the Federal Perkins Loan program. The Secretary proposes to
amend Sec. 674.4 to incorporate an automatic appeals process. The
Secretary would waive the calculation of anticipated collections in
section 462(e)(1) for any institution with a cohort default rate that
does not exceed 7.5 percent and would instead use an amount equal to
actual collections during the second year preceding the beginning of
the award year.
Section 674.5 Federal Perkins Loan Cohort Default Rate and Penalties
The Secretary proposes to add new Sec. 674.5 to the regulations.
This section establishes, in accordance with section 462(f) of the HEA,
the Federal Perkins Loan program cohort default rate and penalties for
an institution with a high cohort default rate for the 1994-95 award
year and subsequent award years. This section includes the definition
of which loans are to be included in the cohort default rate
calculation and provisions detailing how the cohort default rate would
be calculated for an institution with more than one location or
undergoing a change in status, in accordance with section 462(h)(3)(G)
of the HEA which requires the Secretary to prescribe regulations
designed to prevent an institution from evading the application of the
cohort default rate because of situations such as changing control of
the institution. These provisions on calculating a cohort default rate
for locations of an institution are the same as in the FFEL Program.
Section 674.6 Default Reduction Plan
The Secretary proposes to add new Sec. 674.6 to the regulations.
The proposed requirements in Sec. 674.6 describe measures that an
institution participating in the Federal Perkins Loan program must take
to reduce its cohort default rate. Section 462(f) of the HEA now
requires that beginning in the 1994-95 award year, if an institution's
cohort default rate equals or exceeds 15 percent, the institution must
establish a default reduction plan.
It is the Secretary's intent that an institution be able to
coordinate its default reduction efforts in the Federal Perkins Loan
program with its default reduction plan under the requirements of the
FFEL program. To that end, the Secretary is proposing to require
institutions with a cohort default rate that equals or exceeds 15
percent to implement a default reduction plan that is similar to the
plan established by the FFEL program in appendix D of part 668. Any
substantive differences from appendix D are related to characteristics
specific to the FFEL program. Section 674.6(b) describes the plan that
an institution will be required to establish to reduce Federal Perkins
Loan defaults by its students in the future.
Section 674.7 Expanded Lending Option (ELO)
The Amendments, in section 463(a)(2)(B) of the HEA, established the
Expanded Lending Option (ELO) beginning in the 1993-94 award year for
institutions with default rates of 7.5 percent or less that have
executed an ELO participation agreement with the Secretary. The
Technical Amendments further amended that section to provide for a
cohort default rate of 15 percent or less to participate in the ELO for
the 1994-95 award year and subsequent award years. This was necessary
because a default rate will no longer be calculated for an institution.
Instead, as required by the Amendments the default rate calculation has
been replaced by a cohort default rate calculation for the Federal
Perkins Loan Program.
Institutions that receive a Federal Capital Contribution (FCC) and
participate in the ELO are required to match the FCC on a dollar-for-
dollar basis and are allowed to make loans to students at higher annual
maximum and aggregate loan limits than is the case at nonparticipating
institutions. The Secretary proposes to add this section to incorporate
these statutory changes.
Section 674.8 Program Participation Agreement
Section 463(a)(2)(B) of the HEA increased the capital contribution
requirements for institutions that have a participation agreement with
the Secretary to participate in the Federal Perkins Loan program in the
1993-94 award year and subsequent award years. The Secretary proposes
to include in the participation agreement, under Sec. 674.8, these new
capital contribution requirements. In addition, the HEA eliminated the
definition of default rate and implemented the cohort default rate,
which includes new reporting requirements. The Secretary therefore
proposes to amend the regulations to incorporate new reporting
requirements containing information that the Department will use to
determine an institution's cohort default rate.
Section 674.9 Student Eligibility
The amendments to section 461(a) of the HEA provide for the
eligibility of a student engaged in a program of study abroad. This
program must be approved for credit by the home institution. The
Secretary proposes to amend the regulations to reflect this statutory
change.
The Secretary proposes to amend the regulations to incorporate the
new statutory requirement (section 464(b)(1) of the HEA) that a student
must provide a driver's license number, if any, to the institution at
the time of application for the Federal Perkins Loan.
The Secretary also proposes to amend Sec. 674.9 to require that, to
establish eligibility to receive additional Federal Perkins Loan funds,
a borrower must reaffirm a Federal Perkins Loan debt that was
previously cancelled due to the borrower's total and permanent
disability, discharged in bankruptcy, or written off (if the amount of
the write off exceeded $25). This proposal has been incorporated from
the current Federal Family Education Loan program regulations as part
of the Secretary's on-going effort to maintain similar provisions,
wherever possible, in the title IV, HEA student loan programs. This
proposal would treat any borrower who has not satisfied a previous
Federal Perkins Loan debt in a manner that is consistent with 34 CFR
668.7(a)(7), which provides that a borrower who is in default on a
Federal Perkins Loan is ineligible for new loans. It is the Secretary's
position that cancellation in exchange for performing a service (such
as teaching in a low-income school or teaching disabled children)
satisfies the debt but cancellation for total and permanent disability
or bankruptcy does not satisfy the debt.
Section 674.12 Loan Maximums
The Amendments establish annual maximum loan amounts and increase
the aggregate maximum loan amounts allowable for an eligible student.
These amounts depend on whether the student is attending an institution
that participates in the ELO or whether the student is in a program of
study abroad approved for credit by the home institution. The Secretary
proposes to amend the maximum loan limits in Sec. 674.12 to reflect the
statutory changes.
Sections 674.13, 674.19, 674.31, 674.41, 674.47, and 674.49
The Secretary is proposing to amend Secs. 674.13, 674.19, 674.31,
674.41, 674.47, and 674.49 to remove all references to the term
``endorser'' in accordance with section 464(c)(1)(E) of the HEA, which
now provides that Federal Perkins Loans are to be made without security
or endorsement.
Section 674.16 Making and Disbursing Loans
The Amendments require an institution to report to any one national
credit bureau organization with which the Secretary has an agreement
the amount of the Federal Perkins Loan made to a borrower. The
Technical Amendments require that an institution report this
information at least annually. The Secretary proposes in Sec. 674.16 to
incorporate the new statutory requirement that an institution report
loan disbursements to a national credit bureau organization, in
accordance with section 463(c)(4) of the HEA. In addition, the
Secretary proposes to establish procedures by which a borrower may not
be required to sign for any advance of funds made while the borrower is
in a program of study abroad, if obtaining the borrower's signature
would pose an undue hardship on the institution.
Section 674.18 Use of Funds
The Amendments provide for an institution to transfer up to 25
percent of its Federal Capital Contribution allotment for an award year
to either or both the FSEOG and FWS programs effective for the award
years beginning on or after July 1, 1993. The Secretary proposes to
amend this section to incorporate this new authority.
Section 674.31 Promissory Note
The Secretary proposes to require an institution to use the
promissory note that the Secretary has developed and approved and to
prohibit the institution from changing any provisions of that note, as
is the case with the promissory notes in the FFEL program and the
Federal Direct Student Loan program. The notes approved by the
Secretary will no longer appear as appendices in the regulations but
will be provided in a ``Dear Colleague Letter.''
In accordance with provisions in the Amendments, the Secretary is
also proposing to delete the defense of infancy provision in
Sec. 674.31(a)(6).
Section 674.33 Repayment
The Secretary is proposing, in accordance with amended section
464(c) of the HEA, to allow an institution to increase to $40 the
minimum monthly repayment amount provided for in the loan agreement.
This provision applies to loans for which the first disbursement is
made on or after October 1, 1992, to a borrower who on the date the
loan is made owes no balance on any Federal Perkins Loan or National
Direct Student Loan.
The Amendments also established forbearance of principal and
interest, or principal only, as requested in writing by the borrower,
if the borrower's monthly title IV, HEA loan repayment obligation
equals or exceeds 20 percent of the borrower's monthly disposable
income. The institution may also grant forbearance to a borrower if it
identifies other reasons that warrant it. The Secretary proposes to add
this provision to this section.
To encourage repayment of defaulted loans, the Amendments provide
that the Secretary may authorize an institution to compromise on the
repayment of a loan if the borrower pays: (1) At least 90 percent of
the loan; (2) all interest due; and (3) any collection fees due. The
Secretary is proposing to include this authority in this section.
Section 674.34 Deferment of Repayment--Federal Perkins Loans and
Direct Loans Made On or After July 1, 1993
Effective for loans made on or after July 1, 1993, the deferment
provisions under the Federal Perkins Loan Program will change in
accordance with amended section 464(c)(2)(A) of the HEA. The Secretary
is proposing to revise the regulations to reflect this change. Loan
repayment for these loans may be deferred for periods during which a
borrower: (1) Is at least a half-time student; (2) is pursuing a course
of study in a graduate fellowship program approved by the Secretary or
in a rehabilitation training program for disabled individuals approved
by the Secretary, excluding a medical internship or residency program;
(3) is, for a period not to exceed three years, unable to find full-
time employment; (4) is, for a period not to exceed three years,
suffering an economic hardship; or (5) is engaged in service described
under the cancellation provisions.
The definition of economic hardship proposed in these regulations
is the same as the definition of economic hardship as was proposed in
the FFEL program notice of proposed rulemaking, published on March 24,
1994. The Secretary will incorporate the same definition of economic
hardship into the Federal Perkins Loan, the FFEL, and the Federal
Direct Student Loan program regulations based on public comments
received on this notice, the FFEL program notice, the discussions of
the negotiators during the Federal Direct Student Loan program
negotiated rulemaking sessions, and the public comments received on
proposed regulations in the Federal Direct Student Loan program.
Section 674.35 Deferment of Repayment--Federal Perkins Loans Made
Before July 1, 1993
The Secretary is proposing to amend Sec. 674.35 in accordance with
the National and Community Service Act of 1990, which provides that a
borrower who is performing volunteer service that is comparable to
service in the Peace Corps may be compensated at a rate not to exceed
the Federal minimum wage and still qualify for a deferment.
Section 674.38 Deferment Procedures
The Secretary is proposing to amend Sec. 674.38 to include the
requirement that a defaulted borrower make satisfactory arrangements to
repay the loan as one of the conditions to be met in order to be
granted a deferment to bring the Federal Perkins Loan program in line
with the FFEL program.
Section 674.42 Contact With the Borrower
The Secretary is proposing to amend Sec. 674.42 (a)(1)(ii) and
(a)(3) in accordance with amended sections 464(e) and 485(b) of the
HEA, which require each institution to notify the borrower during the
exit interview of the right to forbearance and to require the borrower
to provide during the exit interview: (1) The borrower's expected
permanent address after leaving the institution (regardless of the
reason for leaving); (2) the name and address of the borrower's
expected employer after leaving the institution; (3) the name and
address of the borrower's next-of-kin; and (4) any corrections in the
institution's records relating to the borrower's name, address, social
security number, personal references, and driver's license number.
Section 674.43 Billing Procedures
The Secretary is proposing to amend Sec. 674.43 to allow a borrower
to elect to repay his or her Federal Perkins loan by means of the
electronic transfer of funds from the borrower's bank account. The
Secretary believes that implementing this provision would result in a
burden reduction for both the borrower and the institution.
Section 674.44 Address Searches
Section 463(e) of the HEA has been added to make use of the
Internal Revenue Service and Department of Education's skip-tracing
service permissive rather than mandatory for institutions. Currently,
institutions are required to use the Internal Revenue Service and
Department of Education's skip-tracing service in order to assign a
Federal Perkins loan to the Department. The Secretary proposes to amend
Sec. 674.44 to eliminate skip-tracing as a required due diligence step.
Also, the Secretary proposes to amend Sec. 674.44, in accordance with a
provision of the Amendments that eliminates the statute of limitations
as a limitation on the litigation of a Federal Perkins Loan.
Section 674.45 Collection Procedures
The Secretary is proposing to amend Sec. 674.45 in accordance with
amended section 463(c) of the HEA to require institutions to report
defaulted loans to any one of the credit bureau organizations with
which the Secretary has an agreement. The Secretary proposes to amend
Sec. 674.45 in accordance with a provision of the Amendments that
eliminate the statute of limitations as a limitation on recovering
amounts owed on defaulted accounts. The Secretary is also proposing to
amend this section to clarify that these regulations preempt State
collection laws. This change is needed because some states do not allow
a collection agency to collect a Federal Perkins Loan if the collection
agency is not physically located in the state and this circumstance
directly conflicts with the exercise of Federal authority.
Section 674.46 Litigation Procedures
In accordance with the changes made to section 484A of the HEA, the
Secretary is proposing to amend Sec. 674.46 to eliminate the statute of
limitations as a limitation on the litigation of a Federal Perkins
Loan.
Section 674.48 Use of Contractors to Perform Billing and Collection or
Other Program Activities
The HEA has been amended to prohibit requiring contractors to
deposit funds they collect into an interest-bearing account, unless
those funds will be held longer than 45 days. The Secretary is
proposing to add this provision in Sec. 674.48 in accordance with
section 463(d) of the HEA.
Section 674.50 Assignment of Defaulted Loans to the United States
The Secretary is proposing to amend Sec. 674.50 to reflect the
statutory change from default rate to cohort default rate as a
measurement of institutional administrative capability. Pursuant to the
statute, institutions with cohort default rates of at least 20 percent
will be required to provide documentation demonstrating due diligence
to assign loans to the United States.
Section 674.51 Special Definitions
The Amendments added new loan cancellation provisions for borrowers
who perform certain kinds of public service. The cancellation
provisions use several terms which need to be defined. The Amendments
provided definitions for ``Low-income communities,'' ``High-risk
children,'' ``Infants and toddlers with disabilities,'' ``Children and
youth with disabilities,'' ``Early intervention services,'' and
``Qualified professional provider of early intervention services.'' The
Secretary is proposing definitions for ``Nurse,'' ``Medical
technician,'' and ``Teaching in a field of expertise.'' The Secretary
proposes to amend Sec. 674.51 to incorporate the definitions of these
terms based on consultations with appropriate experts in these fields.
Section 674.53 Teacher Cancellation--Federal Perkins Loans and Direct
Loans Made on or After July 23, 1992
Section 465(a)(2) of the HEA has been amended by removing the 50-
percent limitation on all Chapter 1 schools in a State. Teacher
cancellation provisions are expanded for loans made on or after July
23, 1992, to include loan cancellation for service as: (1) A full-time
special-education teacher, including teachers of infants, toddlers,
children, or youth with disabilities in a public or other nonprofit
elementary or secondary school system, or a full-time qualified
professional provider of early- intervention services in a public or
other nonprofit program under public supervision; or (2) a full-time
teacher of mathematics, science, foreign languages, bilingual
education, or any other field of expertise that is determined by the
State education agency to have a shortage of qualified teachers. The
Secretary proposes to add this section to incorporate these statutory
changes.
