Veterans Education: Suspension and Discontinuance of Payments

DEPARTMENT OF DEFENSE

DEPARTMENT OF TRANSPORTATION

Coast Guard

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 21

RIN 2900-AF85

Veterans Education: Suspension and Discontinuance of Payments

AGENCIES: Department of Defense, Department of Transportation (Coast

Guard), and Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: This document proposes to make changes to the education

regulations. With respect to determinations concerning suspension or

discontinuance of payments of educational assistance when educational

institutions (including training establishments) fail to meet

requirements, it is proposed to require that recommendations first be

obtained from Committees on Educational Allowances, to establish

procedural and composition requirements for the Committees, and to

establish hearing rules for the Committees. In addition, it is proposed

that appeals of a decision concerning such suspension or discontinuance

of payments of educational assistance be determined by the Director of

the Education Service upon request by the affected educational

institution based on the evidence of record. The proposed changes would

apply to the following educational assistance programs: Montgomery GI

Bill--Active Duty, Montgomery GI Bill--Selected Reserve, Survivors' and

Dependents' Educational Assistance, the Post-Vietnam Era Veterans'

Educational Assistance Program, and the Educational Assistance Pilot

Program. The proposed changes appear to be appropriate to ensure proper

decisionmaking. In addition, nonsubstantive changes would be made for

the purpose of clarification.

DATES: Comments must be received on or before October 27, 1997.

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-AF85.'' 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 8:00 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, (202) 273-

7187.

SUPPLEMENTARY INFORMATION: This document proposes to make changes to

the education regulations in 38 CFR part 21. More specifically, it is

proposed to make changes to the regulations concerning suspension or

discontinuance of payments of educational assistance when educational

institutions (including training establishments) fail to meet

requirements. The proposed changes would apply to the following

educational assistance programs: Montgomery GI Bill--Active Duty,

Montgomery GI Bill--Selected Reserve, Survivors' and Dependents'

Educational Assistance, the Post-Vietnam Era Veterans' Educational

Assistance Program (VEAP), and the Educational Assistance Pilot

Program. The authority for this proposal is contained in 10 U.S.C. 2147

note and 16136(b); and 38 U.S.C. 501, 3034(a), 3241(a), and 3690.

Under these programs, veterans, reservists, servicemembers, and

eligible persons (as statutorily identified for each program) receive

educational assistance from the Department of Veterans Affairs (VA)

while attending programs of education. To be eligible for assistance,

individuals must pursue courses approved by a State approving agency.

Educational institutions are required to inform VA of certain

occurrences relating to these programs (e.g., when VA-supported

students discontinue or reduce training, change programs, or fail to

progress satisfactorily), and to meet a number of other legal

requirements. When an educational institution has failed to meet such

requirements and the State approving agency has not withdrawn course

approval, the Director of the VA facility of jurisdiction may suspend

or discontinue payment of educational assistance.

It is not proposed to change the requirement in the regulations

that failure by an educational institution to meet requirements

pertaining to the percentage of students receiving VA educational

benefits could result in discontinuance of educational assistance to

new students based on undisputed information submitted by the

educational institution. (See 38 CFR 21.4201.) However, when an

educational institution otherwise fails to meet requirements, it is

proposed that, prior to making determinations concerning suspension or

discontinuance of educational assistance, the Director of the VA

facility of jurisdiction will refer the matter to the VA facility's

Committee on Educational Allowances and receive recommendations

therefrom. This document also proposes to require that such a referral

be in writing, contain the reasons for the referral, and be posted in

the VA facility of jurisdiction. We believe that this would help ensure

appropriate decisionmaking.

Currently, a Committee on Educational Allowances must be composed

of three individuals. It is proposed to require that at least one of

the individuals be a VA employee familiar with the adjudication of

claims for benefits administered by the Veterans Benefits

Administration. VA believes that this is warranted to ensure that the

committee has sufficient expertise for appropriate recommendations.

This document also proposes to establish a comprehensive set of

hearing rules for use by the respective Committees on Educational

Allowances. This would help ensure uniformity and fairness with respect

to recommendations made by the committees.

The current regulations provide for an automatic de novo review in

VA Central Office by the Central Office Education Training and Review

Panel of any decision of the Director of the VA facility of

jurisdiction if the committee's recommendation to the Director is not

unanimous or if the Director disagrees with the recommendation of the

committee. It is proposed that the review be based on the evidence of

record rather than constituting a de novo review. It is also proposed

that the review be conducted by the Director of the Education Service

rather than by the Central Office Education Training and Review Panel.

Further, instead of providing for an automatic review, it is proposed

that such a review be provided only upon request by the affected

educational institution. This appears to provide adequate fairness for

these circumstances and will help to ensure efficiency and uniformity

in decisionmaking.

Also, nonsubstantive changes would be made for the purpose of

clarification.

The Department of Defense (DOD) and VA are jointly issuing this

proposal insofar as it relates to VEAP. This program is funded by DOD

and administered by VA. DOD, the Department of Transportation (Coast

Guard), and VA are jointly issuing this proposal insofar as it relates

to the Montgomery GI Bill--Selected Reserve program. This program is

funded by DOD and the Coast Guard, and is administered by VA. The

remainder of this proposal is issued solely by VA.

