Gaining Early Awareness and Readiness for Undergraduate Programs; Final Rule and Notice Inviting Applications for New Awards for Fiscal Year 2000

[Federal Register: April 27, 2000 (Volume 65, Number 82)]

[Rules and Regulations]               

[Page 24755-24763]

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

[DOCID:fr27ap00-11]                         



[[Page 24755]]


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Part III






Department of Education






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34 CFR Part 694




Gaining Early Awareness and Readiness for Undergraduate Programs; Final 

Rule and Notice Inviting Applications for New Awards for Fiscal Year 

2000



[[Page 24756]]



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DEPARTMENT OF EDUCATION


34 CFR Part 694


RIN 1840-AC82



Gaining Early Awareness and Readiness for Undergraduate Programs


AGENCY: Office of Postsecondary Education, Education.


ACTION: Final regulations.


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SUMMARY: The Secretary amends 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 final 

regulations apply to any future GEAR UP competitions. The proposed 

regulations were drafted subject to the negotiated rulemaking process 

required by section 492 of the Higher Education Act of 1965, as amended 

(HEA).


DATES: These regulations are effective May 30, 2000.


FOR FURTHER INFORMATION CONTACT: Rafael Ramirez, U.S. Department of 

Education, 1990 K Street, NW., room 6107, Washington, DC 20006. 

Telephone: (202) 502-7676. 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: On December 21, 1999, the Secretary 

published a notice of proposed rulemaking (NPRM) for this program in 

the Federal Register (64 FR 71552). There are several significant 

differences in the final regulations.


Analysis of Comments and Changes


    In response to the Secretary's invitation in the NPRM, 171 parties 

submitted comments on the proposed regulations. Virtually all of these 

letters expressed support for the GEAR UP program. An analysis of the 

comments and of the changes in the regulations follows.

    We discuss substantive issues under the sections of the regulations 

to which they pertain. Generally, we do not address technical and other 

minor changes and suggested changes the law does not authorize the 

Secretary to make.


Students Served Under the Cohort Approach (Sec. 694.2)


    Comment: One commenter believed that following individual students 

from year to year through different middle or high schools and to 

different States would be impractical, unfeasible, and costly. Another 

commenter believed that the regulations should provide a definition of 

what it means to serve a student in a cohort and what records must 

document that services have been provided.

    Discussion: Section 404B(g)(1)(B) requires that Partnerships ensure 

that services continue to be provided to students in a cohort through 

the twelfth grade. Section 694.4 of the regulations (which extends this 

provision to States) addresses which students a GEAR UP program must 

continue to serve when a single middle school feeds into more than one 

high school. A GEAR UP program is required to continue to provide 

services to only those students in the cohort who, after completing the 

last grade level offered by the school, attend participating schools 

that enroll a substantial majority of the students of the cohort. Under 

the regulations, therefore, the GEAR UP program would only have to 

follow the students from the initial cohort who attend subsequent 

participating schools that enroll a substantial majority of the 

students from the initial cohort. The GEAR UP program could follow and 

provide services to students who attend high schools that enroll less 

than a substantial majority of the students from the initial cohort, 

but would not be required to do so.

    In addition, the proposed regulations would not require a State or 

Partnership to follow individual students to different States. As 

explained in the preamble to the NPRM, GEAR UP programs are not 

required to serve students who begin in the cohort but leave the 

participating school before completing the last grade level offered by 

the school. Once a student leaves the participating school before 

completing the last grade level offered by the school, the GEAR UP 

program would no longer be required to follow that student.

    Evaluating the success of the program depends upon following as 

many students from the initial cohort as possible. The regulations as 

published in the NPRM would allow the maximum number of students from 

the initial cohort to receive services, without placing an undue burden 

on Partnerships or States.

    With respect to a definition of what it means to serve students in 

a cohort and what records are required to document that the students 

have been served, we don't believe that information is necessary in the 

regulations. Applicants are evaluated based on selection criteria found 

in 34 CFR 75.210 of the Education General Administrative Regulations 

(EDGAR). Applicants tell the Department, based on the selection 

criteria, what services and resources the program will provide the 

students in the cohort and how they intend to measure the impact of 

these services and resources. By not regulating the specific services 

that must be provided, we allow maximum flexibility to the States and 

Partnerships to develop innovative ways to serve students.

