Gaining Early Awareness and Readiness for Undergraduate Programs

SUMMARY: The Secretary proposes to amend the regulations governing the

Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR

UP) program. These amendments are needed because the current

regulations applied only to the fiscal year 1999 competition. These

proposed regulations will apply to any future GEAR UP competitions and

were drafted subject to the negotiated rulemaking process required by

section 492 of the Higher Education Act of 1964 (HEA), as amended.

DATES: We must receive your comments on or before January 20, 2000.

ADDRESSES: Address all comments about these proposed regulations to

Edward Fuentes, U.S. Department of Education, 1990 K Street, NW., room

6107, Washington, DC 20006. If you prefer to send your comments through

the Internet, use the following address: [email protected]. You must

include the term GEAR UP in the subject line of your electronic

message.

If you want to comment on the information collection requirements

you must send your comments to the Office of Management and Budget at

the address listed in the Paperwork Reduction Act section of this

preamble. You may also send a copy of these comments to the Department

representative named in this section.

FOR FURTHER INFORMATION CONTACT: Lisa Aserkoff, 400 Maryland Ave., SW.,

Room 6E205, Washington, DC 20202. Telephone: (202) 401-6296. If you use

a telecommunications device for the deaf (TDD), you may call the

Federal Information Relay Service (FIRS) at 1-800-877-8339.

Individuals with disabilities may obtain this document in an

alternate format (e.g., Braille, large print, audiotape, or computer

diskette) on request to the contact person listed in the preceding

paragraph.

SUPPLEMENTARY INFORMATION:

Invitation to Comment

We invite you to submit comments regarding these proposed

regulations. To ensure that your comments have the maximum effect in

developing the final regulations, we urge you to identify clearly the

specific section or sections of the proposed regulations that each of

your comments addresses and to arrange your comments in the same order

as the proposed regulations. We invite you to assist us in complying

with the specific requirements of Executive Order 12866 and its overall

requirement of reducing regulatory burden that might result from these

proposed regulations. Please let us know of any further opportunities

we should take to reduce potential costs or increase potential benefits

while preserving the effective and efficient administration of the

program.

During and after the comment period, you may inspect all public

comments about these proposed regulations in room 6107, 1990 K Street,

NW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m., Eastern

time, Monday through Friday of each week except Federal holidays.

Assistance to Individuals With Disabilities in Reviewing the

Rulemaking Record

On request, we will supply an appropriate aid, such as a reader or

print magnifier, to an individual with a disability who needs

assistance to review the comments or other documents in the public

rulemaking record for these proposed regulations. If you want to

schedule an appointment for this type of aid, you may call (202) 205-

8113 or (202) 260-9585. If you use a TDD, you may call the Federal

Information Relay Service at 1-800-877-8339.

Background

Section 403 of the Higher Education Amendments of 1998

(Amendments), (Public Law 105-244), enacted October 7, 1998, amending

the Higher Education Act of 1965 (HEA) established the Gaining Early

Awareness and Readiness for Undergraduate Programs (GEAR UP), a program

designed to give more low-income students the skills, encouragement,

and preparation needed to pursue postsecondary education, and to

strengthen academic programs and student services at participating

schools.

On March 2, 1999, we published final regulations implementing GEAR

UP for fiscal year 1999 (64 FR 10183), using the Department's authority

under section 437(d) of the General Education Provisions Act to waive

rulemaking requirements for regulations governing the first grant

competition under a new or substantially revised program authority (20

U.S.C. 1232(d)(1)).

Negotiated Rulemaking

Section 492 of the HEA requires that, before publishing any

proposed regulations to implement programs under Title IV of the Act,

the Secretary obtain public involvement in the development of the

proposed regulations. After obtaining advice and recommendations, the

Secretary must conduct a negotiated rulemaking process to develop the

proposed regulations. For fiscal year 1999, we determined that, to make

grants under this competition before the funds expired, the use of

negotiated rulemaking would be impracticable and contrary to the public

interest under section 492(b)(2) of the HEA.

The proposed regulations contained in this NPRM were developed

through the use of negotiated rulemaking. The proposed regulations

reflect the final consensus of the GEAR UP negotiating committee

(committee), which was made up of the following members:

California State University System

The College Board

Council of the Great City Schools

Ford Foundation

High School Equivalency Program and the College Assistance Migrant

Program Association and the National Association for Migrant Education,

Inc. (a coalition)

Hispanic Association of Colleges and Universities

``I Have a Dream'' Foundation

National Alliance of Black School Educators

National Association for College Admission Counseling

National Association for Equal Opportunity in Higher Education

National Association of Independent Colleges and Universities

National Association of Secondary School Principals and the National

Forum on Middle-Grades Reform (a coalition)

National Association of State Student Grant and Aid Programs

National Coalition of Title I/Chapter I Parents

National Collaboration for Youth

National Council of Higher Education Loan Programs

National Education Association

United States Chamber of Commerce

United States Department of Education

United States Student Association

As stated in the committee protocols, consensus means that there must

be no dissent by any member in order for the committee to be considered

to have reached agreement. Consensus was reached on all of the proposed

regulations in this document.

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Background

GEAR UP provides two types of competitive grants: State grants and

Partnership grants. State grants must provide early college preparation

and awareness activities through the early intervention component of

the GEAR UP program and scholarships for participating students through

the scholarship component of GEAR UP. Partnerships must provide early

college preparation and awareness activities through the early

intervention component and are encouraged to provide college

scholarships, although they are not required to do so.

Section 694.1 Maximum Grant Amounts

Current Regulations: The current regulations set a maximum amount

that the Secretary could award each year to a Partnership or a State

under GEAR UP. For Partnership grants, the maximum amount that the

Secretary could award each year was calculated by multiplying the

number of students the Partnership proposes to serve that year, as

stated in the Partnership's plan, by $800.

For State grants, the current regulations set the maximum dollar

amount that the Secretary could award each year at $5 million.

Proposed regulations: For Partnership grants, the proposed

regulations would keep the same maximum amount that the Secretary could

award each year as under current regulations, an amount calculated by

multiplying the number of students the Partnership proposes to serve

that year by $800.

Reasons: Negotiators agreed that this is an appropriate maximum

average per student, per year, Federal dollar amount to spend under

GEAR UP. We believe that this maximum average Federal dollar amount per

student will ensure that the Department can fund a substantial number

of projects nationwide each year, while still providing for a broad

range of services for those students served.

Proposed regulations: For State grants the proposed regulations

would state that the Secretary establishes the maximum amount that may

be awarded each fiscal year for a GEAR UP State grant in a notice

published in the Federal Register. The negotiators recognized that a

maximum grant amount was necessary to ensure that we could fund a

substantial number of projects each year, while still providing the

services necessary to ensure a successful program.

Several negotiators, however, expressed some concern that the

maximum amount for the grant was set in regulation. These negotiators

mentioned changes in funding from Congress for the program as a

potential reason why there needed to be discretion each year in setting

the maximum State grant amount. We therefore changed the regulations so

that the maximum amount that the Secretary could award each year for a

GEAR UP State grant would be announced each fiscal year in a notice

published in the Federal Register.

Section 694.2 Students Served By the Cohort Approach Under the Early

Intervention Component

Statute: Section 404B(g) of the HEA requires that Partnerships

provide services to at least one grade level of students, beginning not

later than the 7th grade. In addition, Partnerships must ensure that

those services are provided through the 12th grade to students in the

participating grade levels.

Current Regulations: The current regulations restate the statutory

language, but also add language that would require States that choose

to use the cohort approach to follow the same rules as Partnerships.

The regulations also established the word ``cohort'' as the term used

throughout the regulations to refer to the entire grade levels of

students the Partnership (or State) served.

Proposed Regulations: The proposed regulations would be the same as

the current regulations, with one addition. Partnerships, and States

using the cohort approach, must ensure that supplemental appropriate

services are targeted to the students with the greatest needs.

Reasons: The committee discussed the problems associated with

serving an entire grade level of students in large schools. Several

negotiators felt that it was important to try to ensure that the

students who needed the services the most didn't get lost among the

many other students also served in their school under GEAR UP. The

committee discussed how to provide those students with appropriate

services, without violating the statute, which requires that services

be provided to entire grade levels of students.

The negotiating committee discussed several variations of language

initially offered by several negotiators. The language originally

offered would have required Partnerships to ensure that direct services

be delivered to the most disadvantaged students within a cohort.

Several other negotiators, including the Department, while recognizing

the concerns the language was trying to address, believed that this

language was not the best way to address those concerns. The committee

discussed the use of the word ``disadvantaged,'' and wanted to be sure

that services weren't only targeted at economically disadvantaged

students.

In addition, negotiators were concerned about the word

``delivery,'' and whether it meant that the Partnership had to ensure

the student actually received all of the services. Several negotiators

wondered how the Partnership could ensure that each disadvantaged

student actually receives all of the services if a student adamantly

refuses, or doesn't show up, and what the consequences would be for a

Partnership if services were not delivered. By contrast, under the

proposed regulations, Partnerships would be able to provide services to

the entire cohort, tailor services to students' needs, and target

additional services appropriate to students with the greatest needs.

In addition, several negotiators were concerned that the

requirement as a whole could be read to imply that not all students in

the cohort needed to receive services. Several negotiators emphasized

that one of the most important attributes of the GEAR UP program was

the whole-grade approach, and the negotiators wanted to be sure that

the suggested additional language wouldn't lead to Partnerships

providing services to only some students in a grade.