The Secretary of Defense, the Commandant of the Coast Guard, and

the Secretary of Veterans Affairs, within their respective

jurisdictions, hereby certify that the adoption of the proposed

provisions will not have a 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. Although it is possible that a

small-entity school could be affected by this rulemaking, the number of

individuals affected at the

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school would in all likelihood be an insignificant portion of the

student body. Also, experience has shown that only one or two schools

per year would be affected by the provisions of this rulemaking

concerning suspensions and discontinuance of payments. Therefore,

pursuant to 5 U.S.C. 605(b), the proposed provisions are exempt from

the initial and final regulatory flexibility analyses requirements of

sections 603 and 604.

The Catalog of Federal Domestic Assistance numbers for programs

affected by this proposal are 64.117, 64.120, and 64.124. There is no

Catalog of Federal Domestic Assistance number for the Montgomery GI

Bill--Selected Reserve program.

List of Subjects in 38 CFR Part 21

Administrative practice and procedure, Armed forces, Civil rights,

Claims, Colleges and universities, Conflict of interests, Defense

Department, Education, Employment, Grant programs--education, Grant

programs--veterans, Health care, Loan programs--education, Loan

programs--veterans, Manpower training programs, Reporting and

recordkeeping requirements, Schools, Travel and transportation

expenses, Veterans, Vocational education, Vocational rehabilitation.

Approved: August 21, 1997.

Hershel W. Gober,

Acting Secretary of Veterans Affairs.

Approved: May 8, 1997.

Normand G. Lezy,

Lieutenant General, USAF Deputy Assistant Secretary (Military Personnel

Policy).

Approved: April 24, 1997.

W.C. Donnell,

RADM, USCG Assistant Commandant for Human Resources.

For the reasons set out in the preamble, 38 CFR part 21, subparts

D, G, K, and L, is proposed to be amended as set forth below.

PART 21--VOCATIONAL REHABILITATION AND EDUCATION

Subpart D--Administration of Educational Assistance Programs

1. The authority citation for part 21, subpart D is revised to read

as follows:

Authority: 10 U.S.C. 2147 note, ch. 1606; 38 U.S.C. 501(a), chs.

30, 32, 34, 35, 36, unless otherwise noted.

Sec. 21.4133 [Removed]

2. Section 21.4133 is removed.

Sec. 21.4134 [Removed]

3. Section 21.4134 is removed.

4. In Sec. 21.4135, paragraph (f) is revised; introductory text is

added to paragraph (j); paragraph (j)(1) is revised; the heading for

paragraph (k) is revised; introductory text is added to paragraph (k);

and paragraph (k)(1) is revised, to read as follows:

Sec. 21.4135 Discontinuance dates.

* * * * *

(f) Discontinued by VA (Secs. 21.4215, 21.4216). If VA discontinues

payments of educational assistance as provided by Secs. 21.4215(d) and

21.4216, the effective date of discontinuance will be as follows:

(1) The date on which payments first were suspended by the Director

of a VA facility as provided in Sec. 21.4210, if the discontinuance

were preceded by such a suspension.

(2) End of the month in which the decision to discontinue is

effective pursuant to Sec. 21.4215(d), if the Director of a VA facility

did not suspend payments prior to the discontinuance.

(Authority: 38 U.S.C. 3690)

* * * * *

(j) Disapproval by State approving agency (Sec. 21.4259(a)). If a

State approving agency disapproves a course, the date of discontinuance

of payments to those receiving educational assistance while enrolled in

the course will be as follows:

(1) The date on which payments first were suspended by the Director

of a VA facility as provided in Sec. 21.4210, if disapproval were

preceded by such a suspension.

* * * * *

(k) Disapproval by Department of Veterans Affairs (Secs. 21.4215,

21.4259(c)). If VA disapproves a course, the date of discontinuance of

payments to those receiving educational assistance while enrolled in

the course will be as follows:

(1) Date on which payments first were suspended by the Director of

a VA facility as provided in Sec. 21.4210, if disapproval were preceded

by such a suspension.

* * * * *

Sec. 21.4146 [Amended]

5. Section 21.4146(e) is amended by removing ``Secs. 21.4207 and

21.4202(b)(4)'' and adding, in its place, ``Secs. 21.4210(g) and

21.4212''.

Sec. 21.4152 [Amended]

6. Section 21.4152(b)(2) is amended by removing ``Sec. 21.4202''

and adding, in its place, ``Sec. 21.4210(d)''.

Sec. 21.4202 [Amended]

7. In Sec. 21.4202, paragraphs (a) and (b) are removed and

reserved.

Sec. 21.4207 [Removed]

8. Section 21.4207 is removed.

Sec. 21.4208 [Removed]

9. Section 21.4208 is removed.

10. Section 21.4210 is added to read as follows:

Sec. 21.4210 Suspension and discontinuance of educational assistance

payments and of enrollments or reenrollments for pursuit of approved

courses.

(a) Overview. (1) VA may pay educational assistance to an

individual eligible for such assistance under 10 U.S.C. chapter 1606,

or 38 U.S.C. chapter 30, 32, 35, or 36, only if the individual is

pursuing a course approved in accordance with the provisions of 38

U.S.C. chapter 36. In general, courses are approved for this purpose by

a State approving agency designated to do so (or by VA in some

instances). Notwithstanding such approval, however, VA, as provided in

paragraphs (b), (c), and (d) of this section, may suspend, discontinue,

or deny payment of benefits to any or all otherwise eligible

individuals for pursuit of courses or training approved under 38 U.S.C.

chapter 36.