    Similarly, we believe that it would be too limiting to specify all 

forms of acceptable documentation in the regulations. Partnerships and 

States must be able to document that they are providing the services in 

their project plans. However, because the services provided will vary 

from program to program, appropriate documentation will also vary. This 

approach is consistent with the Department's philosophy on regulating 

only when necessary.

    Changes: None.


Requirements for the Cohort (Sec. 694.3)


    Comments: Two commenters felt that the regulatory language defining 

the cohort was unduly restrictive and inconsistent with the statute.

    Discussion: The statute requires that Partnerships provide GEAR UP 

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

than 7th grade, in a participating school that has a 7th grade and in 

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

free or reduced price lunch. As explained in the NPRM, the intent of 

GEAR UP Partnerships is to emphasize the importance of providing 

services and resources to meet the needs of a cohort of low-income 

students beginning in the middle grades (i.e., schools that include a 

7th grade), and continuing to support those students through high 

school. The regulatory language follows both the purpose and language 

of the statute.

    Changes: None.


Matching Requirements (Sec. 694.7)


    Comments: Two commenters felt that the reduced matching requirement 

available to the institutions eligible under the regulations was 

inadequate. The commenters also suggested that the fact that 

contributions could be in-kind wouldn't help the most needy 

institutions, because it would still require the institution to find 

additional funds to maintain its instruction


[[Page 24757]]


program. The commenters suggested completely eliminating the matching 

requirement for all institutions that qualify for Part B of Title III.

    One commenter also felt that the Department should eliminate the 

requirement that the Partnership include only local educational 

agencies (LEA) in which at least 50 percent of the students enrolled 

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

Lunch Act.

    Discussion: As explained in the preamble to the NPRM, the success 

of the GEAR UP program depends, at least in part, on a strong community 

partnership. Additionally, as the preamble explained, the poorest and 

very rural communities were able to meet the match in the 1999 

competition, suggesting that eliminating the match entirely was 

unnecessary. Therefore, the negotiating committee, in developing the 

proposed regulations, felt strongly that a complete waiver of the 

matching requirement, even for a subset of applicants, was 

unacceptable.

    We also feel that the concern that the neediest institutions would 

not be able to provide an in-kind match, because they would need to 

hire new staff, isn't accurate. An institution would not be required to 

use its faculty or staff to provide the in-kind match. Partnerships 

must include at least two community organizations or entities. The in-

kind match could be met by using qualified community or student 

volunteers, at no additional cost to the institution, so that time and 

effort could be counted as much, or more, than institutional resources. 

The in-kind match could also be met through contributions from partners 

such as non-profit organizations, large and small businesses, service 

groups, religious organizations, and State and local governments.

    The Department also believes that the requirement that a 

Partnership include only LEAs in which at least 50 percent of the 

students enrolled are eligible for free or reduced-price lunch is 

extremely important, and negotiators on the committee to develop the 

proposed regulations agreed. The negotiating committee felt that those 

Partnerships that include only the most needy school districts should 

be eligible for a reduced match. Without the requirement, there could 

be cases in which Partnerships that included wealthier LEAs could 

receive the benefit of a reduced match, simply by partnering with an 

institution of higher education that was eligible for the reduced 

match. This would allow less needy Partnerships to take advantage of a 

reduced match. The matching requirement as written allows us to 

maximize the effects of the program, by encouraging strong community 

support to ensure that the benefits of the program continue even after 

the grant has ended.

    Changes: None.


Indirect Costs (Sec. 694.9)


    Comments: None.

    Discussion: We have determined that the language drafted for the 

proposed regulations, though accurate, is not as clear as it could be. 

We have therefore decided to make minor technical changes to the 

language. The change does not alter the substance of the regulation, 

and the language now reflects the language from the Education General 

Administrative Regulations (EDGAR) provision on which it was based, 

Sec. 75.562 on indirect costs for educational training grants.

    Changes: We have revised the language to reflect Sec. 75.562 of 

EDGAR, the provision on which it was based.


