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: Final rule.

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SUMMARY: This document adopts as a final rule amendments to the general

regulations of the Department of Veterans Affairs (VA). The amendments

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. The adoption of this change

helps veterans pay outstanding debts to the United States.

EFFECTIVE DATES: May 1, 1997.

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: On August 5, 1996, VA published in the

Federal Register (61 FR 40589) a proposed rule to permit individuals

who have an outstanding debt to the United States arising from

participation in educational and vocational rehabilitation programs VA

administers to liquidate that debt through the performance of work-

study services. The public was given 60 days to submit comments. VA

received no comments.

Accordingly, based on the rationale set forth in the proposed rule

document, we are adopting the provisions of the proposed rule as a

final rule. For the purposes of clarity, the organization of

Sec. 1.929(b) is slightly modified. This final rule also affirms the

information in the proposed rule document concerning the Regulatory

Flexibility Act.

The Catalog of Federal Domestic Assistance numbers for the programs

affected by this final rule are 64.116, 64.117, 64.120, and 64.124.

This final rule also affects the Montgomery GI Bill--Selected Reserve

for which there is no Catalog of Federal Domestic Assistance number.

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: December 23, 1996.

Jesse Brown,

Secretary of Veterans Affairs.

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

as set forth below.

PART 1--GENERAL PROVISIONS

1. The authority citation for part 1, continues to read as follows:

Authority: 38 U.S.C. 501(a), unless otherwise noted.

[[Page 15401]]

2. Section 1.929 and its authority citations are added under the

undesignated center heading ``STANDARDS FOR COLLECTION OF CLAIMS'' 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. (1) 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, 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

(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)

[[Page 15402]]

(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. 97-8140 Filed 3-31-97; 8:45 am]

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