(2) For the purposes of this section and the purposes of

Secs. 21.4211 through 21.4216, except as otherwise expressly stated to

the contrary--

(i) The term course includes an apprenticeship or other on-job

training program;

(ii) The term educational institution includes a training

establishment; and

(iii) Reference to action suspending, discontinuing, or otherwise

denying enrollment or reenrollment means such action with respect to

providing educational assistance under the chapters listed in paragraph

(a)(1) of this section. (Authority: 10 U.S.C. 16136(b); 38 U.S.C.

3034(a), 3241(a), 3452, 3671, 3690)

(b) Denial of payment in individual cases. VA may deny payment of

educational assistance to a specific individual for pursuit of a course

or courses if, following an examination of the individual's case, VA

has credible evidence affecting that individual that--

(1) The course fails to meet any of the requirements of 10 U.S.C.

chapter 1606, or 38 U.S.C. chapter 30, 32, 34, 35, or 36; or

(2) The educational institution offering the individual's course

has violated any of those requirements of law.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a),

3690(b)(1), 3690(b)(2))

(c) Notice in individual cases. Except as provided in paragraph (e)

of this section, when VA denies payment of

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educational assistance to an individual under paragraph (b) of this

section, VA will provide concurrent written notice to the individual.

The notice shall state--

(1) The adverse action;

(2) The reasons for the action; and

(3) The individual's right to an opportunity to be heard thereon in

accordance with part 19 of this title.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(d) Actions affecting groups. (1) The Director of the VA facility

of jurisdiction may suspend payments of educational assistance to all

veterans, servicemembers, reservists, or eligible persons already

enrolled in a course, and may disapprove all further enrollments or

reenrollments of individuals seeking VA educational assistance for

pursuit of the course. The decision to take such action, except as

provided in paragraph (d)(2) of this section, must be based on evidence

of a substantial pattern of veterans, servicemembers, reservists, or

eligible persons enrolled in the course receiving educational

assistance to which they are not entitled because:

(i) One or more of the course approval requirements of 38 U.S.C.

chapter 36 are not met, including the course approval requirements

specified in Secs. 21.4253, 21.4254, 21.4261, 21.4262, 21.4263, and

21.4264; or

(ii) The educational institution offering the course has violated

one or more of the recordkeeping or reporting requirements of 10 U.S.C.

chapter 1606, or of 38 U.S.C. chapters 30, 32, 34, 35, and 36. These

violations may include, but are not limited to, the following:

(A) Willful and knowing submission of false reports or

certifications concerning students or courses of education;

(B) Failure to report to VA a veteran's, servicemember's,

reservist's, or eligible person's reduction, discontinuance, or

termination of education or training; or

(C) Submission of improper or incorrect reports in such number,

manner, or period of time as to indicate negligence on its part,

including failure to maintain an adequate reporting or recordkeeping

system.

(2) The Director also may make a decision to take the action

described in paragraph (d)(1) of this section when the Director has

evidence that one or more prohibited assignments of benefits have

occurred at an educational institution as a result of that educational

institution's policy. This decision may be made regardless of whether

there is a substantial pattern of erroneous payments at the educational

institution. See Sec. 21.4146.

(3) The Director may disapprove the enrollment of all individuals

not already enrolled in an educational institution (which for the

purposes of this paragraph does not include a training establishment)

when the Director finds that the educational institution:

(i) Has charged or received from veterans, servicemembers,

reservists, or eligible persons an amount for tuition and fees in

excess of the amount similarly circumstanced nonveterans are required

to pay for the same course; or

(ii) Has instituted a policy or practice with respect to the

payment of tuition, fees, or other charges that substantially denies to

veterans, servicemembers, reservists, or eligible persons the benefits

of advance payment of educational assistance authorized to such

individuals under Secs. 21.4138(d), 21.7140(a), and 21.7640(d); or

(iii) Has used erroneous, deceptive, or misleading practices as set

forth in Sec. 21.4252(h).

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a),

3680A(d), 3684, 3685, 3690, 3696, 5301)

(e) Actions that must accompany a mass suspension of educational

assistance payments or suspension of approval of enrollments and

reenrollments in a course or educational institution. (1) The Director

of the VA facility of jurisdiction may suspend payment of educational

assistance and may suspend approval of new enrollments and

reenrollments as provided in paragraph (d) of this section, only after:

(i) The Director notifies in writing the State approving agency

concerned and the educational institution of any failure to meet the

approval requirements and any violation of recordkeeping or reporting

requirements; and

(ii) The educational institution--

(A) Refuses to take corrective action; or

(B) Does not take corrective action within 60 days (or 90 days if

permitted by the Director).