Amount of Scholarship (Sec. 694.10(a)(2))


    Comments: One commenter expressed concern that the regulations 

would require the State or Partnership to reduce the scholarship amount 

proportionally for any student who receives a GEAR UP scholarship and 

attends on a less than full-time basis.

    Discussion: The State or Partnership would not be required to 

reduce the scholarship proportionally. The proposed regulations provide 

that the State or Partnership may reduce the scholarship for students 

who attend part-time. The regulation further specifies that if the 

State or Partnership chooses to reduce the scholarship, then such a 

reduction cannot be greater than the percentage reduction in tuition 

and fees charged to that student as a result of attending part-time. 

This does not require proportional reductions, but merely provides a 

limit on the maximum reduction in the GEAR UP scholarship. A State or 

Partnership could choose to reduce the GEAR UP scholarship by an amount 

that is less than the percentage reduction in tuition and fees.

    Changes: None.


Continuation Scholarships (Sec. 694.10(c))


    Comments: One commenter suggested that the regulations should 

include discretion for the Secretary to waive the requirement that 

States and Partnerships provide continuation scholarships to students 

who remain eligible when there are insufficient Federal funds.

    Discussion: The preamble to the NPRM clarified that, if Federal 

funding were discontinued during the life of the grant, grantees would 

not be required to continue to provide their share of the funds. The 

same policy would apply if Federal funds were reduced and projects were 

not fully funded as a result. If Federal funds were reduced, grantees 

could also reduce an equivalent amount of non-federal funds. A waiver 

process would be unnecessary. A grantee could only be required to 

provide full continuation scholarships during the life of the grant for 

all students who remain eligible if Federal funding remained the same. 

However, as the preamble to the NPRM explained, as long as some level 

of Federal funding is provided throughout the life of the grant, a 

grantee is obligated to provide continuation scholarships to students 

who remain eligible for scholarships even after the grant period has 

ended.

    Changes: None.


General Scholarship and Disclosure Requirements (Sec. 694.11)


    Comments: Although several commenters supported the NPRM unchanged, 

most of the comments from institutions of higher education repeated 

some or all of the following points: (1) States and Partnerships, not 

the Department, should monitor scholarship procedures. Departmental 

enforcement would be an unacceptable intrusion by the Federal 

government into the internal process by which institutions distribute 

institutional aid; (2) the proposed disclosure of financial aid 

packaging would be a burden on institutions and potentially 

inconsistent with existing regulations on disclosure for institutions; 

(3) the statutory ``supplement-not-supplant'' provision should not 

apply to individual student aid packaging, and should apply to States 

and Partnerships at the program level; (4) it is inappropriate for the 

Department to establish requirements for student aid packaging; (5) 

institutions wouldn't always be able to identify which students were 

GEAR UP recipients, making compliance difficult, with no clear 

direction for how the Department would monitor compliance; (6) the 

regulations would apply to all institutions, not just those 

participating in GEAR UP; and (7) GEAR UP students should not receive 

preferential treatment over non-GEAR UP students, as could be the case 

if the restrictions on financial aid packaging in the proposed 

regulations were retained.

    Discussion: After reviewing the comments we received and upon 

further consideration, we have modified the aid packaging requirements 

and eliminated the disclosure requirements as published in Sec. 694.11 

of the NPRM. The negotiating committee developed


[[Page 24758]]


requirements that would have allowed an institution to deviate from 

certain student financial aid packaging rules, including specific 

overaward procedures. The proposed packaging provisions and the 

accompanying proposed disclosure provisions for the packaging of 

student financial aid have been removed in the final rule. In addition, 

under the final regulations, institutional monitoring of GEAR UP 

scholarship awards will rest with States and Partnerships, and not the 

Department.

    We address more specifically each of the points reiterated by the 

vast majority of the commenters, each under its own heading.


