The Secretary amends the regulations governing the student financial assistance programs authorized under title IV of the Higher Education Act of 1965, as amended (title IV, HEA programs). These programs include the campus-based programs (Federal Perkins

[Federal Register: November 27, 1996 (Volume 61, Number 230)]

[Rules and Regulations]               

[Page 60389-60397]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr27no96-20]



[[Page 60389]]


_______________________________________________________________________


Part IV






Department of Education






_______________________________________________________________________




34 CFR Part 668, et al.




Postsecondary Education: Student Assistance General Provisions; Federal 

Perkins Loan, Federal Work-Study, Federal Supplemental and Federal Pell 

Grant; Final Rule



[[Page 60390]]




DEPARTMENT OF EDUCATION


34 CFR Parts 668, 673, 674, 675, 676, and 690


RIN 1840-AC34



Student Assistance General Provisions; General Provisions for the 

Federal Perkins Loan Program, Federal Work-Study Programs, Federal 

Supplemental Educational Opportunity Grant Program, and Federal Pell 

Grant Program


AGENCY: Department of Education.


ACTION: Final Regulations.


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


SUMMARY: The Secretary amends the regulations governing the student 

financial assistance programs authorized under title IV of the Higher 

Education Act of 1965, as amended (title IV, HEA programs). These 

programs include the campus-based programs (Federal Perkins Loan, 

Federal Work-Study (FWS), and Federal Supplemental Educational 

Opportunity Grant (FSEOG) programs and the Federal Pell Grant Program. 

These regulations, which eliminate duplicate provisions for the student 

financial assistance programs and consolidate common provisions for the 

campus-based programs, are part of a planned series of regulatory 

reform and relief measures for the title IV, HEA programs. The 

Secretary made these changes in response to the President's Regulatory 

Reform Initiative.


EFFECTIVE DATE: These regulations take effect on July 1, 1997.


FOR FURTHER INFORMATION CONTACT: Nancy Adams, U.S. Department of 

Education, 600 Independence Avenue SW, Regional Office Building 3, Room 

3053, Washington, DC 20202-5447. Telephone: (202) 708-4690.

    1. For the Federal Perkins Loan Program: Gail H. McLarnon, U.S. 

Department of Education, 600 Independence Avenue, SW, Regional Office 

Building 3, Room 3053, Washington, DC 20202-5447. Telephone: (202) 708-

8242.

    2. For the FWS and FSEOG programs: Richard P. Coppage, U.S. 

Department of Education, 600 Independence Avenue, SW, Regional Office 

Building 3, Room 3053, Washington, DC 20202-5447. Telephone: (202) 708-

4690.

    3. For the Federal Pell Grant Program: Daniel J. Sullivan, U.S. 

Department of Education, 600 Independence Avenue, SW, Regional Office 

Building 3, Room 3053, Washington, DC 20202-5447. Telephone: (202) 708-

4607.

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

may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 

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


SUPPLEMENTARY INFORMATION: On March 4, 1995, the President directed 

every Federal agency to review its rules and procedures to reduce 

regulatory and paperwork burden and directed Federal agencies to 

eliminate or revise those regulations that are outdated or otherwise in 

need of reform. Responding to the President's Regulatory Reform 

Initiative, the Secretary announced plans to eliminate or revise 93 

percent of the Department's regulations. To launch the Department's 

reinvention effort, the Secretary published a notice in the May 23, 

1995 Federal Register (60 FR 27223-27226), eliminating more than 30 

percent of the Department's regulations, primarily in areas not related 

to student financial assistance.

    The Secretary is conducting a page-by-page review of all student 

financial assistance regulations to identify those that should be 

eliminated or improved. The Secretary is also considering developing 

proposals for statutory amendments to eliminate unnecessary 

administrative burden.

    As part of his response to the President's Regulatory Reinvention 

Initiative, on September 19, 1996, the Secretary published a notice of 

proposed rulemaking (NPRM) for parts 668, 673, 674, 675, 676, and 690 

in the Federal Register (61 FR 49389-49396). The NPRM included a 

discussion of the proposed changes that will not be repeated here. The 

following list summarizes those changes and identifies the pages of the 

preamble to the NPRM on which the discussion can be found.


PART 673-- GENERAL PROVISIONS FOR THE FEDERAL PERKINS LOAN PROGRAM, 

FEDERAL WORK-STUDY PROGRAM, AND FEDERAL SUPPLEMENTAL EDUCATIONAL 

OPPORTUNITY GRANT PROGRAM


Subpart A--Purpose and Scope


    The Secretary proposed to create a new part 673 of 34 CFR to 

consolidate the common provisions of the Federal Perkins Loan Program--

part 674, the FWS Program--part 675, and the FSEOG Program--part 676 of 

program regulations (page 49390).


Subpart B--General Provisions for the Federal Perkins Loan, FWS, and 

FSEOG Programs


Sections 674.3, 675.3, and 676.3  Application

    The Secretary proposed to delete duplicate provisions from parts 

674, 675, and 676 and consolidate the application procedures into the 

new part 673 under Sec. 673.3 (page 49390).

Sections 674.4, 675.4, and 676.4  Allocation and Reallocation

    The Secretary proposed to delete duplicate provisions from parts 

674, 675, and 676 and consolidate the allocation and reallocation 

provisions into the new part 673 under Sec. 673.4 (page 49390).

Sections 674.14, 675.14, and 676.14  Overaward

    The Secretary proposed to delete duplicate provisions from parts 

674, 675, and 676 and consolidate the overaward provisions for the 

campus-based programs into the new part 673 under Sec. 673.5 (page 

49390-49391).

Sections 674.15, 675.15, 676.15  Coordination with BIA Grants

    The Secretary proposed to delete duplicate provisions from parts 

674, 675, and 676 and consolidate the provisions into the new part 673 

under Sec. 673.6 (page 49391).

