Federal Pell Grant Program; Presidential Access Scholarship Program; Proposed Rule DEPARTMENT OF EDUCATION

SUMMARY: The Secretary proposes to amend the Federal Pell Grant Program

regulations and to establish regulations for the newly enacted

Presidential Access Scholarship Program. These regulations are needed

to implement recently enacted provisions of the Higher Education Act of

1965 (HEA), as amended by the Higher Education Amendments of 1992 (the

1992 Amendments), enacted on July 23, 1992.

The proposed amendments to the Federal Pell Grant Program

regulations incorporate changes in student eligibility requirements and

institutional administration requirements. The program name has also

been changed from the ``Pell Grant Program'' to the ``Federal Pell

Grant Program.''

The proposed regulations for the Presidential Access Scholarship

Program specify the eligibility requirements for students to apply for

and receive an award. These proposed regulations also specify the roles

of institutions of higher education, State officials, and State

agencies in administering the program.

DATES: Comments must be received on or before April 11, 1994.

ADDRESSES: All comments concerning these proposed regulations should be

addressed to Fred H. Sellers, Student Financial Assistance Programs,

Office of Postsecondary Education, U.S. Department of Education, 400

Maryland Avenue SW., room 4018, Regional Office Building 3, Washington,

DC 20202-5447. Telephone (202) 708-4607.

A copy of any comments that concern information collection

requirements should also 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: Denise Boulanger, Student Financial

Assistance Programs, Office of Postsecondary Education, U.S. Department

of Education, 400 Maryland Avenue SW., room 4018, Regional Office

Building 3, Washington, DC 20202-5447. Telephone (202) 708-4607.

Individuals who use a telecommunications device for the deaf (TDD) may

call the Federal Information Relay Service at 1-800-877-8339 between 8

a.m. and 8 p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: The purpose of the proposed revisions in the

regulations for the Federal Pell Grant Program (formerly known as the

Pell Grant Program) is to incorporate statutory changes to the HEA, as

amended by the 1992 Amendments. The proposed changes in the Pell Grant

Program would: (1) Rename the program the Federal Pell Grant Program;

(2) eliminate the duration of eligibility limitations; (3) revise the

formula for calculating a Federal Pell Grant payment for a payment

period; (4) limit the eligibility of incarcerated students; (5)

incorporate references to the Federal Need Analysis System's Expected

Family Contribution (EFC) under part F, title IV of the HEA; (6)

eliminate, in certain circumstances, the requirement that the student

present a Student Aid Report (SAR) to the institution in order to be

paid his or her Federal Pell Grant and allow an institution to pay a

student on the basis of a valid institutional student information

report (ISIR), i.e., a report to an institution that includes an

applicant's application information and EFC, generated by the central

processor; and (7) allow less-than-half-time students to receive a

Federal Pell Grant.

The 1992 Amendments included a provision giving the Secretary the

option to allow, on a case-by-case basis, a student pursuing a

baccalaureate degree to receive two Federal Pell Grants within one 12-

month period if the student completed more than an academic year of

coursework and needed funds to attend additional terms beyond the

academic year but within the same award year. The Higher Education

Technical Amendments of 1993, enacted on December 20, 1993, (Pub. L.

103-208) (The 1993 Technical Amendments) expanded the eligibility for a

second Scheduled Award to include students pursuing an associate

degree. The Secretary is requesting comment on how to implement this

provision fairly and equitably.

The Federal Pell Grant Program, a cornerstone of the Federal

student financial aid programs, supports National Education Goal 5

which states that every adult American will be literate and will

possess the knowledge and skills to compete in a global economy and

exercise the rights and responsibilities of citizenship. The program,

reauthorized in section 401 of the 1992 Amendments, will further Goal 5

by helping eligible students obtain marketable skills, achieve higher

levels of education than they might otherwise have pursued, and obtain

the knowledge required to discharge the responsibilities of

citizenship.

Federal Pell Grant Program

Significant Proposed Changes to the Federal Pell Grant Program

Regulations:

Section 690.2 General Definitions

The Secretary proposes to amend the definitions in Sec. 690.2 for

``disbursement schedule'' and ``enrollment status'' to include

references to students enrolled less-than-half-time, ``payment

schedule,'' and to add new definitions of ``academic year,'' ``annual

award,'' ``central processor,'' ``expected family contribution,''

``incarcerated student,'' ``institutional student information report,''

``less-than-half-time student,'' and ``valid institutional student

information report'' to incorporate clarifying eligibility language

included in the 1992 Amendments.

The Secretary believes that the new definition of academic year in

the 1992 Amendments is particularly important because it not only

requires completion of a minimum number of credit hours or clock hours

during an academic year, it also requires that the academic year be a

minimum of 30 weeks of instructional time.

Section 690.3 Payment Period.

The Secretary proposes to amend Sec. 690.3 to define more

accurately payment periods for eligible programs offered in credit

hours, but not in academic terms, if the majority of credit hours

cannot be earned until the program or academic year is completed. Under

the current definition, determining the end of one payment period and

the beginning of another for this type of program has been uncertain

and has resulted in program abuse at some institutions. The addition to

the definition of a payment period was made to prevent a particular

type of program abuse that occurs at an institution without terms that

does not have a clearly defined midpoint in its program or academic

year. Specifically, institutions have arbitrarily established a

midpoint that is inappropriately early. As a result, students received

disbursements in excess of the coursework that the students completed

for the payment period. The Secretary is proposing that for this type

of program, if a student cannot earn half the credits in a program or

academic year by the calendar midpoint of that program or academic

year, the first payment period shall end and the second payment period

shall begin on the later of: (a) the calendar midpoint between the

first and last scheduled days of class of the program or academic year;

or (b) the date, as determined by institution, that the student has

completed half of his or her academic coursework. For example, an

institution offers a program which consists of 24 semester hours. A

student is not considered to have earned any of the semester hours

until he or she finishes the program. The student's second payment

period begins on the later of the date of the calendar midpoint in the

program or the date that the institution determines the student has

completed half of his or her coursework.

Section 690.6 Duration of Eligibility

Currently Secs. 690.6(b) through (d) limit, in most instances, the

eligibility of a Federal Pell Grant recipient to 5 or 6 years,

depending on the length of the recipient's undergraduate program of

study. The 1992 Amendments remove the provisions in section 411(c)(1)

of the HEA that limited the number of years a student was eligible to

receive an award. Therefore, the Secretary proposes to amend this

section of the regulations by removing those limitations.

Section 690.8 Enrollment Status for Students Taking Regular and

Correspondence Courses

The Secretary proposes to amend Sec. 690.8 concerning the

enrollment status of students taking regular and correspondence courses

to include less-than-half-time students.

Section 690.10 Administrative Cost Allowance to Participating Schools

In those instances where an institution enrolls significant numbers

of less-than-full-time or independent students, the Secretary proposes

that the institution use some of its administrative cost allowance

funds to make financial aid services available to those students as

required under section 489(b)(2) of the HEA.

Subpart C--Expected Family Contribution for Students With Special

Conditions

The Secretary proposes to remove subpart C of the current

regulations. In fiscal years 1989-92, the Department of Education

Appropriations Act provided that section 479A of the HEA, which allows

a financial aid administrator to exercise professional judgment

concerning a student's and a student's family's ability to pay for his

or her education, did not apply to the Pell Grant Program. Instead, the

Secretary prescribed ``special conditions'' that, if the student or his

or her family met them, would allow the student to apply for a Pell

Grant using expected year income instead of base year income. The

regulations in subpart C specified those ``special conditions.''

However, the Department of Education Appropriations Act for fiscal year

1993 does not exempt the Federal Pell Grant Program from section 479A

for award year 1993-94. Consequently, financial aid administrators may

exercise professional judgment concerning a student's ability to pay

for his or her education when determining the student's eligibility for

a Federal Pell Grant. Based on that judgment, a financial aid

administrator may make adjustments to data elements submitted by the

student on his or her application, recalculate the expected family

contribution (EFC), and pay the student based on the new EFC. The

special conditions contained in subpart C of the current regulations

will, therefore, no longer be necessary for award year 1993-94.

Section 690.61 Submission Process and Deadline Date for Student Aid

Report or Institutional Student Information Report

The 1992 Amendments authorize and require a financial aid

administrator to pay a student his or her Federal Pell Grant based on

an output document produced by the central processor and sent directly

to the institution. Therefore, the Secretary proposes to allow an

institution to pay a student a Federal Pell Grant not only when the

student presents a valid Student Aid Report (SAR) but, under certain

circumstances, when the institution obtains a ``valid institutional

student information report'' from the central processor.

Section 690.62 Calculation of a Federal Pell Grant

The 1992 Amendments increase the amount of the minimum grant from

$200 to $400. The Secretary proposes to amend the language in

Sec. 690.92 to reflect this change and to provide that a student

eligible for a grant equal to or greater than $200, but less than $400,

shall be awarded $400. In addition, the 1992 Amendments eliminate the

Secretary's authority to adjust Federal Pell Grant awards due to

insufficient appropriations. Therefore, the Secretary proposes to

remove Sec. 690.62(c), which provides for adjustments for less-than-

full funding.

Section 690.63 Calculation of a Federal Pell Grant for a Payment

Period

The 1992 Amendments add new statutory language defining an

``academic year.'' The new definition no longer defines the minimum

academic year for a program using only one measure of length. Instead,

the new definition uses two minimum measures that must be met, and

these measures are, in many circumstances, different from the ones used

under the old definition. The new definition requires that an academic

year be a minimum of 30 weeks of instructional time in which a full-

time student is expected to complete at least (1) 24 semester or

trimester hours; (2) 36 quarter hours at an institution that measures

program length in credit hours; or (3) 900 clock hours at an

institution that measures program length in clock hours.

The 1993 Technical Amendments further amended section 481 of the

HEA definition of academic year to provide that the Secretary may

reduce, for good cause on a case-by-case basis, the 30-week minimum to

not less than 26 weeks of instructional time in the case of an

institution of higher education that provides a 2-year or 4-year

program of instruction for which it awards an associate or

baccalaureate degree. The Secretary is requesting comment on how to

implement this provision in another notice of proposed rulemaking for

subparts A and B of the Student Assistance General Provisions

regulations (34 CFR part 668) which will be published in the Federal

Register in the near future.

While the Secretary is amending the definition of ``academic year''

to comply with section 481 of the HEA, it is also necessary for the

Secretary to amend Sec. 690.63 to incorporate the new definition of

academic year, as defined in section 481 of the HEA, into the Federal

Pell Grant payment calculations. To implement this change for purposes

of Federal Pell Grant award calculations, each institution must define

its academic year for each of its programs in terms of the number of

credit hours or clock hours offered and the number of weeks of

instructional time during which those hours are provided. That

definition must satisfy the new statutory definition of an academic

year, i.e., at least 24 semester or trimester hours, 36 quarter hours,

or 900 clock hours, and at least 30 weeks of instructional time. The

institution may, of course, use the same definition of academic year

for each of its programs. In addition, an institution must determine if

its traditional definition of an academic year--2 semesters or

trimesters, or 3 quarters at an institution that measures program

length in credit hours, or at least 900 clock hours at an institution

that measures program length in clock hours--meets or exceeds 30 weeks

of instructional time as incorporated in the new statutory definition

of academic year.

Institutions with standard academic terms have traditionally

defined an academic year as the period of time in which a full-time

student is expected to complete two semesters or trimesters in the fall

and spring or three quarters in the fall, winter, and spring. These

institutions have not generally included additional or special terms

that it may offer, such as in the summer, as part of the academic year.

Therefore, the Secretary believes that many institutions with

semesters, trimesters, or quarters can satisfy the academic year

requirement in their regularly scheduled fall and spring semesters or

trimesters or fall, winter, and spring quarters.

The following discussions provide descriptions of the procedures

for calculating the amount of a student's payment for a payment period.

The Secretary recognizes that these procedures may be considered

complex and welcomes specific comment on any ways to simplify or better

present them that do not compromise program integrity or implementation

of the new definition of academic year.

Programs Using Standard Terms With at Least 30 Weeks of Instructional

Time as Described in Sec. 690.63(a)(1) With Awards Calculated Under

Sec. 690.63(b)

A student at a term institution may currently complete the credit-

hour requirements for an academic year in two semesters or trimesters,

fall and spring, or three quarters, fall, winter, and spring. Those

terms may total at least 30 weeks of instructional time and the

institution may require a student to enroll for at least 12 credit

hours for any term in the award year to be considered full-time.

Moreover, the institution may not offer the student's program with

multiple start dates or overlapping terms. If all conditions apply, the

institution continues to calculate the Federal Pell Grant payment in a

payment period, for all terms, in the same manner as that payment is

currently calculated. For example, an institution has fall and spring

semesters that when combined provide 24 semester hours of credit, 12

hours per semester for a full-time student, in 30 weeks of

instructional time. Therefore, a full-time student is paid up to one-

half of his or her Scheduled Award for each of the fall and spring

semesters. Further, the student will be eligible to be paid one-half of

his or her Scheduled Award, if he or she has enough remaining

eligibility (including, if eligible, a second Scheduled Award) for a

summer term even if that term is not at least one-half of the academic

year in weeks of instructional time.