1. Departmental Enforcement


    The GEAR UP statute dealing with scholarships closely resembles its 

predecessor, the National Early Intervention Scholarship and 

Partnership (NEISP) program statute, in which enforcement for ensuring 

institutional compliance with the program requirements was placed with 

State recipients. The GEAR UP statute was modified from NEISP to 

include Partnerships as eligible entities. In light of the comments 

regarding Departmental enforcement, States and Partnerships, not the 

Department, will monitor the treatment of GEAR UP scholarships in 

relation to other aid, as was the case under both NEISP and the 1999 

GEAR UP regulations. The treatment of GEAR UP scholarships under the 

final regulations, therefore, is the same as the treatment of NEISP 

scholarships in relation to other aid under the NEISP program, and for 

GEAR UP scholarships under the fiscal year 1999 GEAR UP regulations. In 

addition, we expect that States and Partnerships will ensure that 

institutions, in the case of an overaward, will reduce aid in the 

reverse order of how it was granted.


2. Disclosure, Burden, and Inconsistency


    As mentioned previously, most commenters believed that the 

disclosure requirements would place an extensive burden on 

institutions. Additionally, commenters believed that the disclosure 

requirements were inconsistent with other disclosure requirements for 

Title IV aid.

    The disclosure requirements in the proposed regulations are not 

part of the final regulations. Individual student financial aid 

packaging is dealt with in the final regulations by returning to the 

financial aid ordering language that appeared in both the 1994 NEISP 

and 1999 GEAR UP regulations. The only difference from the 1999 GEAR UP 

regulations is that exceptions to financial aid ordering requirements, 

suggested by the negotiators in developing the NPRM, are retained in 

the final regulations in order to recognize exceptional circumstances 

that cannot be handled by a general packaging regulation. States and 

Partnerships must ensure that institutions document the exceptional 

circumstances related to the GEAR UP student that are unique to that 

student. They will also ensure that institutions document and maintain 

in the GEAR UP student's file the modification made to the GEAR UP 

student's award package and the reason for the modification. Finally, 

States and Partnerships will ensure that institutions provide written 

notice to the GEAR UP student of the reason for and the specific 

modification that was made to the package. We believe that these 

requirements are consistent with other Title IV regulations and do not 

believe that they are overly burdensome for either States and 

Partnerships or to institutions. The institution would only have to 

document cases of exceptional circumstances. Finally, institutions 

would only be required to disclose their policies to a State or 

Partnership that requests it. Commenters were most concerned with the 

burden of disclosing their policy to the Department and prospective 

students. The final regulations therefore eliminate the burden that 

concerned so many commenters.


3. Supplement-Not-Supplant


    Several commenters believed that the proposed regulations implied 

that States and Partnerships were exempt from the statutory requirement 

that GEAR UP funds ``supplement and not supplant funds expended for 

existing programs''. States and Partnerships are both subject to the 

statutory ``supplement not supplant'' requirement and to the assurance 

required in GEAR UP plan submissions. In drafting the regulations, the 

negotiating committee adhered to the Department's principles for 

regulating, and therefore regulated only when necessary. For the most 

part, we did not repeat statutory language in the regulations. That 

does not mean that a statutory requirement not in the regulations does 

not apply. If State or Partnership recipients do supplant, their awards 

will be subject to cancellation or re-negotiation, or repayment after 

an audit finding.

    Other commenters did not believe that the supplement-not-supplant 

provision was intended to apply to individual student aid packages. The 

intent of the GEAR UP program is to benefit individual GEAR UP 

students. Therefore, we believe that individual GEAR UP students must 

benefit through their individual financial aid packages. The 

legislative intent is clear that the GEAR UP scholarship is not 

intended to replace other gift aid but is in addition to any other aid 

the student would have received.


4. Inappropriate Establishment of Packaging Requirements


    The preamble to the NPRM said 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. This statement is correct. Many major federal student 

aid programs have had such requirements at one time or another in their 

history, including Pell Grants and campus-based programs. Additionally, 

it should be noted that the NPRM preamble was written to give context 

to readers of the regulation negotiations. We believe the preamble is 

faithful both to history and to the statements in the negotiations.


5. Identification of GEAR UP Students


    By eliminating the disclosure requirements, institutions will not 

be required to identify GEAR UP students in order to comply with any 

disclosure requirements. Under the final regulations, States and 

Partnerships must monitor the ordering of how aid is packaged. One 

commenter recommended that we require States to develop systems to 

provide data to students and institutions on the eligibility of GEAR UP 

awards in a timely manner. It is the State or Partnership's 

responsibility to inform the institution in a timely manner that the 

student is a GEAR UP student. The Department feels it is not necessary 

to specify the actual process in the regulations.


