Publication Date: November 1, 2007
FR Part: III
Page Numbers: 62013-62034
Summary: Final Rule; Federal student aid programs
Posted on 11-01-2007
[Federal Register: November 1, 2007 (Volume 72, Number 211)]
[Rules and Regulations]
[Page 62013-62034]
[From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01no07-11]
[Page 62013]
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Part III
Department of Education
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34 CFR Parts 668, 674, 676 et al.
Federal Student Aid Programs; Final Rule
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DEPARTMENT OF EDUCATION
34 CFR Parts 668, 674, 676, 682, 685, 690, and 691
[Docket ID ED-2007-OPE-0134]
RIN 1840-AC91
Federal Student Aid Programs
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Final regulations.
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SUMMARY: The Secretary amends the regulations on the Student Assistance
General Provisions; Federal Perkins Loan (Perkins Loan) Program;
Federal Supplemental Educational Opportunity Grant (FSEOG) Program;
Federal Family Education Loan (FFEL) Program; William D. Ford Federal
Direct Loan (Direct Loan) Program; Federal Pell Grant (Pell Grant)
Program; Academic Competitiveness Grant (ACG) Program; and National
Science and Mathematics Access to Retain Talent Grant (National SMART
Grant) Program. The regulations reduce administrative burden for
program participants, provide benefits to students and borrowers, and
protect taxpayers' interests.
DATES: Effective Date: These regulations are effective July 1, 2008.
Implementation Date: The Secretary has determined, in accordance
with section 482(c)(2)(A) of the Higher Education Act of 1965, as
amended (HEA) (20 U.S.C. 1089(c)(2)(A)), that institutions, lenders,
guaranty agencies, and loan servicers that administer Title IV, HEA
programs may, at their discretion, choose to implement all provisions
of these final regulations on or after November 1, 2007. For further
information, see the section entitled Implementation Date of These
Regulations in the SUPPLEMENTARY INFORMATION section of this preamble.
FOR FURTHER INFORMATION CONTACT: Michelle Belton, U.S. Department of
Education, 1990 K Street, NW., 8th Floor, Washington, DC 20006-8502.
Telephone: (202) 502-7821 or via the Internet at:
Michelle.Belton@ed.gov.
If you use a telecommunications device for the deaf (TDD), you may
call the Federal Relay Service (FRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact person listed in this section.
SUPPLEMENTARY INFORMATION: On August 8, 2007, the Secretary published a
notice of proposed rulemaking (NPRM) for the Student Assistance General
Provisions, Perkins Loan Program, FSEOG Program, FFEL Program, Direct
Loan Program, Pell Grant Program, ACG Program, and National SMART Grant
Program in the Federal Register (72 FR 44620).
In the preamble to the NPRM, the Secretary discussed on pages 44621
through 44635 the major changes proposed in that document to strengthen
and improve the administration of the Federal student financial aid
programs authorized under Title IV of the Higher Education Act of 1965,
as amended (HEA). These include the following:
Amending Sec. 668.2 to add a definition for
``professional degree'' and to harmonize and consolidate definitions
for ``full-time student,'' ``graduate or professional student,''
``half-time student,'' ``three-quarter time student,'' and
``undergraduate student.''
Amending Sec. Sec. 668.4, 668.22, 668.164, 682.200,
682.604, and 685.301 to align disbursements, with a few exceptions, for
all Title IV grant and loan programs on a payment period basis.
Amending Sec. 668.10 to define ``independent study'' as a
course of study with predefined objectives where a student works with a
faculty member to decide how those objectives will be met.
Amending Sec. Sec. 668.21, 682.604, and 685.303 to
consolidate all requirements addressing the treatment of Title IV funds
(except Federal Work Study) when a student does not begin attendance in
a payment period or period of enrollment by moving the requirements for
FFEL and Direct Loan funds from Sec. Sec. 682.604 and 685.303,
respectively, to Sec. 668.21.