Section 674.54 Teacher Cancellation--Federal Perkins Loans and Direct
Loans Made Before July 23, 1992
The Secretary is proposing to amend Sec. 674.54 to reflect the
statutory elimination of the 50-percent limitation on all Chapter 1
schools in a State. Teaching in any Chapter 1 school will now qualify a
borrower for a loan cancellation.
Section 674.56 Employment Cancellation--Federal Perkins Loans and
Direct Loans Made On or After July 23, 1992
The Amendments expanded the cancellation provisions for loans made
on or after July 23, 1992, to include the following services: (1) A
full-time nurse or medical technician; (2) a full-time employee of a
public or private nonprofit child or family service agency who is
providing or supervising the provision of services to high-risk
children and their families from low-income communities; or (3) a full-
time qualified professional provider of early intervention services in
a public or other nonprofit program under public supervision by the
lead agency. The Secretary proposes to add this section to incorporate
these changes.
Section 674.57 Cancellation for Law Enforcement or Corrections Officer
Service
Section 465(a)(2) of the HEA was amended by the Police Recruitment
and Education Program (PREP), a provision of the Crime Control Act of
1990. PREP provides for Federal Perkins Loan and National Direct
Student Loan cancellation benefits for full-time law enforcement or
corrections officers providing service to local, State, and Federal law
enforcement or corrections agencies. The provision only applies to
Federal Perkins Loans and Direct Loans made on or after November 29,
1990. The Secretary is proposing to add a new Sec. 674.57 to the
regulations to reflect these provisions. In developing Sec. 674.57, the
Secretary relied on the experience gained from the Law Enforcement
Education Program (LEEP), a highly successful program in the 1970's
that provided financial assistance to law enforcement officers to
attend an institution of higher education. The concepts of an eligible
agency, a law enforcement officer, and eligible service were drawn from
LEEP.
Section 674.61 Cancellation for Death or Disability
The Secretary is proposing to amend the definition of permanent and
total disability in Sec. 674.61 to include the inability of the
borrower to attend an institution.
Federal Work-Study Programs
Program Name Change
The three (3) Federal work-study programs under section 441 of the
HEA are the Federal Work-Study program under subpart A (formerly named
the College Work-Study program), the Job Location and Development
program under subpart B, and the Work-Colleges program under the new
subpart C. These programs will be known collectively as the Federal
Work-Study programs.
Section 675.1 Purpose and Identification of Common Provisions
The National and Community Service Act Amendments of 1990
authorized the creation of full- and part-time national and community
service programs. In an effort to increase participation in community
service, Congress amended the statement of purpose for the FWS program,
in section 441(a) of the HEA, to encourage students receiving program
assistance to participate in community service activities. The
Secretary proposes to amend Sec. 675.1(a) in accordance with the
statute.
Section 675.2 Definitions
The Secretary proposes to amend the definitions section to add a
new definition of ``low-income individual'' for purposes of community
services. The Secretary is proposing to use the same definition
provided for in Sec. 674.33(c) of the Federal Perkins Loan program
regulations. The Secretary believes that the ``income protection
allowance'' (IPA) is the best indicator of a ``low-income individual.''
Also, the IPA charts are very accessible because the Secretary
publishes annually in the Federal Register the revised IPA table that
is mailed to all institutions participating in title IV, HEA programs.
Section 675.8 Program Participation Agreement
The Secretary is proposing to amend the provisions governing the
program participation agreement between the Secretary and the
institution in Sec. 675.8 in accordance with the statutory change in
section 443(b) of the HEA to add assurances that: (1) employment under
the program may be used to support programs for supportive services to
students with disabilities; and (2) institutions will inform all
eligible students of the opportunity to perform community service and
will consult with local nonprofit, governmental, and community-based
organizations to identify community service opportunities. In
identifying community service opportunities, the Secretary expects
institutions to consult with their students.
Section 675.18 Use of Funds
The Secretary is proposing several amendments to Sec. 675.18.
First, in accordance with section 448(b)(1) of the HEA, the Secretary
is proposing to amend Sec. 675.18(a) to provide that institutions
participating in the Work-Colleges program may use funds allocated
under section 442 of the HEA for meeting costs of the Work-Colleges
program.
Second, in accordance with section 447 of the HEA, the Secretary is
proposing to amend Sec. 675.18(b)(5) to eliminate the institutional
administrative expense allowance for work-study for community service
learning. Institutions would, however, be allowed to use up to 10
percent of the funds available for the institution's administrative
cost allowance and attributable to the institution's FWS program
expenditures to cover expenses incurred for its program of community
services.
Third, in accordance with section 488 of the HEA, the Secretary is
proposing to amend Sec. 675.18(f)(1) to increase the amount of an
institution's allocation under the FWS programs that may be transferred
to the FSEOG program from 10 percent to 25 percent.
Fourth, in accordance with section 445(b)(2) of the HEA, the
Secretary is proposing to amend Sec. 675.18 to provide that an
institution is authorized to make payments to students for services
performed on or after May 15 of the previous award year but prior to
the beginning of the succeeding award year (that is, for summer
employment) from the succeeding award year's allocation. This carry-
back authority would be in addition to the existing authority to carry-
back 10 percent of the succeeding year's allocation for use at any time
during the preceding award year.
Fifth, in accordance with section 443(b)(2)(A) of the HEA, the
Secretary is proposing to amend Sec. 675.18 to provide that
institutions are required to use at least 5 percent of the total funds
granted to the institution to compensate students employed in community
service activities for the 1994-95 and subsequent award years. If an
institution is unable to comply with this requirement to provide
community services, the institution may request a waiver of this
requirement. The Secretary will approve a waiver if the Secretary
determines that enforcing this requirement would create a hardship for
students at the institution. The public is invited to comment on the
circumstances under which the community service requirement might
create a hardship for students.
Section 675.21 Institutional Employment
Current regulations provide that a proprietary institution may
employ a student to work for the institution in jobs that are in
community services but also involve the provision of student services
that are directly related to the work-study student's training or
education. In accordance with section 443(b)(8) of the HEA, as amended
by the Technical Amendments, the Secretary is proposing to amend
Sec. 675.21(b) to provide that a student employed by a proprietary
institution and performing community services is no longer also
required to be furnishing student services. This change would help
promote community services because of the limited employment
opportunities that satisfy both types of services.
Section 675.26 FWS Federal Share Limitations
Current regulations provide that the Federal share of FWS
compensation paid to a student employed other than by a for-profit
organization may not exceed 70 percent. In accordance with section
443(b)(5) of the HEA, the Secretary is proposing to amend Sec. 675.26
to increase the Federal share to 75 percent. However, the Federal share
of FWS compensation paid to a student employed by a for-profit
organization still may not exceed 50 percent as established by the HEA.
It is important to note that the Secretary will continue to
authorize a Federal share of 100 percent of the compensation earned by
students during an award year if all of the following criteria are met:
1. The work performed by the student is for the institution itself,
for a Federal, state or local public agency, or for a private nonprofit
organization.
2. The institution at which the student is enrolled is designated
as an eligible institution under the Strengthening Institutions Program
(34 CFR part 607), the Strengthening Historically Black Colleges and
Universities Program (34 CFR part 608), or the Strengthening
Historically Black Graduate Institutions Program (34 CFR part 609).
3. The institution requests the increased Federal share as part of
its regular FWS funding application for that year.
Section 675.28 Community Service Learning Program
Current regulations provide for a separate ``Community Service
Learning program'' under the FWS programs. In an effort to increase
participation in community service activities in the title IV, HEA
programs, Congress amended the statement of purpose for the FWS program
to encourage students to participate in community service activities.
The Amendments removed the authority for a separate ``Community
Service-Learning program'' and instead require institutions to employ a
percentage of their FWS students in community service jobs. As a result
of this change, the Secretary is proposing to remove Sec. 675.28 from
the regulations.
Job Location and Development (JLD) Program (Subpart B)
Sections 675.31, 675.32 Purpose and Program Description
Current regulations provide for two separate Job Location and
Development programs: (1) A regular JLD program to expand off-campus
job opportunities for students enrolled in eligible institutions of
higher education who, regardless of their financial need, want jobs;
and (2) a ``Community Services'' JLD program to locate and develop
community services jobs for students with financial need.
The Secretary is proposing to amend Sec. 675.31 in accordance with
amended section 446 of the HEA to combine the two programs into one
program to expand off-campus job opportunities for students enrolled in
eligible institutions, regardless of their financial need. The
Secretary is further proposing to amend Sec. 675.31, in accordance with
the amended statement of purpose for all the FWS programs in section
441(a) of the HEA, to include in the statement of purpose for the JLD
program the encouragement of participation in community service
activities. Also, in accordance with amended section 446 of the HEA,
the Secretary is proposing to amend Sec. 675.32 to allow an institution
to use the lesser of $50,000 or 10 percent of the institution's
allocation to establish or expand a program to locate and develop jobs,
including community service jobs.
Section 675.34 Multi-Institutional Job Location and Development
Programs
Current regulations provide that institutions may enter into
agreements with other participating institutions and nonprofit
organizations to establish and operate job location programs for its
students.
The Secretary is proposing to amend Sec. 675.34 in accordance with
amended section 446(a) of the HEA to eliminate the authority for
institutions to enter into agreements with nonprofit organizations and
limit institutions to working with other institutions for the purpose
of developing jobs.
Work-Colleges (Subpart C)
Sections 675.41-675.47
The Amendments added new section 448 to the HEA to establish the
``Work-Colleges program.'' Congress created this program to encourage
comprehensive work-learning programs and recognize the special nature
of institutions that choose to make work-learning a central part of
their educational programs.
Under the statute, institutions that satisfy the definition of
``work-college'' may apply to the Secretary to participate in the Work-
Colleges program. The term ``work-college'' under the statute means an
eligible institution that (1) has been a public or private nonprofit
institution with a commitment to community service; (2) has operated a
comprehensive work-learning program for at least two years; (3)
requires all resident students who reside on campus to participate in a
comprehensive work-learning program and the provision of services as an
integral part of the institution's educational program and as part of
the institution's educational philosophy; and (4) provides students
participating in the comprehensive work-learning program with the
opportunity to contribute to their education and to the welfare of the
community as a whole.
A comprehensive work-learning program does not provide only
narrowly career-oriented or job-skill-oriented employment. It provides
work experiences that teach basic habits and attitudes, responsibility,
interpersonal relations, communication, teamwork, self analysis,
organizational behavior, problem solving, leadership and other lessons
that are not job specific or career specific.
The statute requires that funds made available to work-colleges
must be matched on a dollar-for-dollar basis from non-Federal sources.
In addition to any amounts appropriated, the statute allows work-
colleges to also use FWS program funds and Federal Perkins Loan funds
to provide flexibility in strengthening the self-help-through-work
element in financial aid packaging.
Federal Supplemental Educational Opportunity Grant Program
Program Name Change
The ``Supplemental Educational Opportunity Grant program'' will now
be known as the ``Federal Supplemental Educational Opportunity Grant
program.''
Section 676.4 Allocation and Reallocation
The Secretary proposes to amend this section to provide for the
flexibility to reallocate unexpended FSEOG funds. This change would
allow the Secretary to assist students who suffer financial harm from a
natural disaster such as a flood or hurricane.
Section 676.18 Use of Funds
The Secretary proposes to eliminate an institution's authority to
transfer FSEOG funds to the FWS program. This change is required by the
Amendments.
Section 676.20 Minimum and Maximum FSEOG Award
Current regulations provide that an institution may award a student
a maximum of $4,000 per academic year. In accordance with section
413B(a)(3) of the HEA, the Secretary proposes to amend the regulations
to allow an institution to increase the FSEOG to $4,400, for a student
engaged in a program of study abroad.
Section 676.21 FSEOG Federal Share Limitations
The Amendments require that the Federal share of FSEOG awards will
not exceed 75 percent effective for award years beginning on or after
July 1, 1993. The Secretary is proposing to amend this section to
incorporate this statutory change.
It is important to note that the Secretary will continue to
authorize a Federal share of 100 percent of the FSEOGs awarded to
students by an institution for an award year if all of the following
criteria are met:
1. The institution is designated as an eligible institution under
the Strengthening Institutions Program (34 CFR part 607) or the
Strengthening Historically Black Colleges and Universities Program (34
CFR part 608).
2. The institution requests that increased Federal share as part of
its regular FSEOG funding application for that year.
Executive Order 12866
1. Assessment of Costs and Benefits
These proposed 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 this regulatory action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those determined by the
Secretary to be necessary for administering this program effectively
and efficiently. Burdens specifically associated with information
collection requirements, if any, are identified and explained elsewhere
in this preamble under the heading Paperwork Reduction Act of 1980.
In assessing the potential costs and benefits--both quantitative
and qualitative--of these proposed regulations, the Secretary has
determined that the benefits of the proposed 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.
To assist the Department in complying with the specific
requirements of Executive Order 12866, the Secretary invites comment on
whether there may be further opportunities to reduce any potential
costs or increase potential benefits resulting from these regulations
without impeding the effective and efficient administration of the
program.
2. Clarity of the Regulations
Executive Order 12866 requires each agency to write regulations
that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following: (1) Are the requirements in the proposed regulations
clearly stated? (2) Do the regulations contain technical terms or other
wording that interferes with their clarity? (3) Does the format of the
regulations (grouping and order of sections, use of headings,
paragraphing, etc.) aid or reduce their clarity? Would the regulations
be easier to understand if they were divided into more (but shorter)
sections? (A ``section'' is preceded by the symbol ``Sec. '' and a
numbered heading, for example, Sec. 674.4 Allocation and reallocation.)
(4) Is the description of the regulations in the ``Supplementary
Information'' section of this preamble helpful in understanding the
regulations? How could this description be more helpful in making the
regulations easier to understand? (5) What else could the Department do
to make the regulations easier to understand?
A copy of any comments that concern how the Department could make
these proposed regulations easier to understand should be sent to
Stanley M. Cohen, Regulations Quality Officer, U.S. Department of
Education, 400 Maryland Avenue SW. (Room 5125, FOB-6), Washington, DC
20202-2241.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. The small entities affected by these proposed regulations are
small institutions of postsecondary education. The changes in these
regulations will not substantially increase institutions' workload or
costs associated with administering the title IV, HEA programs and,
therefore, will not have a significant economic impact on a substantial
number of small entities.