6. Applicability of the Regulations to All Institutions


    Again, because the disclosure requirements are not part of the 

final regulations, the regulations do not apply to all institutions. 

The final regulations apply to the responsibility of the States and 

Partnerships, not to the institution. If, however, in the absence of 

exceptional circumstances, an institution chooses not to follow the 

ordering outlined in the regulations, then the State or Partnership, 

acting consistent with their responsibilities under this regulation, 

must not provide the GEAR UP scholarship.


[[Page 24759]]


7. Preferential Treatment of GEAR UP Students


    We believe it is important that the final regulations reflect the 

legislative history and intent of the GEAR UP program. GEAR UP was 

designed to provide early intervention services and programs to 

students in middle schools and high schools and, where scholarships are 

offered, to link the scholarships specifically to those students in 

amounts that will significantly reduce what they have to pay for 

college. GEAR UP scholarships are designed to permit these students to 

attend college without the fear of incurring significant debt. Because 

the intent of the GEAR UP program is to benefit GEAR UP students, in 

some cases, this will mean that they receive preferential treatment 

over other non-GEAR UP students.

    Further, the GEAR UP program was designed to encourage 

contributions from partners such as non-profit organizations, large and 

small businesses, service groups, religious organizations, and State 

and local governments. These partners must not be discouraged from 

contributing funds out of concern that institutions will simply reduce 

their own institutional aid to the student, and therefore the GEAR UP 

students will not benefit from the scholarships.

    Additionally, we are obligated under the Government Performance and 

Results Act (GPRA) to evaluate program performance for Congress. The 

term used by several commenters, ``preferential treatment,'' is 

essentially the same as targeting. If funds targeted by Congress to 

certain populations are redistributed to other populations (which would 

be the real effect of a revised package that ``released'' other gift 

aid when a GEAR UP scholarship was added), there will be no way to 

effectively evaluate the effects of the program on the target 

population.


Additional Comments on Sec. 694.11


    In addition to the comments already discussed with respect to 

Sec. 694.11 of the proposed regulations, we also received several other 

comments on the disclosure requirements that are discussed later in 

this preamble. However, because all of the comments refer to changes to 

Sec. 694.11 of the proposed regulations, the changes appear at the end 

of all of the comments on this section.


GEAR UP and Less Needy Students


    Comments: One commenter suggested that not all the students served 

by GEAR UP will be needy, since for Partnerships, a cohort of students 

must be from a school in which at least 50 percent of the students 

enrolled are eligible for free and reduced-price lunch, which could 

mean that some students could come from less needy families. Since 

those students would also receive GEAR UP scholarships, the commenter 

argues funding will have to be taken from other need-based programs 

that serve truly needy students.

    Discussion: We do not believe that the regulations would require an 

institution to take funding from needy students to give to a less needy 

GEAR UP student. While GEAR UP early intervention services must be 

provided to all students in a cohort or students that a State has 

selected as priority students, not all GEAR UP students are guaranteed 

a scholarship, as the commenter suggested. We believe that if a GEAR UP 

student is from a less needy family and therefore not in need of a 

scholarship, the State or Partnerships may choose not to provide that 

student with a scholarship. Under Sec. 694.10(b), a State or 

Partnership must first award a GEAR UP scholarship to students who are 

eligible to receive a Pell Grant. Students eligible for a Pell Grant 

are needy students. If, after all the students who participated in the 

GEAR UP program who are eligible for a Pell Grant are given 

scholarships, a State or Partnership still has scholarship money 

available, the State or Partnership may give scholarships to other GEAR 

UP students, taking into consideration the students' need. Under the 

regulations therefore, it seems unlikely that less needy students would 

receive scholarships that would take funding away from needier 

students.


Redistribution of Aid


    Comments: Commenters noted that students who receive GEAR UP 

scholarships earn the funds. The commenters stated that these students 

must know that the fruits of their labors will truly benefit them by 

reducing their higher education costs. The commenters felt that 

institutions should not be free, in effect, to redistribute those 

dollars to other students. The commenters believed that this line of 

thinking is at odds with the statute. The commenters asserted that, if 

the final regulations do not prevent this practice, then the 

preferences that are to be given to Partnership applications that 

include scholarships should be eliminated.