Sections 674.18, 675.18, and 676.18 Use of Funds

    The Secretary proposed to delete duplicate formulas and the 

``allowable use'' provisions from parts 674, 675, and 676 and present 

them in the new part 673 under Sec. 673.7 with a new heading of 

Administrative cost allowance (page 49391).


Federal Pell Grant Program


    There were no major proposed changes to the Federal Pell Grant 

Program. However, the Secretary proposed some minor technical changes 

as described in the following paragraphs.

Section 690.2  General Definitions

    The Secretary proposed to clarify the definition of ``Annual 

award'' in Sec. 690.2(c) and to remove the definition of ``Comparable 

State income tax return'' because it is obsolete (page 49391).


Subpart B--Application Procedures for Determining Expected Family 

Contribution (EFC).


Section 690.14  Request for Recalculation of Expected Family 

Contribution Because of Clerical or Arithmetic Error

    The Secretary proposed to amend Sec. 690.14 by revising the heading 

of the section and by clarifying paragraph (b)(1) to provide an 

additional reason for recalculating a student's EFC that was


[[Page 60391]]


inadvertently left out of earlier regulations (page 49391).


Subpart F--Determination of Federal Pell Grant Awards.


Section 690.61  Submission Process and Deadline for a Student Aid 

Report or Institutional Student Information Record

    The Secretary proposed to amend Sec. 690.61(b)(2) by deleting the 

June 30 deadline date for a student to submit the required documents. 

Due to faster electronic data processing, a student now has an extended 

period of time to submit the required documents (page 49391).


Subpart G--Administration of Grant Payments.


Section 690.75  Determination of Eligibility for Payment

    The Secretary proposed to revise Sec. 690.75(e) by deleting ``the 

family contribution amount of $3,000'' and adding ``family contribution 

amount at least equal to the maximum authorized award amount for the 

award year'' to reflect the changes to the maximum award amount for 

each award year (page 49391).

Section 690.78  Method of Disbursement--by Check or Credit to a 

Student's Account.

    The Secretary proposed to amend Sec. 690.78(c)(2), (c)(3), and 

(c)(4) to allow a student 20 days instead of 15 days after the 

student's enrollment ends in an award year to pick up a Pell Grant 

disbursement for that award year (page 49391).

Section 690.81  Fiscal Control and Fund Accounting Procedures

    The Secretary proposed to delete Sec. 690.81(c) because the 

provisions contained in that paragraph duplicate provisions in 

Sec. 668.161(b) of the Student Assistance General Provisions 

regulations, which cover all of the title IV programs (page 49391).


Goals 2000: Educate America Act


    The Goals 2000: Educate America Act (Goals 2000) focuses the 

Nation's education reform efforts on the eight National Education Goals 

and provides a framework for meeting them. Goals 2000 promotes new 

partnerships to strengthen schools and expands the Department's 

capacities for helping communities to exchange ideas and obtain 

information needed to achieve the goals.

    These regulations address the National Education Goals that call 

for increasing the rate at which students graduate from high school and 

pursue high quality postsecondary education and for supporting life-

long learning.


Analysis of Comments and Changes


    In response to the Secretary's invitation in the NPRM several 

parties submitted comments on the proposed regulations. An analysis of 

the comments and of the changes in the regulations since the 

publication of the NPRM follows. Please note that this section 

addresses only the proposed regulations on which substantive comments 

were received or regulations that have been substantively changed as a 

result of the Secretary's review.

    Technical and other minor changes--and suggested changes the 

Secretary is not legally authorized to make under the applicable 

statutory authority--are not addressed.


Part 673


    Comments: Seven commenters expressed support for the Secretary's 

efforts to eliminate duplicate provisions and to consolidate common 

procedures in the campus-based program regulations into one section.

    Discussion: The Secretary is encouraged by the expressions of 

support from the public for the activities that are part of the 

President's Regulatory Reinvention Initiative.

    Changes: None.

Section 673.1  Purpose

    Comments: One organization recommended that the Secretary revise 

the definition of the Federal Perkins Loan Program in paragraph (a) to 

refer to neediest undergraduate and graduate students instead of needy 

undergraduate and graduate students.

    Discussion: The Secretary believes that the definition is 

consistent with Secs. 461(a) and 463(a)(9) of the HEA. Section 674.10, 

which describes the selection of students for loans, reflects these 

statutory requirements while giving institutions the flexibility to 

define exceptional need within the unique context of their 

postsecondary population. It is the Secretary's intent to provide 

flexibility and reduce burden for institutions, not to add new 

restrictions.

    Changes: None.

Section 673.5  Overaward

    Comments: One commenter felt strongly that overawards in the 

Federal Perkins Loan Program should be treated the same as overawards 

in the Federal Family Education Loan (FFEL) Program and the William D. 

Ford Federal Direct Loan Program. This commenter believes that 

requiring students to repay overawards immediately rather than adding 

the overaward to the loan balance to be repaid under standard loan 

repayment terms is burdensome and inconsistent with the treatment of 

overawards in the FFEL and Direct Loan programs.

    Discussion: The Secretary recognizes that the treatment of 

overawards in the Federal Perkins Loan Program is different from the 

treatment of overawards in the FFEL and Direct Loan programs. However, 

the Federal Perkins Loan Program is unique in that loans made under 

this program are made from a revolving fund that depends on 

contributions from a Federal Capital Contribution, the institutions own 

matching funds, and the repayment of principal and interest back into 

the fund from Federal Perkins Loan borrowers. The immediate repayment 

of overawards ensures that the Federal Perkins Loan fund is not rapidly 

depleted and that funds are available for future Federal Perkins Loan 

borrowers.

    Changes: None.