Paperwork Reduction Act of 1980
Sections 668.57, 674.6, 674.8, 674.10, 674.16, 674.31, 674.34,
674.35, 674.42, 674.45, 674.48, 674.49, 674.50, 675.10, 675.27, 675.34,
675.35, 675.46, 675.47, and 676.16 contain information collection
requirements. As required by the Paperwork Reduction Act of 1980, the
Department of Education will submit a copy of these sections to the
Office of Management and Budget (OMB) for its review. (44 U.S.C.
3504(h)).
Annual public reporting and recordkeeping burden for the Student
Assistance General Provisions--subpart E, which includes Sec. 668.57,
is estimated to average 365,693 hours, including the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
Annual public reporting and recordkeeping burden for the Federal
Perkins Loan program--subpart C, Secs. 674.42, 674.45, 674.48, 674.49,
and 674.50 is 80,431 hours, including the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
Annual public reporting and recordkeeping burden for the Federal
Perkins Loans, the Federal Work-Study, and the Federal Supplemental
Educational Opportunity Grant programs, Secs. 674.6, 674.8, 674.10,
674.16, 674.31, 674.34, 674.35, 675.10, 675.27, 675.34, 675.35, 675.46,
675.47, and 676.16 is 12,723 hours, including the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
Organizations and individuals desiring to submit comments on the
information collection requirements should direct them to the Office of
Information and Regulatory Affairs, OMB, room 3002, New Executive
Office Building, Washington, DC 20503; Attention: Daniel J. Chenok.
Invitation to Comment
Interested persons are invited to submit comments and
recommendations regarding these proposed regulations.
All comments submitted in response to these proposed regulations
will be available for public inspection, during and after the comment
period, in Room 4310, ROB-3, 7th and D Streets SW., Washington, DC,
between the hours of 8:30 a.m. and 4 p.m., Monday through Friday of
each week except Federal holidays.
Assessment of Educational Impact
The Secretary particularly requests comments 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.
List of Subjects
34 CFR Part 668
Administrative practice and procedure, Colleges and universities,
Consumer protection, Loan programs--education, Grant programs--
education, Student aid, Reporting and recordkeeping requirements.
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.
Dated: February 8, 1994.
Richard W. Riley,
Secretary of Education.
(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal
Supplemental Educational Opportunity Grant Program; 84.032
Consolidation Program; 84.032 Guaranteed Student Loan Program;
84.032 PLUS Program; 84.032 Supplemental Loans for Students Program;
84.038 Federal Perkins Loan Program; 84.033 Federal Work-Study
Program; 84.226 Income Contingent Loan Program; 84.063 Federal Pell
Grant Program; 84.069 State Student Incentive Grant Program)
The Secretary proposes to amend parts 668, 674, 675, and 676 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, and 1141,
unless otherwise noted.
2. Section 668.57 is amended by revising paragraph (c)(1),
introductory text to read as follows:
Sec. 668.57 Acceptable documentation.
* * * * *
(c) Number of family household members enrolled in postsecondary
institutions. (1) Except as provided in Sec. 668.56 (b), (c), (d), and
(e), an institution shall require an applicant selected for
verification to verify annually information included on the application
regarding the number of household members in the applicant's family
enrolled on at least a half-time basis in postsecondary institutions.
The institution shall require the applicant to verify that information
by submitting a statement signed by the applicant and one of the
applicant's parents whose income was used in the applicant's need
analysis, if the applicant is a dependent student, or by the applicant
and the applicant's spouse, if the applicant is an independent student,
listing--
* * * * *
PART 674--FEDERAL PERKINS LOAN PROGRAM
1. 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.
2. Section 674.2(b) is amended by removing the definitions of
``Default rate'', ``Defaulted principal amount outstanding'', and
``Matured loans''; by revising the definition of ``Undergraduate
student''; and by adding, in alphabetical order, the definitions of
``Disposable income'', ``Enter repayment'', ``Making of a loan'', and
``Satisfactory arrangements to repay the loan'' to read as follows:
Sec. 674.2 Definitions.
* * * * *
(b) * * *
Disposable income: That part of a borrower's compensation from an
employer or other income from any source that remains after the
deduction of any amounts required by law to be withheld.
Enter repayment: The day following the expiration of the initial
grace period or the day the borrower waives the initial grace period.
This date does not change if a forbearance, deferment or cancellation
is granted after the borrower enters repayment.
Making of a loan: When the borrower signs for an advance of loan
funds and those funds are disbursed.
Satisfactory arrangements to repay the loan: The establishment of a
new written repayment agreement and the making of one payment each
month for six consecutive months.
Undergraduate student: A student enrolled in a course of study at
an institution of higher education that is at or below the
baccalaureate level and that usually does not exceed four academic
years, or is enrolled in a four to five academic year program designed
to lead to a first degree. A student enrolled in a program of any other
length is considered an undergraduate student for only the first four
academic years of that program.
* * * * *
3. Section 674.4 is amended by revising paragraph (b) and by adding
new paragraphs (e) and (f) to read as follows:
Sec. 674.4 Allocation and reallocation.
* * * * *
(b) The Secretary reallocates Federal capital contributions to
institutions participating in the Federal Perkins Loan program by--
(1) Reallocating 80 percent of the total funds available in
accordance with section 462(j) of the HEA; and
(2) Reallocating 20 percent of the total funds available in a
manner that best carries out the purposes of the Federal Perkins Loan
program.
* * * * *
(e) Unexpended funds. (1) If an institution does not expend its
Federal Perkins Loan allocation during an award year and returns more
than 10 percent of the allocation, the Secretary reduces its allocation
for the next fiscal year by the amount returned.
(2) The Secretary may waive the provision of paragraph (e)(1) of
this section for a specific institution if the Secretary finds that
enforcement would be contrary to the interests of the program.
(3) The Secretary considers enforcement of paragraph (e)(1) of this
section to be contrary to the interest of the program only if the
institution returned more than 10 percent of its allocation due to
circumstances beyond the institution's control that are not expected to
recur.
(f) Anticipated collections. (1) For the purposes of calculating an
institution's share of any excess allocation, an institution's
anticipated collections are equal to the amount that was collected
during the second year preceding the beginning of the award period
multiplied by 1.21.
(2) The Secretary may waive the provision of paragraph (f)(1) of
this section for any institution that has a cohort default rate that
does not exceed 7.5 percent.
4. A new Sec. 674.5 is added to read as follows:
Sec. 674.5 Federal Perkins Loan program cohort default rate and
penalties.
(a) Default penalty. If an institution's cohort default rate meets
the following levels, a default penalty is imposed on the institution
as follows:
(1) If the institution's cohort default rate equals or exceeds 15
percent, the institution must establish a default reduction plan in
accordance with Sec. 674.6.
(2) If the institution's cohort default rate equals or exceeds 20
percent, but is less than 25 percent, the institution's FCC is reduced
by 10 percent.
(3) If the institution's cohort default rate equals or exceeds 25
percent, but is less than 30 percent, the institution's FCC is reduced
by 30 percent.
(4) If the institution's cohort default rate equals or exceeds 30
percent, the institution's FCC is reduced to zero.
(b) Cohort default rate. (1) The term ``cohort default rate''
means, for any award year in which 30 or more current and former
students at the institution enter repayment on a loan received for
attendance at the institution, the percentage of those current and
former students who enter repayment in that award year on the loans
received for attendance at that institution who default before the end
of the following award year.
(2) In determining the number of students who default before the
end of the following award year, the Secretary excludes any loans that,
due to improper servicing or collection, would result in an inaccurate
or incomplete calculation of the cohort default rate.
(3) For any award year in which less than 30 current and former
students at the institution enter repayment on a loan received for
attendance at the institution, the ``cohort default rate'' means the
percentage of those current and former students who entered repayment
on loans received for attendance at that institution in any of the
three most recent award years and who defaulted on those loans before
the end of the award year immediately following the year in which they
entered repayment.
(c) Defaulted loans to be included in the cohort default rate. For
purposes of calculating the cohort default rate under paragraph (b) of
this section--
(1) A borrower must be included only if the borrower's default has
persisted for at least--
(i) 240 consecutive days for loans repayable in monthly
installments; or
(ii) 270 consecutive days for loans repayable in quarterly
installments;
(2) A loan is considered to be in default if a payment is made by
the institution of higher education, its owner, agency, contractor,
employee, or any other entity or individual affiliated with the
institution, in order to avoid default by the borrower;
(3)(i) Any loan that is in default, but on which the borrower has
made satisfactory arrangements to repay the loan, or any loan that has
been rehabilitated before the end of the following award year is not
considered to be in default for purposes of the cohort default rate
calculation; and
(ii) In the case of a student who has attended and borrowed at more
than one institution, the student and his or her subsequent repayment
or default are attributed to the institution for attendance at which
the student received the loan that entered repayment in the award year;
and
(4) Improper servicing or collection means the failure of the
institution to comply with subpart C of this part.
(d) Locations of the institution. (1) A cohort default rate of an
institution applies to all locations of the institution as it exists on
the first day of the award year for which the rate is calculated.
(2) A cohort default rate of an institution applies to all
locations of the institution from the date the institution is notified
of that rate until the institution is notified by the Secretary that
the rate no longer applies.
(3) For an institution that changes status from a location of one
institution to a free-standing institution, the Secretary determines
the cohort default rate based on the institution's status as of July 1
of the award year for which a cohort default rate is being calculated.
(4)(i) For an institution that changes status from a free-standing
institution to a location of another institution, the Secretary
determines the cohort default rate based on the combined number of
students who enter repayment during the applicable award year and the
combined number of students who default during the applicable award
years from both the former free-standing institution and the other
institution. This cohort default rate applies to the new consolidated
institution and all of its current locations.
(ii) For free-standing institutions that merge, the Secretary
determines the cohort default rate based on the combined number of
students who enter repayment during the applicable award year and the
combined number of students who default during the applicable award
years from both of the institutions that are merging. This cohort
default rate applies to the new, consolidated institution.
(iii) For an institution that changes status from a location of one
institution to a location of another institution, the Secretary
determines the cohort default rate based on the combined number of
students who enter repayment during the applicable award year and the
number of students who default during the applicable award years from
both of the institutions in their entirety, not limited solely to the
respective locations.
(5) For an institution that has a change in ownership that results
in a change in control, the Secretary determines the cohort default
rate based on the combined number of students who enter repayment
during the applicable award year and the combined number of students
who default during the applicable award years from the institution
under both the old and new control.
(e) Loan rehabilitation. (1) A loan is considered rehabilitated
only after the borrower has executed a new written repayment agreement
and has made one payment each month for 12 consecutive months.
(2) The institution shall report to any one national credit bureau
organization with which the Secretary has an agreement within 30 days
of the date the loan was rehabilitated that the loan is no longer in
default.
(Authority: 20 U.S.C. 1087bb)
5. A new Sec. 674.6 is added to read as follows:
Sec. 674.6 Default reduction plan.
(a) General. An institution with a cohort default rate that equals
or exceeds 15 percent shall establish and implement a plan designed to
reduce defaults by its students in the future. The institution shall
submit to the Secretary by December 31 of the calendar year in which
the cohort default rate was calculated--
(1) A written description of the default reduction plan;
(2) A statement indicating that the institution agrees to comply
with the required measures in paragraph (b) of this section; or
(3) For an institution that is participating in the Federal Family
Education Loan Program and has in place a default reduction plan for
that program, a statement indicating that the institution agrees to
apply that plan to the Federal Perkins Loan program.
(b) Required measures. The default reduction plan required under
this section must include a description of the measures to be taken by
the institution to reduce defaults. The institution shall explain how
it plans to implement the following measures:
(1) Revise admission policies and screening practices, consistent
with applicable State law, to ensure that students enrolled in the
institution, especially those who are not high school graduates or
those who are in need of substantial remedial work, have a reasonable
expectation of succeeding in their programs of study.
(2) Improve the availability and effectiveness of academic
counseling and other support services to decrease withdrawal rates,
including--
(i) Providing academic counseling and other support services to
students on a regular basis, at a time and location that is convenient
for the students involved;
(ii) Publicizing the availability of the academic counseling and
other support services;
(iii) Establishing procedures to identify academically high-risk
students and schedule those students for immediate counseling services;
and
(iv) Maintaining records identifying those students who receive
academic counseling.
(3) Attempt to reduce its withdrawal rate by conforming with that
accrediting agency's standards of satisfactory progress and with those
described in 34 CFR 668.14, and improving its curricula, facilities,
materials, equipment, qualifications and size of faculty, and other
aspects of its educational program in consultation with its academic
accrediting agency.
(4) Increase the frequency of reviews of in-school status of
borrowers to ensure the institution's prompt recognition of instances
in which borrowers withdraw without notice to the institution. Reviews
must be conducted each month.
(5) Expand its job placement program for its students by--
(i) Increasing contacts with local employers, counseling students
in job search skills, and exploring with local employers the
feasibility of establishing internship and cooperative education
programs;
(ii) Attempting to improve its job placement rate and licensing
examination pass rate by improving its curricula, facilities,
materials, equipment, qualifications and size of faculty, and other
aspects of its educational program in consultation with the cognizant
accrediting body; and
(iii) Establishing a liaison for job information and placement
assistance with the local office of the United States Employment
Service and the Private Industry Council supported by the U.S.
Department of Labor.
(6) Remind the borrower of the importance of the repayment
obligation and of the consequences of default and update the
institution's records regarding the borrower's employer and employer's
address as part of the contacts with the borrower under Sec. 674.42(b).
(7) Obtain information from the borrower regarding references and
family members beyond those provided on the loan application to provide
the institution or its agent with a variety of ways to locate a
borrower who later relocates without notifying the institution at the
time of a borrower's admission to the institution.
(8) Explain to a prospective student that the student's
dissatisfaction with, or nonreceipt of, the educational services being
offered by the institution does not excuse the borrower from repayment
of any Federal Perkins Loan.
(9) Use a written test and intensive additional counseling for
those borrowers who fail the test to ensure the borrower's
comprehension of the terms and conditions of the loan including those
described in Secs. 674.16 and 674.42(a) as part of the initial loan
counseling and the exit interview.
(10) During the exit interview provided to a Federal Perkins Loan
borrower--
(i) Explain the use by institutions of outside contractors to
service and collect loans;
(ii) Provide general information on budgeting of living expenses
and other aspects of personal financial management; and
(iii) Provide guidance on the preparation of correspondence to the
borrower's institution or agent and completion of deferment and
cancellation forms.
(11) Use available audio-visual materials such as videos and films
to enhance the effectiveness of the initial and exit counseling.
(12) Conduct an annual comprehensive self-evaluation of its
administration of the title IV programs to identify institutional
practices that should be modified to reduce defaults, and then
implement those modifications.