(2) Not less than 30 days before the Director acts to make a mass

suspension of payments of educational assistance and/or suspend

approval of new enrollments and reenrollments, the Director will, to

the maximum extent feasible, provide written notice to each veteran,

servicemember, reservist, and eligible person enrolled in the affected

courses. The notice will:

(i) State the Director's intent to suspend payments and/or suspend

approval of new enrollments and reenrollments unless the educational

institution takes corrective action;

(ii) Give the reasons why the Director intends to suspend payments

and/or suspend approval of new enrollments and reenrollments; and

(iii) State the date on which the Director intends to suspend

payments and/or suspend approval of new enrollments and reenrollments.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690(b))

(f) Actions in cases indicating submission of false, misleading, or

fraudulent claims or statements. The Director of the VA facility of

jurisdiction will take the following action, as indicated, that may be

in addition to suspending payments or further approval of enrollments

or reenrollments in a course or educational institution.

(1) If the Director has evidence indicating that an educational

institution has willfully submitted a false or misleading claim, or

that a veteran, servicemember, reservist, eligible person, or other

person, with the complicity of an educational institution, has

submitted such a claim, the Director will make a complete report of the

facts of the case to the appropriate State approving agency and to the

Office of Inspector General for appropriate action.

(2) If the Director believes that an educational institution has

submitted a false, fictitious, or fraudulent claim or written statement

within the meaning of the Program Fraud Civil Remedies Act (31 U.S.C.

3801-3812) or that a veteran, servicemember, reservist, eligible

person, or other person, with the complicity of an educational

institution, has submitted such a claim or made such a written

statement, the Director will follow the procedures in part 42 of this

title.

(Authority: 10 U.S.C. 16136(b); 31 U.S.C. 3801-3812; 38 U.S.C.

3034(a), 3241(a), 3690(d))

(g) Referral to the Committee on Educational Allowances. If the

Director of the VA facility of jurisdiction suspends payment of

educational assistance to, or suspends approval of the enrollment or

reenrollment of, individuals in any course or courses as provided in

paragraph (d) of this section, the Director will refer the matter to

the Committee on Educational Allowances as provided in Sec. 21.4212.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(h) Withdrawal of referral to Committee on Educational Allowances.

(1) If, following a suspension of payments and/or of approval of

enrollments or reenrollments, the Director of the VA facility of

jurisdiction determines that the conditions which

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justified the suspension have been corrected, and the State approving

agency has not withdrawn or suspended approval of the course or

courses, the Director may resume payments to and/or approval of

enrollments or reenrollments of the affected veterans, servicemembers,

reservists, or eligible persons. If the case has already been referred

to the Committee on Educational Allowances under paragraph (g) of this

section at the time such action is taken, the Director will advise the

Committee that the original referral is withdrawn.

(2) If, following a referral to the Committee on Educational

Allowances, the Director finds that the State approving agency will

suspend or withdraw approval, the Director may, if otherwise

appropriate, advise the Committee that the original referral is

withdrawn.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

11. Section 21.4211 is added to read as follows:

Sec. 21.4211 Composition, jurisdiction, and duties of Committee on

Educational Allowances.

(a) Authority. VA is authorized by 38 U.S.C. 3690 to discontinue

educational benefits to veterans, servicemembers, reservists, or

eligible persons when VA finds that the program of education or course

in which such individuals are enrolled fails to meet any of the

requirements of 38 U.S.C. chapter 30, 32, 34, 35, or 36, or 10 U.S.C.

chapter 1606, or the regulations in this part, or when VA finds an

educational institution or training establishment has violated any such

statute or regulation, or fails to meet any such statutory or

regulatory requirement. Sections 21.4210 and 21.4216 implement that

authority. This section provides for establishment of a Committee on

Educational Allowances within each VA facility of jurisdiction whose

findings of fact and recommendations will be provided to the Director

of that VA facility, to whom such authority to discontinue educational

benefits or disapprove enrollments or reenrollments has been delegated.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(b) Purpose. (1) The Committee on Educational Allowances is

established to assist the Director of the VA facility of jurisdiction

in reaching a conclusion as to whether, in a specific case, educational

assistance to all individuals enrolled in any course or courses offered

by the educational institution should be discontinued and, if

appropriate, whether approval of all further enrollments or

reenrollments in those courses should be denied to veterans,

servicemembers, reservists, or other eligible persons pursuing those

courses under programs administered by VA because a requirement of 38

U.S.C. chapter 30, 32, 34, 35, or 36, or 10 U.S.C. chapter 1606, or the

regulations in this part is not being met or a provision of such

statute or regulation has been violated.

(2) The function of the Committee on Educational Allowances is to

develop facts and recommend action to be taken on the basis of the

facts found. A hearing before the Committee is not in the nature of a

trial in a court of law. Instead, it is an administrative inquiry

designed to create a full and complete record upon which a

recommendation can be made as to whether the Director should

discontinue payment of educational benefits and/or deny approval of new

enrollments or reenrollments. Both the interested educational

institution and VA Regional Counsel, or designee, representing VA, will

be afforded the opportunity to present to the Committee any evidence,

argument, or other material considered pertinent.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(c) Jurisdiction. The Committee on Educational Allowances will

consider only those cases which are referred in accordance with

Secs. 21.4210(g) and 21.4212.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(d) Committee members. The Committee on Educational Allowances will

consist of three employees of the VA facility of jurisdiction, at least

one of whom is familiar with the adjudication of claims for benefits

administered by the Veterans Benefits Administration. The Director of

the VA facility of jurisdiction will designate a Chairperson. In the

event that any member becomes unable to serve for any reason, the

Director may appoint a replacement member. Before the Committee resumes

its proceedings, the new member will be given an opportunity to apprise

himself or herself of the actions and testimony already taken by the

Committee.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(e) Duties and responsibilities of the Committee. (1) The function

of the Committee on Educational Allowances is to make recommendations

to the Director of the VA facility of jurisdiction in connection with

specific cases referred for consideration as provided in

Secs. 21.4210(g) and 21.4212.