Section 673.7  Administrative Cost Allowance

    Comment: One organization commented that Sec. 673.7(b) is an area 

in which institutions should be afforded flexibility in using their own 

procedures. Institutions vary on the time-frames within which they book 

entries on administrative cost allowances (ACA) and, therefore, should 

be given extra time to reflect these bookings in their records. The 

commenter believes that a six-month window of time after the award year 

ends to reflect adjustments and additional entries of ACA against their 

Perkins funds would provide institutions flexibility to use their own 

procedures.

    Discussion: Neither the requirement that institutions charge their 

ACA against program expenditures made during an award year, nor the 

requirement that institutions charge their ACA during the same award 

year in which the expenditures for these costs were made under the 

Federal Perkins Loan Program is a new policy.

    These requirements were previously contained in Sec. 674.18, 

675.18, and 676.18. The Secretary believes allowing institutions that 

administer the campus-based programs to report expenditures during a 

six-month window after an award year has ended would unnecessarily 

complicate the program's financial management and accounting 

procedures. However, adjustments may be made during the FISAP editing 

process, as needed.

    Changes: None.


[[Page 60392]]


Federal Pell Grant Program


Section 690.78  Method of Disbursement--by Check or Credit to a 

Student's Account

    Comments: One commenter recommended that the Secretary move the 

treatment of what the commenter described as ``late disbursements'' 

from Sec. 690.78(c)(1) through (c)(5) to Sec. 668.164 of the General 

Provisions regulations. The commenter also believes that 

Secs. 690.78(c)(2), (c)(3), and (c)(4) are in conflict with the 

proposed late disbursement provisions in Sec. 668.164(g).

    Discussion: The Secretary does not believe that Sec. 690.78 (c)(2), 

(c)(3), and (c)(4) are in conflict with the late disbursement 

provisions in Sec. 668.164(g). The late disbursement provisions in 

Sec. 668.164(g) apply only to ineligible students who are ineligible 

solely because they withdraw or are no longer enrolled at an 

institution. The provisions in Sec. 690.78(c)(2), (c)(3), and (c)(4) 

deal with eligible students as well as ineligible students. The latter 

provisions also relate to the ability of a student to claim a Federal 

Pell Grant award rather than the making of late disbursements to 

students. However, the Secretary agrees with the commenter that it 

would be useful in Sec. 690.78(c) to reference the late disbursement 

provisions in Sec. 668.164.

    Changes: Section 690.78(c)(6) is revised to reference the late 

disbursement provisions in Sec. 668.164.


Additional Changes


Section 675.26  FWS Federal Share Limitations

    The Secretary is providing for an additional waiver of the FWS 

institutional-share requirement in Sec. 675.26. The Secretary will 

authorize a Federal share of 100 percent of the compensation earned by 

a student during an award year if all of the following criteria are 

met--

    1. The work performed by the student is for the institution itself, 

for a Federal, State, or local public agency, or for a private 

nonprofit organization; and

    2. The student is employed as a reading tutor for children who are 

in preschool through elementary school.

    This regulatory change will provide an institution with the 

flexibility needed to respond to the President's ``America Reads'' 

Challenge, which will mobilize resources to ensure that all children 

can read independently by the end of the third grade. Forty percent of 

children are not reading well enough by the end of third grade. 

Children who cannot read early and well are hampered at the very start 

of their education and for the rest of their lives. This effort to 

tutor young children in reading can unlock the children's potential to 

learn and empower them throughout their lives. The investment in our 

youth is an investment in this country's future.

    The Secretary strongly encourages all institutions to place FWS 

students as reading tutors for children. The placement of students in 

FWS jobs as reading tutors for children is an important way for 

institutions to meet the community service expenditure requirement 

under the FWS Program, serve the needs of the community, and give the 

FWS students a rewarding and enriching experience. The programs that 

provide this reading tutoring for children may take place during the 

children's school hours; or after school, on weekends, or in the 

summer, in order to extend the learning time. The institution may 

construct its own reading tutor program or become involved with 

existing community programs. The new waiver of the FWS institutional-

share requirement provided in Sec. 675.26 does not require the 

institution to make a request for the waiver. Also, the institution has 

the option of continuing to provide an institutional share and 

determining the amount of that share.

    While institutions will not receive increased FWS allocations for 

this initiative and will be expected to meet the 100 percent Federal 

share from their normal FWS allocations, the Secretary notes that many 

institutions will receive substantially increased FWS allocations for 

the 1997-98 award year due to the higher FWS appropriations for FY 97. 

The Secretary believes that these increased FWS allocations will enable 

many institutions to support this initiative actively by providing 100 

percent Federal share funding for the employment of FWS students as 

reading tutors.

    It is also important to note that the Secretary continues the 

current exception that authorizes a Federal share of 100 percent of the 

compensation earned by students enrolled at institutions designated as 

an eligible institution under the Strengthening Institutions Program, 

the Strengthening Historically Black Colleges and Universities Program, 

or the Strengthening Historically Black Graduate Institutions Program.


Executive Order 12866


1. Assessment of Costs and Benefits


    These final regulations have been reviewed in accordance with 

Executive Order 12866. Under the terms of the order the Secretary has 

assessed the potential costs and benefits of this regulatory action.

    The potential costs associated with the final regulations are those 

resulting from statutory requirements and those determined by the 

Secretary to be necessary for administering this program effectively 

and efficiently.

    Thus, in assessing the potential costs and benefits--both 

quantitative and qualitative--of these final regulations, the Secretary 

has determined that the benefits of the final regulations justify the 

costs.

    Potential costs and benefits of the final regulations are discussed 

elsewhere in this preamble.


Paperwork Reduction Act of 1995


    These regulations have been examined under the Paperwork Reduction 

Act of 1995 and have been found to contain no information collection 

requirements.


Waiver of Proposed Rulemaking


    In accordance with section 437 of the General Education Provisions 

Act (20 U.S.C. 1232) and the Administrative Procedure Act (5 U.S.C. 

