Reduction of Debt Through the Performance of Work-Study Services

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 1

RIN 2900-AF29

Reduction of Debt Through the Performance of Work-Study Services

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its

general regulations to provide that the money payable for performance

of work-study services may be offset against an individual's

outstanding debt to the United States arising from participation in

educational and vocational rehabilitation programs VA administers. This

would help veterans pay outstanding debts to the United States.

DATES: Comments must be received on or before October 4, 1996.

ADDRESSES: Mail or hand deliver written comments to: Director, Office

of Regulations Management (02D), Department of Veterans Affairs, 810

Vermont Ave., NW., Room 1154, Washington, DC 20420. Comments should

indicate that they are submitted in response to ``RIN 2900-AF29.'' All

written comments will be available for public inspection at the above

address in the Office of Regulations Management, Room 1158, between the

hours of 8 a.m. and 4:30 p.m., Monday through Friday (except holidays).

FOR FURTHER INFORMATION CONTACT: June C. Schaeffer, Assistant Director

for Policy and Program Administration, Education Service, Veterans

Benefits Administration, Department of Veterans Affairs, 810 Vermont

Ave., NW., Washington, DC 20420, (202) 273-7187.

SUPPLEMENTARY INFORMATION: Participants in some VA education programs

and in the VA vocational rehabilitation program have been able to

supplement their educational assistance by performing VA-related work

services. An eligible individual contracts with VA to perform work and

receives payment for that work.

In 1991 the governing statute, 38 U.S.C. 3485, was amended to allow

VA to adopt a method by which individuals who are indebted to VA for

overpayments of education or rehabilitation benefits may reduce their

debt by entering into an agreement to provide work-study services. The

money otherwise payable for the performance of these services would be

used to eliminate their outstanding indebtedness. VA is authorized by

the statute to waive certain requirements of law which normally would

apply to individuals participating in a work-study program, and to

waive various provisions of law which apply to payment or offset of a

debt owed to VA. VA is proposing to exercise this authority as

described in the proposed rule.

The statute gives VA authority to waive, in whole or in part, the

limitations otherwise contained in 38 U.S.C. 3485(a) concerning the

number of hours and periods during which work-study services can be

performed. Section 3485(a) permits work-study performance during or

between enrollment periods, but limits the number of hours to be worked

to 25 times the number of weeks in the enrollment period. For those

performing work-study services in order to liquidate a debt, but who

currently may not be enrolled in school, VA finds no reason to limit

those work-study contracts by the number of weeks in a school term.

Thus, VA proposes to waive that restriction. The Department proposes to

allow maximum flexibility for the debtor while at the same time

facilitating collection and program administration. Accordingly,

proposed Sec. 1.929(d) would allow the hours worked to be as much as 40

times the number of weeks in the contract, while limiting the contract

period in which the work-study services are to be performed to the

lesser of the number of weeks needed to liquidate the debt or 52 weeks.

When an individual is performing work-study services to liquidate a

debt, VA also is permitted by 38 U.S.C. 3485 to waive its usual

practice of collection of the debt by offset of other benefits to which

the individual may be entitled. In order to simplify administration and

encourage individuals who may have limited cash resources to liquidate

debt through performance of work-study services, VA has chosen to

exercise the waiver. This issue is addressed in proposed Sec. 1.929(f).

The primary purpose of the work-study program is to provide

eligible persons a means of obtaining additional subsistence or

educational assistance funds to enable them to continue their programs

of education. Therefore, VA proposes that in localities where only a

limited number of work-study positions are available, those individuals

actually in school will be given preference over those who are not in

school. This ensures that the granting of work-study contracts to

debtors to liquidate their debts will not deny deserving persons in

school who have not defaulted on their obligations to VA the economic

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assistance of the work-study benefit, as originally intended by the

law.

VA interprets the authorizing statute as permitting it to approve

only those types of work-study services that are VA-related such as

working in a VA regional office, working on a school campus with

veteran's records or in a VA hospital.

The Secretary of Veterans Affairs hereby certifies that this

proposed rule, if promulgated, would not have significant economic

impact on a substantial number of small entities as they are defined in

the Regulatory Flexibility Act, 5 U.S.C. 601-612. This proposed rule

would directly affect only individuals and would not directly affect

small entities. Pursuant to 5 U.S.C. 605(b), the proposed rule,

therefore, is exempt from the initial and final regulatory flexibility

analyses requirements of sections 603 and 604.

This proposed rule has been reviewed by the Office of Management

and Budget under the provisions of Executive Order 12866.

The Catalog of Federal Domestic Assistance numbers for the

programs affected by the proposed rule are 64.111, 64.117, 64.120

and 64.124.

List of Subjects in 38 CFR Part 1

Administrative practice and procedure, Cemeteries, Claims,

Employment, Flags, Freedom of information, Government contracts,

Government employees, Government property, Inventions and patents,

Investigations, Privacy, Seals and insignia.

Approved: April 24, 1996.

Jesse Brown,

Secretary of Veterans Affairs.

For the reasons set out in the preamble, 38 CFR part 1 is proposed

to be amended as set forth below:

PART 1--GENERAL PROVISIONS

1. The authority citation for part 1, Secs. 1.910 to 1.921

continues to read as follows:

Authority: Sections 1.910 to 1.921 issued under 72 Stat. 1114;

38 U.S.C. 501.

2. Section 1.929 is added to read as follows:

Sec. 1.929 Reduction of debt through performance of work-study

services.