(2) The performance of this function will include:

(i) Hearing testimony or argument from witnesses or representatives

of educational institutions and VA, as appropriate, when such persons

appear personally before the Committee;

(ii) Receiving and reviewing all the evidence, testimony, briefs,

statements, and records included in each case; and

(iii) Furnishing the Director of the VA facility of jurisdiction a

written statement setting forth specifically the question or questions

considered, a summation of the essential facts of record,

recommendations as to issues referred for consideration by the

Committee, and the basis therefor. In any case where there is not

unanimity, both the majority and the minority views and recommendations

will be furnished.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

12. Section 21.4212 is added to read as follows:

Sec. 21.4212 Referral to Committee on Educational Allowances.

(a) Form and content of referral to Committee. When the Director of

the VA facility of jurisdiction refers a case to the Committee on

Educational Allowances, as provided in Sec. 21.4210(g), the referral

will be in writing and will--

(1) State the approval, reporting, recordkeeping, or other criteria

of statute or regulation which the Director has cause to believe the

educational institution has violated;

(2) Describe the substantial pattern of veterans, servicemembers,

reservists, or eligible persons receiving educational assistance to

which they are not entitled which the Director has cause to believe

exists, if applicable;

(3) Outline the nature of the evidence relied on by the Director in

reaching the conclusions of paragraphs (a)(1) and (a)(2) of this

section;

(4) Describe the Director's efforts to obtain corrective action and

the results of those efforts; and

(5) Ask the Committee on Educational Allowances to perform the

functions described in Secs. 21.4211, 21.4213, and 21.4214 and to

recommend to the Director whether educational assistance payable to

individuals pursuing the courses in question should be discontinued and

approval of new enrollments or reenrollments denied.

(b) Notice of the referral. (1) At the time of referral the

Director will--

(i) Send notice of the referral, including a copy of the referral

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document, by certified mail to the educational institution. The notice

will include statements that the Committee on Educational Allowances

will conduct a hearing; that the educational institution has the right

to appear before the Committee and be represented at the hearing to be

scheduled; and that, if the educational institution intends to appear

at the hearing, it must notify the Committee within 60 days of the date

of mailing of the notice;

(ii) Provide an information copy of the notice and referral

document to the State approving agency of jurisdiction; and

(iii) Place a copy of the notice and referral document on display

at the VA facility of jurisdiction for review by any interested party

or parties.

(2) The Director will provide a copy of the notice and referral

document to the VA Regional Counsel, or designee, of jurisdiction, who

will represent VA before the Committee on Educational Allowances.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

13. Section 21.4213 is added to read as follows:

Sec. 21.4213 Notice of hearing by Committee on Educational Allowances.

(a) Content of hearing notice. In any case referred to the

Committee on Educational Allowances for consideration, a hearing will

be held. If, as provided in Sec. 21.4212(b), the educational

institution has timely notified the Committee of its intent to

participate in the hearing, the educational institution will be

notified by certified letter from the Chairperson of the date when the

hearing will be held. This hearing notification will inform the

educational institution of--

(1) The time and place of the hearing;

(2) The matters to be considered;

(3) The right of the educational institution to appear at the

hearing with representation by counsel, to present witnesses, to offer

testimony, to present arguments, and/or to submit a written statement

or brief; and

(4) The complete hearing rules and procedures.

(b) Expenses connected with hearing. The notice also will inform

the educational institution that VA will not pay any expenses incurred

by the educational institution resulting from its participation in the

hearing, including the expenses of counsel or witnesses on behalf of

the educational institution.

(c) Publication of hearing notice. Notice of the hearing will be

published in the Federal Register, which will constitute notice to any

interested individuals, and will indicate that, while such individuals

may attend and observe the hearing, they may not participate unless

called as witnesses by VA or the educational institution.

(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034(a), 3241(a), 3690)

14. Section 21.4214 is added to read as follows:

Sec. 21.4214 Hearing rules and procedures for Committee on Educational

Allowances.

(a) Rule 1. The Chairperson of the Committee on Educational

Allowances will be in charge of the proceedings, will administer oaths

or affirmations to witnesses, and will be responsible for the official

conduct of the hearing. A majority of the members of the Committee will

constitute a quorum. No party to the proceedings may conduct a voir

dire of the Committee members.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(b) Rule 2. At the opening of the hearing, the Chairperson of the

Committee on Educational Allowances will inform the educational

institution of the purpose of the hearing, the nature of the evidence

of record relating to the asserted failures or violations, and the

applicable provisions of law and VA regulations. The Chairperson will

advise the VA Regional Counsel, or designee, representing VA, that the

Committee on Educational Allowances will entertain any relevant

evidence or witnesses which VA Counsel presents to the Committee and

which would substantiate a decision by the Committee to recommend that

the Director of the VA facility of jurisdiction take an adverse action

on the issues submitted for its review. The educational institution

will be advised of its right to present any evidence, relevant to the

issues submitted for the Committee's review, by oral or documentary

evidence; to submit rebuttal evidence; to present and cross-examine

witnesses; and to make such statements as may be appropriate on its

behalf for a true and full disclosure of the facts. VA Counsel will be

allowed to cross-examine any witnesses offered by the educational

institution and to reply to any written briefs or arguments submitted

to the Committee.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(c) Rule 3. Any testimony or evidence, either oral or written,

which the Committee on Educational Allowances deems to be of probative

value in deciding the question at issue will be admitted in evidence.