The committee then discussed several wording alternatives to

address these concerns. One negotiator suggested changing

``disadvantaged'' to ``special needs.'' Some other negotiators,

however, were concerned that the term ``special needs'' might imply

only learning or physical disabilities. In addition, some negotiators

suggested removing ``delivery,'' and instead saying that Partnerships

must ensure that services were ``targeted to'' certain students. To

address the concern about the whole-grade approach, the words

``supplemental appropriate services'' were added, so that it was clear

that while all students should receive appropriate services, students

with the greatest needs should get appropriate supplemental services.

The committee then reached final consensus on a provision that

requires Partnerships, or States using the cohort approach, to ensure

that supplemental appropriate services are targeted to the students

with the greatest needs. The committee believed that this language

addresses the concern that, in large cohorts, the neediest students

might ``get lost,'' and might need some extra attention, but still

makes clear that the

[[Page 71554]]

attention must be in addition to services provided to the entire

cohort. The committee also believed that referring to ``students with

the greatest needs'' would be flexible enough to allow individual

school districts to decide how to determine which students most needed

the additional services.

Section 694.3 Cohort Requirements

Statute: Section 404B(g) of the statute requires that Partnerships

must provide services to at least one grade level of students,

beginning not later than the 7th grade, in a participating school that

has a 7th grade and in which at least 50 percent of the students are

eligible for free or reduced-price lunch under the National School

Lunch Act (or, if a Partnership determines that it would promote the

effectiveness of a program, an entire grade level of students,

beginning not later than the 7th grade, who reside in public housing as

defined in section 3(b)(1) of the United States Housing Act of 1937).

Current Regulations: The current regulations restate the statute,

but divide the requirements into individual paragraphs, to make

statutory language clearer.

Proposed Regulations: The proposed regulations would keep the same

language as in current regulations.

Reason: The negotiators agreed that the regulatory language would

help clarify the statutory requirements. The committee discussed

whether there was any way to provide services to students before they

reached schools that include a 7th grade. Some negotiators mentioned

that in some States there were many elementary schools that didn't

include a 7th grade, but that they felt could still benefit

tremendously from a program like GEAR UP. The committee discussed this

at length, but under the statute Partnerships cannot serve students in

schools that do not include a 7th grade. Additionally, several

negotiators thought that although others could certainly benefit from

GEAR UP services, the emphasis of GEAR UP was intended for students in

middle grades (i.e. schools that include a 7th grade), and wanted to

ensure that GEAR UP funds reached the population for which they were

intended. Students benefit most in the middle grades; research shows

that course and other decisions in the middle grades are critical in

determining a student's chances of going to college. The definition of

schools with a 7th grade already includes a broad range of school

configurations without diluting the program's unique focus on the

middle grades.

Section 694.4 Changes in the Cohort

Current regulations: Under current regulations, a Partnership or

State that chooses to use a cohort approach must serve, as part of the

cohort, any additional students who may have enrolled in the

participating school, at the grade level of the students in the cohort,

after the cohort began receiving GEAR UP services. The current

regulations also provide that if, after completing the last grade level

offered by the school at which the cohort began to receive GEAR UP

services, not all the students in the cohort move on to the same

school, the Partnership or the State may, but is not required to,

provide services to all of those students. However, the Partnership or

State must continue to provide GEAR UP services to at least those

students in the cohort who attend subsequent participating schools that

enroll a substantial majority of the students in the cohort.

Proposed Regulations: The proposed regulations would keep the same

language as in the current regulations to address the students a

Partnership or State must serve when there are changes in the cohort.

Reasons: The committee agreed that any new student who enrolls in a

participating school and joins a GEAR UP cohort before the cohort

completes the GEAR UP program in that school, should have the

opportunity to benefit from the direct services the other cohort

students are receiving. The committee also agreed that some students

who began in the cohort are likely to leave the participating school as

well, and that GEAR UP programs should not be required to serve those

students.

The committee also recognized that as the cohort moves on to a

subsequent participating school (for example, a high school), a single

middle-grades school could feed into more than one high school. Some

cohorts may, therefore, eventually be distributed among several

schools. The committee agreed that Partnerships or States should be

required to continue providing GEAR UP services to at least those

students in the cohort that attend participating schools that enroll a

substantial majority of the students in the cohort. In doing so, the

maximum number of students from the original cohort would continue to

receive services, without placing an undue burden on Partnerships or

States.

Sections 694.5 and 694.6 Serving Private School Students

Current Regulations: The current regulations outline the

requirements a Partnership or State must meet if it chooses to provide

services to private school students under the program's early

intervention component. The regulations are based on private school

student participation requirements generally applicable to most

elementary and secondary education programs carried out by the

Department.

Proposed Regulations: The proposed regulations would keep the

language from current regulations for providing services to private

school students under the program's early intervention component.

Reasons: The committee agreed that regulations are necessary to

ensure that Federal funds are used for educational services that are

secular, neutral, and nonideological.

Section 694.7 Matching Requirements

Statute: Under section 404C(b) of the HEA, the Secretary may not

approve a GEAR UP plan unless the plan provides that the Partnership or

State will provide, from State, local, institutional, or private funds,

not less than 50 percent of the cost of the program, in cash or in

kind. Section 404C(b) also gives the Secretary the authority to modify,

by regulation, the 50 percent requirement for Partnerships.

Current Regulations: The current regulations require a Partnership

to state in its application the percentage of the cost of the GEAR UP

project for each year that the Partnership will provide from non-

Federal funds, and then to comply with the matching percentage stated

in the application for each year of the project period. Under current

regulations, a Partnership must also provide at least 20% of the cost

of the project from non-Federal funds for any year in the project

period, and the non-Federal share of the cost of the GEAR UP project

must be at least 50% of the total cost over the project period.

Proposed regulations: The proposed regulations would keep the

requirement that the non-Federal share of the cost of the GEAR UP

project be not less than 50 percent of the total cost over the project

period. However, the proposed regulations would permit a match lower

than 50 percent, but not lower than 30 percent, for Partnerships with

three or fewer institutions of higher education as members, and in

which the fiscal agent is (1) eligible to receive funds under Title V,

Part B of Title III, or section 316 or 317 of the HEA, or (2) a local

educational agency. In addition, to qualify for the lower match, the

Partnership would have to include only participating schools with a 7th

grade in which at least 75 percent of the students are eligible for

free or reduced-price lunch under the National School Lunch Act; and

only local educational agencies

[[Page 71555]]

in which at least 50 percent of the students enrolled are eligible for

free or reduced-price lunch under the National School Lunch Act.

Reasons: The committee agreed that generally the 50 percent

matching requirement over the entire project period gives Partnerships

broad flexibility in terms of the amount of the project cost that the

Partnership must provide for each year of the project. The success of

any project depends in part upon strong community support. The 50

percent requirement helps to ensure that the GEAR UP project has strong

community support, that all members of the Partnership contribute to

the program, in cash or in kind, and that the Partnership can be

sustained, even after Federal funds are no longer available, through

strong community Partnerships, with support from all partners. The

Department also suggested that the poorest and very rural communities

were able to meet the match in the fiscal year 1999 competition.

Several negotiators, however, felt that the 50 percent match

precluded some of the poorest communities from applying, because they

wouldn't have the resources to meet the 50 percent match. The committee

discussed a variety of options to address this problem.

One negotiator suggested a waiver of the match. If that wouldn't be

possible, the negotiator suggested a minimum match of 20 percent

throughout the life of the grant. The negotiator was concerned that

many colleges and universities, especially those that serve low-income

students, were already burdened by matching requirements of other

programs, even where there is flexibility to substitute in-kind

services for dollars. Several other negotiators, including the

Department, felt that a minimum match of 20 percent throughout the life

of the grant was too low, and that other members of the Partnership

could and needed to provide more. These negotiators stressed that

Partnerships would not need to use cash to meet the match, but could do

so through in-kind contributions, which, in spite of the negotiator's

concerns, should serve to alleviate the burden.

Another option presented by some negotiators was that Partnerships

could be eligible for a 25 percent match if they served only elementary

and secondary schools in which at least 50 percent of the students

enrolled were eligible for free or reduced-price lunch under the

National School Lunch Act, and if they served only LEAs in which at

least 50 percent of the students enrolled were eligible for free or

reduced-price lunch under the National School Lunch Act.

A third option presented to the committee would have permitted the

Secretary to give special consideration to Partnerships with respect to

the match either before the Partnership's application was approved or

after a grant was awarded. For pre-approval special consideration, a

Partnership would apply for special consideration for a match less than

50 percent, and would receive notification from the Secretary as to

whether their request was granted within 30 days of the application

deadline. Whether the request was pre-approval, or post-award, there

would be two circumstances under which a Partnership could apply for

special consideration. The first circumstance would be if an emergency,

such as a natural disaster, occurred where the Partnership was located

that would warrant a lower match.

The other circumstance that could allow a Partnership to apply for

a lower match would be if there were within the Partnership systemic

issues that could preclude the Partnership from being able to meet the

match. To qualify for the lower match, the Partnership would have to

show that, in spite of its limited resources, it had an ongoing

commitment to serving the educational needs of targeted students. The

Partnership would also have to show that it had no access to adequate

fiscal resources, or that it was geographically isolated. Finally, this

would be available only in geographic areas in which at least 75

percent of the students were eligible for free or reduced-price lunch,

or in which there was a high unemployment rate.