553), it is the practice of the Secretary to offer interested parties 

the opportunity to comment on proposed regulations. However, revising 

Sec. 675.26(d) will increase institutional flexibility and help to meet 

an important educational need for reading tutors without imposing any 

burden on the affected parties. The Secretary is specifically 

authorized under section 443(b)(5) of the Higher Education Act of 1965, 

as amended (42 U.S.C. 2753(b)(5)) to determine, through the 

promulgation of regulations, that the Federal share of compensation for 

FWS students may exceed 75 percent if required in furtherance of the 

purposes of the program. The Secretary has made such a determination in 

this case. For these reasons, the Secretary has determined, pursuant to 

5 U.S.C. 553(b)(B), that public comment on the amendment to 

Sec. 675.26(d) is unnecessary and contrary to the public interest.


Intergovernmental Review


    Some of these programs are subject to the requirements of Executive 

Order 12372 and the regulations in 34 CFR Part 79. The objective of the 

Executive order is to foster an intergovernmental partnership and a 

strengthened federalism by relying on processes developed by State and 

local governments for coordination and review of proposed Federal 

financial assistance.


[[Page 60393]]


    In accordance with the order, this document is intended to provide 

early notification of the Department's specific plans and actions for 

these programs.

    The Federal Perkins Loan, Federal Work-Study, and Federal Pell 

Grant programs are not subject to the requirements of Executive Order 

12372 and the regulations in 34 CFR Part 79.


Assessment of Educational Impact


    In the NPRM, the Secretary requested comments on whether the 

proposed regulations would require transmission of information that is 

being gathered by or is available from any other agency or authority of 

the United States.

    Based on the response to the proposed regulations and on its own 

review, the Department has determined that the regulations in this 

document do not require transmission of information that is being 

gathered by or is available from any other agency or authority of the 

United States.


List of Subjects


34 CFR Part 668


    Administrative practice and procedure, Colleges and universities, 

Consumer protection, Loan programs--education, Grant programs--

education, Student aid.


34 CFR Part 673


    Loan programs--education, Grant programs--education, Student aid.


34 CFR Part 674


    Loan programs--education, Student aid.


34 CFR Part 675


    Loan programs--education, Student aid.


34 CFR Part 676


    Grant programs--education, Student aid.


34 CFR 690


    Grant programs--education, Student aid.


(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal 

Supplemental Educational Opportunity Grant Program; 84.033 Federal 

Work-Study Program; 84.038 Federal Perkins Loan Program; and 84.063 

Federal Pell Grant Program.)


    Dated: November 21, 1996.

Richard W. Riley,

Secretary of Education.

    The Secretary amends chapter VI of Title 34 of the Code of Federal 

Regulations as follows:

    1. A new part 673 is added to read as follows:


PART 673--GENERAL PROVISIONS FOR THE FEDERAL PERKINS LOAN PROGRAM, 

FEDERAL WORK-STUDY PROGRAM, AND FEDERAL SUPPLEMENTAL EDUCATIONAL 

OPPORTUNITY GRANT PROGRAM


Subpart A--Purpose and Scope


Sec.

673.1  Purpose.

673.2  Applicability of regulations.


Subpart B--General Provisions for the Federal Perkins Loan, FWS, and 

FSEOG programs


673.3  Application.

673.4  Allocation and reallocation.

673.5  Overaward.

673.6  Coordination with BIA grants.

673.7  Administrative cost allowance.


    Authority: 20 U.S.C. 421-429, 1070b-1070b-3, and 1087aa-1087ii; 

42 U.S.C. 2751-2756b, unless otherwise noted.


Subpart A--Purpose and Scope



Sec. 673.1  Purpose.


    This part governs the following three programs authorized by title 

IV of the Higher Education Act of 1965, as amended (HEA) that 

participating institutions administer:

    (a) The Federal Perkins Loan Program, which encourages the making 

of loans by institutions to needy undergraduate and graduate students 

to help pay for their cost of education.

    (b) The Federal Work-Study (FWS) Program, which encourages the 

part-time employment of undergraduate and graduate students who need 

the income to help pay for their cost of education and which encourages 

FWS recipients to participate in community service activities.

    (c) The Federal Supplemental Educational Opportunity Grant (FSEOG) 

Program, which encourages the providing of grants to exceptionally 

needy undergraduate students to help pay for their cost of education.


(Authority: 20 U.S.C. 421-429, 1070b-1070b-3, and 1087aa-1087ii; 42 

U.S.C. 2751-2756b)



Sec. 673.2  Applicability of regulations.


    The participating institution is responsible for administering 

these programs in accordance with the regulations in this part and the 

applicable program regulations in 34 CFR parts 674, 675, and 676.


(Authority: 20 U.S.C. 421-429, 1070b-1070b-3, and 1087aa-1087ii; 42 

U.S.C. 2751-2756b)


Subpart B--General Provisions for the Federal Perkins Loan, FWS, and 

FSEOG programs



Sec. 673.3  Application.


    (a) To participate in the Federal Perkins Loan, FWS, or FSEOG 

programs, an institution shall file an application before the deadline 

date established annually by the Secretary through publication of a 

notice in the Federal Register.

    (b) The application for the Federal Perkins Loan, FWS, and FSEOG 

programs must be on a form approved by the Secretary and must contain 

the information needed by the Secretary to determine the institution's 

allocation or reallocation of funds under sections 462, 442, and 413D 

of the HEA, respectively.


(Authority: 20 U.S.C. 1070b-3 and 1087bb; 42 U.S.C. 2752)



Sec. 673.4  Allocation and reallocation.


    (a) Allocation and reallocation of Federal Perkins Loan funds. (1) 

The Secretary allocates Federal capital contributions to institutions 

participating in the Federal Perkins Loan Program in accordance with 

section 462 of the HEA.