While irrelevant, immaterial, or unduly repetitious evidence,

testimony, or arguments should be excluded, reasonable latitude will be

permitted with respect to the relevancy, materiality, and competency of

evidence. In most instances the evidence will consist of official

records of the educational institution and VA, and these documents may

be attested to and introduced by affidavit; but the introduction of

oral testimony by the educational institution or by VA will be allowed,

as appropriate, in any instance where the educational institution or VA

Counsel desires. VA, however, will neither subpoena any witness on

behalf of the educational institution for such purposes nor bear any

expenses in connection with the appearance of such witness. In

instances where the evidence reasonably available consists of signed

written statements, secondary or hearsay evidence, etc., such evidence

may be introduced into the record and will be given the weight and

consideration which the circumstances warrant.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(d) Rule 4. A verbatim stenographic or recorded transcript of the

hearing will be made. This transcript will become a permanent part of

the record, and a copy will be furnished to the educational institution

and the VA Counsel at the conclusion of the proceeding, unless

furnishing of the copy of the transcript is waived by the educational

institution.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(e) Rule 5. The Chairperson of the Committee on Educational

Allowances will identify all exhibits in the order of introduction or

receipt (numerically for VA exhibits and alphabetically for exhibits

introduced by the educational institution). All such original exhibits

or documents shall be attached to the original of the transcript. VA

shall make photocopies or certified copies and attach them to the copy

of the transcript furnished to the educational institution and the VA

Counsel. The original transcript will accompany the Committee's

recommendation to the Director of the VA facility of jurisdiction along

with all exhibits, briefs, or written statements received by the

Committee during the course of the proceedings. Such documents should

be clearly marked to indicate which were received into evidence and

relied upon by the Committee in making its recommendations.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[[Page 45602]]

(f) Rule 6. The Committee on Educational Allowances, at its

discretion, may reasonably limit the number of persons appearing at the

hearing, including any affected individuals presented as witnesses by

VA or the educational institution.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(g) Rule 7. Any person who is presented to testify will be required

to be duly placed under oath or affirmation by the Chairperson of the

Committee on Educational Allowances. If an official of the educational

institution desires to present a statement personally, the individual

will be required to be placed under oath or affirmation. The

Chairperson will advise each witness that the Committee understands

that he or she is voluntarily appearing before the Committee; that any

testimony or statement given will be considered as being completely

voluntary; and that no one has authority to require the individual to

make any statement or answer any question against his or her will

before the Committee, except that a person called as a witness on

behalf of either VA or the educational institution must be willing to

submit to cross-examination with respect to testimony given. Each

witness will also be advised that his or her testimony or statement, if

false, even though voluntary, may subject him or her to prosecution

under Federal statutes.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(h) Rule 8. Any member of the Committee on Educational Allowances

may question any witness presented to testify at the hearing or either

a representative of the educational institution or the VA Counsel

concerning matters that are relevant to the question at issue.

Generally, questioning by a Committee member will be limited to the

extent of clarifying information on the facts and issues involved.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(i) Rule 9. If the educational institution fails to timely notify

the Committee of its intent to participate in a hearing or if a

representative of the educational institution is scheduled to appear

for a hearing but, without good cause, fails to appear either in person

or by writing, the Committee will proceed with the hearing and will

review the case on the basis of the evidence of record which shall be

presented by the VA Counsel.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(j) Rule 10. Any objection by an authorized representative of the

educational institution or the VA Counsel on a ruling by the

Chairperson of the Committee on Educational Allowances regarding the

admissibility of testimony or other evidence submitted will be made a

matter of record, together with the substance in brief of the testimony

intended or other evidence concerned. If the other evidence concerned

is in the form of an affidavit or other document, it may be accepted

for filing as a future reference if it is later ruled admissible as

part of the record of the hearing.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(k) Rule 11. Objections relating to the jurisdiction or membership

of the Committee on Educational Allowances or the constitutionality of

statutes or the constitutionality of, or statutory authority for, VA

regulations, are not before the Committee for decision. The time of the

Committee will not be used to hear arguments in this regard. However,

any such matters outside the province of the Committee may be the

subject of a brief or a letter for consideration by the VA Office of

General Counsel upon completion of the hearing. The ruling of such

authority upon such issues will be obtained and included in the record

before the Committee's recommendations are submitted to the Director of

the VA facility of jurisdiction. If the VA General Counsel's ruling on

such legal issues necessitates reopening the proceeding, that shall be

done before the Committee makes its recommendations to the Director of

the VA facility of jurisdiction.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(l) Rule 12. The hearing will be open to the public.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(m) Rule 13. The hearing will be conducted in an orderly manner

with dignity and decorum. The conduct of members of the Committee on

Educational Allowances, the VA Counsel, and any representatives of the

educational institution shall be characterized by appropriate

impartiality, fairness, and cooperation. The Chairperson of the

Committee shall take such action as may be necessary, including

suspension of the hearing or the removal of the offending person from

the hearing room for misbehavior, disorderly conduct, or the persistent

disregard of the Chairperson's ruling. Where this occurs, the

Chairperson will point out that the Committee is entitled to every

possible consideration in order that the case may be presented clearly

and fully, which may be accomplished only through observance of orderly

procedures.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(n) Rule 14. The Chairperson of the Committee on Educational