Amending Sec. 668.22 to allow institutions to make a
direct disbursement of any Title IV grant funds that make up a post-
withdrawal disbursement without notifying a student and obtaining the
student's permission.
Amending Sec. 668.164 to establish timeframes for
returning Title IV, HEA program funds that an institution attempts to
disburse directly to a student or parent, but the student or parent
does not receive or negotiate those funds.
Amending Sec. 668.164 to allow institutions to pay for
prior-year charges of up to $200.
Amending Sec. 668.164(c) to modify the provisions for
issuing a check and add new provisions expanding the use of electronic
funds transfers (EFTs) to bank accounts that underlie stored-value
cards and other transaction devices.
Amending Sec. 668.164(g) to extend the period within
which an institution is allowed to make a late disbursement from 120 to
180 days and to eliminate an institution's ability to request funds
after that period expires.
Amending Sec. 668.165(a) to require institutions to
either obtain affirmative confirmation from a student prior to
disbursing a loan or notify a student no earlier than 30 days before,
but no later than seven days after crediting a student's account with
loan proceeds, and give students 30 days to cancel all or a portion of
the loan.
Amending Sec. 668.166 to expand the definition of excess
cash to include Title IV, HEA program funds received from the Secretary
that are deposited or transferred into the institution's Federal bank
account as a result of an award cancellation, adjustment, or recovery;
to eliminate the three percent excess cash tolerance option; and to
simplify the provisions addressing the consequences for maintaining
excess cash.
Amending Sec. Sec. 674.16 and 676.16 to eliminate the
single disbursement provisions that currently exist in the Perkins Loan
and FSEOG programs.
Amending Sec. Sec. 682.603 and 685.301 to allow
institutions that use credit hours with terms that are at least nine
weeks and substantially equal in length to make a full loan for a
single term; and to allow institutions that use credit hours without
terms or without terms that are substantially equal in length with no
term less than nine weeks in length, or that use clock hours to certify
a loan for the remaining balance of the student's annual loan limit for
the remaining portion of a program for a transfer student or a student
who has completed one degree and will immediately begin another degree
at the same institution.
Amending Sec. Sec. 682.603 and 685.301 to allow students
to progress to the next annual loan limit if they complete an academic
year in calendar time in a nonstandard term credit hour program if the
terms in that program are substantially equal in length and are at
least nine weeks in length.
Amending Sec. Sec. 690.63 and 690.66 to allow
institutions that offer programs with semesters, trimesters, or
quarters and have terms for different cohorts of students that start
periodically to use the same Pell formula as that used for traditional
programs; to amend the Pell calculation for programs using clock hours
or credit hours without terms; and to adjust the Pell calculation for
correspondence study programs.
[[Page 62015]]
Implementation Date of These Regulations
Section 482(c) of the HEA requires that regulations affecting
programs under Title IV of the HEA be published in final form by
November 1 prior to the start of the award year (July 1) to which they
apply. However, that section also permits the Secretary to designate
any regulation as one that an entity subject to the regulation may
choose to implement earlier and the conditions under which the entity
may implement the provisions early.
Consistent with the intent of this regulatory effort to strengthen
and improve the administration of the Title IV, HEA programs, the
Secretary is using the authority granted her under section 482(c) to
designate all of the regulations included in this document for early
implementation at the discretion of each institution, lender, guaranty
agency, or servicer, as appropriate.
Analysis of Comments and Changes
The regulations in this document were developed through the use of
negotiated rulemaking. Section 492 of the HEA requires that, before
publishing any proposed regulations to implement programs under Title
IV of the HEA, the Secretary obtain public involvement in the
development of the proposed regulations. After obtaining advice and
recommendations, the Secretary must conduct a negotiated rulemaking
process to develop the proposed regulations. All proposed regulations
must conform to agreements resulting from the negotiated rulemaking
process unless the Secretary reopens that process or explains any
departure from the agreements to the negotiated rulemaking
participants.