    Discussion: We believe that the final regulations contain 

sufficient protections against redistribution. States and Partnerships 

are required under the regulations to ensure that institutions package 

their aid in accordance with the order specified in the regulations. We 

believe that the ordering specified provides sufficient protection 

against redistribution. Consequently, we do not plan to eliminate the 

competitive preference for Partnerships that include a scholarship 

component in their application.


Students' Knowledge of Institutions' GEAR UP Policies


    Comments: One commenter suggested that students who have a GEAR UP 

scholarship should know how that scholarship will be treated with 

respect to other aid in the packaging of student financial assistance.

    Discussion: In accordance with Sec. 694.10(e), States and 

Partnerships must ensure that institutions follow the ordering outlined 

by the regulations when GEAR UP scholarships are involved. States and 

Partnerships would inform GEAR UP students of any institution that does 

not intend to treat the GEAR UP scholarship as required, so that 

students can decide whether to attend a different institution, or give 

up the scholarship.


Aid Already Disbursed v. Aid Not Yet Disbursed


    Comments: One commenter suggested that the regulations detailing 

the order in which aid is packaged should be modified to distinguish 

aid already disbursed from aid not yet disbursed, since in overaward 

situations, the institution might have to seek a return of a disbursed 

loan.

    Discussion: We don't think that such a distinction is necessary in 

the regulations. Since loans are part of the financial assistance that 

is awarded last under the regulations, students should not be in a 

situation in which loans caused them to exceed their cost of 

attendance. Therefore the recovery of disbursed loans is unlikely.


Supplement-Not-Supplant and Early Intervention


    Comments: One commenter believed that the statutory supplement-not-

supplant language should apply only to early awareness programs of a 

similar nature and shouldn't restrict the rights of individual 

institutions in awarding their own aid to individual students.

    Discussion: We disagree that the supplement-not-supplant language 

applies only to early awareness programs. The existing programs 

referred to in the statute include State and institutional aid programs 

as well as early intervention programs. If supplement-not-supplant 

referred only to early intervention programs similar in nature, States 

could cut their current


[[Page 24760]]


student aid programs. That interpretation would be contrary to 

statutory intent.

    Changes: We have revised Sec. 694.11 to reflect the 1999 

regulation, with the addition of a provision for exceptional 

circumstances.


Cost of Attendance (Sec. 694.11(a)(2))


    Comments: Two commenters suggested that, in determining a student's 

financial aid package, the regulation should state that the total 

assistance provided under Title IV should not exceed the student's 

unmet need, not the student's cost of attendance. The commenters 

suggested that this would conform the GEAR UP regulation to other Title 

IV regulations.

    Discussion: Some Title IV regulations specify cost of attendance 

and some unmet need, depending on the underlying statute. In this case, 

cost of attendance is specified in the statute (section 404E(c)), 

allowing GEAR UP funds to be used to replace expected family 

contribution (EFC). This will permit GEAR UP students to carry a 

reduced loan burden where otherwise they may have been forced to borrow 

to meet their EFC.

    Changes: None.


Master Calendar


    Comments: Two commenters noted that even though the GEAR UP 

regulations were subject to the negotiated rulemaking process, they 

will be published in final form past the November 1 deadline for 

regulations subject to the Master Calendar provisions in the law. The 

commenters questioned whether or not these regulations can take effect 

before July 1, 2001.

    Discussion: The Master Calendar provisions in section 482 of the 

Higher Education Act (HEA) apply only to the student financial 

assistance programs. While the Congress has amended section 482 several 

times to clarify that the scope of the provisions is sweeping with 

regard to those programs, it has not expanded the scope to encompass 

the discretionary grant programs in Title IV of the HEA. The paragraph 

establishing a regulatory deadline of ``November 1 prior to the start 

of the award year'' makes clear in particular that the deadline could 

not apply to the discretionary grant programs, which unlike the student 

financial assistance programs do not operate on an ``award year'' 

basis. In contrast, the statute prescribing negotiated rulemaking, 

section 492 of the HEA, clearly applies to all Title IV programs.