Allowances will conduct the hearing proceedings in such a manner that

will protect from disclosure information which tends to disclose or

compromise investigative sources or methods or which would violate the

privacy of any individual. The salient facts, which form the basis of

charges, may be disclosed and discussed without revealing the source.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(o) Rule 15. At the close of the hearing, the Chairperson of the

Committee on Educational Allowances shall inform the appropriate

representative of the educational institution that the arguments and

the evidence presented will be given careful consideration; and that

notice of the decision of the Director of the VA facility of

jurisdiction, together with the Committee's recommendations, will be

furnished to the educational institution and the VA Counsel at the

earliest possible time. The Chairperson will also indicate that notice

of the Director's decision will be published in the Federal Register

for the information of all other interested persons.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a),

3690)

(p) Rule 16. In making its findings of facts and recommendations,

the Committee on Educational Allowances will consider only questions

which are referred to it by the Director of the VA facility of

jurisdiction as being at issue and which are within the jurisdiction of

the Committee.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

15. Section 21.4215 is added to read as follows:

Sec. 21.4215 Decision of Director of VA facility of jurisdiction.

(a) Decision. The Director of the VA facility of jurisdiction will

render a written decision on the issue of discontinuance of payments of

benefits and/or denial of further enrollments or reenrollments in the

course or courses at the educational institution which was the subject

of the Committee on Educational Allowances proceedings.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

[[Page 45603]]

(b) Basis of decision. (1) The decision of the Director of the VA

facility of jurisdiction will be based upon all admissible evidence of

record, including--

(i) The recommendations of the Committee on Educational Allowances;

(ii) The hearing transcript and the documents admitted in evidence;

and

(iii) The ruling on legal issues referred to appropriate authority.

(2) The decision will clearly describe the evidence and state the

facts on which the decision is based and, in the event that the

decision differs from the recommendations of the Committee on

Educational Allowances, will give the reasons and facts relied upon by

the Director in deciding not to follow the Committee majority's

recommendations.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(c) Correction of deficiencies. If the Director of the VA facility

of jurisdiction believes that the record provided for review is

incomplete or for any reason should be reopened, before rendering a

decision he or she will order VA staff to gather any additional

necessary evidence and will notify the educational institution that it

may comment upon the new evidence added. The Director will then notify

the educational institution as to whether the matter will be

resubmitted to the Committee on Educational Allowances for further

proceedings, on the basis of the new circumstances. If the matter is

referred back to the Committee, the Director will defer a decision

until he or she has received the Committee's new recommendations based

upon all of the evidence of record.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(d) Effective date. If the decision of the Director of the VA

facility of jurisdiction is adverse to the educational institution, the

decision shall indicate specifically the effective date of each adverse

action covered by the decision.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

(e) Notification of decision. (1) The Director of the VA facility

of jurisdiction shall send a copy of the decision to the educational

institution by certified mail, return receipt requested. A copy of the

decision also will be provided by regular mail to the institution's

legal representative of record, if any. If the decision is adverse to

the educational institution, the Director will enclose a notice of the

educational institution's right to have the Director, Education Service

review the decision.

(2) The Director of the VA facility of jurisdiction will also send

a copy of the decision to:

(i) The State approving agency; and

(ii) VA Counsel.

(3) The Director of the VA facility of jurisdiction shall post a

copy of the decision at the VA facility of jurisdiction. A copy of the

decision shall be published in the Federal Register.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

16. Section 21.4216 is added to read as follows:

Sec. 21.4216 Review of decision of Director of VA facility of

jurisdiction.

(a) Decision is subject to review by Director, Education Service. A

review by the Director, Education Service of a decision of a Director

of a VA facility of jurisdiction to terminate payments or disapprove

new enrollments or reenrollments, when requested by the educational

institution, will be based on the evidence of record when the Director

of the VA facility of jurisdiction made that decision. It will not be

de novo in nature and no hearing on review will be held.

(b) Authority of Director, Education Service. The Director,

Education Service has the authority to affirm, reverse, or remand the

original decision. In the case of such a review, the reviewing

official's decision, other than a remand, shall become the final

Department decision on the issue presented.

(c) Notice of decision of Director, Education Service is required.

Notice of the reviewing official's decision will be provided to the

interested parties and published in the Federal Register, in the same

manner as is provided in Sec. 21.4215(e) for decisions of the Director

of the VA facility of jurisdiction, for the information of all

concerned.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

Subpart G--Post-Vietnam Era Veterans' Educational Assistance Under

38 U.S.C. Chapter 32

17. The authority citation for part 21, subpart G, is revised to

read as follows:

Authority: 38 U.S.C. 501(a), chs. 32, 36, unless otherwise

noted.