The negotiators felt that the provision that appears in the

proposed regulations was the best option available. Several negotiators

didn't want the first option of either a waiver or a minimum 20 percent

match throughout the life of the grant. These negotiators felt that a

waiver would be too logistically burdensome, both for the Secretary and

for the applicant. These negotiators also felt that a minimum of 20

percent over the life of the grant was too low.

Negotiators also didn't agree to the second option, because they

felt it could allow too many applicants to take advantage of a reduced

match, which would weaken the projects and mean more Federal money

would be spent per project, and fewer projects could be funded.

Negotiators felt that the third option was not the best option for

a couple of reasons. One reason is that this option would have required

both the applicants and the Department to spend significant amounts of

time determining whether the applicants were in fact eligible for the

lower match, since the criteria to qualify for the lower match were

subjective and extremely detailed. In addition, this option would have

required the Secretary to make individual determinations as to whether

an applicant qualified for the lower match.

Negotiators, including the Department, preferred an approach that

provided a lower match for an easily definable group of applicants.

Negotiators felt that this approach would be less burdensome, both for

applicants and for the Department, and would still provide a lower

match for the applicants that needed it most.

One negotiator argued that the group of institutions of higher

education eligible for the lower match in the proposed regulations

should be expanded to include institutions eligible to receive funds

under all of Part A of title III of the HEA, instead of just sections

316 and 317. Other negotiators, including the Department, felt that the

proposed regulations were sufficiently broad to allow a significant

number of Partnerships to be eligible for the reduced match and further

believed that including the institutions the negotiator suggested would

expand the exception so broadly that it would become the rule.

Section 694.8 Fiscal Agents for Partnerships

Statute: Section 404B(d) of the statute requires that a Partnership

designate an Institution of Higher Education (IHE) or a Local

Educational Agency (LEA) as the fiscal agent for the partnership.

Current Regulations: The current regulations restate the statutory

language and add that the IHE must be an IHE that is not pervasively

sectarian.

Proposed Regulations: The proposed regulations would keep the

language from the current regulations, but would add language

clarifying that although the IHE or LEA must be the fiscal agent, any

member of the Partnership can organize the project.

Reasons: Several negotiators wanted to clarify in the regulations

that other members of the Partnership, such as community-based

organizations, though not eligible to be the fiscal agent, could still

be a driving force in a Partnership. Some negotiators felt that without

the clarifying language, organizations other than IHEs and LEAs might

think they couldn't play a significant organizational role in the

Partnership and might be less inclined to join the Partnership.

[[Page 71556]]

Section 694.9 Maximum Indirect Cost Rates for States and LEAs

Current Regulations: Although the current regulations don't address

indirect cost rates, we addressed indirect cost rates in the

application package for GEAR UP. We determined that GEAR UP projects

were educational training grants under 34 CFR 74.562. Consistent with

that provision in EDGAR, a recipient was limited to the maximum of

eight percent or the rate permitted by an applicant's negotiated cost

rate agreement, whichever was less. This rate did not apply to costs

incurred by State agencies or LEAs.

Proposed Regulations: Under the proposed regulations, the same rule

that applies to applicants other than State agencies or LEAs under 34

CFR 74.562 would also apply to State agencies and LEAs, so that all

grant recipients' maximum indirect cost rates would be limited to the

lesser of the rate established by the negotiated indirect cost

agreement, or eight percent of a modified total direct cost base.

Reasons: While both negotiators and the Department recognize that

indirect costs are both real and legitimate, they also believe that

having large amounts of funds compensate partners for their general

overhead and related expenses is inconsistent with the purpose of the

program. The negotiating committee agreed that the eight percent

maximum on indirect cost reimbursement is a fair percentage that still

allows significant funds to be available for direct grant services.

Section 694.10 Requirements for Awards Under the Scholarship Component

Section 694.10(a) Amount of Scholarship

Statute: Section 404E of the HEA requires States that participate

in GEAR UP to establish or maintain a financial assistance program that

awards scholarships to students. The minimum scholarship amount for

each fiscal year must not be less than the lesser of 75 percent of the

average cost of attendance for an in-State student, in a 4-year program

of instruction, at public IHEs in the State, or the maximum Federal

Pell Grant funded under section 401 of the HEA for the fiscal year.

Section 404E also requires that GEAR UP scholarships under this

section may not be considered for the purpose of awarding Federal grant

assistance under title IV of the HEA, except that the total amount of

student financial assistance awarded may not exceed a student's total

cost of attendance.

Current Regulations: The current regulations include the

requirements outlining the minimum scholarship amount, and add that

cost of attendance is to be determined under section 472 of the HEA.

The current regulations also require a State, or Partnership that

chooses to participate in the scholarship component under section 404E,

to ensure that it will not award a GEAR UP scholarship to a student in

an amount that, in combination with other student financial assistance

under title IV of the HEA, exceeds cost of attendance, again as defined

by section 472 of the HEA.

The current regulations further require that a State or Partnership

must reduce the scholarship amount proportionally for any student who

receives a GEAR UP scholarship and attends an institution on a less

than full-time basis during any academic year.

Proposed regulations: The proposed regulations would remain the

same as the current regulations with respect to the minimum scholarship

amount required. The proposed regulations would describe the statutory

requirements, and would keep section 472 of the HEA as the means of

determining cost of attendance for establishing the minimum award

amount.

The proposed regulations would no longer require a reduction in the

scholarship amount for students attending institutions on a less than

full-time basis during an academic year. Instead, the proposed

regulations would allow a State or Partnership to reduce the

scholarship amount to students attending less than full-time, but in no

case could the percentage reduction in the scholarship be greater than

the percentage reduction in tuition and fees charged to that student.

Reasons: The negotiators believed that the language in the current

regulations regarding the reduction of a scholarship award for students

who attend an institution on a less than full-time basis needed to be

changed. The negotiators didn't think that the regulations should

require that the reduction in scholarship be proportional. Several

negotiators pointed out that, at some institutions, a student could

attend less than full-time but still be required to pay full-time

tuition and fees. In addition, a student may attend less than full-time

but may still have to be on campus each day of the week, so

transportation costs could be the same regardless of whether a student

is attending full- or part-time.

The negotiators therefore decided that a student's scholarship

shouldn't necessarily be reduced proportionately when a student attends

an institution on a less than full-time basis. The negotiators thought

it would be better for the student if the State or Partnership had the

discretion as to whether to reduce the scholarship and if so by how

much. However, in no case could the percentage reduction in the

scholarship be greater than the percentage reduction in tuition and

fees charged to the student. For example, if a student attends an

institution less than full-time, and the student's tuition and fees are

reduced by 25%, then the State or Partnership could, if it chose,

reduce the GEAR UP scholarship by no more than 25%. The negotiators

felt this was the best way to ensure that students who decided to

attend less than full-time could still cover at least the same amount

of their tuition and fees with the their GEAR UP scholarships.

Section 694.10(b) Scholarships and Pell Grant Recipients

Statute: Section 404E requires the Secretary to ensure that States

place a priority on awarding scholarships to students who will receive

a Federal Pell Grant for the academic year for which the GEAR UP

scholarship is awarded.

Current Regulations: Under the current regulations, a State, or a

Partnership that chooses to participate in the scholarship component

under section 404E of the HEA, must award GEAR UP scholarships to

students who are eligible for a GEAR UP scholarship, and who will

receive a Federal Pell Grant for the academic year for which the GEAR

UP scholarship is being awarded. If the State or Partnership still has

funds remaining after awarding scholarships to those students, it may

award scholarships to other eligible students (who will not receive a

Federal Pell Grant) after considering the need of those students for

GEAR UP scholarships.

Proposed Regulations: The proposed regulations would make two

substantive changes to the current regulations. First, the proposed

regulations would add students ``who are eligible to receive'' a

Federal Pell Grant, rather than just ``who will receive'' a Federal

Pell Grant. Second, the proposed regulations would change ``academic

year'' to ``award year.'' With the exception of these two changes, the

proposed regulations are substantively the same as the current

regulations.

Reasons: Under the proposed regulations, a State or Partnership

would have to award GEAR UP scholarships first to students who will

receive, or are eligible to receive, a Federal Pell Grant during the

award year in which the GEAR UP scholarship is being awarded.

Negotiators felt that

[[Page 71557]]

eligibility was crucial because in many cases it would be very

difficult to tell whether a student would actually receive a Federal

Pell Grant at the time the GEAR UP scholarship award would be made. The

negotiators felt therefore that it was important to include that a

student could be eligible to receive a Pell Grant in order to be

eligible for the statutory Pell Grant priority. Negotiators felt that

eligibility for a Pell Grant still showed that the student was

exceptionally needy and therefore deserving of a priority for a GEAR UP

scholarship.

In addition, the negotiators changed ``academic year'' to ``award

year.'' Several negotiators felt that using award year would be more

appropriate, because student financial aid is generally provided based

on an award year, and not an academic year.

The committee also agreed that we would not read the language as it

appears in the proposed regulations (i.e. ``first'' and ``during the

award year'') to penalize a State or Partnership that awarded all of

its scholarships at the appropriate time and subsequently additional

students became eligible for Pell Grants. Although a State or

Partnership must first award scholarships to students they know to be

eligible for a Pell Grant, they are not required to award scholarships

later for students whom they couldn't have known would be eligible for

a Pell Grant at the time the scholarships were awarded.