    Changes: None.


Mandatory Priority (Sec. 694.15)


    Comments: None.

    Discussion: While the statutory provisions reflected in 

Sec. 694.15, as proposed in the NPRM, are still applicable, we do not 

believe that as a practical matter the priority will arise, since 

States eligible for the priority have received Gear Up grants.

    Changes: Section 694.15, as proposed in the NPRM, has been removed.


Executive Order 12866


    We have reviewed these final regulations in accordance with 

Executive Order 12866. Under the terms of the order we have assessed 

the potential costs and benefits of this regulatory action.

    The potential costs associated with the final regulations are those 

we have determined to be necessary for administering this program 

effectively and efficiently.

    In assessing the potential costs and benefits--both quantitative 

and qualitative--of these final regulations, we have determined that 

the benefits of the regulations justify the costs.

    We also have determined that this regulatory action does not unduly 

interfere with State, local, and tribal governments in the exercise of 

their governmental functions.

    We discussed the potential costs and benefits of these final 

regulations in the preamble to the NPRM under the following headings: 

Executive Order 12866; Summary of Potential Costs and Benefits (64 FR 

71560-71561).


Paperwork Reduction Act of 1995


    The Paperwork Reduction Act of 1995 does not require you to respond 

to a collection of information unless it displays a valid OMB control 

number. We display the valid OMB control number assigned to the 

collection of information in these final regulations at the end of the 

affected section of the regulations.


Intergovernmental Review


    This program is 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.

    In accordance with the order, we intend this document to provide 

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

this program.


Assessment of Educational Impact


    In the NPRM we requested comments on whether the proposed 

regulations would require transmission of information that any other 

agency or authority of the United States gathers or makes available.

    Based on the response to the NPRM and on our review, we have 

determined that these final regulations do not 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 any of the following 

sites:



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

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

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

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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 does not apply.)


    Program Authority: 20 U.S.C. 1070a-21.


List of Subjects in 34 CFR Part 694


    Colleges and universities, Elementary and secondary education, 

Grant programs--education, Reporting and recordkeeping requirements, 

Student aid.


    Dated: April 6, 2000.

A. Lee Frischler,

Assistant Secretary, Office of Postsecondary Education.


    For the reasons discussed in the preamble, the Secretary amends 

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


[[Page 24761]]


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?

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 HEA?

694.11   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?

694.12   How does a State determine which State agency will apply 

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

694.13   What requirements must be met by a Partnership or State 

participating in GEAR UP with respect to 21st Century Scholarship 

Certificates?

694.14   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?

694.15   What priorities may the Secretary establish for a GEAR UP 

grant?


    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


[[Page 24762]]


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 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 of a modified total direct cost base.


(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(d) 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) 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.

    (d) 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.

    (e) Order of Scholarships. (1) In general. Notwithstanding 34 CFR 

673.5, in awarding GEAR UP scholarships, a State or Partnership must 

ensure that, for each recipient of a scholarship under this part who is 

eligible for and receiving other postsecondary student financial 

assistance, a Federal Pell Grant, if applicable, be awarded first, any 

other public or private grants, scholarships, or tuition discounts be 

awarded second, a GEAR UP scholarship be awarded third, and then any 

other financial assistance, such as loans or work-study, be awarded.

    (2) Exception. Notwithstanding paragraph (e)(1) of this section, a 

State or Partnership is not required to ensure that a GEAR UP 

scholarship recipient's financial aid be awarded in the order set forth 

in paragraph (e)(1) only if--

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

exceptional circumstances related to the GEAR UP student's 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 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 

package.


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



Sec. 694.11  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 may provide financial assistance for 

postsecondary education, either with funds under this chapter, (Under 

Chapter 2 of subpart 2 of Part A of Title IV of the HEA,) 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 Sec. 694.10.


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



Sec. 694.12  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


[[Page 24763]]


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


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



Sec. 694.13  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. 694.14  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. 694.15  What priorities may the Secretary establish for a GEAR UP 

grant?


    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. 694.11, to 

strengthen the early intervention component of its GEAR UP project.


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


[FR Doc. 00-10324 Filed 4-26-00; 8:45 am]

BILLING CODE 4000-01-P