Sec. 21.5130 [Amended]

18. In Sec. 21.5130, paragraphs (b) and (c) are removed, and

paragraphs (d), (e), (f), and (g) are redesignated as paragraphs (b),

(c), (d), and (e), respectively.

19. In Sec. 21.5200, the introductory text is amended by removing

``in the same manner as they are applied in the administration of

chapters 34 and 36''; paragraph (h) is removed; paragraph (j) is

redesignated as paragraph (h); and paragraph (i) is revised and

paragraphs (j), (k), (l), (m), (n), and (o) are added, to read as

follows:

Sec. 21.5200 Schools.

* * * * *

(i) Section 21.4210--Suspension and discontinuance of educational

assistance payments and of enrollments or reenrollments for pursuit of

approved courses.

(j) Section 21.4211--Composition, jurisdiction and duties of

Committee on Educational Allowances.

(k) Section 21.4212--Referral to Committee on Educational

Allowances.

(l) Section 21.4213--Notice of hearing by Committee on Educational

Allowances.

(m) Section 21.4214--Hearing rules and procedures for Committee on

Educational Allowances.

(n) Section 21.4215--Decision of Director of VA facility of

jurisdiction.

(o) Section 21.4216--Review of decision of Director of VA facility

of jurisdiction.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

Subpart K--All Volunteer Force Educational Assistance Program

(Montgomery GI Bill--Active Duty)

20. The authority citation for part 21, subpart K, is revised to

read as follows:

Authority: 38 U.S.C. 501(a), chs. 30, 36, unless otherwise

noted.

21. Section 21.7133 is revised to read as follows:

Sec. 21.7133 Suspension or discontinuance of payments.

VA may suspend or discontinue payments of educational assistance.

In doing so, VA will apply Secs. 21.4210 through 21.4216.

(Authority: 38 U.S.C. 3034, 3690)

Sec. 21.7135 [Amended]

22. In Sec. 21.7135, paragraph (i) introductory text and paragraph

(i)(2) are amended by removing ``Sec. 21.4207'' and adding, in its

place, ``Sec. 21.4211 (d) and (g)''; and paragraphs (i)(1), (j)(1), and

(k)(1) are amended by removing ``Sec. 21.4134'' wherever it appears,

and adding, in its place, ``Sec. 21.4210''.

23. In Sec. 21.7158, the section heading, paragraph (b)(2), and the

authority citation for paragraph (b) are revised, to read as follows:

Sec. 21.7158 False, late, or missing reports.

* * * * *

(b) * * *

[[Page 45604]]

(2) If an educational institution or training establishment

willfully and knowingly submits a false report or certification, VA may

disapprove that institution's or establishment's courses for further

enrollments and may discontinue educational assistance to veterans and

servicemembers already enrolled. In doing so, VA will apply

Secs. 21.4210 through 21.4216.

(Authority: 38 U.S.C. 3034, 3690)

Subpart L--Educational Assistance for Members of the Selected

Reserve

24. The authority citation for part 21, subpart L, is revised to

read as follows:

Authority: 10 U.S.C. ch. 1606; 38 U.S.C. 501(a), ch. 36, unless

otherwise noted.

Sec. 21.7624 [Amended]

25. Section 21.7624(b) is amended by removing ``21.4202(b)'' and

adding, in its place, ``21.4210(b)''.

26. Section 21.7633 is revised to read as follows:

Sec. 21.7633 Suspension or discontinuance of payments.

VA may suspend or discontinue payments of educational assistance.

In doing so, VA will apply Secs. 21.4210 through 21.4216.

(Authority: 10 U.S.C 16136(b); 38 U.S.C. 3690)

Sec. 21.7635 [Amended]

27. In Sec. 21.7635, the introductory text of paragraph (e) is

amended by removing ``Sec. 21.4207 of this part'', and adding, in its

place, ``Sec. 21.4211 (d) and (g)''; paragraph (e)(2) is amended by

removing ``Sec. 21.4207 of this part'', and adding, in its place,

``Sec. 21.4211 (d) and (g)''; and paragraphs (e)(1), (f)(1), and (g)(1)

are amended by removing ``Sec. 21.4134 of this part'' wherever it

appears, and adding, in its place, ``Sec. 21.4210''.

28. In Sec. 21.7658, paragraph (b)(1) introductory text is amended

by removing ``negligent'' and adding, in its place, ``negligent:'';

paragraph (b)(1)(i) is amended by removing ``institution of higher

learning to report,'' and adding, in its place, ``educational

institution to report'' and by removing ``reservist,'' and adding, in

its place, ``reservist;''; paragraph (b)(1)(ii) is amended by removing

``Sec. 21.7644(b) of this part'' and adding, in its place,

``Sec. 21.7644(c)''; and the section heading, the heading of paragraph

(b), and paragraph (b)(2) are revised to read as follows:

Sec. 21.7658 False, late, or missing reports.

* * * * *

(b) Educational institution or training establishment. * * *

(2) If an educational institution or training establishment

willfully and knowingly submits a false report or certification, VA may

disapprove that institution's or establishment's courses for further

enrollments and may discontinue educational assistance to reservists

already enrolled. In doing so, VA will apply Secs. 21.4210 through

21.4216.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3690)

[FR Doc. 97-22876 Filed 8-27-97; 8:45 am]

BILLING CODE 8320-01-P