Programs Using Standard Terms With Less Than 30 Weeks of Instructional

Time as Described in Sec. 690.63(a)(2) With Awards Calculated Under

Sec. 690.63(c)

A student at a term institution that measures its program in credit

hours may currently complete the credit-hour requirements for an

academic year in two semesters or trimesters, fall and spring, or three

quarters, fall, winter, and spring. However, the weeks in these terms

may total less than 30 weeks of instructional time, and the institution

may require a student to attend at least 12 hours for any term in the

award year to be considered full-time. Moreover, the institution may

not offer the student's program with multiple start dates or

overlapping terms. Under these conditions, the institution must prorate

the Federal Pell Grant award for a term based on the number of weeks of

instructional time in the two semesters or trimesters or three quarters

that it takes to complete the credit-hour requirements for an academic

year compared to the number of weeks of instructional time required to

complete the institution's academic year as defined by the institution

consistent with section 481 of the HEA. A payment for a payment period,

for all terms, is then determined from a student's award. For example,

an institution has two semesters, fall and spring, in which a student

attends 12 hours each semester to be considered a full-time student.

The two semesters have 28 weeks of instructional time. The institution

defines its academic year as 24 semester hours and 30 weeks of

instructional time. The institution must determine a full-time

student's award for the two semesters by multiplying the student's

Scheduled Award by 28 weeks of instructional time, the instructional

time in the fall and spring semesters, divided by the 30 weeks of

instructional time in the institution's academic year consistent with

section 481 of the HEA. The student will be eligible to be paid one-

half of his or her award as calculated by this formula for any term in

the award year. Further, the student will be eligible to be paid one-

half of his or her award as calculated by this formula, if he or she

has enough remaining eligibility, for the summer term.

Other Programs Using Terms and Credit Hours as Described in

Sec. 690.63(a)(3) With Awards Calculated Under Sec. 690.63(d)

These provisions apply to institutions that use terms, measure

progress in credit hours, and do not meet the provisions of Sec. 690.63

(a)(1) and (b) or Sec. 690.63 (a)(2) and (c). In addition, the

Secretary proposes to provide that institutions that meet the

requirements under Sec. 690.63 (a)(1) or (a)(2) to use the formulas in

Sec. 690.63 (b) or (c) may also use the formula in (d). The Secretary

believes that providing this option ensures that these institutions

will have the flexibility to handle any special circumstances that may

arise. If the terms are standard terms (i.e., semesters, trimesters, or

quarters), the institution must determine a student's enrollment status

and, based on that enrollment status, determine the student's award

from the Payment Schedule or one of the Disbursement Schedules (annual

award). Then, a student's payment for a payment period is determined by

multiplying the annual award by the number of weeks of instructional

time in the term divided by the number of weeks of instructional time

in the institution's academic year. For example, an institution uses

quarters and credit hours and those quarters begin each week throughout

the year. A full-time student is required to enroll for at least 12

credit hours per quarter. Each quarter provides 8 weeks of

instructional time. The institution defines its academic year as 36

quarter hours and 30 weeks of instructional time. A student's payment

for a payment period is calculated by: (1) Determining his or her

enrollment status; (2) based on that enrollment status, selecting his

or her annual award from the proper Payment or Disbursement Schedule;

and (3) multiplying the annual award by the fraction of the number of

weeks of instructional time in the term (8 weeks) divided by the number

of weeks of instructional time in the academic year (30 weeks). The

student's payment for a payment period would be 8/30 of the annual

award.

For programs at institutions using terms and credit hours, other

than semesters, trimesters, and quarters, the institution must first

determine a student's enrollment status before an award can be

calculated. If the terms are not semesters, trimesters, or quarters,

full-time enrollment status is determined by: (1) Dividing the number

of weeks of instructional time in the term by the number of weeks of

instructional time in the academic year; and (2) multiplying the credit

hours in the academic year by the number obtained in item 1. Once the

institution determines the number of credit hours for full-time

enrollment status in a term and determines what portion of full-time

equals three-quarter-time, half-time, or less-than-half-time enrollment

status, the institution must compare the number of hours the student is

enrolled to the number of hours required for full-time, three-quarter-

time, half-time, or less-than-half-time. Once enrollment status is

determined, the institution selects the appropriate Payment or

Disbursement Schedule to determine the student's annual award. The

institution then divides the number of weeks of instructional time in

the payment period by the number of weeks of instructional time in the

institution's academic year and calculates the student's payment for a

payment period by multiplying the annual award by results of the

fraction. For example, an institution has 4 nonstandard terms.

The first and fourth terms provide 4 weeks of instructional time,

the second term provides 8 weeks of instructional time, and the third

term provides 6 weeks of instructional time. The institution defines

its academic year as 30 credit hours and 30 weeks of instructional

time. A student enrolls for 6 credits during the first and fourth terms

of 4 weeks each, 12 credits for the second term of 8 weeks, and 6

credits during the third term of 6 weeks. To calculate the student's

enrollment status in the first and fourth terms, the institution

divides the number of weeks of instructional time in each term (4) by

the number of weeks of instructional time in the academic year (30).

The institution then multiplies the credit hours in its academic year

(30) by the fraction (\4/30\) to determine the student's enrollment

status ((30 (\4/30\))=4). The student must be enrolled for 4 credits to

be considered full time. Since the student is enrolled full time for 6

hours in the first term, the student's annual award is determined from

the Payment Schedule. To determine the payments for the first and

fourth terms, the institution divides the number of weeks in the terms

(4) by the number of weeks in the academic year (30). The institution

then multiplies the annual award by the results of that fraction (\4/

30\=.133). The enrollment status and payments for the other payment

periods are determined in the same manner.

Programs Using Clock Hours or Credit Hours Without Terms as Described

in Sec. 690.63(a)(4) With Awards Calculated Under Sec. 690.63(e)

At an institution that offers its programs using credit hours

without terms or clock hours, the institution calculates a student's

Federal Pell Grant for a payment period by: (1) Determining the

student's Scheduled Federal Pell Grant from the Payment Schedule; (2)

multiplying the student's Scheduled Award by the following fraction:

the number of weeks of instructional time required for a full-time

student to complete the lesser of the clock or credit hours in the

program or academic year divided by the number of weeks of

instructional time for a full-time student to complete the clock or

credit hours in the institution's academic year; and (3) multiplying

the amount determined in step 2 by the following fraction: the number

of credit or clock hours in the payment period divided by the number of

credit or clock hours in the institution's academic year.

For example, a student enrolls in a 1,200 clock-hour program at an

institution that defines its academic year as 900 clock hours and 30

weeks of instructional time. Each payment period is 450 clock hours,

and a full-time student completes the clock hours in the payment period

in 12 weeks of instructional time. To determine the student's payment

for a payment period, the institution must determine the student's

Scheduled Award using the Payment Schedule. The institution then must

multiply the student's Scheduled Award by the number of weeks of

instructional time that it takes a full-time student to complete the

clock hours in the academic year divided by the number of weeks of

instructional time in the academic year (24/30 = .8). The institution

multiplies that amount by the number of clock hours in the payment

period divided by the number of clock hours in the academic year (450/

900 = .5).

Section Sec. 690.65 Transfer Student: Attendance at More Than One

Institution During an Award Year

Because the 1992 Amendments authorize and require a financial aid

administrator to pay a student his or her Federal Pell Grant based on

receipt of a valid institutional student information report produced by

the central processor that is sent directly to the institution, the

Secretary proposes to amend Sec. 690.65 to incorporate the use of the

institutional student information report into the procedures for paying

transfer students. The use of an institutional student information

report to, in some instances, pay a student a Federal Pell Grant

eliminates the SAR as the only document from which a student can be

paid.

Section 690.75 Determination of Eligibility for Payment

The 1992 Amendments allow a student attending an institution on a

less-than-half-time basis to receive a Federal Pell Grant. Prior to the

1992 Amendments, a less-than-half-time student was only eligible under

certain restricted conditions. Therefore, the Secretary proposes to

amend the regulations to incorporate less-than-half-time students into

the requirements for determining the eligibility of a student for

payment.

The Secretary proposes to limit the eligibility of an incarcerated

student for a Federal Pell Grant as required under amended section

401(b)(8) of the HEA. A student incarcerated under a sentence of death

or life without eligibility for parole or release would not be eligible

to receive a Federal Pell Grant. In addition, the HEA provides that for

an incarcerated student to receive a Federal Pell Grant, the State in

which the student is incarcerated must demonstrate to the Secretary

that it uses Federal Pell Grants to supplement, not supplant, the

postsecondary assistance provided incarcerated students in fiscal year

1988. The Secretary has determined that this provision applies only to

students who are incarcerated by a State. Federally incarcerated

students are not covered by this provision. Under the proposed

regulations, the Secretary requires a State to submit an annual report

to demonstrate its continuing financial commitment to assisting

incarcerated students to receive postsecondary education assistance.

In a May 7, 1993 letter to the Governor of each State, the

Secretary provided a form for the 1993-94 award year. Using the form,

each State can provide the information necessary to determine if that

State is currently using Federal Pell Grant funds to supplement and not

supplant State postsecondary assistance provided to incarcerated

students in fiscal year 1988. The form for the 1993-94 award year did

not require, as do the proposed regulations, that a State provide the

data by individual categories. The Secretary believes that the

categories assist a State in determining sources of postsecondary

assistance provided to incarcerated students, and the State must

consider these categories to arrive at a total amount. The Secretary

also believes that providing the information by individual categories

will assure that the information is more accurate while imposing

minimal additional burden on the State. However, the Secretary is

requesting comment on whether providing the data by individual

categories imposes an additional burden on States and, if so, whether

commenters believe that the benefits of more accurate information may

outweigh the additional burden.

Section 690.77 Initial Disbursement of a Federal Pell Grant in an

Award Year Without a Valid SAR or Valid Institutional Student

Information Report

The Secretary has proposed an amendment to Sec. 690.77 to allow an

institution to make an initial Federal Pell Grant disbursement before

receiving a valid SAR or valid institutional student information report

sent to the institution from the central processor. The Secretary is

proposing this amendment to include payment of an initial disbursement

before receiving the valid institutional student information report

provided for in the amendment to section 401(f) of the HEA.

Notwithstanding the proposed amendment, the Secretary is also

considering removing Sec. 690.77 due to the rapid delivery of

institutional student information reports to institutions, the

increased use of the Department's electronic programs in the Federal

application processing system, and the growing number of mandated

Federal requirements, such as matching applicant information with other

Federal agency data bases. The Secretary specifically requests comment

concerning the possible deletion of this section.

Section 690.80 Recalculation of a Federal Pell Grant Award

Because there is no longer statutory authority requiring the use of

the provision in subpart C, the Secretary proposes to amend Sec. 690.80

to remove the references to sections in subpart C. Those sections

provided for a student to apply for a Federal Pell Grant using expected

year income instead of base year income if the student or his or her

family met special conditions.

Section 690.82 Maintenance and Retention of Records

The Secretary proposes to amend the recordkeeping requirements in

the regulations to require an institution to maintain the SARs or

institutional student information reports only for those students who

receive Federal Pell Grants. Currently, an institution is required to

keep SARs on file for every student who submits one to the institution,

regardless of whether the student receives assistance from the

institution. The Secretary believes that the current recordkeeping

requirement in Sec. 690.82 is unnecessary if the student did not

receive a Federal Pell Grant. All other recordkeeping requirements of

other title IV HEA programs would still apply.

Presidential Access Scholarship Program

The proposed regulations for the Presidential Access Scholarship

(PAS) Program would implement the PAS Program as enacted under title

IV, part A, subpart 2, chapter 3 of the amended HEA. Funds for the PAS

Program were not appropriated for fiscal year 1993 (the 1993-94 award

year) or 1994 (the 1994-95 award year). As indicated in the Conference

Report for the 1992 Amendments to the HEA, the purposes of the PAS

Program are to (1) encourage students to finish high school and attend

college and (2) to upgrade the course of study completed by high school

graduates who are from low or moderate-income families. The PAS Program

supports National Education Goal 2, which calls for the high school

graduation rate in the United States to reach at least 90 percent;

National Education Goal 3, which calls for students to learn to use

their minds well so they will be prepared for responsible citizenship,

further learning, and productive employment in our modern economy; and

National Education Goal 5, which calls for every adult American to be

literate and possess the knowledge and skills to compete in a global

economy and exercise the rights and responsibilities of citizenship.