    (2) The Secretary reallocates Federal capital contributions to 

institutions participating in the Federal Perkins Loan Program by--

    (i) Reallocating 80 percent of the total funds available in 

accordance with section 462(j) of the HEA; and

    (ii) Reallocating 20 percent of the total funds available in a 

manner that best carries out the purposes of the Federal Perkins Loan 

Program.

    (b) Allocation and reallocation of FWS funds. The Secretary 

allocates and reallocates funds to institutions participating in the 

FWS Program in accordance with section 442 of the HEA.

    (c) Allocation and reallocation of FSEOG funds. (1) The Secretary 

allocates funds to institutions participating in the FSEOG program in 

accordance with section 413D of the HEA.

    (2) The Secretary reallocates funds to institutions participating 

in the FSEOG Program in a manner that best carries out the purposes of 

the FSEOG Program.

    (d) General allocation and reallocation.--(1) Categories. As used 

in section 462 (Federal Perkins Loan Program), section 442 (FWS 

Program), and section 413D (FSEOG Program) of the HEA, ``Eligible 

institutions offering comparable programs of instruction'' means 

institutions that are being compared with the applicant institution and 

that fall within one of the following six categories:


[[Page 60394]]


    (i) Cosmetology.

    (ii) Business.

    (iii) Trade/Technical.

    (iv) Art Schools.

    (v) Other Proprietary Institutions.

    (vi) Non-Proprietary Institutions.

    (2) Payments to institutions. The Secretary allocates funds for a 

specific period of time. The Secretary provides an institution its 

allocation in accordance with the payment methods described in 34 CFR 

668.162.

    (3) Unexpended funds. (i) If an institution returns more than 10 

percent of its Federal Perkins Loan, FWS, or FSEOG allocation for an 

award year, the Secretary reduces the institution's allocation for that 

program for the second succeeding award year by the dollar amount 

returned.

    (ii) The Secretary may waive the provision of paragraph (d)(3)(i) 

of this section for a specific institution if the Secretary finds that 

enforcement would be contrary to the interests of the program.

    (iii) The Secretary considers enforcement of paragraph (d)(3)(i) of 

this section to be contrary to the interest of the program only if the 

institution returns more than 10 percent of its allocation due to 

circumstances beyond the institution's control that are not expected to 

recur.

    (e) Anticipated collections of Federal Perkins Loan funds.

    (1) For the purposes of calculating an institution's share of any 

excess allocation of Federal Perkins Loan funds, an institution's 

anticipated collections are equal to the amount that was collected by 

the institution during the second year preceding the beginning of the 

award period multiplied by 1.21.

    (2) The Secretary may waive the provision of paragraph (e)(1) of 

this section for any institution that has a cohort default rate that 

does not exceed 7.5 percent.

    (f) Authority to expend FWS funds. Except as specifically provided 

in 34 CFR 675.18(b), (c), and (f), an institution may not use funds 

allocated or reallocated for an award year--

    (1) To meet FWS wage obligations incurred with regard to an award 

of FWS employment made for any other award year; or

    (2) To satisfy any other obligation incurred after the end of the 

designated award year.

    (g) Authority to expend FSEOG funds. Except as specifically 

provided in 34 CFR 668.164(g), an institution shall not use funds 

allocated or reallocated for an award year--

    (1) To make FSEOG disbursements to students in any other award 

year; or

    (2) To satisfy any other obligation incurred after the end of the 

designated award year.


(Authority: 20 U.S.C. 1070b-3 and 1087bb, 42 U.S.C. 2752)



Sec. 673.5  Overaward.


    (a) Overaward prohibited.--(1) Federal Perkins Loan and FSEOG 

Programs. An institution may only award or disburse a Federal Perkins 

loan or an FSEOG to a student if that loan or the FSEOG, combined with 

the other resources the student receives, does not exceed the student's 

financial need.

    (2) FWS Program. An institution may only award FWS employment to a 

student if the award, combined with the other resources the student 

receives, does not exceed the student's financial need.

    (b) Awarding and disbursement. (1) When awarding and disbursing a 

Federal Perkins loan or an FSEOG or awarding FWS employment to a 

student, the institution shall take into account those resources it--

    (i) Can reasonably anticipate at the time it awards Federal Perkins 

Loan funds, an FSEOG, or FWS funds to the student;

    (ii) Makes available to its students; or

    (iii) Otherwise knows about.

    (2) If a student receives resources at any time during the award 

period that were not considered in calculating the Federal Perkins Loan 

amount or the FWS or FSEOG award, and the total resources including the 

loan, the FSEOG, or the prospective FWS wages exceed the student's 

need, the overaward is the amount that exceeds need.

    (c) Resources. (1) Except as provided in paragraph (c)(2) of this 

section, the Secretary considers that ``resources'' include, but are 

not limited to, any--

    (i) Funds a student is entitled to receive from a Federal Pell 

Grant;

    (ii) William D. Ford Federal Direct Loans;

    (iii) Federal Family Education Loans;

    (iv) Long-term loans, including Federal Perkins loans made by the 

institution;

    (v) Grants, including FSEOGs, State grants, and ROTC subsistence 

allowances;

    (vi) Scholarships, including athletic scholarships and ROTC 

scholarships;

    (vii) Waivers of tuition and fees;

    (viii) Fellowships or assistantships;

    (ix) Veterans benefits;

    (x) Net earnings from need-based employment; and

    (xi) Insurance programs for the student's education.

    (2) The Secretary does not consider as a resource--

    (i) Any portion of the resources described in paragraph (c)(1) of 

this section that are included in the calculation of the student's 

expected family contribution (EFC); and

    (ii) Earnings from non-need-based employment.