Section 694.10(c) Continuation Scholarships

Current Regulations: Under the current regulations, a State or a

Partnership must award continuation scholarships in successive award

years to each student who received an initial scholarship and who

continues to be eligible for a scholarship.

Proposed Regulations: The proposed regulations would remain

substantively the same as the current regulations.

Reasons: Negotiators felt that it was important to assure students

that once they received a scholarship, it would remain available to

them for as long as they remained eligible. Because GEAR UP is a

program for low-income students, negotiators wanted to be sure that

students wouldn't suddenly need to find alternate ways to fund their

education after they'd been awarded a scholarship. Negotiators felt it

was important not to deter these students from going to college because

there was no guarantee that there would be money available for them

after they had completed a year or more of college. With these

regulations, GEAR UP students who receive a GEAR UP scholarship can be

assured that for as long as they remain eligible, they will receive

GEAR UP scholarship money.

Additionally, negotiators discussed whether grantees would still be

required to provide continuation scholarships if Federal funding was

discontinued during the life of the grant. We clarified for the

negotiators that if Federal funding were discontinued during the life

of the grant, we wouldn't require grantees to continue to come up with

their share of the funds. If Federal funding is provided throughout the

life of the grant, however, a grantee would be obligated to provide

continuation scholarships to students who remain eligible for

scholarships even after the grant period has ended.

Section 694.11 Disclosure Requirements Regarding an Institution's

Treatment of a GEAR UP Scholarship in Relation to Other Student

Financial Assistance

Statute: Under section 404E of the HEA, scholarships provided under

section 404E may not be considered for the purpose of awarding Federal

grant assistance under title IV, except that in no case may the total

amount of financial assistance awarded to a student under title IV

exceed that student's total cost of attendance.

In addition, section 404C of the HEA requires that the plan that a

State or Partnership submits to be eligible for a GEAR UP grant must

contain provisions designed to ensure that funds provided under GEAR UP

will supplement and not supplant funds expended for existing programs.

Current regulations: The current regulations essentially reiterate

the statutory provision that a GEAR UP scholarship must not be

considered in the determination of a student's eligibility for other

grant assistance provided under title IV of the HEA. In addition, the

current regulations established the order in which postsecondary

student financial assistance must be awarded for each recipient of a

GEAR UP scholarship.

Proposed regulations: The proposed regulations would modify the

current regulations. Under the proposed regulations, an institution may

have to disclose its policy for the treatment of a GEAR UP scholarship

in relation to other student financial assistance. An institution would

not be required to disclose its policy for the treatment of a GEAR UP

scholarship in relation to other financial assistance if the

institution's policy meets certain criteria. The first criterion would

be that the GEAR UP scholarship must not be considered in the

determination of a student's eligibility for other grant assistance

provided under title IV of the HEA, as required by section 404E of the

statute. The second criterion is that an institution must also have a

policy under which the GEAR UP scholarship does not supplant other

public or institutional gift aid that the student would otherwise have

been eligible to receive.

The final criterion for non-disclosure is that an institution must

follow certain procedures when a student receives an overaward of

student financial aid. A GEAR UP scholarship, in combination with other

student financial assistance awarded under any title IV HEA program and

any other grant or scholarship assistance, may not exceed the student's

cost of attendance. If that combination does exceed the student's cost

of attendance, the institution must, before reducing public or

institutional gift aid, reduce other assistance to zero, by the amount

in excess of cost of attendance, in a prescribed order. The institution

must first reduce loans, then need-based employment, and then the GEAR

UP scholarship before reducing public or institutional gift aid, except

that the institution may reduce need-based employment first and loans

second at the election of the student. This would mean that both the

student and the institution would have to agree to reduce the need-

based employment first and loans second.

The proposed regulations would therefore require an institution to

reduce each category of assistance (i.e. loans, need-based employment,

the GEAR UP scholarships) to zero, by the amount in excess of cost of

attendance, before reducing the next category. For example, if a

student's award package exceeds cost of attendance by $500 and the

student has $400 in loans, the institution would have to reduce the

loans to zero and then reduce the need-based employment by $100 to

ensure that the package wouldn't exceed cost of attendance.

The proposed regulations would allow an institution to reduce its

institutional aid before reducing a GEAR UP scholarship only if it

determines in writing that there are exceptional circumstances related

to the GEAR UP student's institutional aid that are unique to that GEAR

UP student. For example, an exceptional circumstance could occur if

it's clear that allowing the institution to spend the GEAR UP money and

reduce the student's institutional award would benefit the GEAR UP

student. What would be key to the determination of whether something is

an exceptional

[[Page 71558]]

circumstance is the institution's alternative use of funds that would

otherwise be made available to the GEAR UP student in a financial aid

package. An exceptional circumstance could exist if the institution

commits the institutional aid to make a grant for the future benefit of

that student, such as graduate school or if the institution spends the

money on a special curriculum or extra support for that student.

If exceptional circumstances do exist and an institution does

reduce the GEAR UP student's institutional aid before the GEAR UP

scholarship, the institution must document and maintain in the GEAR UP

student's file the modification that was made to the GEAR UP student's

gift aid award package and the reason for the modification. Finally,

the institution would be required to provide written notification to

the GEAR UP student of the reason for and the specific modification

made to the gift aid package.

Under the proposed regulations, an institution would be required to

disclose its policy for the treatment of a GEAR UP scholarship in

relation to other student financial assistance if it doesn't follow the

procedures already discussed. The proposed regulations would require

the institution, if it chooses a policy other than that outlined in

Sec. 694.11(a), to establish a policy for the treatment of GEAR UP

scholarships and inform all prospective students of that policy. Under

the proposed regulations, there would be a cross-reference to the

definition of ``prospective student'' in Sec. 668.41, which provides

that prospective students are individuals who have contacted an

eligible institution requesting information concerning admission to

that institution. This could include students who have written a

letter, called, or notified by email an institution that they'd like

information about admission to the institution.

In addition, the institution would be required to notify the

Department by September 1, 2000 that its treatment of GEAR UP

scholarships with respect to institutional gift aid is different from

the procedures that would not require disclosure. The institution also

must notify the Department in a timely manner if, after September 1,

2000, it elects to treat GEAR UP scholarships differently from the

procedures that would not require disclosure.

Finally, the proposed regulations would make clear that regardless

of the disclosure requirements, all institutions must follow the

procedures outlined in Sec. 694.11 (a) with respect to title IV aid,

regardless of whether the institution was required to disclose its

policy.

Reasons: The Department's initial proposal would have required

institutions to treat GEAR UP scholarships, with respect to other

student financial assistance, in the same way as the procedures that do

not require disclosure in the proposed regulations as they appear in

this NPRM and also to apply this requirement to other private

scholarship funds. However, one negotiator objected that those

procedures meant that the Federal government would be putting

conditions on how institutions and private charities package or award

their own scholarship aid. The negotiator was concerned that this could

set a negative precedent for future programs and regulations and

ultimately penalize schools that do the most for needy students, such

as those that practice need-blind admissions. The negotiator also

argued that the ``supplement not supplant'' language in the GEAR UP

legislation applies to programmatic funds, not to individual student

aid packages funded through private dollars at colleges not part of a

GEAR UP partnership. The negotiator also argued that the Department's

interpretation gave special treatment to GEAR UP students over other

needy students, including many in existing early intervention programs.

Finally, it was pointed out that some private scholarship money is

``last-dollar.'' To attempt to make the GEAR UP program last-dollar

might have the perverse effect of decreasing a GEAR UP student's

overall aid package by removing a student's eligibility for these

funds.

Other negotiators, including the Department, agreed that private

charitable scholarships, other than institutional aid, should be

excluded from the regulation. With regard to institutional aid,

however, these negotiators pointed out that it was not unprecedented

for the Federal government to place conditions on such aid to protect

the Federal fiscal interest. Several negotiators noted that the Federal

Government had a long history of placing maintenance-of-effort,

supplement-not-supplant, and similar restrictions on institutional aid

as a condition of receiving Federal funds. These negotiators also felt

that the Federal Government should ensure that not only its funds, but

also the matching funds provided in good faith by other GEAR UP donors,

such as school districts, service clubs, businesses, and SEAs and State

higher education agencies, are used properly by institutions for the

intended purpose of aiding GEAR UP students, not to supplant

institutional scholarship aid.

These negotiators also rejected the suggestion that putting

conditions on institutional scholarship aid penalizes any institutions.

All institutions would be treated the same, wherever Federal GEAR UP

funds were used. They argued that it cannot be considered an

institutional penalty when students come to an institution with GEAR UP

scholarships to help pay for college, in addition to the other

scholarships for which they would otherwise qualify. The fact that some

institutions would consider the conditions a denial of an opportunity

to exchange GEAR UP aid for other aid, which could be used for other

purposes, is not an institutional penalty but a prudent measure to

prevent misuse of Federal program funds.

These negotiators rejected the suggestion that supplement-not-

supplant should not apply to individual student aid packages. They

agreed with the point that applying this provision to individual

student aid packages gives special treatment to GEAR UP students (and

TRIO and NEISP students who receive a GEAR UP scholarship) above

others, but noted that this is the whole point of the GEAR UP program.