One of the eligibility requirements for a student to qualify for a

PAS award is based directly on his or her eligibility for a Federal

Pell Grant award. The Secretary has developed a functional delivery

system for providing Federal Pell Grant funds to a student through his

or her institution. Because the amount of the PAS award is based on the

amount of a student's Federal Pell Grant and the PAS can easily be

incorporated into the Federal Pell Grant delivery system, the Secretary

believes that this system is the best method for providing a student

with his or her PAS award. The Secretary, therefore, is proposing

regulations describing the requirements for a participating

institution's administration of the program. The proposed regulations

for the PAS Program duplicate, or are as similar as possible to, the

Federal Pell Grant Program regulations. The Secretary believes that

coordinating the administrative requirements of the PAS Program with

the Federal Pell Grant Program will assist participating institutions

in administering both programs, reduce the amount of additional

institutional administrative burden and paperwork, and simplify the

process for students to apply for assistance under these programs.

The proposed PAS regulations that clarify or amplify the statutory

requirements are explained below.

Subpart B--Application Procedures and Eligibility Requirements

Section 406C(b) of the HEA specifies that an eligible student shall

submit an application to the Secretary. Section 691.12 of the proposed

regulations requires that the student apply for a PAS at the same time

the student applies for a Federal Pell Grant. The Secretary believes

that because a student is eligible to receive a PAS only if he or she

is eligible to receive a Federal Pell Grant, it is a matter of

administrative convenience for a student, his or her institution, and

the Secretary if a single application is submitted for both programs.

Sections 406C and 406E of the HEA specify the eligibility

requirements for students to apply for, receive, and continue to

receive a PAS. The proposed regulations have incorporated these

requirements in Secs. 691.15, 691.16, and 691.17. These sections

include the following requirements: (1) The student be scheduled to

graduate from high school or be a high school graduate, or the

recipient of the equivalent of a high school diploma as recognized by a

State, within 3 years of being accepted for enrollment or enrolling at

an institution of higher education; (2) the student have taken certain

specified college preparatory coursework in high school and achieved a

minimum 2.5 grade point average in the final two years of high school;

(3) the student have participated, with limited exceptions, in a

federally sponsored or federally approved early-intervention program or

have graduated in the top 10 percent of his or her high school class;

and (4) to continue to receive an award, the student must remain

eligible for a Federal Pell Grant and be maintaining satisfactory

academic progress at his or her institution.

It should be noted that the definition of eligible early-

intervention program at Sec. 691.2 includes the National Early

Intervention Scholarship and Partnership Program as authorized by

section 404A of the HEA. Regulations for this program have not yet been

promulgated. When they are, however, they will be incorporated into

these regulations.

The Secretary believes that if an applicant who did not graduate in

the top 10 percent of his or her high school class was unable to

participate in an early intervention program where the applicant

resides due to unusual or exceptional circumstances, the applicant

should not be prevented from participating in the PAS Program.

Therefore, Sec. 691.16 implements a waiver for those students not

graduating in the top 10 percent of their class. However, an applicant

who simply chooses not to participate in an early intervention program

should not receive PAS Program funds. The Secretary believes that this

interpretation is consistent with the statute. The requirement that an

applicant take certain specified college preparatory classes cannot be

waived under the statute. The regulations mirror this requirement but

also permit an applicant who was unable to take the required high

school coursework where he or she resides to complete that coursework

at another high school or community college. The applicant must be able

to demonstrate that he or she has completed the required coursework

before the applicant receives a PAS award.

Subpart F--Determination of Awards

Subpart F of the proposed regulations includes instructions for

determining the amount of an award for any academic year and for a

specific payment period. This determination is based on the amount of

the Federal Pell Grant a student is eligible to receive. Procedures are

proposed for receiving a valid SAR or valid institutional student

information report and for calculating an award when the payment period

crosses over 2 award years. In addition, the Secretary proposes to

establish institutional requirements regarding transfer students,

correspondence students, and exceptions to the maximum PAS award when a

student is eligible for more than one Scheduled Federal Pell Grant

within an award year.

Subpart G--Institutional Administration

Subpart G of the proposed regulations establishes requirements

under which institutions must administer the PAS Program. As proposed,

in order to participate in the PAS Program, an institution would be

required to include the PAS Program in its agreement with the Secretary

under 34 CFR 668.12. To implement this requirement, the Secretary

intends to propose amending 34 CFR 668.1(c) to include the PAS Program

in a separate notice of proposed rulemaking amending subparts A and B

of the Student Assistance General Provisions regulations. As a result,

all the relevant provisions of 34 CFR part 668 would apply to the PAS

Program. If the institution withdraws or is terminated from the

program, provisions will be proposed that prescribe how an institution

must disburse funds to a student. Also, this proposed subpart would

provide guidance on fiscal accounting procedures, retention of records,

and submission of reports. As in the Federal Pell Grant Program, the

Secretary specifically is requesting comment concerning the need for

proposed Sec. 691.77 and also concerning the proposed administrative

burden on institutions to administer the program.

Subpart H--Administrative Responsibilities of a State

Because section 406F(a) of the HEA requires that a State enter into

an agreement with the Secretary in order for students residing in that

State to receive a PAS, proposed Sec. 691.90 describes the contents of

the agreement. In addition, proposed Sec. 691.91 establishes the

records a State must maintain and the length of time a State must keep

those records.

Executive Order 12866

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 the 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 cost 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 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 proposed

regulations without impeding the effective and efficient administration

of the program.

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. States entering into an agreement with the Secretary are not

defined as ``small entities'' in the Regulatory Flexibility Act. The

small entities that would be affected by these proposed regulations are

small institutions of higher education. However, these proposed

regulations would not have a significant economic impact on the small

institutions affected because, although certain reporting and

recordkeeping requirements are imposed on participating institutions,

these requirements are modeled on existing student financial assistance

programs requirements already imposed on these institutions under title

IV of the Higher Education Act of 1965, as amended. Therefore, the

Secretary has determined that these provisions will have minimal impact

on the small institutions of higher education.

Paperwork Reduction Act of 1980

Sections 690.13, 690.75, 690.77, 690.82, 691.7, 691.9, 691.12,

691.61, 691.73, 691.79, 691.81, 691.82, 691.83, 691.90, and 691.91

contain information collection requirements for the Federal Pell Grant

Program and the PAS Program. 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))

These proposed regulations affect businesses or other for-profit

organizations and nonprofit institutions that are eligible to

participate in the title IV, HEA programs. The Department needs and

uses the information to implement the 1992 Amendments for the Federal

Pell Grant Program and PAS Program. The regulations provide the

requirements that States, institutions, and students must follow to

participate in these programs.

Federal Pell Grant

Annual public reporting and recordkeeping burden for this

collection of information is estimated to average 40 hours per response

for 57 States and Territories and 2,280 total hours per year, including

the time for reviewing instructions, searching existing data sources,

gathering and maintaining the data needed, and completing and reviewing

the collection of information.

Presidential Access Scholarship Program

Annual public reporting and recordkeeping burden for this

collection of information is estimated to average: (1) 3 hours per

response for 57 States and Territories; (2) 1 hour per response for

390,000 applicants; and (3) 3 hours per response for 10,000

institutions. The total hours for States, applicants, and institutions

are 420,171 hours per year 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 4018, Regional Office Building 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.

To assist the Department in complying with the specific

requirements of Executive Order 12291 and the Paperwork Reduction Act

of 1980 and their overall requirement of reducing regulatory burden,

the Secretary invites comment on whether there might be further

opportunities to reduce any regulatory burdens found in these proposed

regulations.

Assessment of 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 690

Administrative practice and procedure, Colleges and universities,

Education, Grant programs--education, Reporting and recordkeeping

requirements, Student aid.

34 CFR Part 691

Administrative practice and procedure, Colleges and universities,

Education, Grant programs--education, Reporting and recordkeeping

requirements, Student aid.

(Catalog of Federal Domestic Assistance (CFDA) Numbers: 84.063

Federal Pell Grant Program; Catalog of Federal Domestic Assistance

Number for the Presidential Access Scholarship Program has not been

assigned)

Dated: February 17, 1994.

Richard W. Riley,

Secretary of Education.

The Secretary proposes to amend title 34 of the Code of Federal

Regulations by amending part 690 and adding a new part 691 as follows:

PART 690--[Amended]

1. The authority citation for part 690 is revised to read as

follows:

Authority: 20 U.S.C. 1070a, unless otherwise noted.

2. The heading for part 690 is revised to read as follows:

PART 690--FEDERAL PELL GRANT PROGRAM

Secs. 690.1, 690.2, 690.3, 690.6, 690.7, 690.9, 690.10, 690.11, 690.12,

subpart F, 690.62, 690.64, 690.65, 690.66, 690.71, 690.72, 690.73,

690.74, 690.75, 690.78, 690.79, 690.81, and 690.83 [Amended]

3. In part 690 add the word ``Federal'' before the words ``Pell

Grant'' in the following places:

(a) Section 690.1;

(b) Section 690.2(c) under the terms ``Disbursement Schedule'' and

``Scheduled Pell Grant'';

(c) Section 690.3(a)(2)(ii);

(d) Section 690.6(a) and (e);

(e) Section 690.7(a)(1) introductory text, (a)(2) (twice), (b)

introductory text (twice), (c)(2), (c)(3), and (c)(4);

(f) Section 690.9(a) introductory text, (a)(1) (twice), (a)(2)

introductory text, and (a)(2)(ii);

(g) Section 690.10(a) and (b);

(h) Section 690.11 heading and text;

(i) Section 690.12(a);

(j) Subpart F heading;

(k) Section 690.62(a);

(l) Section 690.64 heading, (a)(2), and (b);

(m) Section 690.65(d) introductory text, (d)(1), (d)(3), and (e)

(three times);

(n) Section 690.66(b)(1) introductory text, (b)(1)(i), (b)(1)(ii),

(c)(1) introductory text, (c)(1)(i), (c)(1)(ii), and (c)(5);

(o) Section 690.71;

(p) Section 690.72(a);

(q) Section 690.73(b)(2), (b)(3), and (b)(4);

(r) Section 690.75(a) introductory text, (a)(3)(i), (a)(3)(ii),

(c), and (d) (twice);

(s) Section 690.78(c) introductory text;

(t) Section 690.79(a)(1) and (a)(2);

(u) Section 690.81(a)(2) and (b) (twice); and

(v) Section 690.83(a)(1) introductory text, (b)(1), and (c)(2).

Secs. 690.74 and 690.81 [Amended]

4. In part 690 add the word ``Federal'' before the words ``Pell

Grants'' in the following places:

(a) Section 690.74 (twice); and

(b) Section 690.81(c).

Sec. 690.2 [Amended]

5. Section 690.2 paragraph (b) is amended by adding in alphabetical

order the term ``Federal Pell Grant Program'' and removing the terms

``Academic year'' and ``Pell Grant Program''.

6. Section 690.2 paragraph (c) is amended by removing the

definition of ``Pell Grant Index''; by adding, in alphabetical order,

new definitions of ``Academic year'', ``Annual award'', ``Central

processor'', ``Expected family contribution'', ``Incarcerated

student'', ``Institutional student information report'', ``Less-than-

half-time student'', and ``Valid institutional student information

report''; and by revising the definitions of ``Disbursement Schedule'',

paragraph (1) under ``Enrollment status'', and ``Payment Schedule'' to

read as follows:

Sec. 690.2 General Definitions

* * * * *

(c) * * *

Academic year: An academic year as defined in section 481 of the

HEA.

Annual award: The Federal Pell Grant award amount a full-time

student would receive under the Payment Schedule for a full award year,

and the amount a three-quarter-time, half-time, and less-than-half-time

student would receive under the appropriate Disbursement Schedule for a

full award year.

Central processor: An organization under contract with the

Secretary that calculates an applicant's expected family contribution

based on the applicant's application data, transmits an institutional

student information report to each institution designated by the

applicant, and submits reports to the Secretary on the correctness of

the central processor's computations of the amount of the expected

family contribution and the accuracy of the answers to questions on the

application form for the previous academic year.

* * * * *

Disbursement Schedule: A table showing the grant amounts that

three-quarter, half-time, and less-than-half-time students at term-

based institutions using credit hours would receive for an academic

year. This table is published annually by the Secretary and is based

on--

(1) A student's expected family contribution, as determined in

accordance with title IV, part F of the Higher Education Act of 1965

(HEA), as amended; and

(2) A student's attendance costs as defined in title IV, part F of

the HEA.

* * * * *

Enrollment status: (1) Full-time, three-quarter-time, half-time, or

less-than-half-time depending on a student's credit-hour work load per

academic term at an institution using semesters, trimesters, quarters,

or other academic terms and measuring progress by credit hours.

* * * * *

Expected family contribution (EFC): The amount an applicant and his

or her spouse and family are expected to pay toward the student's cost

of attendance.

* * * * *

Incarcerated student: A student serving a criminal sentence in a

Federal, State, or local penitentiary, prison, jail, reformatory, work

farm, or other similar correctional institution. A student who is in a

``half-way house'' or ``home detention'' or is sentenced to serve only

weekends is not considered incarcerated.

* * * * *

Institutional student information report: A paper document or an

institutional paper printout from a computer-generated electronic

record that the central processor transmits to the institution that

includes an applicant's--

(1) Personal identification information;

(2) Application data used to calculate the applicant's EFC; and

(3) EFC calculated by the central processor.