    (3) The institution may treat a Federal Direct PLUS Loan, a Federal 

PLUS Loan, a Federal Direct Unsubsidized Stafford/Ford Loan, a Federal 

Unsubsidized Stafford Loan, or a State-sponsored or private loan as a 

substitute for a student's EFC. However, if the sum of the loan amounts 

received exceeds the student's EFC, the excess is a resource.

    (d) Treatment of resources in excess of need--General. An 

institution shall take the following steps if it learns that a student 

has received additional resources not included in the calculation of 

Federal Perkins Loan, FWS, or FSEOG eligibility that would result in 

the student's total resources exceeding his or her financial need by 

more than $300:

    (1) The institution shall decide whether the student has increased 

financial need that was unanticipated when it awarded financial aid to 

the student. If the student demonstrates increased financial need and 

the total resources do not exceed this increased need by more than 

$300, no further action is necessary.

    (2) If the student's total resources still exceed his or her need 

by more than $300, as recalculated pursuant to paragraph (d)(1) of this 

section, the institution shall cancel any undisbursed loan or grant 

(other than a Federal Pell Grant).

    (3) Federal Perkins loan and FSEOG overpayment. If the student's 

total resources still exceed his or her need by more than $300, after 

the institution takes the steps required in paragraphs (d)(1) and (2) 

of this section, the institution shall consider the amount by which the 

resources exceed the student's financial need by more than $300 as an 

overpayment.

    (e) Termination of FWS employment. (1) An institution may fund a 

student's FWS employment with FWS funds only until the amount of the 

FWS award has been earned or until the student's financial need, as 

recalculated under paragraph (d)(1) of this section, is met.

     (2) Notwithstanding the provisions of paragraph (e)(1) of this 

section, an institution may provide additional FWS funding to a student 

whose need has been met until that student's cumulative earnings from 

all need-based employment occurring subsequent to the time his or her 

financial need has been met exceed $300.


[[Page 60395]]


    (f) Liability for and recovery of Federal Perkins loans and FSEOG 

overpayments. (1) A student is liable for any Federal Perkins loan or 

FSEOG overpayment made to him or her.

    (2) The institution is also liable for a Federal Perkins loan or 

FSEOG overpayment if the overpayment occurred because the institution 

failed to follow the procedures in this part, 34 CFR Part 668, 34 CFR 

Part 674, or 34 CFR Part 676. The institution shall restore an amount 

equal to the overpayment and any administrative cost allowance claimed 

on that amount to its loan fund for a Federal Perkins loan overpayment 

or to its FSEOG account for an FSEOG overpayment if it cannot collect 

the overpayment from the student.

    (3) If an institution makes a Federal Perkins loan or FSEOG 

overpayment for which it is not liable, it shall help the Secretary 

recover the overpayment by promptly attempting to recover the 

overpayment by sending a written notice to the student requesting 

repayment of the overawarded funds. The notice must state that failure 

to make that repayment or to make arrangements, satisfactory to the 

holder of the overpayment debt, to pay the overpayment renders the 

student ineligible for further title IV aid until final resolution of 

the overpayment.

    (4) If a student objects to the institution's Federal Perkins loan 

or FSEOG overpayment determination on the grounds that it is erroneous, 

the institution shall consider any information provided by the student 

and determine whether the objection is warranted.

    (5) Referral of FSEOG overpayments. (i) If the student fails to 

repay an FSEOG overpayment or make arrangements, satisfactory to the 

holder of the overpayment debt, to pay the FSEOG overpayment after 

taking the action required by paragraph (f)(3) and, if applicable, 

paragraph (f)(4) of this section, and the Federal share of the FSEOG 

overpayment is $25.00 or more, the institution shall notify the 

Secretary, identifying the Federal share of the FSEOG overpayment, the 

student's name, most recent address, telephone number, and any other 

relevant information. After notifying the Secretary under this section, 

the institution need make no further recovery efforts of FSEOG 

overpayments.

    (ii) If an institution fails in its attempt to collect the 

overpayment and the Federal share of the FSEOG overpayment is less than 

$25.00, the institution need make no further recovery efforts of the 

FSEOG overpayment.


(Approved by the Office of Management and Budget under control 

number 1840-0535)


(Authority: 20 U.S.C. 1070b-1, 1087dd, and 1087hh, 42 U.S.C. 2753)



Sec. 673.6  Coordination with BIA grants.


    (a) Coordination of BIA grants with Federal Perkins loans, FWS 

awards, or FSEOGs. To determine the amount of a Federal Perkins loan, 

FWS compensation, or an FSEOG for a student who is also eligible for a 

Bureau of Indian Affairs (BIA) education grant, an institution shall 

prepare a package of student aid--

    (1) From resources other than the BIA education grant the student 

has received or is expected to receive; and

    (2) That is consistent in type and amount with packages prepared 

for students in similar circumstances who are not eligible for a BIA 

education grant.

    (b)(1) The BIA education grant, whether received by the student 

before or after the preparation of the student aid package, supplements 

the student aid package specified in paragraph (a) of this section.

    (2) No adjustment may be made to the student aid package as long as 

the total of the package and the BIA education grant is less than the 

institution's determination of that student's financial need.

    (c)(1) If the BIA education grant, when combined with other aid in 

the package, exceeds the student's need, the excess must be deducted 

from the other assistance (except for Federal Pell Grants), not from 

the BIA education grant.

    (2) The institution shall deduct the excess in the following 

sequence: loans, work-study awards, and grants other than Federal Pell 

Grants. However, the institution may change the sequence if requested 

to do so by a student and the institution believes the change benefits 

the student.

    (d) To determine the financial need of a student who is also 

eligible for a BIA education grant, a financial aid administrator is 

encouraged to consult with area officials in charge of BIA 

postsecondary financial aid.


(Authority: 20 U.S.C. 1070b-1 and 1087dd; 42 U.S.C. 2753)



Sec. 673.7  Administrative cost allowance.