They pointed out that GEAR UP scholarships are not a general need-based

aid program, or an institutional aid program, but a scholarship program

to motivate individual GEAR UP students and help them pay for college.

The committee agreed, in response to a negotiator's concern, that

excess GEAR UP scholarships would go to other GEAR UP students and not

to the Federal Treasury.

In an effort to reach consensus, all the negotiators agreed to

fulfill the intent of GEAR UP scholarships through public disclosure

and public information. By doing so, the institution would be able to

treat GEAR UP scholarships as they relate to certain other non-Title IV

student financial assistance as it sees fit. An institution would,

however, have to disclose, to both prospective students and the

Department, that it has chosen not to follow the procedures in the

proposed regulations and would have to disclose to prospective students

its policy for GEAR UP scholarships. GEAR UP scholarship students would

then know how institutions plan to treat GEAR UP scholarships so that

they can make informed decisions about which institution they want to

apply to and attend based on the amount and type of financial

assistance they are likely to receive.

In addition to the reasons already mentioned, the negotiators felt

that

[[Page 71559]]

disclosure requirements were the best option for several other

purposes. A list of the institutions that report their policies to the

Department will be made available to all GEAR UP Partnership and State

grant programs so that they can advise students that a GEAR UP

scholarship may not result in any additional benefits if used at any of

the institutions on the list. Also, the Department may use the list to

distinguish among institutions in future GEAR UP program evaluations,

because GEAR UP scholarships should not be expected to make a program

performance difference at institutions where they are packaged not to

make such a difference. Finally, any institution that wants to comply

with the non-supplantation procedures, but can't due to exceptional

circumstances, related to a particular student, could document the

circumstances, rather than inform the Department that it isn't adopting

the policy in the proposed regulations. For example, if a GEAR UP

student were eligible for a non-GEAR UP scholarship and any portion of

the scholarship that wasn't needed for undergraduate education could be

saved for graduate education, the institution could benefit the student

by reducing this other scholarship before reducing the GEAR UP

scholarship.

Section 694.12 Financial Assistance for Partnerships That Don't

Participate in the Scholarship Component Under Section 404E of the HEA

Current regulations: The current regulations provide that a GEAR UP

Partnership that does not participate in the GEAR UP scholarship

component may provide financial assistance for postsecondary education

to students who participate in the early intervention component only if

the financial aid is directly related to, and in support of, other

activities of the Partnership under the early intervention component of

GEAR UP.

Proposed Regulations: The proposed regulations would keep the

language from the current regulations, with minor additions. One

addition is that the proposed regulations would add language to clarify

that the requirements in this section apply to Partnerships only if

they use either GEAR UP funds, or non-Federal funds used to comply with

the matching requirement, to provide the financial assistance for

postsecondary education. In addition, the proposed regulations would

add the requirement that the Partnership comply with the provisions in

Secs. 694.10(c) and 694.11, governing the treatment of student

financial assistance under GEAR UP.

Reasons: Several negotiators asked for this clarifying language.

Negotiators felt the regulation could be read to imply that any

financial assistance provided by the Partnership would have to be

directly related to, and in support of, other activities of the

Partnership under the early intervention component. Negotiators wanted

it to be clearer that Partnerships could also provide financial

assistance using non-Federal funds that the Partnership was not using

to comply with the matching requirement to students that participated

in GEAR UP, and that this financial assistance would not be subject to

the requirements of this section. We therefore agreed to add language

that would make the clarification.

In addition, negotiators, including the Department, realized that

financial assistance provided under this section should be subject to

similar requirements as the financial assistance provided by the

scholarship component in section 404E of the HEA.

Several negotiators wanted clarification that in addition to these

requirements, there are other, more general principles that apply to

Partnerships that want to offer financial assistance. For example,

there are principles of obligation law that dictate when and how

financial assistance can be awarded if it is going to be counted toward

the match in a particular fiscal year. The committee agreed that it is

not necessary or desirable to have this kind of information in

regulations, but that there would need to be non-regulatory guidance

from the Department on other restrictions that might apply.

Section 694.13 Determination of the State Applicant

Current regulations: The current regulations provide that the

Governor of a State must designate which State agency applies for, and

administers, a State grant under GEAR UP.

Proposed regulations: The proposed language would keep the language

in the current regulations.

Reasons: Several negotiators mentioned that they would prefer a

more collaborative approach to the designation of which State agency

will apply for and administer a GEAR UP State grant. The negotiating

committee therefore discussed whether others, such as the State

Educational Agency (SEA), or the Chief State School Officer, should be

involved in the decision. Although the negotiating committee agreed

that collaboration was important, many on the committee felt that there

was no need to add language to the regulations, because, in most if not

all cases, the Governor of a State will collaborate with the SEA, the

Chief State School Officer, and other relevant agencies and people. In

addition, several negotiators felt that although many should be

involved in the decision and implementation of the grant, the final

decision needs to rest with the State's chief executive officer, the

Governor. The Governor is in the best position to ensure that agencies

collaborate in the design and implementation of the GEAR UP project.

Finally, some negotiators felt that the Governor was necessary to

bridge the gap between the elementary and secondary education community

and the higher education community, both of which are involved in GEAR

UP.

The proposed regulations remain unchanged, therefore, with the

Governor responsible for designating the State agency that applies for

and administers the GEAR UP State grant. However, we expect that

Governors of States applying for GEAR UP grants will collaborate with

appropriate agencies and officials to determine which agency should

apply on behalf of the State and how agencies should collaborate in

implementing the grant.

Section 694.14 21st Century Certificates

Statute: Section 404F of the HEA requires that the Secretary ensure

that 21st century scholarship certificates are provided to all students

participating in GEAR UP. In addition, the certificate must be

personalized for each student and indicate the amount of Federal

financial aid for college a student may be eligible to receive.

Current Regulations: The current regulations provide that a State

or Partnership must provide, in accordance with such procedures as the

Secretary may specify, a 21st Century Scholar Certificate from the

Secretary of Education to each student participating in the early

intervention component of its GEAR UP project. In addition, current

regulations require each certificate to be personalized and to indicate

the amount of Federal financial aid for college that a student may be

eligible to receive.

Proposed Regulations: The proposed regulations would keep the

language that is in the current regulations.

Reasons: The negotiating committee agreed that the statute requires

the Secretary to ensure that the students participating in GEAR UP each

receive an individualized certificate, indicating the amount of Federal

financial aid for college that a student may be eligible to receive.

The regulations make it clear that the State or Partnership must

[[Page 71560]]

provide the certificate to each student, but that the certificate will

be from the Secretary. Since the certificates must be personalized, the

best and most efficient way to award the certificates is to involve the

Partnerships and States, since they are the more likely to have the

students' personal information, such as the students' names and the

date the certificate will be presented.

Section 694.15 NEISP States

Statute: Section 404A(b)(2) of the HEA requires that the Secretary

ensure that students served under the chapter 2 of subpart 2 of part A

of title IV of the HEA, the National Early Intervention Scholarship and

Partnership (NEISP) Program, on the day before the date of enactment of

the Higher Education Amendments of 1998 (Amendments) continue to

receive assistance through the completion of secondary school.

Current regulations: The current regulations basically restate the

requirements in statute for any State that receives a GEAR UP grant

that served the students referred to in the statute.

Proposed regulations: The proposed regulations would keep the

language in the current regulations.

Reasons: The negotiators agreed that the statute requires the

Secretary to ensure that students served under the NEISP program

continue to receive assistance through the completion of secondary

school. The regulations clarify that the chapter mentioned in the

statute is NEISP, and that the date of enactment of the Amendments was

October 7, 1998.

Section 694.16 Mandatory Priority

Statute: Section 404A(b)(2) of the HEA requires that the Secretary,

in making awards to States, give priority to eligible entities that on

the date of enactment of the Amendments, carried out successful

opportunity programs under chapter 2 of subpart 2 of part A of title

IV, and that have a prior, demonstrated commitment to early

intervention leading to college access through collaboration and

replication of successful strategies.

Current regulations: The current regulations essentially restate

the statute, with language that the date of enactment was October 7,

1998, and that the chapter referred to is the NEISP program, which GEAR

UP replaced.

Proposed regulations: The proposed regulations basically restate

the proposed regulations, with only small editorial changes.

Reason: The statutory priority remains in the regulations because

the language is clearer than in the statute, and because there are also

permissible priorities in the regulations, and so it seemed clearer to

people to have all the priorities appear in the same place, rather than

having to reference both the regulations and the statute to know what

priorities applied.

Section 694.17 Permissible Priorities

Current regulations: The current regulations include two priorities

that the Secretary would have the discretion to choose for the fiscal

year 1999 competition. Under those regulations, the Secretary could

give priority to projects by Partnerships or States that serve a

substantial number or percentage of students who reside in an

Empowerment Zone, including a Supplemental Empowerment Zone, or

Enterprise Community designated by the U.S. Department of Housing and

Urban Development or the U.S. Department of Agriculture. In addition,

the Secretary could give priority to Partnerships that establish or

maintain a financial assistance program that awards scholarships to

students either in accordance with section 404E of the HEA, or in

accordance with these regulations.