* * * * *

Less-than-half-time student: An enrolled student who is carrying a

less-than-half-time academic work load--as determined by the

institution--that amounts to less than half the work load of the

appropriate minimum requirement outlined in the institution's

definition of a full-time student.

* * * * *

Payment Schedule: A table showing a full-time student's Scheduled

Federal Pell Grant for a given award year. This table, published

annually by the Secretary, is based on--

(1) The student's expected family contribution, as determined in

accordance with part F of title IV; and

(2) The student's cost of attendance as defined in part F of title

IV.

* * * * *

Valid institutional student information report: An institutional

student information report--

(1) On which all the information used in calculating the

applicant's expected family contribution is accurate and complete as of

the date the application is signed;

(2) That is signed by the applicant; and

(3) That, if corrections are made, is signed--

(i) By the applicant's spouse; and

(ii) If the applicant is dependent, by one of his or her parents.

* * * * *

7. Section 690.3 is amended by revising (b) introductory text,

(b)(1), and (b)(2), removing (b)(3), and redesignating (b)(4) as

(b)(3):

Sec. 690.3 Payment period.

* * * * *

(b) Payment periods for an eligible program that does not have

academic terms: (1) For a student whose eligible program is one

academic year or less--

(i) (A) The first payment period is the period of time in which the

student completes the first half of his or her academic year or the

first half of his or her program (in credit or clock hours); and

(B) The second payment period is the period of time in which the

student completes the second half of the academic year or the second

half of his or her program (in credit or clock hours); or

(ii) At an institution measuring progress in credit hours, if a

student cannot earn half the credits in the academic year or program

until after the midpoint between the first and last scheduled days of

class, the student is considered to begin his or her second payment

period on the later of--

(A) The calendar midpoint between the first and last scheduled days

of class of the program or academic year; or

(B) The date, as determined by institution, that the student has

completed half of his or her academic coursework.

(2) For a student whose program is more than one academic year in

credit or clock hours, the payment periods must be calculated under

paragraph (b)(1) of this section unless the remaining portion of the

program is less than an academic year. If the remaining portion of the

program is less than an academic year, each payment period must be the

period of time in which a student first completes--

(i) One-half of the academic year as determined under the

provisions in (b)(1); or

(ii) The remaining hours in the student's program.

* * * * *

8. Section 690.6 is amended by removing paragraphs (c), (d), and

(e), and by amending paragraph (b) by adding a second sentence to read

as follows:

Sec. 690.6 Duration of student eligibility.

* * * * *

(b) * * * Any noncredit or remedial course taken by a student,

including a course in English language instruction, is not included in

the institution's determination of that student's period of Federal

Pell Grant eligibility.

(Authority: 20 U.S.C. 1070a)

9. Section 690.8 is amended by revising paragraphs (c) and (d) to

read as follows:

Sec. 690.8 Enrollment status for students taking regular and

correspondence courses.

* * * * *

(c)(1) Notwithstanding the limitation in paragraph (b)(3) of this

section, a student who would be a half-time student based solely on his

or her correspondence work is considered a half-time student unless the

calculation in paragraph (b) of this section produces an enrollment

status greater than half-time.

(2) A student who would be a less-than-half-time student based

solely on his or her correspondence work or a combination of

correspondence work and regular course work is considered a less-than-

half-time student.

(d) The following chart provides examples of the rules set forth in

this section. It assumes that the institution defines full-time

enrollment as 12 credits per term, making the half-time enrollment

equal to 6 credits per term.

----------------------------------------------------------------------------------------------------------------

Total

Number of course load

credit Number of in credit

Under Sec. 691.8 hours credit hours hours to Enrollment status

regular correspondence determine

work enrollment

status

----------------------------------------------------------------------------------------------------------------

(b)(3)................................ 3 3 6 Half-time.

(b)(3)................................ 3 6 6 Half-time.

(b)(3)................................ 3 9 6 Half-time.

(b)(3)................................ 6 3 9 Three-quarter-time.

(b)(3)................................ 6 6 12 Full-time.

(b)(3) and (c)........................ 2 6 6 Half-time.

(c)1.................................. ........... .............. ........... Less-than-half-time.

----------------------------------------------------------------------------------------------------------------

1Any combination of regular and correspondence work that is greater than 0, but less than 6 hours.

10. Section 690.10 is amended by revising the authority citation at

the end of the section and by adding a new paragraph (c) to read as

follows:

Sec. 690.10 Administrative cost allowance to participating schools.

* * * * *

(c) If an institution enrolls a significant number of students who

are attending less-than-full-time or are independent students, the

institution shall use a reasonable proportion of these funds to make

financial aid services available during times and in places that will

most effectively accommodate the needs of those students.

(Authority: 20 U.S.C. 1096)

11. Section 690.13 is amended by revising the first sentence to

read as follows:

Sec. 690.13 Notification of expected family contribution.

The Secretary sends a ``Student Aid Report'' (SAR) to each eligible

applicant and an institutional student information report to each

institution designated by the applicant. * * *

Subpart C--[Removed and Reserved]

12. Subpart C is removed and reserved.

13. Section 690.61 is revised to read as follows:

Sec. 690.61 Submission process and deadline for a student aid report

or institutional student information report.

(a) Submission process. (1) Except as provided in paragraph (a)(2)

of this section, an institution may make a disbursement of a Federal

Pell Grant to a student only if--

(i) The student has submitted a valid SAR to the institution; or

(ii) The institution--

(A) Has obtained a valid institutional student information report

for that student; and

(B) Participates in the Secretary's electronic programs (Recipient

Data Exchange, Electronic Data Exchange, or ``Floppy Disk'' Exchange)

to report Federal Pell Grant disbursements; and

(C) Uses that institutional student information report to determine

the student's eligibility to receive his or her Federal Pell Grant.

(2) An institution may make one disbursement of a student's Federal

Pell Grant without a valid SAR or valid institutional student

information report if it follows the procedures described in

Sec. 690.77.

(3) An institution is entitled to rely on valid SAR information or

valid institutional student information report information except under

the conditions set forth in 34 CFR 668.14(f) and 668.60.

(b) Student Aid Report or institutional student information report

deadline. (1) Except as noted in 34 CFR 668.60, for a student to

receive a Federal Pell Grant for an award year, the student must submit

the relevant parts of the SAR to his or her institution or the

institution must receive a valid institutional student information

report by June 30 of that award year.

(2) Except as noted in 34 CFR 668.60, for a student to receive a

Federal Pell Grant for an award year, the student must submit the

relevant parts of the SAR to his or her institution or the institution

must receive a valid institutional student information report while the

student is still enrolled and eligible for payment at that institution.

(Authority: 20 U.S.C 1070a)

14. Section 690.62 is amended by revising the heading of the

section, by removing paragraph (c), and by revising paragraph (b), to

read as follows:

Sec. 690.62 Calculation of a Federal Pell Grant.

* * * * *

(b) No payment may be made to a student if the student's Scheduled

Federal Pell Grant is less than $200. However, a student who is

eligible for a Federal Pell Grant that is equal to or greater than

$200, but less than or equal to $400, shall be awarded a Federal Pell

Grant of $400.

15. Section 690.63 is revised to read as follows:

Sec. 690.63 Calculation of a Federal Pell Grant for a payment period.

(a)(1) Programs using standard terms with at least 30 weeks of

instructional time. A student's Federal Pell Grant for a payment period

is calculated under paragraph (b) or (d) of this section if--

(i) The student is enrolled in an eligible program that--

(A) Measures progress in credit hours;

(B) Is offered in semesters, trimesters, or quarters;

(C) Requires the student to enroll for at least 12 credit hours in

each term in the award year to qualify as a full-time student; and

(D) Is not offered with multiple start dates or overlapping terms;

and

(ii) The institution offering the program--

(A) Provides the program using an academic calendar that includes

two semesters or trimesters in the fall through the following spring,

or three quarters in the fall, winter, and spring; and

(B) Provides at least 30 weeks of instructional time in the terms

specified in paragraph (a)(1)(ii)(A) of this section.

(2) Programs using standard terms with less than 30 weeks of

instructional time. A student's Federal Pell Grant for a payment period

is calculated under paragraph (c) or (d) of this section if--

(i) The student is enrolled in an eligible program that--

(A) Measures progress in credit hours;

(B) Is offered in semesters, trimesters, or quarters;

(C) Requires the student to enroll in at least 12 credit hours in

each term in the award year to qualify as a full-time student; and

(D) Is not offered with multiple start dates or overlapping terms;

and

(ii) The institution offering the program--

(A) Provides the program using an academic calendar that includes

two semesters or trimesters in the fall through the following spring,

or three quarters in the fall, winter, and spring; and

(B) Does not provide at least 30 weeks of instructional time in the

terms specified in paragraph (a)(2)(ii)(A) of this section.

(3) Other programs using terms and credit hours. A student's

Federal Pell Grant for a payment period is calculated under paragraph

(d) of this section if the student is enrolled in an eligible program

that--

(i) Measures progress in credit hours; and

(ii) Is offered in academic terms other than those described in

paragraphs (a)(1) and (a)(2) of this section.

(4) Programs not using terms or using clock hours. A student's

Federal Pell Grant for any payment period is calculated under paragraph

(e) of this section if the student is enrolled in an eligible program

that--

(i) Is offered in credit hours but is not offered in academic

terms; or

(ii) Is offered in clock hours.

(b) Programs using standard terms with at least 30 weeks of

instructional time. The Federal Pell Grant for a payment period, i.e.,

an academic term, for a student in a program using standard terms with

at least 30 weeks of instructional time in two semesters or trimesters

or in three quarters as described in paragraph (a)(1)(ii)(A) of this

section, is calculated by--

(1) Determining his or her enrollment status for the term;

(2) Based upon that enrollment status, determining his or her

annual award from the Payment Schedule for full-time students or the

Disbursement Schedule for three-quarter-time, half-time, or less-than-

half-time students; and

(3) Dividing the amount described under paragraph (b)(2) of this

section by--

(i) Two at institutions using semesters or trimesters or three at

institutions using quarters; or

(ii) The number of terms over which the institution chooses to

distribute the student's annual award if--

(A) An institution chooses to distribute all of the student's

annual award determined under paragraph (b)(2) of this section over

more than two terms at institutions using semesters or trimesters or

more than three quarters at institutions using quarters; and

(B) The number of weeks of instructional time in the terms,

including the additional term or terms, equals the weeks of

instructional time in the institution's academic year.

(c) Programs using standard terms with less than 30 weeks of

instructional time. The Federal Pell Grant for a payment period, i.e.,

an academic term, for a student in a program using standard terms with

less than 30 weeks of instructional time in two semesters or trimesters

or in three quarters as described in paragraph (a)(2)(ii)(A) of this

section, is calculated by--

(1) Determining his or her enrollment status for the term;

(2) Based upon that enrollment status, determining his or her

annual award from the Payment Schedule for full-time students or the

Disbursement Schedule for three-quarter-time, half-time, or less-than-

half-time students;

(3) Either--

(i)(A) Multiplying his or her annual award determined under

paragraph (c)(2) of this section by the following fraction as

applicable:

At an institution using semesters or trimesters--

TP25FE94.010

; or

At an institution using quarters--

TP25FE94.011

; and

(B) Dividing the amount determined under paragraph (c)(3)(i)(A) of

this section by two at institutions using semesters or trimesters or

three at institutions using quarters; or

(ii) Dividing the student's annual award determined under paragraph

(c)(2) by the number of terms over which the institution chooses to

distribute the student's annual award if--

(A) An institution chooses to distribute all of the student's

annual award determined under paragraph (c)(2) of this section over

more than two terms at institutions using semesters or trimesters or

more than three quarters at institutions using quarters; and

(B) The number of weeks of instructional time in the terms

including the additional term or terms equals the weeks of

instructional time in the institution's academic year.

(d) Other programs using terms and credit hours. The Federal Pell

Grant for a payment period, i.e., an academic term, for a student in a

program using terms and credit hours, other than those described in

paragraphs (a) (1) or (2) of this section, is calculated by--

(1)(i) For a student enrolled in a semester, trimester, or quarter,

determining his or her enrollment status for the term; or

(ii) For a student enrolled in a term other than a semester,

trimester, or quarter, determining his or her enrollment status for the

term by--

(A) Dividing the number weeks of instructional time in the term by

the number of weeks of instructional time in the institution's academic

year;

(B) Multiplying the fraction determined under paragraph

(d)(1)(ii)(A) by the number of credit hours in the institution's

academic year to determine the number of hours required to be enrolled

to be considered a full-time student; and

(C) Determining a student's enrollment status by calculating the

proportion of the number of hours in which the student enrolls in the

term to the number of hours required to be considered full-time under

paragraph (d)(1)(ii)(B) of this section;

(2) Based upon that enrollment status, determining his or her

annual award from the Payment Schedule for full-time students or the

Disbursement Schedule for three-quarter-time, half-time, or less-than-

half-time student;

(3) Multiplying his or her annual award determined under paragraph

(d)(2) of this section by the following fraction:

TP25FE94.012

; and

(4) Paying the student the amount determined under paragraph (d)(3)

of this section.