These regulations were published in proposed form on August 8,
2007, in conformance with the consensus of the negotiated rulemaking
committee. Under the committee's protocols, consensus meant that no
member of the committee dissented from the agreed-upon language. The
Secretary invited comments on the proposed regulations by September 7,
and in response to the Secretary's invitation, 22 parties submitted
comments on the proposed regulations. An analysis of the comments and
the changes in the regulations since publication of the NPRM follows.
We group major issues according to subject, with appropriate
sections of the regulations referenced in parentheses. We discuss other
substantive issues under the sections of the regulations to which they
pertain. Generally, we do not respond to technical and other minor
changes--and suggested changes the law does not authorize the Secretary
to make. We also do not respond to comments pertaining to issues that
were not within the scope of the NPRM.
General Definitions (Sec. 668.2)
Comments: In general, commenters supported the proposed changes in
Sec. 668.2. With regard to the definition of ``full-time student,''
one commenter requested that the Department not increase the number of
clock hours required to be considered full-time as that would affect
the amount of time a student must be enrolled to be considered part-
time.
Discussion: These regulations do not include any provisions that
increase the number of clock hours required for full-time students. The
Department originally considered changing the number of clock hours
required for a student to be considered a full-time student, but
withdrew this proposal during the negotiated rulemaking sessions
because this change could unfavorably affect part-time clock hour
students.
Change: None.
Comments: We received comments from two institutions regarding the
definitions of ``graduate or professional student'' and ``undergraduate
student'' and the clarification of when a student is considered an
undergraduate in a dual degree program. One of the commenters noted
that this clarification is welcomed in light of the fact that ``there
has been considerable growth in such programs, often co-mingling
undergraduate coursework, making it difficult to determine exact
eligibility for Title IV aid. By considering such students to be
undergraduates for the first three years of the academic program, this
confusion will be greatly reduced.'' The other commenter agreed with
this regulatory change but only if institutions are allowed to use
their own definition of academic year when determining the ``third
year.''
Discussion: The term ``academic year'' is defined in section 481 of
the HEA. Generally, institutions that participate in the Title IV, HEA
programs and measure their program length in credit hours are required
to define their academic year as at least 30 weeks of instructional
time during which a full-time student in an undergraduate program is
expected to complete at least 24 semester or trimester credit hours or
36 quarter credit hours of study. Institutions that participate in the
Title IV, HEA programs and measure their program length in clock hours
are required to define their academic year as at least 26 weeks of
instructional time during which a full-time student in an undergraduate
program is expected to complete at least 900 clock hours. However, the
statutory purpose behind the definition of an academic year is to
determine the minimum period of time for which we will pay a student an
academic year's worth of financial aid. Determining ``grade level'' for
the purpose of categorizing a student as either a graduate or
professional student or an undergraduate student is not related to the
issue the HEA addresses with the definition of an academic year.
Therefore, we agree with the commenter who suggested that an
institution can, without reference to the statutory definition of an
academic year, define what a year is in its programs for purposes of
determining when a student is an undergraduate student or a graduate or
professional student.
Change: The definition of ``graduate or professional student'' in
Sec. 668.2 is amended by using the term ``year'' instead of ``academic
year'' in paragraph (3). In addition, the definition of ``undergraduate
student'' in Sec. 668.2 is similarly amended by using the term
``year'' instead of ``academic year'' in those places that describe the
length of a course of study or a program.
Comment: We received one comment requesting the Department to
consider altering the definitions for ``graduate or professional
student'' and ``undergraduate student'' to reflect the language that is
currently used in the Department's Federal Student Aid (FSA) Handbook
for consistency and clarity. In particular, the commenter asked the
Department to (1) consider adopting the definition for an
``undergraduate student'' as it appears in the handbook, (2) use the
term ``program'' consistently throughout the regulations, (3) change
the term ``institution of higher education'' to ``eligible
institution'' since the term ``institution of higher education'' is
defined in the regulations to exclude proprietary institutions, (4)
drop the word ``first'' in the phrases ``first professional degree''
and ``first degree at the baccalaureate level,'' and (5) use the term
``mixed-degree programs'' rather than ``dual degree programs.''