Proposed regulations: The proposed regulations would keep the

language in the current regulations, with some minor changes. In the

priority for projects in Empowerment Zones or Enterprise Communities,

the proposed regulations would allow a priority for projects that serve

a substantial number or percentage or students who either reside in, or

attend a school in, an Empowerment Zone or Enterprise Community. In

addition, the priority for Partnerships that establish or maintain a

financial assistance program that awards scholarships would include

language that the scholarship program is to strengthen the early

intervention component of its GEAR UP project.

Reasons: For the priority about Empowerment Zones and Enterprise

Communities, several negotiators felt that Partnerships or States that

serve a substantial number of students who attend a school in an

Empowerment Zone or Enterprise Community should be eligible for the

priority, even if the students don't live in an Empowerment Zone or

Enterprise Community. The committee discussed whether it could ever

occur that students who weren't truly needy would ever attend schools

in Empowerment Zones or Enterprise Communities. The Committee decided

that it was not a concern because the other eligibility requirements

would still apply.

For the priority for Partnerships that include a scholarship

program in their GEAR UP project, several negotiators were concerned

that this priority would penalize Partnerships that had very strong

early intervention components, but no scholarships. These negotiators

felt that the early intervention component was crucial to the success

of GEAR UP, and that Partnerships shouldn't be penalized for

concentrating their efforts and sometimes very limited resources on

early intervention. The committee discussed the importance of

scholarships, and the need to ensure that the benefits of the early

intervention component resulted in more students going to college. The

committee therefore decided to add language to the priority to ensure

that the priority wouldn't be read to mean that the scholarship

component was more important, or could replace, the early intervention

component. The priority is not intended to imply that scholarships are

more important than the early intervention component, only that

scholarships are an excellent way to supplement an already strong early

intervention component.

Executive Order 12866

1. Potential Costs and Benefits

Under Executive Order 12866, we have assessed the potential costs

and benefits of this regulatory action.

The potential costs associated with the proposed regulations are

those resulting from statutory requirements and those we have

determined as necessary for administering this program effectively and

efficiently.

In assessing the potential costs and benefits of this regulatory

action--both quantitative and qualitative--we have determined that the

benefits would justify the costs.

We have also determined that this regulatory action would not

unduly interfere with State, local, and tribal governments in the

exercise of their governmental functions.

We note that, as these proposed regulations were subject to

negotiated rulemaking, the costs and benefits of the various

requirements were discussed thoroughly by negotiators. The consensus

reached on a particular requirement generally reflected agreement on

the best possible approach to that requirement in terms of cost and

benefit.

To assist the Department in complying with the specific

requirements of Executive Order 12866, the Secretary invites comments

on whether there may be further opportunities to reduce any potential

costs or to increase any potential benefits resulting from these

proposed

[[Page 71561]]

regulations without impeding the effective and efficient administration

of the program.

Summary of Potential Costs and Benefits

Sections 694.1, 694.3-694.6, 694.8, and 694.12-694.17 of the

proposed regulations would provide guidance for complying with

statutory requirements and ensure the proper and effective expenditure

of program funds. These regulations would set and clarify: the maximum

amount that may be awarded to a Partnership or State; the requirements

for serving a cohort of students; the requirements for serving private

school students; the requirements for Partnerships in designating a

fiscal agent; the conditions under which Partnerships may provide

financial assistance to students; the procedure for designating a State

agency; the requirements for providing 21st Century Scholarship

Certificates; the requirements for States that served National Early

Intervention Scholarship and Partnership students; and the priorities

that must and may be established by the Secretary. There would be no

costs associated with these regulations.

Section 694.2 of the proposed regulations would clarify those

services that a Partnership or State that chooses to use the cohort

approach must provide. It would require appropriate, supplemental

services to be targeted to students with the greatest needs. The

Department has determined that the cost to provide these services would

be minimal, and that the benefit would exceed the cost. This regulation

would ensure that the neediest students in programs with large cohorts

would receive a level of services sufficient to succeed in the program.

Section 694.7 of the proposed regulations would modify the matching

requirements for Partnerships. It would allow Partnerships to set their

own matching levels in any year, as long as they comply with the

matching percentage stated in their application and provide at least 50

percent of the total project cost over the total project period. It

would also allow Partnerships that meet certain, specified criteria to

provide as low as 30 percent of the total project cost over the total

project period. This regulation would provide greater flexibility to

Partnerships in meeting matching requirements, giving Partnerships the

ability to reduce costs in any given year and the ability to reduce

costs over the total project period if they meet the specified

criteria.

Section 694.9 of the proposed regulations would set a maximum

indirect cost rate of 8 percent for State and local government

agencies. The potential cost associated with this regulation would be

the amount of indirect costs that a State or local government agency

could not charge to program funds. This amount would be the difference

between a State or local government agency's negotiated indirect cost

agreement, if it would exceed 8 percent, and the 8 percent maximum rate

allowed. The Department has determined that the benefit from this

regulation would exceed the potential cost. Setting a maximum indirect

cost rate would increase the efficiency of program funds by ensuring

that the vast majority of funds are used to provide direct services to

students. Furthermore, the proposed regulation would support the

competitive nature of the program by setting a maximum indirect cost

rate that reflects the current indirect cost rates of the States that

have been awarded grants.

Section 694.10 of the proposed regulations would provide guidance

for complying with statutory requirements for scholarships awarded

under this program. It would require States and Partnerships that

participate in the scholarship component to award continuation

scholarships to those students who receive an initial scholarship, as

long as those students remain eligible. The potential cost of this

regulation would be the cost of scholarships for those students who

continue to remain eligible beyond the time period for which a State or

Partnership has budgeted. Given the substantial matching resources of

States, which are required to participate in the scholarship component,

the Department has determined the potential cost of this requirement to

be minimal. More importantly, this regulation would ensure that

students receive the continuing financial support that is necessary to

complete their postsecondary education.

Section 694.11 of the proposed regulations would clarify the

statutory requirements for scholarships as they relate to title IV aid.

It would require institutions of higher education to disclose their

policy for the treatment of a scholarship under this program, if they

choose not to follow the specified procedures for determining financial

assistance eligibility and making adjustments in the case of an over-

award. The minimal cost of this regulation would be the cost for

institutions to disclose their policy or to follow the procedures in

the regulation. The Department has determined that the benefit of the

proposed regulation would exceed the cost because students would be

better informed about the treatment of their scholarship and the

calculation of their financial assistance at competing institutions.

2. Clarity of the Regulations

Executive Order 12866 and the President's Memorandum of June 1,

1998 on ``Plain Language in Government Writing'' require each agency to

write regulations that are easy to understand.

The Secretary invites comments on how to make these proposed

regulations easier to understand, including answers to questions such

as the following:

Are the requirements in the proposed regulations clearly

stated?

Do the proposed regulations contain technical terms or

other wording that interferes with their clarity?

Does the format of the proposed regulations (grouping and

order of sections, use of headings, paragraphing, etc.) aid or reduce

their clarity?

Would the proposed regulations be easier to understand if

we divided them into more (but shorter) sections? (A ``section'' is

preceded by the symbol ``Sec. ''and a numbered heading; for example,

Sec. 694.1 What is the maximum amount that the Secretary may award each

fiscal year to a Partnership or a State under this program?)

Could the description of the proposed regulations in the

SUPPLEMENTARY INFORMATION section of this preamble be more helpful in

making the proposed regulations easier to understand? If so, how?

What else could we do to make the proposed regulations

easier to understand?

Send any comments that concern how the Department could make these

proposed regulations easier to understand to the person listed in the

ADDRESSES section of the preamble.

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.

Entities that would be affected by these regulations are States and

State agencies, local education agencies (LEAs), local community

organizations, and institutions of higher education. States and State

agencies are not ``small entities'' under the Regulatory Flexibility

Act.

Institutions of higher education are defined as ``small entities,''

according to the U.S. Small Business Administration Size Standards, if

they are for-profit or nonprofit institutions with total annual revenue

below $5,000,000 or if they are

[[Page 71562]]

institutions controlled by governmental entities with populations below

50,000. Small LEAs and local community organizations are small entities

for the purposes of the Regulatory Flexibility Act.

The proposed regulations would not have a significant economic

impact on small entities because the regulations would not impose

excessive regulatory burden or require unnecessary Federal supervision.

The regulations would give small entities greater flexibility in

meeting matching requirements, provide guidance for complying with

statutory provisions, and impose minimal requirements to ensure the

proper expenditure of program funds.

Paperwork Reduction Act

Section 694.7 contains an information collection requirement. In

addition, there is an application package associated with the

regulations that contains information collection. Under the Paperwork

Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department of Education

has submitted a copy of this section as well as a copy of the

application package to the Office of Management and Budget (OMB) for

its review.

Collection of Information--Discretionary Grant Programs--Application

Package for the Gear UP Discretionary Grant Program

The information collection would apply to two types of grants--

Partnership grants and State grants--awarded to help more low-income

students stay in school, study hard, and take the right courses to go

to college. By June 2000, approximately 74 new Partnership grants

averaging $460,000 a year for five years, and 6 new State grants

averaging $2.1 million per year for five years will be awarded.

The likely respondents would be State agencies; two- and four-year

degree granting institutions of higher education; LEAs; businesses and

other for-profit entities; nonprofit institutions; small businesses or

organizations; and public and private schools.

This collection of information is necessary for applicants to apply

for new grants under the GEAR UP program. Grants will be awarded on the

basis of competitively reviewed applications submitted to the U.S.

Department of Education, Office of Postsecondary Education (OPE),

Policy, Planning & Innovation (PPI), GEAR UP grant competition.