(e) Programs using clock hours or credit hours without terms. The

Federal Pell Grant for a payment period for a student in a program

using credit hours without terms or using clock hours is calculated

by--

(1) Determining the student's Scheduled Federal Pell Grant using

the Payment Schedule;

(2) Multiplying the Scheduled Award by--

TP25FE94.013

; and

(3) Multiplying the amount determined under paragraph (e)(2) of

this section by--

TP25FE94.014

(f) A single disbursement may not exceed 50 percent of any award

determined under paragraph (d) or (e) of this section. If a payment for

a payment period calculated under paragraphs (d) or (e) of this section

would require the disbursement of more than 50 percent of a student's

annual award in that payment period, the institution shall make at

least two disbursements to the student in that payment period. The

institution may not disburse an amount that exceeds 50 percent of the

student's annual award until the student has completed the period of

time in the payment period that equals, in terms of weeks of

instructional time, 50 percent of the weeks of instructional time in

the institution's academic year.

(g) Notwithstanding paragraphs (b), (c), (d), (e), and (f) of this

section--

(1) The amount of a student's award for an award year may not

exceed his or her Scheduled Federal Pell Grant award for that award

year; and

(2) An incarcerated student's Federal Pell Grant shall not exceed

the sum of the amount of tuition and fees normally assessed for that

course of study by the institution plus the actual cost of books and

supplies.

(h) For purposes of this section, an institution must define its

academic year for each of its eligible programs in terms of the number

of credit or clock hours and weeks of instructional time in accordance

with the requirements of section 481(d) of the HEA.

16. Section 690.65 is amended by revising paragraphs (a), (c), and

(f) to read as follows:

Sec. 690.65 Transfer student: attendance at more than one institution

during an award year.

(a) If a student who receives a Federal Pell Grant at one

institution subsequently enrolls at a second institution in the same

award year, the student may receive a grant at the second institution

only if--

(1) The student has submitted a valid SAR; or

(2) The second institution participates in the Secretary's

electronic programs to report Federal Pell Grant disbursements

(Recipient Data Exchange, Electronic Data Exchange, or ``Floppy Disk''

Exchange) and the second institution has obtained a valid institutional

student information report, in which case the institution shall use the

information from the valid institutional student information report to

determine the amount of the student's award. (The institution shall

follow the procedures set forth in 34 CFR 668.19 relating to financial

aid transcripts.)

* * * * *

(c) The second institution may pay a Federal Pell Grant only for

that portion of the academic year in which a student is enrolled at

that institution. The grant amount must be adjusted, if necessary, to

ensure that the grant does not exceed the student's Scheduled Federal

Pell Grant for that award year.

* * * * *

(f) A transfer student shall repay any amount received in an award

year that exceeds his or her Scheduled Federal Pell Grant.

Sec. 690.73 [Amended]

17. Section 690.73(b)(1) is amended by adding after the word

``institution'' the words ``or for whom the institution received a

valid institutional student information report''.

18. Section 690.75 is amended by revising paragraphs (a)(2), and

(b), and by adding new paragraphs (f), (g), and (h) to read as follows:

Sec. 690.75 Determination of eligibility for payment.

(a) * * *

(2) Is enrolled as an undergraduate student; and

* * * * *

(b) If an eligible student submits a valid SAR to the institution

or the institution receives a valid institutional student information

report for that student and that student then becomes ineligible before

receiving a payment, the institution may pay the student only the

amount that it determines could have been used for educational purposes

before the student became ineligible.

* * * * *

(f) If the student is an incarcerated student, the student is

eligible to receive a Federal Pell Grant if--

(1) (i) The State in which the student is incarcerated has

submitted, and the Secretary has approved, a report as described in

Sec. 690.75(g); or

(ii) The student is a federally incarcerated student in any state;

and

(2) The student is not under sentence of death or under sentence of

life imprisonment without eligibility for parole or release.

(g) For an eligible incarcerated student to receive funds during an

award year, the State in which the student is incarcerated must file a

report annually on a form approved by the Secretary. The report

confirms that the State expended as much on postsecondary educational

assistance for incarcerated students during the Federal fiscal year

prior to the year in which an incarcerated student is otherwise

eligible to receive a Federal Pell Grant as was expended by the State

for incarcerated students in Federal fiscal year 1988. For purposes of

this report, States must provide information about State postsecondary

educational expenditures for incarcerated students for the Federal

fiscal year prior to the year in which the student is eligible and

Federal fiscal year 1988. The report must include fiscal information

about the following--

(1) Appropriated funds, including funds appropriated to State

Departments of Correction or other State agencies, expended for

postsecondary education assistance to incarcerated students;

(2) Tuition waivers for postsecondary incarcerated students;

(3) Tuition reimbursements for postsecondary incarcerated students;

(4) State postsecondary educational assistance programs where the

funds are expended for incarcerated students (except the Federal

portion of any grant under the State Student Incentive Grant Program,

and any other Federal postsecondary assistance);

(5) Special school district funding for postsecondary education for

incarcerated students; and

(6) Any other funds expended on postsecondary educational

assistance for incarcerated students, excluding any Federal assistance.

(h) For each payment period during which an incarcerated student is

otherwise eligible, the institution may make payments to the student

only if the State has submitted its annual report and the Secretary

approved that report prior to the payment period during which the

student is eligible to be paid. The institution shall not make payments

to an incarcerated student for payment periods during which the student

was enrolled and eligible but the State's annual report was not

submitted and approved by the Secretary.

19. Section 690.77 is revised to read as follows:

Sec. 690.77 Initial disbursement of a Federal Pell Grant in an award

year without a valid SAR or valid institutional student information

report.

(a) Within an award year, an institution may make one disbursement

of a student's Federal Pell Grant before receiving the student's valid

SAR or valid institutional student information report if the

institution--

(1) Receives a student's application information;

(2) Does not have documentation that indicates that the application

information is inaccurate; and

(3) Receives an EFC--

(i) From the Secretary; or

(ii) From an organization that has a contract with the Secretary to

transmit application data to the Secretary.

(b) If an institution receives a student's application information

specified in paragraphs (a)(1) and (a)(3) of this section and his or

her EFC from the Secretary, or his or her EFC as calculated by the

Secretary from an organization that has a contract to transmit

application data to the Secretary, but the institution has

documentation that indicates that the application information is

inaccurate, the institution may make one disbursement of a student's

Federal Pell Grant within an award year before receiving the student's

valid SAR or valid institutional student information report if the

institution--

(1) Resolves the inconsistencies between its documentation and the

student's application information;

(2) Recalculates the student's EFC based on correct information;

(3) Makes the disbursement of the student's Federal Pell Grant for

the first payment period based on the recalculated EFC; and

(4) Reports the changes in the student's application information

and the recalculated EFC to the Secretary within the deadline

established by the Secretary.

(c)(1) If an institution chooses to make a disbursement under

paragraph (a) or (b) of this section, it shall be liable for that

disbursement if the institution does not receive a valid SAR or valid

institutional student information report for the student for that award

year.

(2) If an institution chooses to make a disbursement under

paragraph (b) of this section, the institution and the student shall be

liable for any overpayment caused by an incorrect recalculation of the

student's EFC.

(3) If a student receives an overpayment as a result of a

disbursement made under paragraph (a) or (b) of this section, the

institution shall eliminate the overpayment by following the procedures

described in 34 CFR 668.61(a).

(Authority: 20 U.S.C. 1070a)

20. Section Sec. 690.80 is amended by revising the section heading

and paragraphs (a) and (b)(1) to read as follows:

Sec. 690.80 Recalculation of a Federal Pell Grant award.

(a) Change in expected family contribution. (1) The institution

shall recalculate a Federal Pell Grant award for the entire award year

if the student's expected family contribution changes at any time

during the award year. The change may result from--

(i) The correction of a clerical or arithmetic error under

Sec. 690.14; or

(ii) A correction based on information required in Sec. 690.12 or

Sec. 690.77.

(2) Except as described in 34 CFR 668.60(c), the institution shall

adjust the student's award when an overaward or underaward is caused by

the change in the expected family contribution. That adjustment must be

made--

(i) Within the same award year--if possible--to correct any

overpayment or underpayment; or

(ii) During the next award year to correct any overpayment that

could not be adjusted during the year in which the student was

overpaid.

(b) Change in enrollment status. (1) If the student's enrollment

status changes from one academic term to another term within the same

award year, the institution shall recalculate the Federal Pell Grant

award for the new payment period taking into account any changes in the

cost of attendance.

* * * * *

21. Section 690.82 is amended by revising paragraphs (a)

introductory text and (a)(1) to read as follows:

Sec. 690.82 Maintenance and retention of records.

(a) Each institution shall maintain adequate records (including

those related to verification), which include the fiscal and accounting

records that are required under Sec. 690.81, records required for

audits in 34 CFR 668.23, the SAR or institutional student information

report of each student who received a Federal Pell Grant, and records

indicating--

(1) The eligibility of all enrolled students who have submitted

valid SARs to the institution or for whom the institution has received

valid institutional student information report;

* * * * *

22. A new part 691 is added to read as follows:

PART 691--PRESIDENTIAL ACCESS SCHOLARSHIP PROGRAM

Subpart A--General

Sec.

691.1 Scope and purpose.

691.2 General definitions.

691.3 Definitions of payment period.

691.4 [Reserved]

691.5 [Reserved]

691.6 Duration of student eligibility.

691.7 Institutional participation.

691.8 Enrollment status for students taking regular and

correspondence courses.

691.9 Written agreements between two or more eligible institutions.

691.10 [Reserved]

691.11 Payments from more than one institution.

Subpart B--Application Procedures and Eligibility Requirements

691.12 The application process.

691.13-691.14 [Reserved]

691.15 Eligibility to apply initially for a scholarship.

691.16 Eligibility requirements to receive an award.

691.17 Eligibility requirements to continue to receive an award.

Subpart C--[Reserved]

Subpart D--[Reserved]

Subpart E--[Reserved]

Subpart F--Determination of Awards

691.61 Disbursement conditions and deadlines.

691.62 Calculation of a Presidential Access Scholarship Program

award.

691.63 Calculation of a Presidential Access Scholarship for a

payment period.

691.64 Calculation of a Presidential Access Scholarship for a

payment period that occurs in 2 award years.

691.65 Transfer student: attendance at more than one institution

during an award year.

691.66 Correspondence study.

Subpart G--Institutional Administration

691.71 Scope.

691.72 Institutional participation agreement.

691.73 Termination of institutional participation agreement.

691.74 [Reserved]

691.75 Determination of eligibility for payment.

691.76 Frequency of payment.

691.77 Initial disbursement of a PAS in an award year without a

valid SAR or institutional student information report.

691.78 Method of disbursement by check or credit to a student's

account.

691.79 Recovery of overpayments.

691.80 Recalculation of a PAS Program award.

691.81 Fiscal control and fund accounting procedures.

691.82 Maintenance and retention of records.

691.83 Submission of reports.

Subpart H--Administrative Responsibilities of a State

691.90 Early-intervention agreement.

691.91 Records a State must maintain.

Authority: 20 U.S.C. 1070a-31 et seq.

Subpart A--General

Sec. 691.1 Scope and purpose.

The purposes of the Presidential Access Scholarship (PAS) Program

are to encourage students to finish high school and attend college and

to upgrade the course of study completed by high school graduates who

are from low or moderate-income families.

(Authority: 20 U.S.C. 1070a-31)

Sec. 691.2 General definitions.

(a) Definitions of the following terms used in this part are

described in subpart A of the regulations for Institutional Eligibility

under the Higher Education Act of 1965, as amended, 34 CFR part 600:

Accredited

Clock hour

program

Program of study by correspondence

Recognized equivalent of high school diploma

Secretary

(b) Definitions of the following terms used in this part are

described in subpart A of the Student Assistance General Provisions, 34

CFR part 668:

Award year

Enrolled

Federal Pell Grant Program

Public or private nonprofit institution of higher education

Regular student

State

(c) Other terms used in this part are:

Academic year: An academic year as defined in section 481 of the

HEA.

Central processor: An organization under contract with the

Secretary that calculates an applicant's expected family contribution

based on the applicant's application data, transmits an institutional

student information report to each of the institutions designated by

the applicant, and submits reports to the Secretary on the correctness

of the central processor's computations of the amount of the expected

family contribution and the accuracy of the answers to questions on the

application form for the previous academic year.

Disbursement Schedule: A table showing the scholarship amounts for

three-quarter, half-time, and less-than-half-time students at term-

based institutions using credit hours would receive for an academic

year. This table, published annually by the Secretary, is based on the

amount of a student's Federal Pell Grant.