(13) Delay loan disbursements to first-time borrowers for 30 days
after enrollment.
(14) Require first-time borrowers to endorse their loan check at
the institution and to pick up at the institution any loan proceeds
remaining after deduction of institutional charges.
(Authority: 20 U.S.C. 1087bb)
6. A new Sec. 674.7 is added to read as follows:
Sec. 674.7 Expanded lending option (ELO).
(a) To participate in the expanded lending option in any award
year, an eligible institution shall enter into a special ELO
participation agreement with the Secretary. The agreement provides that
the institution shall--
(1) Deposit ICC equal to 100 percent of its FCC into the Fund;
(2) Maintain a cohort default rate that is equal to or less than 15
percent; and
(3) Have participated in the Federal Perkins Loan Program for at
least two years.
(b) The maximum annual amount of Federal Perkins Loans and Direct
Loans an eligible student who attends an institution that participates
in the ELO may borrow in any academic year is--
(1) $4,000 for a student who has not successfully completed a
program of undergraduate education; and
(2) $6,000 for a graduate or professional student.
(c) The aggregate maximum amount of Federal Perkins and Direct
Loans an eligible student who attends an institution that participates
in the ELO may borrow in any academic year is--
(1) $8,000 for a student who has not successfully completed two
years of a program leading to a bachelor's degree;
(2) $20,000 for a student who has successfully completed two years
of a program leading to a bachelor's degree but who has not received
the degree; and
(3) $40,000 for a graduate or professional student.
(d) The maximum annual amounts described in paragraph (b) of this
section and the aggregate maximum amounts described in paragraph (c) of
this section may be exceeded by 20 percent if the student is engaged in
a program of study abroad that is approved for credit by the home
institution at which the student is enrolled and that has reasonable
costs in excess of the home institution's cost of attendance.
(e) For each student, the maximum annual amounts described in
paragraphs (b) and (d) of this section and the aggregate maximum
amounts listed in paragraphs (c) and (d) of this section include any
amount borrowed previously by that student under title IV, part E of
the HEA at any institution, including any amounts that may have been
repaid to the Fund at any institution.
(f) The institution shall deposit into its Fund an amount required
under paragraph (a)(1) of this section whether or not the institution
makes loans in the amount authorized under paragraphs (b) and (c) of
this section.
(Authority: 20 U.S.C. 1087cc, 1087dd)
7. Section 674.8 is amended by revising paragraph (a)(2); by
redesignating paragraphs (a)(3) through (a)(6) as paragraphs (a)(4)
through (a)(7) respectively; by adding a new paragraph (a)(3); and by
revising paragraph (c) to read as follows:
Sec. 674.8 Program participation agreement.
* * * * *
(a) * * *
(2) Except as provided in paragraph (a)(1) of Sec. 674.7--
(i) ICC equal to at least three-seventeenths of the FCC described
in paragraph (a)(1) of this section in award year 1993-94; and
(ii) ICC equal to at least one-third of the FCC described in
paragraph (a)(1) of this section in award year 1994-95 and succeeding
award years;
(3) ICC equal to the amount of FCC described in paragraph (a)(1) of
Sec. 674.7 for an institution that has been granted permission by the
Secretary to participate in the ELO under the Federal Perkins Loan
program;
* * * * *
(c) The institution shall submit an annual report to the Secretary
containing information that determines its cohort default rate that
includes--
(1) For institutions in which 30 or more of its current or former
students first entered repayment in an award year--
(i) The total number of borrowers who first entered repayment in
the award year; and
(ii) The number of those borrowers in default by the end of the
following award year; or
(2) For institutions in which less than 30 of its current or former
students entered repayment in an award year--
(i) The total number of borrowers who first entered repayment in
any of the three most recent award years; and
(ii) The number of those borrowers in default before the end of the
award year immediately following the year in which they entered
repayment.
* * * * *
8. Section 674.9 is amended by revising paragraph (b); by removing
the word ``and'' after the semicolon in paragraph (d)(2); by removing
the period at the end of paragraph (e) and adding, in its place, a
semicolon; and by adding new paragraphs (f), (g), (h), and (i) to read
as follows:
Sec. 674.9 Student eligibility.
* * * * *
(b) Is enrolled or accepted for enrollment as an undergraduate,
graduate, or professional student at the institution, whether or not
engaged in a program of study abroad approved for credit by the home
institution;
* * * * *
(f) Provides to the institution a driver's license number, if any,
at the time of application for the loan;
(g) Reaffirms any Federal Perkins, Direct, or Defense loan amount
that previously was cancelled due to the borrower's total and permanent
disability, or discharged in bankruptcy, or written off (if the amount
of the write-off exceeded $25); and
(h)(1) In the case of a borrower whose previous loan was cancelled
due to total and permanent disability, obtains a certification from a
physician that the borrower's condition has improved and that the
borrower is able to engage in substantial gainful activity; and
(2) Signs a statement acknowledging that any new Federal Perkins,
Direct, or Defense loan the borrower received cannot be cancelled in
the future on the basis of any present impairment, unless that
condition substantially deteriorates.
(i) For purposes of this section, reaffirmation means the
acknowledgment of the loan by the borrower in a legally binding manner.
The acknowledgement may include, but is not limited to, the borrower--
(1) Signing a new promissory note or new repayment agreement; or
(2) Making a payment on the loan.
(Authority: 20 U.S.C. 1087aa, 1087dd, and 1091)
9. Section 674.10 is amended by revising paragraph (b) to read as
follows:
Sec. 674.10 Selection of students for loans.
* * * * *
(b) If an institution's allocation of FCC is directly or indirectly
based in part on the financial need demonstrated by students who are
attending the institution as less-than-full-time students, or who are
independent students, and the total financial need of all the less-
than-full-time or independent students at the institution exceeds 5
percent of the total financial need of all students at the institution,
at least 5 percent of those loans shall be made available to those
less-than-full-time or independent students.
* * * * *
10. Section 674.12 is revised to read as follows:
Sec. 674.12 Loan maximums.
(a) The maximum annual amount of Federal Perkins Loans and Direct
Loans an eligible student who attends an institution that does not
participate in the ELO may borrow in any academic year is--
(1) $3,000 for a student who has not successfully completed a
program of undergraduate education; and
(2) $5,000 for a graduate or professional student.
(b) The aggregate maximum amount of Federal Perkins Loans and
Direct Loans an eligible student who attends an institution that does
not participate in the ELO may borrow is--
(1) $15,000 for a student who has not successfully completed a
program of undergraduate education; and
(2) $30,000 for a graduate or professional student.
(c) The maximum annual amounts described in paragraph (a) of this
section and the aggregate maximum amounts described in paragraph (b) of
this section may be exceeded by 20 percent if the student is engaged in
a program of study abroad that is approved for credit by the home
institution at which the student is enrolled and that has reasonable
costs in excess of the home institution's cost of attendance.
(d) For each student, the maximum annual amounts described in
paragraphs (a) and (c) of this section and the aggregate maximum
amounts described in paragraphs (b) and (c) of this section, include
any amounts borrowed previously by the student under title IV, part E
of the HEA at any institution, including any amounts that may have been
repaid to the Fund at any institution.
* * * * *
Sec. 674.13 [Amended]
11. Section 674.13 is amended by removing the words ``or endorser''
after the word ``borrower'' in paragraph (b)(1)(ii).
12. Section 674.14 is amended by removing the words ``Guaranteed
Student Loans'' and adding, in its place, the words ``Federal Family
Education Loan'' in paragraph (b)(1)(ii); by removing the words ``and
need-based ICLs'' after the words ``Direct Loans'' in paragraph
(b)(1)(x); by adding the words ``or Federal'' before the word ``PLUS'',
by removing the comma after the words ``PLUS loan'', and by removing
the words ``or non-need-based ICL'' before the word ``as'' in paragraph
(b)(3); and by revising paragraphs (c) introductory text, (c)(1),
(c)(2), and (c)(3) to read as follows:
Sec. 674.14 Overaward.
* * * * *
(c) Treatment of resources in excess of need. An institution shall
take the following steps if it learns that a student has received
additional resources not included in the calculation of Direct or
Federal Perkins Loan eligibility that would result in the student's
total resources exceeding his or her financial need by more than $200,
or $300 if employed under the FWS program:
(1) The institution shall decide whether the student has increased
financial need that was unanticipated when it awarded financial aid to
the student. If the student demonstrates increased financial need and
the total resources do not exceed this increased need by more than
$200, or $300 if employed under the FWS program, no further action is
necessary.
(2) If no increased need is demonstrated, or the student's total
resources still exceed his or her need by more than $200, or $300 if
employed under the FWS program, as recalculated pursuant to paragraph
(c)(1) of this section, the institution shall cancel any undisbursed
loan or grant (other than a Federal Pell Grant).
(3) If the student's total resources still exceed his or her need
by more than $200, or $300 if employed under the FWS program, after the
institution takes the steps required in paragraphs (c)(1) and (2) of
this section, the institution shall consider the amount by which the
resources exceed the student's financial need by more than the
applicable amount as an overpayment.
13. Section 674.16 is amended by revising paragraph (a)(1)(ii); by
revising paragraph (a)(1)(x); by revising paragraph (d); by
redesignating paragraphs (g) and (h) as paragraphs (h) and (i)
respectively; by adding a new paragraph (g); by adding the word
``Federal'' before the words ``Perkins Loan program'' in redesignated
paragraph (h); and by adding a new paragraph (j) to read as follows:
Sec. 674.16 Making and disbursing loans.
(a)(1) * * *
(ii) The principal amount of the loan and a statement that the
institution will report the amount of the loan to a national credit
bureau organization with which the Secretary has an agreement at least
annually.
* * * * *
(x) A definition of default and the consequences to the borrower,
including a statement that the institution may report the default to
any one national credit bureau organization with which the Secretary
has an agreement.
* * * * *
(d)(1) The institution may advance the loan proceeds to the
borrower directly by check or by crediting his or her account with the
institution. The institution shall notify the student of the amount he
or she can expect to receive and of how and when that amount will be
paid. In either case, the borrower must sign for each advance of funds
on the promissory note, except as provided in paragraph (d)(2) of this
section.
(2)(i) In the case of a borrower enrolled in a study-abroad program
approved for credit by the home institution in which the borrower is
enrolled, the borrower may not be required to sign for any advance of
funds made while the borrower is studying abroad if obtaining the
borrower's signature would pose an undue hardship on the institution.
(ii) The institution shall properly document the reason for not
obtaining the borrower's signature.
* * * * *
(g)(1) An institution may disburse Federal Perkins Loan funds in
accordance with paragraphs (g)(2) and (3) of this section after the
student has ceased to be enrolled.
(2) A disbursement described in paragraph (g)(1) of this section
may be made--
(i) Only if the loan was awarded to the student while he or she was
still an eligible student; and
(ii) Only if the loan funds will be used to cover documented
educational costs to the student that are normally included in a
borrower's cost of attendance under section 472 of the HEA for the
payment period for which the loan was intended and the student was
actually enrolled.
(3) The institution shall document in the student's file the reason
for the late disbursement.
* * * * *
(j) An institution shall report to any one national credit bureau
organization with which the Secretary has an agreement--
(1) The amount of each disbursement;
(2) The date the disbursement was made; and
(3) Information as specified in section 430A of the Act.
* * * * *
14. Section 674.18 is amended by adding a new paragraph (c) to read
as follows:
Sec. 674.18 Use of funds.
* * * * *
(c) Transfer of funds. An institution may transfer up to 25 percent
of the sum of its initial and supplemental Federal Perkins Loan
allocations for an award year to the Federal Work-Study program or
Federal Supplemental Educational Opportunity Grant program, or to both.
* * * * *
15. Section 674.19 is amended by revising paragraph (e)(2)(ii) to
read as follows:
Sec. 674.19 Fiscal procedures and records.
* * * * *
(e) * * *
(2) * * *
(ii) The history must also show the date, nature, and result of
each contact with the borrower in the collection of an overdue loan.
The institution shall include in the repayment history copies of all
correspondence to or from the borrower, except bills, routine overdue
notices, and routine form letters.
* * * * *
16. Section 674.31 is amended by removing paragraph (a)(2); by
redesignating paragraphs (a)(3)(i) and (a)(3)(ii)(A) and (B) as
paragraphs (a)(2)(i) and (a)(2)(ii)(A) and (B) respectively; by
revising redesignated paragraph (a)(2)(ii)(A); by adding a new
paragraph (a)(2)(iii); and by revising paragraphs (b)(6) and (b)(10) to
read as follows:
Sec. 674.31 Promissory note.
(a) * * *
(2) * * *
(ii) * * *
(A) The note requires the signature of the borrower on each page;
or
* * * * *
(iii) The promissory note must state the exact amount of the
minimum monthly repayment amount if the institution chooses the option
under Sec. 674.33(b).
(b) * * *
(6) Security and endorsement. The promissory note must state that
the loan shall be made without security and endorsement.
* * * * *
(10) Disclosure of information. The promissory note must state
that--
(i) The institution shall disclose to any one national credit
bureau organization with which the Secretary has an agreement, the
amount of the loan made to the borrower, along with other relevant
information;
(ii) If the borrower defaults on the loan, the institution shall
disclose to any one national credit bureau organization with which the
Secretary has an agreement that the borrower has defaulted on the loan,
along with other relevant information; and
(iii) If the borrower defaults on the loan and the loan is assigned
to the Secretary for collection, the Secretary may disclose to a
national credit bureau organization, that the borrower has defaulted on
the loan, along with other relevant information.
* * * * *
17. Section 674.33 is amended by redesignating paragraph (a)(3) as
paragraph (a)(4); by adding a new paragraph (a)(3); by revising
paragraph (b); by revising paragraph (c)(1); and by adding new
paragraphs (d) and (e) to read as follows:
Sec. 674.33 Repayment.
(a) * * *
(3) If the installment payment for all loans made to a borrower by
an institution is not a multiple of $5, the institution may round that
payment to the next highest dollar amount that is a multiple of $5.
* * * * *
(b) Minimum monthly repayment--(1) Minimum monthly repayment
option. (i) An institution may require a borrower to pay a minimum
monthly repayment if--
(A) The promissory note includes a minimum monthly repayment
provision specifying the amount of the minimum monthly repayment; and
(B) The monthly repayment of principal and interest for a 10-year
repayment period is less than the minimum monthly repayment; or
(ii) An institution may require a borrower to pay a minimum monthly
repayment if the borrower has received loans with different interest
rates at the same institution and the total monthly repayment would
otherwise be less than the minimum monthly repayment.