Continued support for these grants is based on the availability of

funds and substantial progress in achieving project objectives. This

application process occurs once each year to enable applicants to

compete for Federal funds annually appropriated by Congress. The

Department of Education is requesting approval of the information

collection used to apply for new grants under this program.

The total annual public reporting and record keeping burden for

this information is 20 hours per application. We anticipate that there

will be 800 applications (770 Partnership Grant applications and 30

State Grant applications), for a total burden of 16,000 hours.

If you want to comment on the information collection requirements,

please send your comments to the Office of Information and Regulatory

Affairs, OMB, room 10235, New Executive Office Building, Washington, DC

20503; Attention: Desk Officer for U.S. Department of Education. You

may also send a copy of these comments to the Department representative

named in the ADDRESSES section of this preamble.

We consider your comments on this proposed collection of

information in--

Deciding whether the proposed collection is necessary for

the proper performance of our functions, including whether the

information will have practical use;

Evaluating the accuracy of our estimate of the burden of

the proposed collection, including the validity of our methodology and

assumptions;

Enhancing the quality, usefulness, and clarity of the

information we collect; and

Minimizing the burden on those who must respond. This

includes exploring the use of appropriate automated, electronic,

mechanical, or other technological collection techniques or other forms

of information technology; e.g., permitting electronic submission of

responses.

OMB is required to make a decision concerning the collection of

information associated with these proposed regulations between 30 and

60 days after publication of this document in the Federal Register.

Therefore, to ensure that OMB gives your comments full consideration,

it is important that OMB receives the comments within 30 days of

publication. This does not affect the deadline for your comments to us

on the proposed regulations.

Assessment of Educational Impact

The Secretary particularly requests comments on whether these

proposed regulations would require transmission of information that any

other agency or authority of the United States gathers or makes

available.

Electronic Access to This Document

You may view this document, as well as all other Department of

Education documents published in the Federal Register, in text or Adobe

Portable Document Format (PDF) on the Internet at either of the

following sites:

http://ocfo.ed.gov/fedreg.htm

http://www.ed.gov/news.html

To use PDF you must have the Adobe Acrobat Reader Program with

Search, which is available free at either of the previous sites. If you

have questions about using the PDF, call the U.S. Government Printing

Office (GPO), toll free, at 1-888-293-6498; or in the Washington, DC,

area at (202) 512-1530.

Note: The official version of this document is the document

published in the Federal Register. Free Internet access to the

official edition of the Federal Register and the Code of Federal

Regulations is available on GPO Access at: http://

www.access.gpo.gov/nara/index.html.

(Catalog of Federal Domestic Assistance Number 84.334 Gaining Early

Awareness and Readiness for Undergraduate Programs)

List of Subjects in 34 CFR Part 694

Colleges and universities, Elementary and secondary education,

Grant programs-education, Student aid.

Dated: December 15, 1999.

A. Lee Fritschler,

Assistant Secretary for Postsecondary Education.

For the reasons discussed in the preamble, the Secretary proposes

to amend title 34 of the Code of Federal Regulations by revising part

694 to read as follows:

PART 694-GAINING EARLY AWARENESS AND READINESS FOR UNDERGRADUATE

PROGRAMS (GEAR UP)

Sec.

694.1 What is the maximum amount that the Secretary may award each

fiscal year to a Partnership or a State under this program?

694.2 Which students must a Partnership, or a State that chooses to

use the cohort approach in its project, serve under the program's

early intervention component?

694.3 What are the requirements for a cohort?

694.4 Which students must a State or Partnership serve when there

are changes in the cohort?

694.5 What requirements must be met by a Partnership or State that

chooses to provide services to private school students under the

program's early intervention component?

694.6 Who may provide GEAR UP services to students attending

private schools?

694.7 What are the matching requirements for a GEAR UP Partnership?

[[Page 71563]]

694.8 What are the requirements that a Partnership must meet in

designating a fiscal agent for its project under this program?

694.9 What is the maximum indirect cost rate for an agency of a

State or local government?

694.10 What are the requirements for awards under the program's

scholarship component under section 404E of the Higher Education Act

of 1965, as amended (HEA)?

694.11 What are the disclosure requirements regarding an

institution's treatment of a GEAR UP scholarship in relation to

other student financial assistance?

694.12 Under what conditions may a Partnership that does not

participate in the GEAR UP scholarship component under section 404E

of the HEA provide financial assistance for postsecondary education

to students under the GEAR UP early intervention component?

694.13 How does a State determine which State agency will apply

for, and administer, a State grant under this program?

694.14 What requirements must be met by a Partnership or State

participating in GEAR UP with respect to 21st Century Scholarship

Certificates?

694.15 What requirements apply to a State that served students

under the National Early Intervention Scholarship and Partnership

program (NEISP) and that receives a GEAR UP grant?

694.16 What priority must the Secretary establish?

694.17 What priorities may the Secretary establish?

Authority: 20 U.S.C. 1070a-21 to 1070a-28

Sec. 694.1 What is the maximum amount that the Secretary may award

each fiscal year to a Partnership or a State under this program?

(a) Partnership grants. The maximum amount that the Secretary may

award each fiscal year for a GEAR UP Partnership grant is calculated by

multiplying--

(1) $800; by

(2) The number of students the Partnership proposes to serve that

year, as stated in the Partnership's plan.

(b) State grants. The Secretary establishes the maximum amount that

may be awarded each fiscal year for a GEAR UP State grant in a notice

published in the Federal Register.

(Authority: 20 U.S.C. 1070a-23)

Sec. 694.2 Which students must a Partnership, or a State that chooses

to use the cohort approach in its project, serve under the program's

early intervention component?

A Partnership, or a State that chooses to use a cohort approach in

its GEAR UP early intervention component, must, except as provided in

Sec. 694.4--

(a) Provide services to at least one entire grade level (cohort) of

students (subject to Sec. 694.3(b)) beginning not later than the 7th

grade;

(b) Ensure that supplemental appropriate services are targeted to

the students with the greatest needs; and

(c) Ensure that services are provided through the 12th grade to

those students.

(Authority: 20 U.S.C. 1070a-22)

Sec. 694.3 What are the requirements for a cohort?

(a) In general. Each cohort to be served by a Partnership or State

must be from a participating school--

(1) That has a 7th grade; and

(2) In which at least 50 percent of the students are eligible for

free or reduced-price lunch under the National School Lunch Act; or

(b) Public housing exception. If the Partnership or State

determines it would promote program effectiveness, a cohort may consist

of all of the students in a particular grade level at one or more

participating schools who reside in public housing, as defined in

section 3(b)(1) of the United States Housing Act of 1937.

(Authority: 20 U.S.C. 1070a-22)

Sec. 694.4 Which students must a State or Partnership serve when there

are changes in the cohort?

(a) At the school where the cohort began. A Partnership or State

must serve, as part of the cohort, any additional students who--

(1) Are at the grade level of the students in the cohort; and

(2) Begin attending the participating school at which the cohort

began to receive GEAR UP services.

(b) At a subsequent participating school. If not all of the

students in the cohort attend the same school after the cohort

completes the last grade level offered by the school at which the

cohort began to receive GEAR UP services, a Partnership or a State--

(1) May continue to provide GEAR UP services to all students in the

cohort; and

(2) Must continue to provide GEAR UP services to at least those

students in the cohort that attend participating schools that enroll a

substantial majority of the students in the cohort.

(Authority: 20 U.S.C. 1070-a22)

Sec. 694.5 What requirements must be met by a Partnership or State

that chooses to provide services to private school students under the

program's early intervention component?

(a) Secular, neutral, and nonideological services or benefits.

Educational services or other benefits, including materials and

equipment, provided under GEAR UP by a Partnership or State that

chooses to provide those services or benefits to students attending

private schools, must be secular, neutral, and nonideological.

(b) Control of funds. In the case of a Partnership or State that

chooses to provide services under GEAR UP to students attending private

schools, the fiscal agent (in the case of a Partnership) or a State

agency (in the case of a State) must--

(1) Control the funds used to provide services under GEAR UP to

those students;

(2) Hold title to materials, equipment, and property purchased with

GEAR UP funds for GEAR UP program uses and purposes related to those

students; and

(3) Administer those GEAR UP funds and property.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)

Sec. 694.6 Who may provide GEAR UP services to students attending

private schools?

(a) GEAR UP services to students attending private schools must be

provided--

(1) By employees of a public agency; or

(2) Through contract by the public agency with an individual,

association, agency, or organization.

(b) In providing GEAR UP services to students attending private

schools, the employee, individual, association, agency, or organization

must be independent of the private school that the students attend, and

of any religious organization affiliated with the school, and that

employment or contract must be under the control and supervision of the

public agency.

(c) Federal funds used to provide GEAR UP services to students

attending private schools may not be commingled with non-Federal funds.

(Authority: 1070a-21 to 1070a-28)

Sec. 694.7 What are the matching requirements for a GEAR UP

Partnership?

(a) In general. A Partnership must--

(1) State in its application the percentage of the cost of the GEAR

UP project the Partnership will provide for each year from non-Federal

funds, subject to the requirements in paragraph (b) of this section;

and

(2) Comply with the matching percentage stated in its application

for each year of the project period.

(b) Matching requirements. (1) Except as provided in paragraph

(b)(2) of this section, the non-Federal share of the cost of the GEAR

UP project must be not

[[Page 71564]]

less than 50 percent of the total cost over the project period.