Electronic Data Exchange: An electronic exchange system between the

Secretary and an institution under which a student is able to correct

or verify information contained on his or her SAR at the institution he

or she is attending and the institution is able to print out a SAR for

that student that is based on the corrected or verified information.

Eligible early-intervention program: A program as required under

Sec. 691.16(a)(5) that provides education-related activities such as

counseling, mentoring, academic support, outreach, and other supportive

services, including providing information on opportunities for

postsecondary financial aid, to students enrolled in preschool through

grade 12. To qualify, a program must be one of the following:

(1) A Talent Search project as described in 34 CFR part 643 and

authorized under section 402B of the HEA, as amended;

(2) An Upward Bound project as described in 34 CFR part 645 and

authorized under section 402C of the HEA, as amended;

(3) An Opportunity Center as described in 34 CFR part 644 and

authorized under section 402F of the HEA, as amended; or

(4) A National Early Intervention Scholarship and Partnership

Program as authorized under section 404A of the HEA, as amended; or

(5) A program that is certified as an honors scholars program by

the Governor of the State in which it is offered and that the Governor

determines meets comparable requirements for any program funded under

34 CFR parts 643, 644, 645, or section 404A of the HEA.

Eligible institution: An institution as defined in section 481 of

the HEA.

Eligible program: A program as defined in section 481 of the HEA.

Expected family contribution (EFC): The amount a student and his or

her spouse and family are expected to pay toward the student's cost of

attendance.

Full-time student: An enrolled student who is carrying a full-time

academic work load (other than by correspondence)--as determined by the

institution--under a standard applicable to all students enrolled in a

particular program. However, an institution's full-time standard must

equal or exceed one of the following minimum requirements:

(1) 12 semester hours or 12 quarter hours per academic term in an

institution using a semester, trimester, or quarter system;

(2) 24 semester hours or 36 quarter hours per academic year for an

institution using credit hours but not using a semester, trimester, or

quarter system, or the prorated equivalent for a program of less than 1

academic year;

(3) 24 clock hours per week for an institution using clock hours;

(4) In an institution using both credit and clock hours, any

combination of credit and clock hours where the sum of the following

fractions is equal to or greater than one:

TP25FE94.015

(5) A series of courses or seminars which equal 12 semester hours

or 12 quarter hours in a maximum of 18 weeks; or

(6) The work portion of a cooperative education program in which

the amount of work performed is equivalent to the academic workload of

a full-time student.

Half-time student: (1) Except as provided in paragraph (2) of this

definition, an enrolled student who is carrying a half-time academic

work load--as determined by the institution--that amounts to at least

half the work load of the appropriate minimum requirement outlined in

the institution's definition of a full-time student.

(2) A student enrolled solely in a program of study by

correspondence who is carrying a work load of at least 12 hours of work

per week or is earning at least 6 credit hours per semester, trimester,

or quarter. However, regardless of the workload, no student enrolled

solely in correspondence study is considered more than a half-time

student.

Honors scholars program: A program designed to encourage a high

level of academic achievement from students who are enrolled in the

program.

Institution of higher education (Institution): An institution of

higher education, a proprietary institution of higher education, or a

postsecondary vocational institution as defined in section 481 of the

HEA.

Institutional student information report: A paper document or an

institutional paper printout from a computer-generated electronic

record that the central processor transmits to the institution, which

includes an applicant's--

(1) Personal identifying information;

(2) Application data used to calculate the applicant's EFC; and

(3) EFC calculated by the central processor.

Less than half-time student: An enrolled student who is carrying a

less than half-time academic work load--as determined by the

institution--that amounts to less than half the work load of the

appropriate minimum requirement outlined in the definition of a full-

time student.

Payment Schedule: A table showing a full-time student's Scheduled

PAS Award for an academic year. This table is published annually by the

Secretary.

Scheduled Presidential Access Scholarship: The amount of a PAS that

would be paid to a full-time student for a full academic year.

Student Aid Report (SAR): A report provided to an applicant showing

the amount of his or her expected family contribution.

Student Aid Report (SAR) Payment Document: A part of the SAR that

is provided to the Secretary by an institution showing an applicant's

expected family contribution, cost of attendance, and enrollment status

at that institution.

Three-quarter-time student: An enrolled student who is carrying a

three-quarter-time academic work load--as determined by the

institution--that amounts to at least three-quarters of the work of the

appropriate minimum requirement outlined in the definition of a ``full-

time student.''

Undergraduate student: A student enrolled in an undergraduate

course of study at an institution of higher education who--

(1) Has not earned a baccalaureate or first professional degree;

and

(2) Is in an undergraduate course of study that 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 only

for the first 4 academic years of that program.

Valid institutional student information report: An institutional

student information report--

(1) On which all the information used in calculating the

applicant's expected family contribution is accurate and complete as of

the date the application is signed;

(2) That is signed by the applicant; and

(3) That if corrections are made, is signed--

(i) By the applicant's spouse; and

(ii) If the applicant is dependent, by one of his or her parents.

Valid Student Aid Report: A Student Aid Report--

(1) On which all of the information used in the calculation of the

applicant's expected family contribution is accurate and complete as of

the date the application is signed; and

(2) For the Electronic Data Exchange, that is signed by the

applicant and, if corrections are made--

(i) Is signed by the applicant's spouse; and

(ii) If the applicant is dependent, is signed by one of his or her

parents.

(Authority: 20 U.S.C. 1070a--31 et seq.)

Sec. 691.3 Definitions of payment period.

(a) Payment period for an eligible program that has academic terms:

(1) Except as noted in paragraph (a)(2) of this section, for an

eligible program that uses semesters, trimesters, quarters, or other

academic terms, the payment period is the semester, trimester, quarter,

or other academic term.

(2) For an eligible program that uses semesters, trimesters,

quarters, or other academic terms and measures progress in clock

hours--

(i) A payment period is a semester, trimester, quarter, or other

academic term if the student completes all the clock hours scheduled

for that term;

(ii) If at the end of a term, the student has not completed all of

the clock hours scheduled for that term and the student has received a

PAS for that term, the payment period extends beyond that term for as

long as it takes the student to complete the number of clock hours

originally scheduled for that term; and

(iii) If a payment period extends into another term, the next

payment period consists of the number of clock hours scheduled for that

term that were not included in the previous payment period.

(b) Payment period for an institution that does not have academic

terms:

(1) For the first academic year for a student--

(i) The first payment period is the period of time in which the

student completes the first half of his or her academic year (in credit

hours or clock hours);

(ii) The second payment period is the period of time in which the

student completes the second half of that academic year.

(2) For subsequent academic years, or fractions of academic years,

each payment period must be the period of time in which a student

completes--

(i) One-half of the academic year; or

(ii) The remaining hours in the student's program, whichever is to

be completed first.

(3) For a student whose remaining program is less than an academic

year--

(i) The first payment period must be the period of time in which

the student completes the first half of his or her remaining program

(in credit or clock hours); and

(ii) The second payment period must be the period of time in which

the student completes the second half of his or her remaining program.

(4) If an institution chooses to have more than two payment periods

in an academic year, the rules in paragraphs (b)(1) through (b)(3) of

this section are modified to reflect the increased number of payment

periods. For example, if an institution chooses to have three payment

periods in an academic year, each payment period must correspond to

one-third of the academic year.

(Authority: 20 U.S.C. 1070a-32)

Secs. 691.4-691.5 [Reserved]

Sec. 691.6 Duration of student eligibility.

A scholarship under the PAS Program shall be awarded to a student

for a period of--

(a) Not more than 4 academic years; or

(b) Not more than 5 academic years in the case of a student who is

enrolled in an undergraduate course of study requiring attendance for

the full-time equivalent of 5 academic years.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.7 Institutional participation.

(a)(1) An institution of higher education is eligible to award

scholarships for the PAS Program if it--

(i) Meets the appropriate definition set forth in section 481 of

the HEA;

(ii) Enters into a program participation agreement with the

Secretary; and

(iii) Complies with that agreement and with the applicable

provisions of this part and 34 CFR part 668.

(2) If an institution begins participation in the PAS Program

during an award year, a student enrolled in and attending that

institution is eligible to receive a PAS for the payment period during

which the institution enters into a program participation agreement

with the Secretary and any subsequent payment period.

(b) If an institution becomes ineligible to participate in the PAS

Program during an award year, an eligible student who was attending the

institution and who submitted a valid SAR to the institution or whose

institution received a valid institutional student information report

from the U.S. Department of Education before the date the institution

became ineligible is paid a PAS for that award year for--

(1) The payment periods that the student completed before the

institution became ineligible; and

(2) The payment period in which the institution became ineligible.

(c) An institution that becomes ineligible shall, within 45 days

after the effective date of loss of eligibility, provide to the

Secretary--

(1) The name and enrollment status of each eligible student who,

during the award year, received a PAS at the institution before it

became ineligible;

(2) The amount of funds paid to each PAS recipient for that award

year;

(3) The amount due each student eligible to receive a PAS through

the end of the payment period during which the institution became

ineligible; and

(4) An accounting of the PAS expenditures for that award year to

the date of ineligibility.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.8 Enrollment status for students taking regular and

correspondence courses.

(a) If, in addition to regular coursework, a student takes

correspondence courses from either his or her own institution or

another institution having an agreement for this purpose with the

student's institution, the correspondence work may be included in

determining the student's enrollment status to the extent permitted

under paragraph (b) of this section.

(b) Except as noted in paragraph (c) of this section, the

correspondence work that may be included in determining a student's

enrollment status is that amount of work which--

(1) Applies toward a student's degree or certificate;

(2) Is completed within the period of time required for regular

course work; and

(3) Does not exceed the amount of a student's regular course work

for the payment period for which the student's enrollment status is

being calculated.

(c) (1) Notwithstanding the limitation in paragraph (b)(3) of this

section, a student who would be a half-time student based solely on his

or her correspondence work is considered a half-time student unless the

calculation in paragraph (b) of this section produces an enrollment

status greater than half-time.

(2) A student who would be a less-than-half-time student based

solely on his or her correspondence work or a combination of

correspondence work and regular course work is considered a less-than-

half-time student.

(d) The following chart provides examples of the rules set forth in

this section. It assumes that the institution defines full-time

enrollment as 12 credits per term, making the half-time enrollment

equal to 6 credits per term.

----------------------------------------------------------------------------------------------------------------

Total

Number of course load

credit Number of in credit

Under Sec. 691.8 hours credit hours hours to Enrollment status

regular correspondence determine

work enrollment

status

----------------------------------------------------------------------------------------------------------------

(b)(3)................................ 3 3 6 Half-time.

(b)(3)................................ 3 6 6 Half-time.

(b)(3)................................ 3 9 6 Half-time.

(b)(3)................................ 6 3 9 Three-quarter-time.

(b)(3)................................ 6 6 12 Full-time.

(b)(3) and (c)........................ 2 6 6 Half-time.

(c)\1\................................ ........... .............. ........... Less-than-half-time.

----------------------------------------------------------------------------------------------------------------

\1\Any combination of regular and correspondence work that is greater than 0, but less than 6 hours.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.9 Written agreements between two or more eligible

institutions.

(a) A student who is enrolled in an eligible program at one

eligible institution and taking courses at one or more other eligible

institutions that apply toward his or her degree or certificate at the

first institution may receive a PAS for attendance at both institutions

only if there is a written agreement between the institutions.

(b) The institution at which the student is enrolled and expects to

receive his or her degree or certificate shall determine and pay the

student's PAS. However, the other institution may determine and pay the

student's PAS if the institutions agree in writing to that arrangement.

(c) The institution that determines and pays the PAS shall--

(1) Take into account all courses that apply to the student's

degree or certificate taken by the student at each eligible institution

participating in the agreement when determining the student's

enrollment status and cost of attendance; and

(2) Maintain all records regarding the student's eligibility for

and receipt of the PAS.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.10 [Reserved]

Sec. 691.11 Payments from more than one institution.

A student is not entitled to receive PAS Program payments

concurrently from more than one institution or from the Secretary and

an institution.

(Authority: 20 U.S.C. 1070a-32)

Subpart B--Application Procedures and Eligibility Requirements

Sec. 691.12 The application process.

Each eligible student desiring to apply for a PAS shall--

(a) Submit annually an application to the Secretary on the same

approved form and at the same time the student applies for a Federal

Pell Grant;

(b) Provide the application to the Secretary within the time frame

required to apply for a Federal Pell Grant; and

(c) Provide such information as is required to apply for a Federal

Pell Grant.

(Authority: 20 U.S.C. 1070a-33)

Secs. 691.13-691.14 [Reserved]

Sec. 691.15 Eligibility to apply initially for a scholarship.

A student is eligible to apply for a PAS for his or her first year

of postsecondary study if the student--

(a) Is scheduled to graduate from or is a graduate of a public or

private secondary school, or has the equivalent of a high school

diploma as recognized by the State in which the eligible student

resides, but has not yet received a baccalaureate degree; and

(b) Is either enrolled, accepted for enrollment, or intends to

enroll, at an institution of higher education not later than 3 calendar

years after the date that the student graduates from secondary school

or obtains the recognized equivalent of a high school diploma.