(a) Scope. (1) Subject to the provisions of this section VA may

allow an individual to reduce an indebtedness to the United States

through offset of benefits to which the individual becomes entitled by

performance of work-study services under 38 U.S.C. 3485 and 3537 when

the debt arose by virtue of the individual's participation in a

benefits program provided under any of the following:

(i) 38 U.S.C. chapter 30;

(ii) 38 U.S.C. chapter 31;

(iii) 38 U.S.C. chapter 32;

(iv) 38 U.S.C. chapter 34;

(v) 38 U.S.C. chapter 35;

(vi) 38 U.S.C. chapter 36 (other than an education loan provided

under subpart F, part 21 of this title); or

(vii) 10 U.S.C. chapter 1606 (other than an indebtedness arising

from a refund penalty imposed under 10 U.S.C. 16135).

(2) This section shall not apply in any case in which the

individual has a pending request for waiver of the debt under

Secs. 1.950 through 1.970.

(Authority: 38 U.S.C. 3485(e)(1); Pub. L. 102-16)

(b) Selection criteria. If there are more candidates for a work-

study allowance than there are work-study positions available in the

area in which the services are to be performed:

(1) VA will give priority to the candidates who are pursuing a

program of education or rehabilitation.

(2) Only after all candidates in the area described in paragraph

(b)(1) of this section either have been given work-study contracts or

have withdrawn their request for contracts will VA offer contracts to

those who are not pursuing a program of education or rehabilitation and

who wish to reduce their indebtedness through performance of work-study

services.

(3) VA shall not offer a contract to an individual who is receiving

compensation from another source for the work-study services the

individual wishes to perform.

(4) VA shall not offer a contract to an individual if VA determines

that the debt can be collected through other means such as collection

in a lump sum, collection in installments as provided in Sec. 1.917 or

compromise as provided in Sec. 1.918.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

(c) Utilization. The work-study services to be performed under a

debt-liquidation contract will be limited as follows:

(1) If the individual is concurrently receiving educational

assistance in a program administered by VA, work-study services are

limited to those allowed in the educational program under which the

individual is receiving benefits.

(2) If the individual is not concurrently receiving educational

assistance in a program administered by VA, the individual may perform

only those work-study services and activities which are or were open to

those students receiving a work-study allowance while pursuing a

program of education pursuant to the chapter under which the debt was

incurred.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

(d) Contract to perform services. (1) The work-study services

performed to reduce indebtedness shall be performed pursuant to a

contract between the individual and VA.

(2) The individual shall perform the work-study services required

by the contract at the place or places designated by VA.

(3) The number of hours of services to be performed under the

contract must be sufficient to enable the individual to become entitled

to a sum large enough to liquidate the debt by offset.

(4) The number of weeks in the contract will not exceed the lesser

of--

(i) The number of weeks of services the individual needs to perform

to liquidate his or her debt; or

(ii) 52.

(5) In determining the number of hours per week and the number of

weeks under paragraphs (d)(3) and (d)(4) of this section necessary to

liquidate the debt, VA will use the amount of the account receivable,

including all accrued interest, administrative costs and marshall fees

outstanding on the date the contract is offered to the individual and

all accrued interest, administrative costs and marshall fees VA

estimates will have become outstanding on the debt on the date the debt

is to be liquidated.

(6) The contract will automatically terminate after the total

amount of the individual's indebtedness described in paragraph (d)(5)

of this section has been recouped, waived, or otherwise liquidated. An

individual performing work-study services under a contract to liquidate

a debt is released from the contract if the debt is liquidated by other

means.

(7) The contract to perform work-study services for the purpose of

liquidating indebtedness will be terminated if:

(i) The individual is liquidating his or her debt under this

section while receiving either an educational assistance allowance for

further pursuit of a program of education or a subsistence allowance

for further pursuit of a program of rehabilitation;

(ii) The individual terminates or reduces the rate of pursuit of

his or her program of education or rehabilitation; and

[[Page 40591]]

(iii) The termination or reduction causes an account receivable as

a debt owed by the individual.

(8) VA may terminate the contract at any time the individual fails

to perform the services required by the contract in a satisfactory

manner.

(Authority: 38 U.S.C. 3485(e), 7104(a); Pub. L. 102-16)

(e) Reduction of indebtedness. (1) In return for the individual's

agreement to perform hours of services totaling not more than 40 times

the number of weeks in the contract, VA will reduce the eligible

person's outstanding indebtedness by an amount equal to the higher of--

(i) The hourly minimum wage in effect under section 6(a) of the

Fair Labor Standards Act of 1938 times the number of hours the

individual works; or

(ii) The hourly minimum wage under comparable law of the State in

which the services are performed times the number of hours the

individual works.

(2) VA will reduce the individual's debt by the amount of the money

earned for the performance of work-study services after the completion

of each 50 hours of services (or in the case of any remaining hours

required by the contract, the amount for those hours).

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

(f) Suspension of collections by offset. Notwithstanding the

provisions of Sec. 1.912a, during the period covered by the work-study

debt-liquidation contract with the individual, VA will ordinarily

suspend the collection by offset of a debt described in paragraph

(a)(1) of this section. However, the individual may voluntarily permit

VA to collect part of the debt through offset against other benefits

payable while the individual is performing work-study services. If the

contract is terminated before its scheduled completion date, and the

debt has not been liquidated, collection through offset against other

benefits payable will resume on the date the contract terminates.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

(g) Payment for additional hours. (1) If an individual, without

fault on his or her part, performs work-study services for which

payment may not be authorized, including services performed after

termination of the contract, VA will pay the individual at the

applicable hourly minimum wage for such services as the Director of the

VA field station of jurisdiction determines were satisfactorily

performed.

(2) The Director of the VA field station of jurisdiction shall

determine whether the individual was without fault. In making this

decision he or she shall consider all evidence of record and any

additional evidence which the individual wishes to submit.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

[FR Doc. 96-19780 Filed 8-2-96; 8:45 am]

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