(2) Minimum monthly repayment of loans from more than one
institution. If a borrower has received loans from more than one
institution, the following rules apply:
(i) If the total of the monthly repayments is equal to at least the
minimum monthly repayment, no institution may exercise a minimum
monthly repayment option.
(ii) If only one institution exercises the minimum monthly
repayment option when the monthly repayment would otherwise be less
than the minimum repayment option, that institution receives the
difference between the minimum monthly repayment and the repayment owed
to the other institution.
(iii) If each institution exercises the minimum repayment option,
the minimum monthly repayment must be divided among the institutions in
proportion to the amount of principal advanced by each institution.
(3) Minimum monthly repayment of both Defense and Direct or Federal
Perkins loans from one or more institutions. If the total monthly
repayment is less than $30 and the monthly repayment on a Defense loan
is less than $15 a month, the amount attributed to the Defense loan may
not exceed $15 a month.
(4) Minimum monthly repayment of loans with differing grace periods
and deferments. If the borrower has received loans with different grace
periods and deferments, the institution shall treat each note
separately, and the borrower shall pay the applicable minimum monthly
payment for a loan that is not in the grace or deferment period.
(5) Hardship. The institution may reduce the borrower's scheduled
repayments for a period of not more than one year at a time if--
(i) It determines that the borrower is unable to make the scheduled
repayments due to hardship (see Sec. 674.33(c)); and
(ii) The borrower's scheduled repayment is the minimum monthly
repayment described in paragraph (b) of this section.
(6) Minimum monthly repayment rates. For the purposes of this
section, the minimum monthly repayment rate is--
(i) $15 for a Defense loan;
(ii) $30 for a Federal Perkins loan made before October 1, 1992, or
for a Federal Perkins loan made on or after October 1, 1992, to a
borrower who, on the date the loan is made, has an outstanding balance
of principal or interest owing on any loan made under this part; or
(iii) $40 for a Federal Perkins loan made on or after October 1,
1992, to a borrower who, on the date the loan is made, has no
outstanding balance of principal or interest owing on any loan made
under this part.
(7) The institution shall determine the minimum repayment amount
under paragraph (b) of this section for loans with repayment
installment intervals greater than one month by multiplying the amounts
in paragraph (b) of this section by the number of months in the
installment interval.
(c) Extension of repayment period--(1) Hardship. The institution
may extend a borrower's repayment period due to prolonged illness or
unemployment.
* * * * *
(d) Forbearance. (1) Forbearance means the temporary cessation of
payments, allowing an extension of time for making payments, or
temporarily accepting smaller payments than previously were scheduled.
(2) Upon written request and receipt of supporting documentation,
the institution shall grant the borrower forbearance of principal and,
unless otherwise indicated by the borrower, interest renewable at
intervals of 12 months for a period not to exceed three years.
(3) The terms of forbearance must be agreed upon, in writing, by
the borrower and the institution.
(4) In granting a forbearance under this section, an institution
shall grant a temporary cessation of payments, unless the borrower
chooses another form of forbearance subject to paragraph (d)(1) of this
section.
(5) An institution shall grant forbearance if--
(i) The amount of the payments the borrower is obligated to make on
title IV loans each month (or a proportional share if the payments are
due less frequently than monthly) is collectively equal to or greater
than 20 percent of the borrower's monthly disposable income;
(ii) The institution determines that the borrower should qualify
for the forbearance due to poor health or for other acceptable reasons;
or
(iii) The Secretary authorizes a period in the event of a national
military mobilization or other national emergency.
(6) Before granting a forbearance to a borrower under paragraph
(d)(4)(i) of this section, the institution shall require the borrower
to submit at least the following documentation:
(i) Evidence showing the amount of the borrower's most recent
monthly disposable income.
(ii) A copy of the borrower's federal income tax return if the
borrower filed a tax return within eight months prior to the date the
forbearance is requested.
(iii) Evidence showing the most recent monthly amount due on the
borrower's title IV loans.
(7) Interest accrues during any period of forbearance.
(e) Compromise of repayment. (1) An institution may compromise on
the repayment of a defaulted loan if--
(i) The institution has fully complied with all due diligence
requirements specified in subpart C of this part; and
(ii) The student borrower pays in a single lump-sum payment--
(A) 90 percent of the outstanding principal balance on the loan
under this part;
(B) The interest due on the loan; and
(C) Any collection fees due on the loan.
(2) The Federal share of the compromise repayment must bear the
same relation to the institution's share of the compromise repayment as
the Federal capital contribution to the institution's loan Fund under
this part bears to the institution's capital contribution to the Fund.
* * * * *
18. Sections 674.34 through 674.39 are redesignated as Secs. 674.35
through 674.40 respectively and a new Sec. 674.34 is added to read as
follows:
Sec. 674.34 Deferment of repayment--Federal Perkins loans and Direct
loans made on or after July 1, 1993.
(a) The borrower may defer making scheduled installment repayment
on a Federal Perkins loan or a Direct loan made on or after July 1,
1993, during the periods described in this section.
(b)(1) The borrower need not repay principal, and interest does not
accrue, during a period after the commencement or resumption of the
repayment period on a loan, when the borrower is--
(i) Enrolled and in attendance as a regular student in at least a
half-time course of study at an eligible institution;
(ii) Enrolled and in attendance as a regular student in a course of
study that is part of a graduate fellowship program approved by the
Secretary;
(iii) Engaged in graduate or post-graduate fellowship-supported
study (such as a Fulbright grant) outside the United States; or
(iv) Enrolled in a course of study that is part of a rehabilitation
training program for disabled individuals approved by the Secretary as
described in paragraph (g) of this section.
(2) No borrower is eligible for a deferment under paragraph (b)(1)
of this section while serving in a medical internship or residency
program.
(3) The institution of higher education at which the borrower is
enrolled does not need to be participating in the Federal Perkins Loan
program for the borrower to qualify for a deferment.
(4) If a borrower is attending an institution of higher education
as at least a half-time regular student for a full academic year and
intends to enroll as at least a half-time regular student in the next
academic year, the borrower is entitled to a deferment for 12 months.
(5) If an institution no longer qualifies as an institution of
higher education, the borrower's deferment ends on the date the
institution ceases to qualify.
(c)(1) The borrower of a Federal Perkins loan need not repay
principal, and interest does not accrue, for any period during which
the borrower is engaged in service described in Secs. 674.53, 674.54,
674.56, 674.57, 674.58, 674.59, and 674.60.
(2) The borrower of a Direct loan need not repay principal, and
interest does not accrue, for any period during which the borrower is
engaged in service described in Secs. 674.53, 674.54, 674.56, 674.57,
674.58, and 674.59.
(d) The borrower need not repay principal, and interest does not
accrue, for any period not to exceed 3 years during which the borrower
is seeking and unable to find full-time employment.
(e)(1) The borrower need not repay principal, and interest does not
accrue, for any period not to exceed 3 years during which the borrower
is suffering an economic hardship. To qualify for this deferment, the
borrower must be--
(i) Employed full-time and earning an amount that does not exceed
the greater of--
(A) The minimum wage rate described in section 6 of the Fair Labor
Standards Act of 1938; or
(B) An amount equal to 100 percent of the poverty line for a family
of 2 as determined in accordance with section 673(2) of the Community
Service Block Grant Act; or
(ii) Not receiving monthly disposable income from all sources that
is more than four times the amount specified in paragraph (e)(1)(i) of
this section, and the amount of the borrower's payments due each month
(or a proportional share if the payments are due less frequently than
monthly) on the borrower's nondefaulted education loans that were
obtained through a Federal program is collectively equal to or greater
than 20 percent of the borrower's monthly disposable income.
(2) The institution shall require the borrower to submit at least
the following documentation to qualify for a deferment under paragraph
(e) of this section:
(i) Evidence showing the amount of the borrower's most recent
monthly disposable income from all sources.
(ii) A copy of the borrower's Federal income tax return if the
borrower filed a tax return within eight months prior to the date the
deferment is requested.
(iii) Evidence showing the most recent monthly amount due on the
borrower's nondefaulted education loans that were obtained through
Federal programs, or the borrower's defaulted education loans obtained
through Federal programs if the holders of the loans provide written
statements that the borrower has made satisfactory arrangements to
repay the loans.
(f) To qualify for a deferment for study as part of a graduate
fellowship program pursuant to paragraph (b)(1)(ii) of this section, a
borrower must provide the institution certification that the borrower
has been accepted for or is engaged in full-time study in the
institution's graduate fellowship program.
(g) To qualify for a deferment for study in a rehabilitation
training program, pursuant to paragraph (b)(1)(iv) of this section, the
borrower must be receiving, or be scheduled to receive, services under
a program designed to rehabilitate disabled individuals and must
provide the institution with the following documentation:
(1) A certification from the rehabilitation agency that the
borrower is either receiving or scheduled to receive rehabilitation
training services from the agency.
(2) A certification from the rehabilitation agency that the
rehabilitation program--
(i) Is licensed, approved, certified, or otherwise recognized by
one of the following entities as providing rehabilitation training to
disabled individuals--
(A) A State agency with responsibility for vocational
rehabilitation programs;
(B) A State agency with responsibility for drug abuse treatment
programs;
(C) A State agency with responsibility for mental health services
programs;
(D) A State agency with responsibility for alcohol abuse treatment
programs; or
(E) The Department of Veterans Affairs; and
(ii) Provides or will provide the borrower with rehabilitation
services under a written plan that--
(A) Is individualized to meet the borrower's needs;
(B) Specifies the date on which the services to the borrower are
expected to end; and
(C) Is structured in a way that requires a substantial commitment
by the borrower to his or her rehabilitation. The Secretary considers a
substantial commitment by the borrower to be a commitment of time and
effort that would normally prevent an individual from engaging in full-
time employment either because of the number of hours that must be
devoted to rehabilitation or because of the nature of the
rehabilitation.
(h) The institution may not include the deferment periods described
in paragraphs (b), (c), (d), (e), (f) and (g) of this section when
determining the 10-year repayment period.
(i) The borrower need not pay principal and interest does not
accrue until six months after completion of any period during which the
borrower is in deferment under paragraphs (b), (c), (d), (e), (f), and
(g) of this section.
(j) For purposes of this section, full-time employment means at
least 35 hours of work per week.
(Authority: 20 U.S.C. 1087dd)
19. Redesignated Sec. 674.35 is amended by revising the heading of
the section; by revising paragraph (a); by adding the word ``Federal''
before the words ``Perkins Loan'' in paragraph (b)(2); and by revising
paragraph (c)(5)(iii) to read as follows:
Sec. 674.35 Deferment of repayment--Federal Perkins loans made before
July 1, 1993.
(a) The borrower may defer repayment on a Federal Perkins Loan made
before July 1, 1993, during the periods described in this section.
* * * * *
(c) * * *
(5) * * *
(iii) The borrower does not receive compensation that exceeds the
rate prescribed under section 6 of the Fair Labor Standards Act of 1938
(the Federal minimum wage), except that the tax-exempt organization may
provide health, retirement, and other fringe benefits to the volunteer
that are substantially equivalent to the benefits offered to other
employees of the organization.
* * * * *
20. Redesignated Sec. 674.36 is amended by revising the heading of
the section; by revising paragraph (a); by adding the word ``Federal''
before the words ``Perkins Loan program'' in paragraph (b)(2); and by
revising paragraph (c)(4)(iii) to read as follows:
Sec. 674.36 Deferment of repayment--Direct loans made on or after
October 1, 1980, but before July 1, 1993.
(a) The borrower may defer repayment on a Direct Loan made on or
after October 1, 1980, but before July 1, 1993, during the periods
described in this section.
* * * * *
(c) * * *
(4) * * *
(iii) The borrower does not receive compensation that exceeds the
rate prescribed under section 6 of the Fair Labor Standards Act of 1938
(the Federal minimum wage), except that the tax-exempt organization may
provide health, retirement, and other fringe benefits to the volunteer
that are substantially equivalent to the benefits offered to other
employees of the organization.
* * * * *
21. Redesignated Sec. 674.38 is amended by revising paragraph
(b)(2) and by adding a new paragraph (d) to read as follows:
Sec. 674.38 Deferment procedures.
* * * * *
(b) * * *
(2) As a condition for a deferment under this paragraph, the
institution shall require the borrower to make satisfactory
arrangements to repay the loan.
* * * * *
(d) The institution shall determine the continued eligibility of a
borrower for a deferment at least annually.
* * * * *
22. Redesignated Sec. 674.39 is amended by adding the word
``Federal'' before the word ``Perkins'' in paragraph (b) and by
revising the heading of the section to read as follows:
Sec. 674.39 Postponement of loan repayments in anticipation of
cancellation--loans made before July 1, 1992.
* * * * *
23. Section 674.41 is amended by removing the words ``or any
endorser'' after the words ``the borrower'' in paragraph (a)(2); by
removing paragraph (b); and by redesignating paragraph (c) as (b).
24. Section 674.42 is amended by revising paragraph (a)(1)(ii); by
redesignating paragraphs (a)(3) and (a)(4) as paragraphs (a)(4) and
(a)(5) respectively; and by adding a new paragraph (a)(3) to read as
follows:
Sec. 674.42 Contact with the borrower.
(a) * * *
(1) * * *
(ii) The borrower's rights to forbearance, deferment, cancellation
or postponement of repayment and the procedures for filing for those
benefits.
* * * * *
(3) The institution shall require the borrower to provide to the
institution, during the exit interview--
(i) The borrower's expected permanent address after leaving the
institution, regardless of the reason for leaving;
(ii) The name and address of the borrower's expected employer after
leaving the institution;
(iii) The name and address of the borrower's next of kin; and
(iv) Any corrections in the institution's records relating to the
borrower's name, address, social security number, personal references,
and driver's license number.
* * * * *
25. Section 674.43 is amended by adding a new paragraph (a)(3) to
read as follows:
Sec. 674.43 Billing procedures.
(a) * * *
(3) Notwithstanding paragraph (a)(2)(ii) of this section, if the
borrower elects to make payment by means of an electronic transfer of
funds from the borrower's bank account, the institution shall send to
the borrower a statement of account each quarter, if payments are made
monthly, or semi-annually, if payments are made on other than a monthly
basis.
* * * * *
26. Section 674.44 is amended by revising paragraph (a)(3) and by
revising paragraph (d)(1) to read as follows:
Sec. 674.44 Address searches.
(a) * * *
(3) If, after following the procedures in paragraph (a) of this
section, an institution is still unable to locate a borrower, the
institution may use the Internal Revenue Service skip-tracing service.
* * * * *
(d) * * *
(1) The loan is recovered through litigation;
* * * * *
27. Section 674.45 is amended by revising paragraph (a)(1); by
revising paragraph (b); by revising paragraph (d); and by adding a new
paragraph (g) to read as follows:
Sec. 674.45 Collection procedures.