(2) A Partnership that has three or fewer institutions of higher

education as members may provide less than 50 percent, but not less

than 30 percent of the total cost over the project period if it

includes--

(i) A fiscal agent that is eligible to receive funds under Title V,

or Part B of Title III, or section 316 or 317 of the HEA, or a local

educational agency;

(ii) Only participating schools with a 7th grade in which at least

75 percent of the students are eligible for free or reduced-price lunch

under the National School Lunch Act; and

(iii) Only local educational agencies in which at least 50 percent

of the students enrolled are eligible for free or reduced-price lunch

under the National School Lunch Act.

(3) The non-Federal share of the cost of a GEAR UP project may be

provided in cash or in-kind.

(Authority: 20 U.S.C. 1070a-23)

Sec. 694.8 What are the requirements that a Partnership must meet in

designating a fiscal agent for its project under this program?

Although any member of a Partnership may organize the project, a

Partnership must designate as the fiscal agent for its project under

GEAR UP--

(a) A local educational agency; or

(b) An institution of higher education that is not pervasively

sectarian.

(Authority: 20 U.S.C. 1070a-22)

Sec. 694.9 What is the maximum indirect cost rate for an agency of a

State or local government?

Notwithstanding 34 CFR 75.560-75.562 and 34 CFR 80.22, the maximum

indirect cost rate that an agency of a State or local government

receiving funds under GEAR UP may use to charge indirect costs to these

funds is the lesser of--

(a) The rate established by the negotiated indirect cost agreement;

or

(b) Eight percent.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)

Sec. 694.10 What are the requirements for awards under the program's

scholarship component under section 404E of the HEA?

(a) Amount of scholarship. (1) Except as provided in paragraph

(a)(2) of this section, the amount of a scholarship awarded under

section 404E of the HEA must be at least the lesser of--

(i) 75 percent of the average cost of attendance, as determined

under section 472 of the HEA, for in-State students in 4-year programs

of instruction at public institutions of higher education in the State;

or

(ii) The maximum Federal Pell Grant award funded for the award year

in which the scholarship will be awarded.

(2) If a student who is awarded a GEAR UP scholarship attends an

institution on a less than full-time basis during any award year, the

State or Partnership awarding the GEAR UP scholarship may reduce the

scholarship amount, but in no case shall the percentage reduction in

the scholarship be greater than the percentage reduction in tuition and

fees charged to that student.

(b) Pell Grant recipient priority. A State, or a Partnership that

chooses to participate in the scholarship component under section 404E

of the HEA in its GEAR UP project--

(1) Must award GEAR UP scholarships first to students who will

receive, or are eligible to receive, a Federal Pell Grant during the

award year in which the GEAR UP scholarship is being awarded and who

are eligible for a GEAR UP scholarship under the eligibility

requirements in section 404E of the HEA; and

(2) May, if GEAR UP scholarship funds remain after awarding

scholarships to students under paragraph (b)(1) of this section, award

GEAR UP scholarships to other eligible students (who will not receive a

Federal Pell Grant) after considering the need of those students for

GEAR UP scholarships.

(c) Continuation scholarships. A State, or a Partnership that

chooses to participate in the scholarship component in accordance with

section 404E of the HEA in its GEAR UP project, must award continuation

scholarships in successive award years to each student who received an

initial scholarship and who continues to be eligible for a scholarship.

(Authority: 20 U.S.C. 1070a-25)

Sec. 694.11 What are the disclosure requirements regarding an

institution's treatment of a GEAR UP scholarship in relation to other

student financial assistance?

(a) No disclosure. No disclosure of an institution's policy for the

treatment of a GEAR UP scholarship in relation to other student

financial assistance is necessary if the institution's policy is as

follows:

(1) Other grant assistance. A GEAR UP scholarship--

(i) Is not considered in the determination of a student's

eligibility for other grant assistance provided under title IV of the

HEA; and

(ii) Does not supplant other public or institutional gift aid that

the student would otherwise have been eligible to receive (such as

grants, scholarships, and tuition discounts) unless the conditions in

Sec. 694.11(b)(2) apply.

(2) Cost of attendance. A GEAR UP scholarship, in combination with

other student financial assistance awarded under any title IV HEA

program and any other grant or scholarship assistance, may not exceed

the student's cost of attendance.

(3) Overawards. (i) In general. If the combination of the GEAR UP

scholarship and other student financial assistance under title IV of

the HEA and any other grant or scholarship assistance exceeds the

student's cost of attendance, the institution must, before reducing

public or institutional gift aid, reduce the assistance to zero, by the

amount in excess of cost of attendance, in the following order--

(A) Loans;

(B) Need-based student employment;

(C) The GEAR UP scholarship;

(ii) Exception. The institution may reduce need-based employment

first and loans second at the election of the student.

(4) Notwithstanding paragraph (a)(3) of this section, an

institution may reduce its institutional aid before reducing a GEAR UP

scholarship only if--

(i) It determines and documents in writing that there are

exceptional circumstances related to the GEAR UP student's

institutional aid that are unique to that GEAR UP student;

(ii) It documents and maintains in the GEAR UP student's file the

modification that was made to the GEAR UP student's gift aid award

package and the reason for the modification; and

(iii) It provides written notification to the GEAR UP student of

the reason for and the specific modification that was made to the gift

aid package.

(b) Disclosure. (1) Disclosure of an institution's policy for the

treatment of a GEAR UP scholarship in relation to other student

financial assistance is required if the institution does not follow the

procedures set forth in paragraph (a) of this section.

(2) If an institution does not follow the procedures in paragraph

(a) of this section it must--

(i) Establish a policy for the treatment of GEAR UP scholarships

and inform all prospective students, as defined in Sec. 668.41 of this

chapter;

(ii) Notify the Department by September 1, 2000 that its treatment

of GEAR UP scholarships with respect to institutional gift aid is

different from the procedures in paragraph (a) of this section; and

(iii) If, after September 1, 2000, it elects to treat GEAR UP

scholarships

[[Page 71565]]

differently from the procedures in paragraph (a) of this section,

notify the Department in a timely manner of that decision.

(c) Notwithstanding the disclosure requirements with respect to

GEAR UP and its relation to other student financial assistance, an

institution must follow the procedures in paragraph (a) of this section

as they relate to title IV aid.

(Authority: 20 U.S.C. 1070a-25; 20 U.S.C. 3474)

Sec. 694.12 Under what conditions may a Partnership that does not

participate in the GEAR UP scholarship component under section 404E of

the HEA provide financial assistance for postsecondary education to

students under the GEAR UP early intervention component?

A GEAR UP Partnership that does not participate in the GEAR UP

scholarship component under section 404E of the HEA may provide

financial assistance for postsecondary education, either with funds

under this chapter, or with non-Federal funds used to comply with the

matching requirement, to students who participate in the early

intervention component of GEAR UP if--

(a) The financial assistance is directly related to, and in support

of, other activities of the Partnership under the early intervention

component of GEAR UP; and

(b) It complies with the requirements in Secs. 694.10(c) and

694.11.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)

Sec. 694.13 How does a State determine which State agency will apply

for, and administer, a State grant under this program?

The Governor of a State must designate which State agency applies

for, and administers, a State grant under GEAR UP.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)

Sec. 694.14 What requirements must be met by a Partnership or State

participating in GEAR UP with respect to 21st Century Scholarship

Certificates?

(a) A State or Partnership must provide, in accordance with

procedures the Secretary may specify, a 21st Century Scholar

Certificate from the Secretary to each student participating in the

early intervention component of its GEAR UP project.

(b) 21st Century Scholarship Certificates must be personalized and

indicate the amount of Federal financial aid for college that a student

may be eligible to receive.

(Authority: 20 U.S.C. 1070a-26)

Sec. 694.15 What requirements apply to a State that served students

under the National Early Intervention Scholarship and Partnership

program (NEISP) and that receives a GEAR UP grant?

Any State that receives a grant under this part and that served

students under the NEISP program on October 6, 1998 must continue to

provide services under this part to those students until they complete

secondary school.

(Authority: 20 U.S.C. 1070a-21)

Sec. 694.16 What priority must the Secretary establish?

For any fiscal year, the Secretary selects the following priority

for any State grant applicant that--

(a) On October 6, 1998, carried out successful educational

opportunity programs under the National Early Intervention Scholarship

and Partnership program (as that program was in effect on that date);

and

(b) Has a prior, demonstrated commitment to early intervention

leading to college access through collaboration and replication of

successful strategies.

(Authority: 20 U.S.C. 1070a-21)

Sec. 694.17 What priorities may the Secretary establish?

For any fiscal year, the Secretary may select one or more of the

following priorities:

(a) Projects by Partnerships or States that serve a substantial

number or percentage of students who reside, or attend a school, in an

Empowerment Zone, including a Supplemental Empowerment Zone, or

Enterprise Community designated by the U.S. Department of Housing and

Urban Development or the U.S. Department of Agriculture.

(b) Partnerships that establish or maintain a financial assistance

program that awards scholarships to students, either in accordance with

section 404E of the HEA, or in accordance with Sec. 694.12, to

strengthen the early intervention component of its GEAR UP project.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)

[FR Doc. 99-32918 Filed 12-20-99; 8:45 am]

BILLING CODE 4000-01-U