(Authority: 20 U.S.C. 1070a-35)

Sec. 691.16 Eligibility requirements to receive an award.

(a) A student is eligible to receive a PAS for his or her first

year of postsecondary study if the student--

(1) Is eligible to receive a Federal Pell Grant in the award year

in which the PAS is awarded;

(2) Is enrolled or accepted for enrollment in a degree or

certificate program of at least 2 years in length;

(3) Has demonstrated academic achievement and preparation for

postsecondary education by taking the following college preparatory

level coursework that includes at least--

(i) Four years of English;

(ii) Three years of science;

(iii) Three years of mathematics;

(iv) Either--

(A) Three years of history; or

(B) Two years of history and one year of social studies; and

(v) Either--

(A) Two years of foreign language; or

(B) One year of computer science and 1 year of foreign language;

(4) Has earned a gradepoint average of 2.5 or higher, on a scale of

4.0, in the final 2 years of high school; and

(5) Has either (i) participated for a minimum period of 36 months

in an eligible early-intervention program; or

(ii) Ranked in the top 10 percent, by grade point average, of the

student's secondary school graduating class.

(b) Notwithstanding the requirements in paragraph (a)(5) of this

section, a student may receive a PAS if an authorized official of the

State in which the student resides certifies to the Secretary that the

student was unable to participate in an eligible early-intervention

program because--

(1) The program was not available in the area where the student

resides; or

(2) Due to unusual and exceptional circumstances, the student was

unable to participate in such a program.

(c) Notwithstanding the requirements in paragraph (a)(3) of this

section, a student may receive a PAS if the student's secondary school

does not offer the necessary coursework required in paragraph (a)(3) of

this section, and the student has completed the required coursework at

another local secondary school or at a community college.

(d) Notwithstanding the requirements in paragraph (a)(3)(v) of this

section, a student may receive a PAS if the student is--

(1) Fluent in a language other than English and participates in a

program to learn English; or

(2) An English-speaking student who is fluent in a second language.

(Authority: 20 U.S.C. 1070a-33, 1070a-35, 1070a-36(c))

Sec. 691.17 Eligibility requirements to continue to receive an award.

(a) To be eligible to continue to receive a PAS after the first

year of postsecondary study, a student shall--

(1) Continue to meet the eligibility requirements in Sec. 691.16(a)

(1) and (2); and

(2) Fulfill the requirements for satisfactory academic progress as

described in Sec. 668.7(c) of the Student Assistance General Provisions

regulations and section 484(c) of the HEA.

(b) If a student ceases to be eligible for a PAS because he or she

is no longer eligible for a Federal Pell Grant, the student can later

regain eligibility to receive a PAS at the time he or she qualifies for

a Federal Pell Grant.

(Authority: 20 U.S.C. 1070a-33)

Subparts C-E [Reserved]

Subpart F--Determination of Awards

Sec. 691.61 Disbursement conditions and deadlines.

(a) Submission process. (1) Except as provided in paragraph (a)(2)

of this section, an institution makes a disbursement of a PAS to a

student only if--

(i) (A) The student has submitted a valid Student Aid Report (SAR)

to that institution; or

(B) The institution has obtained a valid institutional student

information report for that student, the institution participates in

the Secretary's electronic programs (Recipient Data Exchange,

Electronic Data Exchange, or ``Floppy Disk'' Exchange) to report

Federal Pell Grant disbursements, and the institution uses that

institutional student information report for the student to receive his

or her PAS; and

(ii) (A) The student presents a certificate issued by an

appropriate official of a high school in a State verifying that the

student has completed the necessary coursework to qualify for a PAS; or

(B) The student presents written documentation that he or she has

participated in an approved eligible early-intervention program for at

least 36 months or qualifies for an exception under Secs. 691.16(b).

(2) An institution may make one disbursement of a student's PAS

without a valid SAR or valid institutional student information report

if it follows the procedures described in Sec. 691.77.

(3) An institution may rely on valid SAR information or

institutional student information report information except under

conditions set forth in 34 CFR 668.14(f) and 668.60.

(b) Student Aid Report or institutional student information report

deadline.

(1) Except as noted in 34 CFR 668.60, to receive a PAS for an award

year, a student shall submit to his or her institution the relevant

parts of the SAR or the institution shall receive a valid institutional

student information report by June 30 of that award year.

(2) Except as noted in 34 CFR 668.60, for a student to receive a

PAS for an award year, the student shall submit to his or her

institution the relevant parts of the SAR or the institution shall

receive a valid institutional student information report while the

student is still enrolled and eligible for payment at that institution.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.62 Calculation of a Presidential Access Scholarship Program

award.

The amount of a student's PAS for an academic year is equal to 25

percent of the student's Federal Pell Grant awarded for that academic

year as determined under 34 CFR 690.62 except that--

(a) If funding in a fiscal year is sufficient to fund fully all

eligible student awards in that academic year, no payment shall be made

to a full-time student of less than $400 for an academic year,

independent of the amount of the Federal Pell Grant.

(b) If funding is insufficient to fund fully all eligible students,

the Secretary reduces each student's award in proportion to the amount

that the PAS Program is not fully funded.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.63 Calculation of a Presidential Access Scholarship for a

payment period.

For an eligible student enrolled in an institution of higher

education in an eligible program, the student's PAS for each payment

period is calculated by--

(a) Determining his or her total PAS award in accordance with

Sec. 691.62; and

(b) Determining the amount of each payment based on the payment

amount for a Federal Pell Grant as calculated in accordance with

Sec. 690.63.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.64 Calculation of a Presidential Access Scholarship for a

payment period that occurs in 2 award years.

(a) If a student enrolls in a payment period that is scheduled to

occur in 2 award years--

(1) The entire payment period must be considered to occur within 1

award year.

(2) The institution shall determine for each PAS recipient the

award year in which the payment period will be placed subject to the

restrictions set forth in paragraph (a)(3) of this section.

(3) The institution shall place a payment period with more than 6

months scheduled to occur within 1 award year in that award year.

(4) If an institution places the payment period in the first award

year, it shall pay a student with funds from the first award year.

(5) If an institution places the payment period in the second award

year, it shall pay a student with funds from the second award year.

(b) An institution may not make a payment that will result in the

student receiving more than his or her Scheduled PAS for an award year

(c)(1) If an eligible program uses academic terms and offers a

series of minisessions that occur in 2 award years, the combined

sessions must be treated as one term. A student may not receive more

that one term's award for completing any combination of these

minisessions.

(2) For each minisession, an institution that uses academic terms

in an eligible program shall determine the student's enrollment status

for the entire term. That enrollment status must be based on--

(i) The total number of credits for which the student enrolled in

all sessions if that number is known when the award is calculated; or

(ii) A projected number of credits based on the credits enrolled

for in the first session, if the number of credits to be taken in

subsequent sessions is unknown when the award is calculated.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.65 Transfer student: attendance at more than one institution

during an award year.

(a) If a student who receives a PAS at one institution subsequently

enrolls at a second institution in the same award year, the student may

receive a PAS at the second institution only if--

(1) The student has submitted a valid SAR; or

(2) The second institution participates in the Secretary's

electronic programs (Recipient Data Exchange, Electronic Data Exchange,

or ``Floppy Disk'' Exchange) to report Federal Pell Grant disbursements

and the second institution obtains a valid institutional student

information report, in which case the institution shall use the

information from the institutional student information report to

determine the student's PAS.

(b) The second institution shall calculate the student's award

according to Sec. 691.63.

(c) The second institution may pay a PAS only for that portion of

the award year in which a student is enrolled at that institution. The

scholarship amount must be adjusted, if necessary, to ensure that the

scholarship award does not exceed the percentage of the award remaining

from the student's first institution for that award year.

(d) If a student's PAS award at the second institution differs from

the Scheduled PAS Award at the first institution, the award amount at

the second institution is calculated as follows--

(1) The amount received at the first institution is compared to the

PAS award at the first institution to determine the percentage of the

PAS award that the student has received.

(2) The percentage in paragraph (d)(1) of this section is

subtracted from 100 percent.

(3) The remaining percentage is the percentage of the Scheduled PAS

award at the second institution to which the student is entitled.

(e) The student's PAS award for each payment period is calculated

according to the procedures in Sec. 691.63, unless the remaining

percentage of the Scheduled PAS at the second institution, referred to

in paragraph (d)(3) of this section, is less than the amount the

student would normally receive for that payment period. In that case,

the student's PAS is equal to the remaining percentage.

(f) A transfer student shall repay any amount received in an award

year which exceeds his or her Scheduled PAS.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.66 Correspondence study.

A student enrolled in an eligible program of study by

correspondence must be paid according to the following procedures:

(a) The institution shall determine the length of each

correspondence program it offers by preparing a written schedule for

submission of lessons, reflecting a work load of at least 12 hours of

preparation per week.

(b)(1) For an institution, if there is not a required period of

residential training in the program, a student's PAS for an academic

year is calculated by--

(i) Determining the student's PAS award based on Sec. 691.62; and

(ii) Multiplying the Scheduled PAS by one-half.

(2) An academic year must consist of two payment periods. The first

payment period must be the period of time in which the student

completes the first half of his or her academic year. The second

payment period must be the period of time in which the student

completes the second half of the academic year.

(3) For the first payment period, the institution shall pay the

student one-half of the amount calculated in paragraph (b)(1)(ii) of

this section after he or she has submitted 25 percent of the lessons or

otherwise completed 25 percent of the work scheduled for the academic

year or for the program if the program is less than an academic year.

(4) The institution shall make the final payment for the second

payment period after the student has submitted 75 percent of the

lessons or otherwise completed 75 percent of the work scheduled for the

academic year or for the program.

(c) (1) For an institution, if there is a required period of

residential training in the program, a student's PAS for an academic

year is calculated by--

(i) Determining the student's PAS award according to Sec. 691.62,

and;

(ii) Multiplying the Scheduled PAS by one-half.

(2) The nonresidential portion of an academic year must consist of

two payment periods. The first payment period must be the period of

time in which the student completes the first half of his or her

academic year or the nonresidential portion of the program if it is

less than an academic year. The second payment period must be the

period of time in which the student completes the second half of the

academic year or nonresidential portion of the program.

(3) For the first payment period, the institution shall pay the

student one-half of the amount calculated in paragraph (c)(1)(ii) of

this section after he or she has submitted 25 percent of the

nonresidential lessons or otherwise completed 25 percent of the work

scheduled for the academic year or for the program if the program is

less than an academic year.

(4) The institution shall make the final payment (for the

nonresidential portion of the program) for the second payment period

after the student has submitted 75 percent of the nonresidential

lessons or otherwise completed 75 percent of the work scheduled for the

academic year or for the program.

(5) A student's PAS disbursement for the residential portion of the

program is calculated according to the procedures in Sec. 691.63(c) for

a student enrolled in a regular course of study at an institution that

measures progress by clock hours.

(Authority: 20 U.S.C. 1070a-32)

Subpart G--Institutional Administration

Sec. 691.71 Scope.

This subpart deals with program administration by an institution of

higher education. An institution shall enter into a program

participation agreement with the Secretary so that it may calculate and

pay PAS awards to students.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.72 Institutional participation agreement.

The Secretary may enter into an agreement with an institution of

higher education pursuant to which the institution will calculate and

pay PAS awards to its students.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.73 Termination of institutional participation agreement.

(a) Termination by the Secretary. The Secretary may terminate the

agreement with an institution by giving the institution--

(1) Thirty days written notice; or

(2) Less than 30 days written notice if a shorter notice is

necessary to prevent the likelihood of a substantial loss of funds to

the Federal government or to students.

(b) Information required. An institution shall provide the

following information to the Secretary if the Secretary terminates the

agreement:

(1) The name and enrollment status of each eligible student who

submitted a valid SAR to the institution or for whom the institution

obtained a valid institutional student information report before the

termination date.

(2) The amount of funds the institution paid to PAS recipients for

the award year in which the agreement is terminated.

(3) The amount due to each student eligible to receive a PAS

through the end of the award year.

(4) An accounting of PAS expenditures to the date of termination.

(c) Termination by the institution. An institution may terminate

the agreement by giving the Secretary written notice. The termination

becomes effective on June 30 of that award year. The institution shall

carry out the agreement for the remainder of that award year.

(d) Termination because of a change in ownership which results in a

change of control. The agreement automatically terminates when an

institution changes ownership that results in a change of control. The

Secretary may enter into an agreement with the new owner if the

institution complies with requirements set forth in subpart B of the

Student Assistance General Provisions, 34 CFR part 668.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.74 [Reserved]

Sec. 691.75 Determination of eligibility for payment.