(a) * * *
(1) Report the defaulted account to any one national credit bureau
organization with which the Secretary has an agreement; and
* * * * *
(b) An institution shall report to any one national credit bureau
organization with which the Secretary has an agreement, according to
the reporting procedures of the national credit bureau organization,
any changes in account status and shall respond within one month of its
receipt to any inquiry from any credit bureau regarding the information
reported on the loan amount.
* * * * *
(d) If the institution is unable to place the loan in repayment as
described in paragraph (c)(1) of this section after following the
procedures in paragraphs (a), (b), and (c) of this section, the
institution shall continue to make annual attempts to collect from the
borrower until--
(1) The loan is recovered through litigation;
(2) The account is assigned to the United States; or
(3) The account is written off under Sec. 674.47(g).
* * * * *
(g) Preemption of State law. The provisions of this section preempt
any State law, including State statutes, regulations, or rules, that
would conflict with or hinder satisfaction of the requirements or
frustrate the purposes of this section.
* * * * *
28. Section 674.46 is amended by revising paragraph (a)(1)
introductory text to read as follows:
Sec. 674.46 Litigation procedures.
(a)(1) If the collection efforts described in Sec. 674.45 do not
result in the repayment of a loan, the institution shall determine at
least annually whether--
* * * * *
29. Section 674.48 is amended by revising paragraph (c)(4)(iii) and
by revising paragraph (d)(1)(iii) to read as follows:
Sec. 674.48 Use of contractors to perform billing and collection or
other program activities.
* * * * *
(c) * * *
(4) * * *
(iii) Deposits those funds received directly from the borrower
immediately in an institutional trust account that must be an interest-
bearing account if those funds will be held for longer than 45 days;
and
* * * * *
(d) * * *
(1) * * *
(iii) Deposits those funds received directly from the borrower
immediately in an institutional trust account that must be an interest-
bearing account if those funds will be held for longer than 45 days,
after deducting its fees if authorized to do so by the institution; and
* * * * *
30. Section 674.49 is amended by revising paragraph (a); by
removing paragraph (g); by redesignating paragraph (h) as paragraph
(g); by removing redesignated paragraph (g)(3); and by revising
redesignated paragraph (g)(1) introductory text to read as follows:
Sec. 674.49 Bankruptcy of borrower.
(a) General. If an institution receives notice that a borrower has
filed a petition for relief in bankruptcy, usually by receiving a
notice of meeting of creditors, the institution and its agents shall
immediately suspend any collection efforts outside the bankruptcy
proceeding against the borrower.
* * * * *
(g) Termination of collection and write-off. (1) An institution
shall terminate all collection action and write off a loan if it
receives--
* * * * *
31. Section 674.50 is amended by revising paragraph (c)(10) to read
as follows:
Sec. 674.50 Assignment of defaulted loans to the United States.
* * * * *
(c) * * *
(10) Documentation that the institution has complied with all of
the due diligence requirements described in paragraph (a)(1) of this
section if the institution has a cohort default rate that is equal to
or greater than 20 percent as of June 30 of the second year preceding
the submission period.
* * * * *
Subpart D--Loan Cancellation
32. Section 674.51 is amended by redesignating paragraphs (g), (h),
and (i) as paragraphs (o), (p), and (q) respectively; by redesignating
paragraph (f) as paragraph (j); by redesignating paragraphs (d) and (e)
as paragraphs (f) and (g) respectively; by revising redesignated
paragraph (q)(3); and by adding new paragraphs (d), (e), (h), (i), (k),
(l), (m), (n), and (r) to read as follows:
Sec. 674.51 Special definitions.
* * * * *
(d) Children and youth with disabilities: Children and youth from
ages 3 through 21, inclusive, who require special education and related
services because they have disabilities as defined in section 602(a)(1)
of the Individuals with Disabilities Education Act.
(e) Early intervention services: Those services defined in section
672(2) of the Individuals with Disabilities Education Act that are
provided to infants and toddlers with disabilities.
* * * * *
(h) High-risk children: Individuals under the age of 21 who are
low-income or at risk of abuse or neglect, have been abused or
neglected, have serious emotional, mental, or behavioral disturbances,
reside in placements outside their homes, or are involved in the
juvenile justice system.
(i) Infants and toddlers with disabilities: Infants and toddlers
from birth to age 2, inclusive, who need early intervention services
for specified reasons, as defined in section 672(1) of the Individuals
with Disabilities Education Act.
* * * * *
(k) Low-income communities: Communities in which there is a high
concentration of children eligible to be counted under chapter 1 of
title I of the Elementary and Secondary Education Act of 1965.
(l) Medical technician: An allied health professional who is
certified, registered, or licensed by the appropriate State agency in
the State in which he or she provides specialized medical services.
(m) Nurse: An individual who is licensed by the appropriate State
agency in the State in which he or she is providing nursing care.
(n) Qualified professional provider of early intervention services:
A provider of services as defined in section 672(2) of the Individuals
with Disabilities Education Act.
* * * * *
(q) * * *
(3) * * *
(i) Speech and language pathology and audiology;
(ii) Physical therapy;
(iii) Occupational therapy;
(iv) Psychological and counseling services; or
(v) Recreational therapy.
(r) Teaching in a field of expertise: The majority of classes
taught are in the borrower's field of expertise.
* * * * *
33. Section 674.52 is amended by revising paragraph (d) to read as
follows:
Sec. 674.52 Cancellation procedures.
* * * * *
(d) The Secretary considers a borrower's loan deferment under
Secs. 674.35, 674.36, and 674.37 to run concurrently with any period
for which a cancellation for military, Peace Corps, or ACTION program
service is granted.
* * * * *
34. Sections 674.55 through 674.60 are redesignated as Secs. 674.58
through 674.63 respectively; Secs. 674.53 and 674.54 are redesignated
as Secs. 674.54 and 674.55 respectively; and a new Sec. 674.53 is added
to read as follows:
Sec. 674.53 Teacher cancellation--Federal Perkins loans and Direct
loans made on or after July 23, 1992.
(a) Cancellation for full-time teaching in an elementary or
secondary school serving low-income students. (1) An institution shall
cancel up to 100 percent of the outstanding loan balance on a Federal
Perkins loan or a Direct loan made on or after July 23, 1992, for full-
time teaching in a public or other nonprofit elementary or secondary
school that--
(i) Is in a school district that qualified for funds, in that year,
under Chapter 1 of the Education Consolidation and Improvement Act of
1981; and
(ii) Has been selected by the Secretary based on a determination
that more than 30 percent of the school's total enrollment is made up
of Chapter 1 children.
(2) For each academic year, the Secretary notifies participating
institutions of the schools selected under paragraph (a) of this
section.
(3) If a list of eligible institutions in which a teacher performs
services under paragraph (a)(1) of this section is not available before
May 1 of any year, the Secretary may use the list for the year
preceding the year for which the determination is made to make the
service determination.
(4) The Secretary considers all elementary and secondary schools
operated by the Bureau of Indian Affairs (BIA) or operated on Indian
reservations by Indian tribal groups under contract with BIA to qualify
as schools serving low-income students.
(5) A teacher, who performs service in a school that meets the
requirement of paragraph (a)(1) of this section in any year and in a
subsequent year fails to meet these requirements, may continue to teach
in that school and will be eligible for loan cancellation pursuant to
paragraph (a) of this section, in subsequent years.
(b) Cancellation for full-time teaching in special education. An
institution shall cancel up to 100 percent of the outstanding balance
on a borrower's Federal Perkins loan or Direct loan made on or after
July 23, 1992, for the borrower's service as a full-time special
education teacher of infants, toddlers, children, or youth with
disabilities, in a public or other nonprofit elementary or secondary
school system;
(c) Cancellation for full-time teaching in fields of expertise. An
institution shall cancel up to 100 percent of the outstanding balance
on a borrower's Federal Perkins loan or Direct loan made on or after
July 23, 1992, for full-time teaching in mathematics, science, foreign
languages, bilingual education, or any other field of expertise where
the State education agency determines that there is a shortage of
qualified teachers.
(d) Cancellation rates. (1) To qualify for cancellation under
paragraphs (a), (b), or (c) of this section, a borrower shall teach
full-time for a complete academic year or its equivalent.
(2) Cancellation rates are--
(i) 15 percent of the original principal loan amount plus the
interest on the unpaid balance accruing during the year of qualifying
service, for each of the first and second years of full-time teaching;
(ii) 20 percent of the original principal loan amount, plus the
interest on the unpaid balance accruing during the year of qualifying
service, for each of the third and fourth years of full-time teaching;
and
(iii) 30 percent of the original principal loan amount, plus the
interest on the unpaid balance accruing during the year of qualifying
service, for the fifth year of full-time teaching.
(e) Teaching in a school system. The Secretary considers a borrower
to be teaching in a public or other nonprofit elementary or secondary
school system only if the borrower is directly employed by the school
system.
(f) Teaching children and adults. A borrower who teaches both
adults and children qualifies for cancellation for this service only if
a majority of the students whom the borrower teaches are children.
(Authority: 20 U.S.C 1087ee.)
35. Redesignated Sec. 674.54 is amended by revising the heading of
the section; by revising paragraph (a)(1) introductory text; by
removing paragraph (a)(2); by redesignating paragraphs (a)(3) and
(a)(4) as paragraphs (a)(2) and (a)(3) respectively; and by revising
paragraph (b)(1) to read as follows:
Sec. 674.54 Teacher cancellation--Federal Perkins loans and Direct
loans made before July 23, 1992.
(a) Cancellation for full-time teaching in an elementary or
secondary school serving low-income students. (1) An institution shall
cancel up to 100 percent of the outstanding loan balance on a Federal
Perkins loan or a Direct loan made before July 23, 1992, for full-time
teaching in a public or other nonprofit elementary or secondary school
that--
* * * * *
(b) Cancellation for full-time teaching of the handicapped. (1) An
institution shall cancel up to 100 percent of the outstanding balance
on a borrower's Federal Perkins loan or Direct loan made before July
23, 1992, for full-time teaching of handicapped children in a public or
other nonprofit elementary or secondary school system.
* * * * *
(Authority: 20 U.S.C 1087ee.)
36. A new Sec. 674.56 is added to read as follows:
Sec. 674.56 Employment cancellation--Federal Perkins loans and Direct
loans made on or after July 23, 1992.
(a)(1) Cancellation for full-time employment as a nurse or medical
technician. An institution shall cancel up to 100 percent of the
outstanding balance on a borrower's Federal Perkins or Direct loan made
on or after July 23, 1992, for full-time employment as a nurse or
medical technician by a public or private nonprofit health care
facility.
(b) Cancellation for full-time employment in a public or private
nonprofit child or family service agency. An institution shall cancel
up to 100 percent of the outstanding balance on a borrower's Federal
Perkins loan or Direct loan made on or after July 23, 1992, for service
as a full-time employee in a public or private nonprofit child or
family service agency who is providing, or supervising the provision
of, services to high-risk children who are from low-income communities
and the families of such children.
(c) Cancellation for service as a qualified professional provider
of early intervention services. An institution shall cancel up to 100
percent of the outstanding balance on a borrower's Federal Perkins loan
or Direct loan made on or after July 23, 1992, for the borrower's
service as a full-time qualified professional provider of early
intervention services in a public or other nonprofit program under
public supervision by the lead agency as authorized in section
676(b)(9) of the Individuals With Disabilities Education Act.
(d) Cancellation rates. (1) To qualify for cancellation under
paragraphs (a), (b), and (c) of this section, a borrower must work
full-time for a 12 consecutive months.
(2) Cancellation rates are--
(i) 15 percent of the original principal loan amount plus the
interest on the unpaid balance accruing during the year of qualifying
service, for each of the first and second years of full-time
employment;
(ii) 20 percent of the original principal loan amount plus the
interest on the unpaid balance accruing during the year of qualifying
service, for each of the third and fourth years of full-time
employment; and
(iii) 30 percent of the original principal loan amount plus the
interest on the unpaid balance accruing during the year of qualifying
service, for the fifth year of full-time employment.
(Authority: 20 U.S.C. 1087ee.)
37. A new Sec. 674.57 is added to read as follows:
Sec. 674.57 Cancellation for law enforcement or corrections officer
service--Federal Perkins and Direct loans for loans made on or after
November 29, 1990.
(a)(1) An institution shall cancel up to 100 percent of the
outstanding balance on a borrower's Federal Perkins loan or Direct loan
made on or after November 29, 1990, for full-time service as a law
enforcement or corrections officer for an eligible employing agency.
(2) An eligible employing agency is an agency--
(i) That is a local, State, or Federal law enforcement or
corrections agency;
(ii) That is public-funded; and
(iii) The principal activities of which pertain to crime
prevention, control, or reduction or the enforcement of the criminal
law.
(3) Agencies that are primarily responsible for enforcement of
civil, regulatory, or administrative laws are ineligible employing
agencies.
(4) A borrower qualifies for cancellation under this section only
if the borrower is--
(i) A sworn law enforcement or corrections officer; or
(ii) A person whose principal responsibilities are unique to the
criminal justice system.
(5) To qualify for a cancellation under this section, the
borrower's service must be essential in the performance of the eligible
employing agency's primary mission.
(6) The agency must be able to document the employee's functions.
(7) A borrower whose principal official responsibilities are
administrative or supportive does not qualify for cancellation under
this section.
(b)(1) To qualify for cancellation under paragraph (a) of this
section, a borrower shall work full-time for 12 consecutive months.
(2) Cancellation rates are--
(i) 15 percent of the original principal loan amount plus the
interest on the unpaid balance accruing during the year of qualifying
service, for each of the first and second years of full-time
employment;
(ii) 20 percent of the original principal loan amount plus the
interest on the unpaid balance accruing during the year of qualifying
service, for each of the third and fourth years of full-time
employment; and
(iii) 30 percent of the original principal loan amount plus the
interest on the unpaid balance accruing during the year of qualifying
service, for the fifth year of full-time employment.
(Authority: 20 U.S.C. 465.)
38. Redesignated Sec. 674.58 is amended by adding the word
``Federal'' before the words ``Perkins loan'' in paragraph (a).
39. Redesignated Sec. 674.61 is amended by revising paragraph
(b)(2) to read as follows:
Sec. 674.61 Cancellation for death or disability.
* * * * *
(b) * * *
(2) Permanent and total disability is the inability to work and
earn money or to attend an institution because of an impairment that is
expected to continue indefinitely or result in death.
* * * * *
40. Redesignated Sec. 674.63 is amended by revising paragraphs
(a)(1) and (b) to read as follows:
Sec. 674.63 Reimbursement to institutions for loan cancellation.