    (a) An institution participating in the Federal Perkins Loan, FWS, 

or FSEOG programs is entitled to an administrative cost allowance for 

an award year if it advances funds under the Federal Perkins Loan 

Program, provides FWS employment, or awards grants under the FSEOG 

Program to students in that year.

    (b) An institution may charge the administrative cost allowance 

calculated in accordance with paragraph (c) of this section for an 

award year against-(1) The Federal Perkins Loan Fund, if the 

institution advances funds under the Federal Perkins Loan Program to 

students in that award year;

    (2) The FWS allocation, if the institution provides FWS employment 

to students in that award year; and

    (3) The FSEOG allocation, if the institution awards grants to 

students under the FSEOG program in that award year.

    (c) For any award year, the amount of the administrative costs 

allowance equals--

    (1) Five percent of the first $2,750,000 of the institution's total 

expenditures to students in that award year under the FWS, FSEOG, and 

the Federal Perkins Loan programs; plus

    (2) Four percent of its expenditures to students that are greater 

than $2,750,000 but less than $5,500,000; plus

    (3) Three percent of its expenditures to students that are 

$5,500,000 or more.

    (d) The institution shall not include, when calculating the 

allowance in paragraph (c) of this section, the amount of loans made 

under the Federal Perkins Loan Program that it assigns during the award 

year to the Secretary under section 463(a)(6) of the HEA.

    (e) An institution shall use its administrative costs allowance to 

offset its cost of administering the Federal Pell Grant, FWS, FSEOG, 

and Federal Perkins Loan programs. Administrative costs also include 

the expenses incurred for carrying out the student consumer information 

services requirements of Subpart D of the Student Assistance General 

Provisions regulations, 34 CFR Part 668.

    (f) An institution may use up to 10 percent of the administrative 

costs allowance, as calculated under paragraph (c) of this section, 

that is attributable to the institution's expenditures under the FWS 

program to pay the administrative costs of conducting its program of 

community service. These costs may include the costs of--

    (1) Developing mechanisms to assure the academic quality of a 

student's experience;

    (2) Assuring student access to educational resources, expertise, 

and supervision necessary to achieve community service objectives; and

    (3) Collaborating with public and private nonprofit agencies and 

programs assisted under the National and Community Service Act of 1990 

in the


[[Page 60396]]


planning, development, and administration of these programs.

    (g) If an institution charges any administrative cost allowance 

against its Federal Perkins Loan Fund, it must charge these costs 

during the same award year in which the expenditures for these costs 

were made.


(Authority: 20 U.S.C. 1070b-2, 1087cc, and 1096, 42 U.S.C. 2753)


PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS


    2. The authority citation for part 668 continues to read as 

follows:


    Authority: 20 U.S.C. 1085, 1088, 1091, 1092, 1094, 1099c, and 

1141, unless otherwise noted.



Sec. 668.1  [Amended]


    3. Section 668.1, paragraph (c)(4) is amended by adding ``673 and'' 

before ``676'' and adding an ``s'' to the word ``part''; paragraph 

(c)(10) is amended by adding ``673 and'' before ``675'' and adding an 

``s'' to the word ``part''; and paragraph (c)(12) is amended by adding 

``673 and'' before ``674'' and adding an ``s'' to the word ``part''.



Sec. 668.2  [Amended]


    4. Section 668.2, in paragraph (b) amend the definition of 

``Campus-based programs'' in paragraph (1) by adding ``673 and'' before 

``674'' and adding an ``s'' to the word ``part''; in paragraph (2) add 

``673 and'' before ``675'' and add an ``s'' to the word ``part''; and 

in paragraph (3) add ``673 and'' before ``676'' and add an ``s'' to the 

word ``part''.



Sec. 668.22  [Amended]


    5. Section 668.22, paragraph (g)(3)(i) is amended by removing 

``674, 675, 676,''.


PART 674--FEDERAL PERKINS LOAN PROGRAM


    6. The authority citation for part 674 continues to read as 

follows:


    Authority: 20 U.S.C. 1087aa-1087hh and 20 U.S.C. 421-429, unless 

otherwise noted.



Sec. 674.3  [Removed]


    7. Section 674.3 is removed and reserved.



Sec. 674.4  [Removed]


    8. Section 674.4 is removed and reserved.



Sec. 674.8  [Amended]


    9. Section 674.8 is amended by removing in paragraph (b)(2), 

``Sec. 674.18(b)'' and adding in its place ``34 CFR 673.7''.



Sec. 674.14  [Removed]


    10. Section 674.14 is removed and reserved.



Sec. 674.15  [Removed]


    11. Section 674.15 is removed and reserved.



Sec. 674.18  [Amended]


    12. Section 674.18 is amended by removing paragraph (b) and by 

redesignating paragraph (c) as paragraph (b).


PART 675--FEDERAL WORK-STUDY PROGRAM


    13. The authority citation for part 675 continues to read as 

follows:


    Authority: 42 U.S.C. 2751-2756b, unless otherwise noted.



Sec. 675.3  [Removed]


    14. Section 675.3 is removed and reserved.



Sec. 675.4  [Removed]


    15. Section 675.4 is removed and reserved.



Sec. 675.14  [Removed]


    16. Section 675.14 is removed and reserved.



Sec. 675.15  [Removed]


    17. Section 675.15 is removed and reserved.



Sec. 675.18  [Amended]


    18. Section 675.18 is amended by removing paragraph (b) and by 

redesignating paragraphs (c), (d), (e), (f), (g), and (h) as paragraphs 

(b), (c), (d), (e), (f), and (g), respectively.

    19. Section 675.26 is amended by revising paragraph (d) to read as 

follows:



Sec. 675.26  FWS Federal Share Limitations.


