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

FR part
III
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PublicationDate: 4/27/2000
FRPart: III
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PageNumbers: 24755-24763
Summary: Gaining Early Awareness and Readiness for Undergraduate Programs; Final Rule and Notice Inviting Applications for New Awards for Fiscal Year 2000
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[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.

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(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



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Last Modified: 06/14/2000