(a) Reimbursement for Defense loan cancellation. (1) The Secretary
pays an institution each award year its share of the principal and
interest cancelled under Secs. 674.55 and 674.59(a).
* * * * *
(b) Reimbursement for Direct and Federal Perkins loan cancellation.
The Secretary pays an institution each award year the principal and
interest cancelled from its student loan fund under Secs. 674.53,
674.54, 674.56, 674.57, 674.58, 674.59(b), and 674.60. The institution
shall deposit this amount in its Fund.
* * * * *
41. Appendix A to Part 674--Promissory Note--Perkins Loan is
removed.
42. Appendix B to Part 674--Promissory Note--Direct Loan is
removed.
43. Appendix C to Part 674--Promissory Note--Perkins Loan--Less
Than Half-Time Student Borrower is removed.
44. Appendix D to Part 674--Promissory Note--Direct Loan--Less Than
Half-Time Student Borrower is removed.
45. In 34 CFR part 674 add the word ``Federal'' before the word
``Perkins'' in the following places:
(a) Section 674.1 (a) and (b)(1).
(b) Section 674.2 (a) and (b) definitions.
(c) Section 674.3 (a) and (b).
(d) Section 674.4 (a) and (b).
(e) Section 674.8 introductory text.
(f) Section 674.9 introductory text.
(g) Section 674.14 (a)(1), (a)(2) introductory text, (b)(1)(x).
(h) Section 674.17 (a) and (b)(1) introductory text.
(i) Section 674.18 (a), (b)(1), (b)(2)(i), (b)(3), and (b)(4).
(j) Section 674.19 (a)(1), (a)(3)(i), (b), (b)(1), (b)(1)(ii),
(b)(3), (b)(4) introductory text, (d)(4), and (e)(4)(iv).
(k) Section 674.20(b).
(l) Section 674.31 (b)(2)(i)(B), (b)(5)(ii)(A), and (b)(7)(ii).
(m) Section 674.33(c)(2)(i).
(n) Section 674.42(b)(1)(i).
(o) Section 674.46(a)(1)(i).
46. In 34 CFR part 674 remove the term ``College Work-Study (CWS)
Program'' and add, in its place, the term ``Federal Work-Study (FWS)
Program'' in Sec. 674.2(a).
47. In 34 CFR part 674 remove the term ``CWS'' and add, in its
place, the term ``FWS'' in the following places:
(a) Section 674.18 (b)(2)(i), (b)(3), and (b)(4).
(b) Section 674.19(d)(4).
48. In 34 CFR part 674 remove the term ``Supplemental Educational
Opportunity Grant (SEOG) Program'' and add, in its place, the term
``Federal Supplemental Educational Opportunity Grant (FSEOG) Program''
in Sec. 674.2(a).
49. In 34 CFR part 674 remove the term ``SEOG'' and add, in its
place, the term ``FSEOG'' in the following places:
(a) Section 674.18 (b)(2)(i) and (b)(4).
(b) Section 674.19(d)(4).
50. In 34 CFR part 674 remove the term ``SEOGs'' and add, in its
place, the term ``FSEOGs'' in Sec. 674.14(b)(1)(iv).
51. In 34 CFR part 674 remove the term ``Guaranteed Student Loan
(GSL) Program'' and add, in its place, the term ``Federal Family
Education Loan (FFEL) programs'' in Sec. 674.2(a).
52. In 34 CFR part 674 add the term ``Federal'' before the term
``Pell Grant'' in the following places:
(a) Section 674.2(a).
(b) Section 674.9(d)(1) and (d)(2).
(c) Section 674.14(b)(1)(i).
(d) Section 674.15(c)(2).
53. In 34 CFR part 674 remove the term ``Income Contingent Loan
(ICL) Program'' in Sec. 674.2(a).
54. In 34 CFR part 674 add the term ``Federal'' before the term
``PLUS'' Program'' and the term ``SLS Program'' in Sec. 674.2(a).
55. In 34 CFR part 674 add the term ``Federal'' before the term
``Supplemental Loan for Students (SLS)'' in Sec. 674.14(b)(3).
PART 675--FEDERAL WORK-STUDY PROGRAMS
1. The authority citation for part 675 continues to read as
follows:
Authority: 42 U.S.C. 2571-2756b, unless otherwise noted.
2. The heading of part 675 is revised to read as set forth above.
3. The heading for subpart A is amended by removing the term
``College Work-Study Program'' and adding, in its place, the term
``Federal Work-Study Program''.
4. Section 675.1 is amended by revising paragraph (a) to read as
follows:
Sec. 675.1 Purpose and identification of common provisions.
(a) The Federal Work-Study (FWS) program provides part-time
employment to students attending institutions of higher education who
need the earnings to help meet their costs of postsecondary education
and encourages students receiving FWS assistance to participate in
community service activities.
* * * * *
5. Section 675.2, paragraph (b) is amended by adding, in
alphabetical order, the definition of ``Low-income individual'' and by
revising the definition of ``Undergraduate student'' to read as
follows:
Sec. 675.2 Definitions.
* * * * *
(b) * * *
Low-income individual. (1)(i) An individual without dependents
whose total income for the preceding calendar year did not exceed 45
percent of the income protection allowance for the current award year
for a family of four with one in college; or
(ii) An individual with a family that includes the individual and
any spouse or legal dependents whose total family income for the
preceding calendar year did not exceed 125 percent of the Income
Protection Allowance for the current award year for a family with one
in college and equal in size to that of the individual's family.
(2) The institution shall use the income protection allowance
published annually in accordance with section 478 of the HEA in making
this determination.
* * * * *
Undergraduate student: A student enrolled at an institution of
higher education who is in an undergraduate course of study which
usually does not exceed 4 academic years, or is enrolled in a 4 to 5
academic year program designed to lead to a first degree. A student
enrolled in a program of any other length is considered an
undergraduate student for only the first 4 academic years of that
program.
* * * * *
6. Section 675.4 is amended by revising the introductory text of
paragraph (d) and adding new paragraph (e) to read as follows:
Sec. 675.4 Allocation and reallocation.
* * * * *
(d) Authority to expend funds. Except as specifically provided in
Sec. 675.18, paragraphs (c), (d), and (g), an institution may not use
funds allocated or reallocated for an award year--
* * * * *
(e) Unexpended funds. (1) If an institution does not expend its FWS
allocation during an award year and returns more than 10 percent of the
allocation, the Secretary reduces its allocation for the next fiscal
year by the amount returned.
(2) The Secretary may waive the provision of paragraph (e)(1) of
this section for a specific institution if the Secretary finds that
enforcement would be contrary to the interests of the program.
(3) The Secretary considers enforcement of paragraph (e)(1) of this
section to be contrary to the interest of the program only if the
institution returns more than 10 percent of its allocation due to
circumstances beyond the institution's control that are not expected to
recur.
* * * * *
7. Section 675.8 is amended by removing the word ``and'' after
paragraph (d); by removing the period after paragraph (e) and adding,
in its place, a semicolon; and adding new paragraphs (f) and (g) to
read as follows:
Sec. 675.8 Program participation agreement.
* * * * *
(f) Assure that employment under this part may be used to support
programs for supportive services to students with disabilities; and
(g) Inform all eligible students of the opportunity to perform
community services and consult with local nonprofit, governmental, and
community-based organizations to identify those opportunities.
* * * * *
8. Section 675.10 is amended by revising the heading of the section
and by revising paragraph (c) to read as follows:
Sec. 675.10 Selection of students for FWS employment.
* * * * *
(c) Part-time and independent students. If an institution's
allocation of FWS funds is directly or indirectly based in part on the
financial need demonstrated by students attending the institution as
less than full-time students or independent students, and if the total
financial need of those students exceeds 5 percent of the total
financial need of all students at the institution, the institution
shall make available at least 5 percent of its allocation, under this
part, to those students.
* * * * *
9. Section 675.14 is amended by removing the words ``Guaranteed
Students Loans'' and adding, in its place, the words ``Federal Family
Education Loan'' in paragraph (b)(1)(ii); by removing the words ``and
need-based ICLs'' after the words ``Direct Loans'' in paragraph
(b)(1)(x); by adding the words ``or Federal'' before the word ``PLUS'',
by removing the comma after the words ``PLUS loan'', and by removing
the words ``or non-need-based ICL'' before the word ``as'' in paragraph
(b)(3); by removing the dollar figure ``$200'' and adding, in its
place, the dollar figure ``$300'' in paragraphs (c) introductory text,
(c)(1), and (c)(2); and by revising paragraph (d)(2) to read as
follows:
Sec. 675.14 Overaward.
* * * * *
(d) * * *
(2) Notwithstanding the provisions of paragraph (d)(1) of this
section, an institution may provide additional FWS funding to a student
whose need has been met until that student's cumulative earnings from
all need-based employment occurring subsequent to the time his or her
financial need has been met exceed $300.
* * * * *
10. Section 675.18 is amended by redesignating paragraphs (a)(3)
and (a)(4) as paragraphs (a)(4) and (a)(5) respectively; by removing
paragraph (f)(4); by adding a new paragraph (a)(3); by revising
paragraphs (b)(3), (b)(5), and (f)(1); and by adding new paragraphs (g)
and (h) to read as follows:
Sec. 675.18 Use of funds.
(a) * * *
(3) Meeting the cost of a Work-Colleges program under subpart C;
* * * * *
(b) * * *
(3) However, the institution shall not include, when calculating
the allowance in paragraph (b)(1) of this section, the amount of loans
made under the Federal Perkins Loan program it assigns to the Secretary
under section 463(a)(6) of the HEA.
* * * * *
(5) An institution may use up to 10 percent of the allowance in
paragraph (b) of this section, that is attributable to the
institution's expenditures under the FWS program, to pay the
administrative costs of conducting its program of community service.
These costs may include the costs of--
(i) Developing mechanisms to assure the academic quality of a
student's experience;
(ii) Assuring student access to educational resources, expertise,
and supervision necessary to achieve community service objectives; and
(iii) Collaborating with public and private nonprofit agencies and
programs assisted under the National and Community Service Act of 1990,
in the planning, development, and administration of these programs.
* * * * *
(f) Transfer funds to FSEOG. (1) Beginning with the 1993-94 award
year, an institution may transfer up to 25 percent of the sum of its
initial and supplemental FWS allocations for an award year to its FSEOG
program.
* * * * *
(g) Carry back funds for summer employment. An institution may
carry back and expend in the previous award year its initial and
supplemental FWS allocations for the current award year to pay student
wages earned on or after May 15 of the previous award year but prior to
the beginning of the current award year.
(h) Community service. (1) For the 1994-95 and subsequent award
years, an institution shall use at least 5 percent of the sum of its
initial and supplemental FWS allocations for an award year to
compensate students employed in community service activities.
(2) If an institution is unable to comply with this requirement,
the institution may request a waiver of this requirement.
(3) A request for a waiver must be in writing to the Secretary and
is approved if the Secretary determines that enforcing this requirement
would create a hardship for students at the institution.
11. Section 675.21 is amended by revising paragraph (b) to read as
follows:
Sec. 675.21 Institutional employment.
* * * * *
(b) A proprietary institution may employ a student to work for the
institution, but only in jobs that--
(1) Are in community services as defined in Sec. 675.2; or
(2) Are on campus and that--
(i) Involve the provision of student services as defined in
Sec. 675.2;
(ii) To the maximum extent possible, complement and reinforce the
educational program or vocational goals of the student; and
(iii) Do not involve the solicitation of potential students to
enroll at the proprietary institution.
12. Section 675.26 is amended by revising paragraphs (a)(1),
(a)(2), and (a)(3) to read as follows:
Sec. 675.26 FWS Federal share limitations.
(a)(1) The Federal share of FWS compensation paid to a student
employed other than by a private for-profit organization, as described
in Sec. 675.23, may not exceed 75 percent for the 1993-94 award year
and subsequent award years unless the Secretary approves a higher share
under paragraph (d) of this section.
(2) The Federal share of the compensation paid to a student
employed by a private for-profit organization may not exceed 50
percent.
(3) An institution may not use FWS funds to pay a student after he
or she has, in addition to other resources, earned $300 or more over
his or her financial need.
* * * * *
13. Section 675.28 is removed.
14. The heading for subpart B is amended by removing the ``s'' from
the word ``Programs''.
15. Section 675.31 is revised to read as follows:
Sec. 675.31 Purpose.
The purpose of the Job Location and Development program is to
expand off-campus job opportunities for students who are enrolled in
eligible institutions of higher education and want jobs, regardless of
their financial need, and to encourage students to participate in
community service activities.
(Authority: 42 U.S.C. 2756)
16. Section 675.32 is revised to read as follows:
Sec. 675.32 Program description.
An institution may expend up to the lesser of $50,000 or 10 percent
of its FWS allocation and reallocation for an award year to establish
or expand a program under which the institution, separately or in
combination with other eligible institutions, locates and develops
jobs, including community service jobs, for currently enrolled
students.
(Authority: 42 U.S.C. 2756)
17. Section 675.34 is amended by revising the heading of the
section; by revising paragraph (a); and by revising paragraph (c) to
read as follows:
Sec. 675.34 Multiinstitutional job location and development programs.
(a) An institution participating in the FWS program may enter into
a written agreement to establish and operate job location programs for
its students with other participating institutions.
* * * * *
(c) Each institution shall retain responsibility for the proper
disbursement of the Federal funds it contributes under an agreement
with other eligible institutions.
* * * * *
18. Section 675.35 is amended by adding the word ``in'' before the
word ``accordance'' in paragraph (b)(1) and by revising paragraph
(b)(3)(i) to read as follows:
Sec. 675.35 Agreement.
* * * * *
(b) * * *
(3) * * *
(i) The institution will not use program funds to locate and
develop jobs at an eligible institution;
* * * * *
19. A new subpart C is added to part 675 to read as follows:
Subpart C--Work-Colleges Program
Sec. 675.41 Special definitions.
The following definitions apply to this subpart:
(a) Work-college: The term ``work-college'' means an eligible
institution that--
(1) Is a public or private nonprofit institution with a commitment
to community service;
(2) Has operated a comprehensive work-learning program for at least
two years;
(3) Requires--
(i) All resident students who reside on campus to participate in a
comprehensive work-learning program; and
(ii) The provision of services as an integral part of the
institution's educational program and as part of the institution's
educational philosophy; and
(4) Provides students participating in the comprehensive work-
learning program with the opportunity to contribute to their education
and to the welfare of the community as a whole.