* * * * *

    (d) For each award year, the Secretary authorizes a Federal share 

of 100 percent of the compensation earned by a student under this part 

if the work performed by the student is for the institution itself, for 

a Federal, State or local public agency, or for a private nonprofit 

organization, and

    (1) The institution in which the student is enrolled--

    (i) Is designated as an eligible institution under the 

Strengthening Institutions program (34 CFR part 607), the Strengthening 

Historically Black Colleges and Universities program (34 CFR part 608), 

or the Strengthening Historically Black Graduate Institutions program 

(34 CFR part 609); and

    (ii) Requests that increased Federal share as part of its regular 

FWS funding application for that year; or

    (2) The student is employed as a reading tutor for children who are 

in preschool through elementary school.



Sec. 675.49  [Amended]


    20. Section 675.49 is amended by adding the words ``34 CFR part 673 

and'' before the words ``this part 675''.


PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT 

PROGRAM


    21. The authority citation for part 676 continues to read as 

follows:


    Authority: 20 U.S.C. 1070b-1070b-3, unless otherwise noted.



Sec. 676.3  [Removed]


    22. Section 676.3 is removed and reserved.



Sec. 676.4  [Removed]


    23. Section 676.4 is removed and reserved.



Sec. 676.14  [Removed]


    24. Section 676.14 is removed and reserved.



Sec. 676.15  [Removed]


    25. Section 676.15 is removed and reserved.



Sec. 676.16  [Amended]


    26. Section 676.16 is amended by removing in paragraph (e)(1) and 

(e)(2) ``(f)'' and adding, in its place, ``(e)''.



Sec. 676.18  [Amended]


    27. Section 676.18 is amended by removing paragraph (b) and by 

redesignating paragraph (c) as paragraph (b).


PART 690--FEDERAL PELL GRANT PROGRAM


    28. The authority citation for part 690 continues to read as 

follows:


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


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

definition of ``Comparable State income tax return'' and by revising 

the definition of ``Annual award'' to read as follows:



Sec. 690.2  General definitions.


* * * * *

    (c) * * *

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

student would receive under the Payment Schedule for a full academic 

year in an award year, and the amount a three-quarter-time, half-time, 

and less-than-half-time student would receive under the appropriate 

Disbursement Schedule for being enrolled in that enrollment status


[[Page 60397]]


for a full academic year in an award year.

* * * * *

    30. Section 690.10(b) is revised to read as follows:



Sec. 690.10  Administrative cost allowance to participating schools.


* * * * *

    (b) All funds an institution receives under this section must be 

used solely to pay the institution's cost of administering the Federal 

Pell Grant, Federal Perkins Loan, Federal Work-Study, and Federal 

Supplemental Educational Opportunity Grant programs.

* * * * *



Sec. 690.12  [Amended]


    31. Section 690.12(b)(1) is amended by removing ``a copy of''.

    32. Section 690.13 is revised to read as follows:



Sec. 690.13  Notification of expected family contribution.


    The Secretary sends a student's application information and EFC as 

calculated by the central processor to the student on an SAR and allows 

each institution designated by the student to obtain an ISIR for that 

student.


(Approved by the Office of Management and Budget under control 

number 1840-0681)


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


    33. Section 690.14 is amended by removing paragraphs (b)(1) and 

(b)(2); by redesignating paragraph (b)(3) introductory text as 

paragraph (c) introductory text; by redesignating paragraph (b)(3)(i) 

as paragraph (c)(1); by redesignating paragraph (b)(3)(ii) as paragraph 

(c)(2); by redesignating paragraph (b)(4) as paragraph (d); and by 

revising the heading and paragraphs (a) and (b) to read as follows:



Sec. 690.14  Applicant's request to recalculate expected family 

contribution because of a clerical or arithmetic error or the 

submission of inaccurate information.


    (a) An applicant may request that the Secretary recalculate his or 

her expected family contribution if--

    (1) He or she believes a clerical or arithmetic error has occurred; 

or

    (2) The information he or she submitted was inaccurate when the 

application was signed.

    (b) The applicant shall request that the Secretary make the 

recalculation described in paragraph (a) of this section by--

    (1) Having his or her institution transmit that request to the 

Secretary under EDE; or

    (2) Sending to the Secretary an approved form, certified by the 

student, and one of the student's parents if the student is a dependent 

student.

* * * * *

    34. Section 690.61 is amended by revising paragraphs (a)(1)(ii) and 

(b)(2) to read as follows:



Sec. 690.61  Disbursement conditions and deadlines.


    (a) * * *

    (1) * * *

    (ii) The institution obtains a valid ISIR for the student.

* * * * *

    (b) * * *

    (2) By the deadline date established by the Secretary through 

publication of a notice in the Federal Register.

* * * * *



Sec. 690.75  [Amended]


    35. Section 690.75 (a)(2) is amended by adding ``in an eligible 

program'' after ``enrolled''; and paragraph (e), introductory text is 

amended by removing the phrase ``an expected family contribution of at 

least $3,000'' and adding, in its place, ``an expected family 

contribution amount at least equal to the maximum authorized award 

amount for the award year''.

    36. In Section 690.78 paragraph (c)(2) is amended by removing 

``15'' and adding, in its place, ``20''; paragraph (c)(3) is amended by 

removing ``15'' and adding, in its place, ``20''; paragraph (c)(4) is 

amended by removing ``15'' and adding, in its place, ``20''; and a new 

paragraph (c)(6) is added to read as follows:



Sec. 690.78  Method of disbursement--by check or credit to a student's 

account.


* * * * *

    (c) * * *

    (6) An institution shall make a late disbursement to an ineligible 

student in accordance with the provisions in 34 CFR 668.164(g).

* * * * *



Sec. 690.81  [Amended]


    37. Section 690.81 is amended by removing paragraph (c).

[FR Doc. 96-30264 Filed 11-26-96; 8:45 am]

BILLING CODE 4000-01-P