(a) For each payment period, an institution may pay a PAS to an

eligible student only after it determines that the financial aid

transcript requirements of 34 CFR 668.19 have been met, and the

student--

(1) Qualifies as eligible to receive a Federal Pell Grant and as an

eligible student under Secs. 691.16 or 691.17 for a continuing student;

(2) Is enrolled as an undergraduate student; and

(3) (i) Has completed required clock hours for which he or she has

been paid a PAS, if the student is enrolled in an eligible program that

is measured in clock hours; or

(ii) Has completed the required credit hours for which he or she

has been paid a PAS, if the student is enrolled in an eligible program

that is measured in credit hours and that does not have academic terms.

(b) If an eligible student submits a valid SAR to the institution

or the institution receives a valid institutional student information

report for the student and that student then becomes ineligible before

receiving a payment, the institution may pay the student only the

amount that it determines could have been used for purposes before the

student became ineligible.

(c) If an institution determines at the beginning of a payment

period that a student is not maintaining satisfactory progress but

reverses that determination before the end of the payment period, the

institution may pay a PAS to the student for the entire payment period.

(d) If an institution determines at the beginning of a payment

period that a student is not maintaining satisfactory progress but

reverses that determination after the end of the payment period, the

institution may neither pay the student a PAS for that payment period

nor make adjustments in subsequent PAS payments to compensate for the

loss of aid for that period.

(e) A member of a religious order, community, society, agency, or

organization who is pursuing a course of study in an institution of

higher education is considered to have an expected family contribution

of at least $3,000 if that religious order--

(1) Has as a primary objective the promotion of ideals and beliefs

regarding a Supreme Being; and

(2) Provides subsistence support to its members or has directed the

member to pursue the course of study.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.76 Frequency of payment.

(a) In each payment period, an institution may pay a student at

such times and in such installments as it determines will best meet the

student's needs.

(b) The institution may pay funds in one lump sum for all the prior

payment periods for which the student was an eligible student within

the award year. The student's enrollment status must be determined

according to work already completed.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.77 Initial disbursement of a PAS in an award year without a

valid SAR or institutional student information report.

(a) Within an award year, an institution may make one disbursement

of a student's PAS before receiving the student's valid SAR or valid

institutional student information report if the institution--

(1) Receives a student's application information;

(2) Does not have documentation that indicates that the application

information is inaccurate; and

(3) Receives an EFC--

(i) From the Secretary; or

(ii) From an organization that has a contract with the Secretary to

transmit application data to the Secretary.

(b) If an institution receives a student's application information

specified in paragraphs (a)(1) and (a)(3) of this section and the

student's EFC from the Secretary, or the student's EFC produced by the

Secretary from an organization that has a contract to transmit

application data to the Secretary, but the institution has

documentation that indicates that the application information is

inaccurate, the institution may make one disbursement of a student's

PAS within an award year before receiving the student's valid SAR or

valid institutional student information report if the institution--

(1) Resolves the inconsistencies between its documentation and the

student's application information;

(2) Recalculates the student's EFC and Federal Pell Grant based on

correct information;

(3) Makes the disbursement of the student's PAS for the first

payment period based on the recalculated EFC and Federal Pell Grant;

and

(4) Reports the changes in the student's application information

and the recalculated EFC to the Secretary within the deadline

established by the Secretary.

(c)(1) If an institution chooses to make a disbursement under

paragraph (a) or (b) of this section, it shall be liable for that

disbursement if it does not receive a valid SAR or valid institutional

student information report for the student for that award year.

(2) If an institution chooses to make a disbursement under

paragraph (b) of this section, the institution and the student shall be

liable for any overpayment caused by an incorrect recalculation of the

student's EFC.

(3) If a student receives an overpayment as a result of a

disbursement made under paragraph (a) or (b) of this section, the

institution shall eliminate the overpayment by following the procedures

described in 34 CFR 690.77.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.78 Method of disbursement by check or credit to a student's

account.

(a)(1) The institution may pay a student directly by check or by

crediting his or her institutional account.

(2) Unless a student has agreed otherwise, the amount an

institution may credit to a student's account may not exceed the amount

the student is required to pay the institution for--

(i) Tuition and fees;

(ii) Board, if the student contracts with the institution for

board; and

(iii) Housing, if the student contracts with the institution for

housing.

(3) An institution may not require a student to grant permission to

credit his or her account for the costs of other goods and services the

institution provides to the student.

(4) The institution shall notify the student of the amount he or

she can expect to receive and how that amount will be paid.

(b)(1) The institution may not make a payment to a student for a

payment period until the student is registered for classes for that

period.

(2) The earliest an institution may directly pay a registered

student is 10 days before the first day of classes of a payment period.

(3) The earliest an institution may credit a registered student's

account is 3 weeks before the first day of classes of a payment period.

(c) The institution shall return to the Secretary any funds paid to

a student who, before the first day of classes--

(1) Officially or unofficially withdraws; or

(2) Is expelled.

(d)(1) If an institution intends to pay a student directly, it

shall notify him or her before the payment is made when it will pay the

PAS award.

(2) If a student does not pick up the check on time, the

institution shall still pay the student if he or she requests payment

within 15 days after the last date that his or her enrollment ends in

that award year.

(3) If the student has not picked up his or her payment at the end

of the 15-day period, the institution may credit the student's account

only for any outstanding charges for tuition and fees and room and

board for the award year incurred by the student while he or she was

eligible.

(4) A student forfeits the rights to receive the payment if he or

she does not pick up a payment by the end of the 15 day period.

(5) Notwithstanding paragraph (d)(4) of this section, the

institution may, if it chooses, pay a student who did not pick up his

or her payment, through the next payment period.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.79 Recovery of overpayments.

(a)(1) A student is liable for any PAS overpayment made to him or

her.

(2) The institution is liable for any overpayment if the

overpayment occurred because the institution failed to follow the

procedures set forth in this part. The institution shall restore those

funds to the Secretary even if it cannot collect the overpayment from

the student.

(b) If an institution makes an overpayment for which it is not

liable, it shall help the Secretary recover the overpayment by--

(1) Making a reasonable effort to contact the student and recover

the overpayment; and

(2) If unsuccessful, providing the Secretary with the student's

name, social security number, amount of overpayment, and other relevant

information.

(c) If an institution refers a student who received an overpayment

for which it is not liable to the Secretary for recovery, the student

remains ineligible for further title IV, HEA program assistance for

attendance at any institution until the student repays the overpayment

or the Secretary determines the overpayment has been resolved.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.80 Recalculation of a PAS Program award.

(a) The institution shall recalculate a PAS award for the entire

award year if the student's Federal Pell Grant changes at any time

during the award year for any reason specified in Sec. 690.80,

including changes in enrollment status, EFC, or cost of attendance.

(b) The institution shall adjust the student's award when an

overaward or underaward is caused by the change in the Federal Pell

Grant award. That adjustment must be made--

(1) Within the same award year--if possible--to correct any

overpayment or underpayment; or

(2) During the next award year to correct any overpayment that

could not be adjusted during the year in which the student was

overpaid.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.81 Fiscal control and fund accounting procedures.

(a)(1) An institution shall establish and maintain on a current

basis financial records that reflect all program transactions. The

institution shall establish and maintain general ledger control

accounts and related subsidiary accounts that identify each program

transaction and separate those transactions from all other

institutional financial activity.

(2) The institution shall account for the receipt and expenditure

of PAS funds in accordance with generally accepted accounting

principles.

(b) A separate bank account for PAS funds is not required. However,

the institution shall notify any bank in which it deposits PAS funds of

all accounts in that bank in which it deposits Federal funds.

(c) Except for funds received for administrative expenses, funds

received by an institution under this part may be used only to pay PAS

funds to students. The funds are held in trust by the institution for

the intended student beneficiaries and may not be used or hypothecated

for any other purpose.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.82 Maintenance and retention of records.

(a) Each institution shall maintain adequate records (including

those related to verification) that include the fiscal and accounting

records that are required under Sec. 691.81, records required for

audits in 34 CFR 668.23, the SAR or valid institutional student

information report of each student receiving a PAS, and records

indicating--

(1) The eligibility for a PAS of all enrolled students who have

submitted valid SARs or valid institutional student information report

to the institution;

(2) The name and social security number of and the amount of the

PAS award paid to each student;

(3) The amount and date of each payment;

(4) The amount and date of any overpayment that has been restored

to the program account; and

(5) Each student's enrollment period.

(b)(1) The institution shall make the records listed in paragraph

(a) of this section available for inspection by the Secretary's

authorized representative at any reasonable time in the institution's

offices. It shall keep the records for each award year for 5 years

after that award year has ended.

(2) For any disputed expenditures in any award year for which the

institution cannot provide records, the Secretary determines the final

authorized level of expenditures.

(c) The institution shall keep records involved in any claim or

expenditure questioned by Federal audit until resolution of any audit

questions.

(d) An institution may substitute microform copies in lieu of

original records in meeting the requirements of this section.

(Authority: 20 U.S.C. 1070a-32)

Sec. 691.83 Submission of reports.

(a)(1) An institution may receive either a payment from the

Secretary for an award to a PAS recipient or a corresponding reduction

in the amount of Federal funds received in advance for which it is

accountable if--

(i) The institution submits to the Secretary all SAR Payment

Documents (or the equivalent as defined by the Secretary) for that

award in the manner and form prescribed in paragraph (a)(2) of this

section by September 30 following the end of the award year in which

the scholarship is made, and

(ii) The Secretary accepts those SAR Payment Documents.

(2) The Secretary accepts SAR Payment Documents that are submitted

in accordance with procedures established through publication in the

Federal Register and that contain information including that previously

provided by the student and the institution.

(3) An institution that does not comply with the requirements of

this paragraph may receive payment or reduction in accountability only

as provided in paragraph (c) of this section.

(b) An institution shall report to the Secretary any change in

enrollment status, cost of attendance, or other event or condition that

causes a change in the amount of a Federal Pell Grant and a resulting

change in a PAS for which a student qualifies by submitting to the

Secretary an SAR Payment Document reporting a change to the Secretary

by the end of that reporting period that next follows the reporting

period in which the change occurred.

(c) (1) An institution that has timely submitted an SAR Payment

Document for a student in accordance with paragraph (a) of this section

but does not timely submit to the Secretary, or have accepted by the

Secretary, an SAR Payment Document necessary to document the full

amount of the PAS award to which the student is entitled may receive a

payment or reduction in accountability in the full amount of that award

if--

(i) A program review or an audit report produced in accordance with

the standards prescribed in 34 CFR 668.23(c) demonstrated to the

satisfaction of the Secretary that the student was eligible to receive

an amount greater than that reported on the SAR Payment Document timely

submitted to, and accepted by the Secretary; and

(ii) The institution seeks an adjustment to reflect an overpayment

for that award that is at least $100.

(2) An institution that has timely submitted and has accepted a SAR

Payment Document for a student in accordance with this section shall

report a reduction in the amount of a PAS award that the student

received when it determines that an overpayment has occurred, unless

that overpayment is one for which the institution is not liable under

Sec. 690.79(a).

(3) The Secretary pays or recognizes a reduction in accountability

under this paragraph after deducting the amount of any overpayments for

which the institution is liable under Sec. 691.79(a).

(d) In accordance with 34 CFR 668.84, the Secretary may impose a

fine on the institution if the institution fails to comply with the

requirements in paragraph (a), (b), or (c) of this section.

(Authority 20 U.S.C. 1070a-32)

Subpart H--Administrative Responsibilities of a State

Sec. 691.90 Early-intervention agreement.

For a student to receive a PAS, the State agency in the State in

which the student resides shall have entered into a one-time written

agreement with the Secretary, except that a State must submit a

subsequent agreement if the Secretary subsequently requires changes in

this initial agreement. Each State's agreement must be approved by the

Secretary and must include provisions designed to ensure the following:

(a) All secondary school students in the State have equal and easy

access to the coursework described in Sec. 691.16(c) and 406C(a)(2) of

the HEA.

(b) The State agency has procedures in place to verify to the

Secretary that--

(1) A student receiving a PAS has taken the coursework described in

Sec. 691.16(c);

(2) The coursework described in Sec. 691.16 is of a college

preparatory level; and

(3) The State requires all secondary schools in the State to issue

a certificate to each eligible student certifying that the student has

completed the necessary coursework to qualify for a PAS.

(c) The State agency has procedures in place to notify institutions

of higher education of the availability of the PAS so that the

institutions may award additional scholarships in concert with the PAS.

The State agency has procedures to inform junior high school students

enrolled in public or private schools and their families about--

(1) The value of postsecondary education;

(2) The availability of student aid to meet college expenses; and

(3) The availability of a PAS for students from low and moderate-

income families who take academically demanding courses.

(Authority 20 U.S.C. 1070a-36)

Sec. 691.91 Records a State must maintain.

(a) The State agency shall maintain written procedures and records

to support the information supplied in the

early-intervention agreement in Sec. 691.90 and the Governor's

certification of other eligible early intervention programs.

(b) The State agency shall maintain the written procedures and

records required under this subpart for a period of five calendar years

from the end of the award year to which the records relate.

(Authority: U.S.C. 1070a-36)

[FR Doc. 94-4152 Filed 2-24-94; 8:45 am]

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