(b) Comprehensive student work-learning program: A student work/
service program that--
(1) Is an integral and stated part of the institution's educational
philosophy and program;
(2) Requires participation of all resident students for enrollment,
participation, and graduation;
(3) Includes learning objectives, evaluation, and a record of work
performance as part of the student's college record;
(4) Provides programmatic leadership by college personnel at levels
comparable to traditional academic programs;
(5) Recognizes the educational role of work-learning supervisors;
and
(6) Includes consequences for nonperformance or failure in the
work-learning program similar to the consequences for failure in the
regular academic program.
(Authority: 42 U.S.C. 2756b)
Sec. 675.42 Purpose.
The purpose of the Work-Colleges program is to recognize,
encourage, and promote the use of comprehensive work-learning programs
as a valuable educational approach when it is an integral part of the
institution's educational program and a part of a financial plan that
decreases reliance on grants and loans and to encourage students to
participate in community service activities.
(Authority: 42 U.S.C. 2756b)
Sec. 675.43 Program description.
(a) An institution that satisfies the definition of ``work-
college'' in Sec. 675.41(a) and wishes to participate in the Work-
Colleges program must apply to the Secretary at the time and in the
manner prescribed by the Secretary.
(b) An institution may expend funds separately, or in combination
with other eligible institutions, to provide work-learning
opportunities for currently enrolled students.
(c) For any given award year, Federal funds allocated for that
award year under sections 442 and 462 of the HEA may be transferred for
the purpose of carrying out the Work-Colleges program to provide
flexibility in strengthening the self-help-through-work element in
financial aid packaging.
(Authority: 42 U.S.C. 2756b)
Sec. 675.44 Allowable costs, Federal share, and institutional share.
(a) Allowable costs. An institution participating in the Work-
Colleges program may use appropriated funds to carry out the following
activities:
(1) Support the educational costs of qualified students through
self-help payments or credits provided under the work learning program
within the limits of part F of title IV of the HEA.
(2) Promote the work-learning-service experience as a tool of
postsecondary education, financial self-help, and community service-
learning opportunities.
(3) Carry out activities in sections 443 or 446 of the HEA.
(4) Administer, develop, and assess comprehensive work-learning
programs including--
(i) Community-based work-learning alternatives that expand
opportunities for community service and career-related work; and
(ii) Alternatives that develop sound citizenship, encourage student
persistence, and make optimum use of assistance under the Work-Colleges
program in education and student development.
(b) Federal share of allowable costs. An institution, in addition
to the funds allocated for this program, may transfer allocations
provided under its Federal Perkins Loan or its Federal Work-Study
program to pay allowable costs.
(c) Institutional share of allowable costs. An institution must
match Federal funds made available for this program on a dollar-for-
dollar basis from non-Federal sources. The institution shall keep
records documenting the amount and source of its share.
(Authority: 42 U.S.C. 2756b)
Sec. 675.45 Unallowable costs.
An institution may not use funds appropriated to carry out the
Work-Colleges program to pay costs related to the purchase,
construction, or alteration of physical facilities or indirect
administrative costs.
(Authority: 42 U.S.C. 2756b)
Sec. 675.46 Multiinstitutional work-colleges arrangements.
(a) An institution participating in the Work-Colleges program may
enter into a written agreement with another participating institution
to promote the work-learning-service experience.
(b) The agreement described in paragraph (a) of this section must--
(1) Designate the administrator of the program; and
(2) Specify the terms, conditions, and performance standards of the
program.
(c) Each institution shall retain responsibility for the proper
disbursement of the Federal funds it contributes under an agreement
with other eligible institutions.
(Authority: 42 U.S.C. 2756b)
Sec. 675.47 Agreement.
To participate in the Work-Colleges program, an institution shall
enter into an agreement with the Secretary. The agreement provides
that, among other things, the institution shall--
(a) Assure that it will comply with all the appropriate provisions
of the HEA and the appropriate provisions of the regulations;
(b) Assure that it satisfies the definition of ``work-college'' in
Sec. 675.41(a);
(c) Assure that it will match the Federal funds according to the
requirements in Sec. 675.44(c); and
(d) Assure that it will use funds only to carry out the activities
in Sec. 675.44(a).
(Authority: 42 U.S.C. 2756b)
Sec. 675.48 Procedures and records.
In administering a Work-Colleges program under this subpart, an
institution shall comply with the applicable provisions of this part
675.
(Authority: 42 U.S.C. 2756b)
Sec. 675.49 Termination and suspension.
Procedures for termination and suspension under this subpart are
governed by applicable provisions found in 34 CFR part 668, subpart G
of the Student Assistance General Provisions regulations.
(Authority: 42 U.S.C. 2756b)
* * * * *
20. In 34 CFR part 675 remove the term ``College Work-Study''
before the word ``program'' and add, in its place, the term ``FWS'' in
Sec. 675.4(a).
21. In 34 CFR part 675 remove the term ``CWS'' and add, in its
place, the term ``FWS'' in the following places:
(a) Section 675.3(a) and (b).
(b) Section 675.4(d)(1).
(c) Section 675.8 introductory text, (b), (c), and (e).
(d) Section 675.9 introductory text.
(e) Section 675.10(a).
(f) Section 675.14 (a)(1), (a)(2) introductory text, (a)(2)(i),
(a)(3), (c) introductory text, and (d)(1).
(g) Section 675.15(a) introductory text.
(h) Section 675.16(a)(3), (a)(4), (b)(1), (b)(2), and (b)(3).
(i) Section 675.17.
(j) Section 675.18(a) introductory text, (a)(1), redesignated
(a)(5), (b)(1), (b)(2)(i), (b)(4), (c)(1) and (2), and (d).
(k) Section 675.19(a)(1), (a)(3)(i) introductory text, (a)(3)(ii),
and (b)(4).
(l) Section 675.20(a) heading and introductory text, (b)(1), (c)
heading, and (c)(2) introductory text.
(m) Section 675.22(b) introductory text heading.
(n) Section 675.23(a), and (b)(2)(ii).
(o) Section 675.24 heading, (a)(1), and (b).
(p) Section 675.25(a)(1) and (2), and (b).
(q) Section 675.26 heading and (d)(2)(ii).
(r) Section 675.27(a)(1), redesignated (a)(4), and (b).
(s) Section 675.33(b).
(t) Section 675.35(a).
(u) Section 675.37(a).
22. In 34 CFR part 675 remove the term ``SEOGs'' and add, in its
place, the term ``FSEOGs'' in Sec. 675.14(b)(1)(iv).
23. In 34 CFR part 675 remove the term ``SEOG'' and add, in its
place, the term ``FSEOG'' in the following places:
(a) Section 675.18 redesignated (a)(5), (b)(2)(i), and (b)(4).
(b) Section 675.19(b)(4).
24. In Sec. 675.2, paragraph (a) is amended by removing the term
``Supplemental Educational Opportunity Grant (SEOG) program'' and
adding, in its place, the term ``Federal Supplemental Educational
Opportunity Grant (FSEOG) program''.
25. Appendix B to 34 CFR part 675 is amended by removing the term
``College Work-Study program'' and adding, in its place, ``Federal
Work-Study program'', and removing the term ``CWS'' and adding, in its
place, the term ``FWS'' each place these terms appear.
26. In 34 CFR part 675 add the word ``Federal'' before the word
``Perkins'' in the following places:
(a) Section 675.2(a).
(b) Section 675.14(b)(1)(x).
(c) Section 675.18(b)(2)(i) and (b)(4).
(d) Section 675.19(b)(4).
27. In 34 CFR part 675 add the word ``Federal'' before the word
``Pell'' in the following places:
(a) Section 675.2(a).
(b) Section 675.14(b)(1)(i) and (c)(2).
(c) Section 675.15(c)(2).
(d) Section 675.18(b)(4).
28. In 34 CFR part 675 remove the term ``Guaranteed Student Loan
(GSL) Program'' and add, in its place, the term ``Federal Family
Education Loan (FFEL) programs'' in Sec. 675.2(a).
29. In 34 CFR part 675 remove the term ``Income Contingent Loan
Program'' in Sec. 675.2(a).
30. In 34 CFR part 675 add the word ``Federal'' before the term
``PLUS Program'' and the term ``SLS Program'' in Sec. 675.2(a).
31. In 34 CFR part 675 add the word ``Federal'' before the term
``Supplemental Loan for Students (SLS)'' in Sec. 675.14(b)(3).
32. In 34 CFR part 675 change the word ``Programs'' to ``Program''
after the word ``Development'' in Sec. 675.17. The Secretary proposes
to amend part 676 of title 34 of the Code of Federal Regulations as
follows:
PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT
PROGRAM
1. The authority citation for part 676 continues to read as
follows:
Authority: 20 U.S.C. 1070b-1070b-3, unless otherwise noted.
2. Section 676.1 is amended by removing the term ``Supplemental
Educational Opportunity Grant (SEOG) Program'' and replacing it with
the term ``Federal Supplemental Educational Opportunity Grant (FSEOG)
program'' in paragraph (a).
3. Section 676.4 is amended by redesignating paragraphs (b), (c),
and (d) as paragraphs (c), (d), and (e) respectively; by adding the
words ``Except as specifically provided in Sec. 676.16(f), an'' before
the word ``institution'' in the introductory text of redesignated
paragraph (e); revising paragraph (a); and by adding new paragraphs (b)
and (f) to read as follows:
Sec. 676.4 Allocation and reallocation.
(a) The Secretary allocates funds to institutions participating in
the FSEOG program in accordance with section 413D of the HEA.
(b) The Secretary reallocates funds to institutions participating
in the FSEOG program in a manner that best carries out the purposes of
the FSEOG program.
* * * * *
(f) Unexpended funds. (1) If an institution does not expend its
FSEOG allocation during an award year and returns more than 10 percent
of the allocation, the Secretary reduces its allocation for the next
fiscal year by the amount returned.
(2) The Secretary may waive the provision of paragraph (f)(1) of
this section for a specific institution if the Secretary finds that
enforcement would be contrary to the interests of the program.
(3) The Secretary considers enforcement of paragraph (f)(1) of this
section to be contrary to the interest of the program only if the
institution returned more than 10 percent of its allocation due to
circumstances beyond the institution's control that are not expected to
recur.
* * * * *
4. Section 676.10 is amended by revising paragraph (b) to read as
follows:
Sec. 676.10 Selection of students for FSEOG awards.
* * * * *
(b) Part-time and independent students. If an institution's
allocation of FSEOG funds is directly or indirectly based in part on
the financial need demonstrated by students attending the institution
as less than full-time or independent students and if the total
financial need of those students exceeds 5 percent of the total
financial need of all students at an institution, the institution shall
make available at least 5 percent of its allocation under this part to
those students.
* * * * *
5. Section 676.14 is amended by removing the words ``Guaranteed
Student Loans'' and adding, in its place, the words ``Federal Family
Education Loan'' in paragraph (b)(1)(ii); by removing the words ``and
need-based ICLs'' after the words ``Direct Loans'' in paragraph
(b)(1)(x); by adding the words ``or Federal'' before the word ``PLUS'',
by removing the comma after the words ``PLUS loan'', and by removing
the words ``or non-need-based ICL'' before the word ``as'' in paragraph
(b)(3); and by revising paragraphs (c) introductory text, (c)(1),
(c)(2), and (c)(3) to read as follows:
Sec. 676.14 Overaward.
* * * * *
(c) Treatment of resources in excess of need. An institution shall
take the following steps when it learns that a student has received
additional resources not included in the calculation of FSEOG
eligibility that would result in the student's total resources
exceeding his or her financial need by more than $200, or $300 if
employed under the FWS program:
(1) The institution shall decide whether the student has increased
financial need that was unanticipated when it awarded financial aid to
the student. If the student demonstrates increased financial need and
the total resources do not exceed this increased need by more than
$200, or $300 if employed under the FWS program, no further action is
necessary.
(2) If no increased need is demonstrated, or the student's total
resources still exceed his or her need by more than $200, or $300 if
employed under the FWS program, as recalculated pursuant to paragraph
(c)(1) of this section, the institution shall cancel any undisbursed
loan or grant (other than a Federal Pell Grant).
(3) If the student's total resources still exceed his or her need
by more than $200, or $300 if employed under the FWS program, after the
institution takes the steps required in paragraphs (c)(1) and (2) of
this section, the institution shall consider the amount by which the
resources exceed the student's financial need by more than the
applicable amount as an overpayment.
* * * * *
6. Section 676.16 is amended by redesignating paragraphs (f) and
(g) as paragraphs (g) and (h) respectively and a new paragraph (f) is
added to read as follows:
Sec. 676.16 Payment of an FSEOG.
* * * * *
(f)(1) An institution may disburse FSEOG funds after the student
has ceased to be enrolled in accordance with paragraphs (f)(2) and (3)
of this section.
(2) A disbursement described in paragraph (f)(1) of this section
may be made--
(i) Only if the FSEOG was awarded to the student while he or she
was still an eligible student; and
(ii) Only if the FSEOG funds will be used to cover documented
educational costs to the student that are normally included in a
student's cost of attendance under section 472 of the HEA for the
payment period for which the FSEOG was intended and the student was
actually enrolled.
(3) The institution shall document in the student's file the reason
for the late disbursement.
* * * * *
7. Section 676.18 is amended by removing paragraph (a)(3); by
adding the word ``and'' after the semicolon in paragraph (a)(1); by
removing the word ``and'' after the semicolon in paragraph (a)(2); by
removing the semicolon in paragraph (a)(2) and adding, in its place, a
period; and by revising paragraph (c) to read as follows:
Sec. 676.18 Use of funds.
* * * * *
(c) Transfer back of funds to FWS. An institution shall transfer
back to the FWS program any funds unexpended at the end of the award
year that it transferred to the FSEOG program from the FWS program.
* * * * *
8. Section 676.20 is amended by revising paragraph (a) and by
adding a new paragraph (c) to read as follows:
Sec. 676.20 Minimum and maximum FSEOG award.
(a) An institution may award an FSEOG for an academic year in an
amount it determines a student needs to continue his or her studies.
However, except as provided in paragraph (c) of this section, an FSEOG
may not be awarded for a full academic year that is--
(1) Less than $100; or
(2) More than $4,000.
* * * * *
(c) The maximum amount of the FSEOG may be increased from $4,000 to
as much as $4,400 for a student participating in a program of study
abroad that is approved for credit by the home institution, if
reasonable costs for the study abroad program exceed the cost of
attendance at the home institution.
* * * * *
9. Section 676.21 is amended by removing the words ``Beginning with
the 1989-90 award year'', by removing the comma before the words ``the
Secretary'', and by capitalizing the letter ``t'' in the word ``the''
before the word ``Secretary'' in paragraph (b) introductory text and by
revising paragraph (a) to read as
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