Discussion: The definition of an ``undergraduate student'' in the
FSA Handbook is ``a student who is enrolled in a program of study that
usually does not exceed four (and can be up to five) academic years in
length and that is designed to lead to a degree or certificate at or
below the baccalaureate level.'' While this definition is correct, it
does not address certain student eligibility or program specific
[[Page 62016]]
requirements that are covered in the more comprehensive definition in
Sec. 668.2. The definition of ``undergraduate student'' in Sec.
668.2, which contains definitions that are relevant to all of the Title
IV, HEA programs, was intended to incorporate requirements from the
definition of ``undergraduate student'' currently in different program
regulations. However, in proposing the definition of ``undergraduate
student,'' we inadvertently omitted certain provisions currently in
Sec. Sec. 674.2, 675.2, and 676.2. Specifically, these sections
describe an undergraduate student as a student enrolled in a course of
study that usually does not exceed four years, or is enrolled in a four
or five year program designed to lead to a degree. A student enrolled
in a program of any longer period is considered an undergraduate
student for only the first four years of that program.
The HEA refers to a student following a course of study, while
institutions offer programs. A course of study refers to a student's
particular academic path in a program. For example, a student's major
would be considered a course of study. Program, as it appears in the
HEA, refers to the overall bachelor's program, which includes not only
the course of study but also any other general coursework that may be
required by an institution.
We understand the commenter's concerns that the term ``institution
of higher education,'' as defined in the regulations, appears to
exclude proprietary institutions. Additionally, this term is not used
in the definition of undergraduate student. Therefore, to address the
commenter's concerns and for consistency, we are removing the reference
to an institution of higher education in the definition of graduate or
professional student.
We agree with the commenter's point regarding the use of the term
``first degree at the baccalaureate level'' in paragraph (1) of the
definition for ``undergraduate student'' and the term ``first
professional degree.'' Because a student can be considered an
undergraduate student when taking courses below the baccalaureate level
even after receiving a bachelor's degree for purposes of the FFEL,
Direct Loan, and Perkins Loan programs, the term ``first degree at the
baccalaureate level'' in paragraph (1) will be amended. It is not
necessary to specify whether a professional degree is a first
professional degree for Title IV, HEA program purposes and, therefore,
we will amend the definitions for ``graduate or professional student''
and ``undergraduate student.'' We will also amend the term ``first
professional degree'' to ``professional degree'' to clarify the
Department's intention when using this term in the regulations.
Finally, we believe the term ``dual degree programs'' is commonly
used in the academic community. It is more descriptive of the types of
programs to which the definitions apply and is less confusing than the
term ``mixed degree programs.''
Changes: Section 668.2 is amended by removing the word ``first'' in
paragraphs (1), (2), and (3) of the definition for an ``undergraduate
student'' and from paragraph (2) of the definition for ``graduate or
professional student.'' Section 668.2 is further amended by removing
the term ``institution of higher education'' from the definition of a
``graduate or professional student'' and by removing the word ``first''
from the term ``first professional degree.'' In addition, the
definition of ``undergraduate student'' is amended to reflect the
omitted provisions in Sec. Sec. 674.2, 675.2, and 676.2.
Payment Periods (Sec. Sec. 668.4, 668.22, 668.164, 682.200, 682.604,
and 685.301)
Comments: One commenter believed that the regulatory provisions
allowing an institution to disburse Title IV grant funds at such times
and in such installments in each payment period as the institution
determines best meets the student's needs should also apply to the
disbursement of FFEL and Direct Loan funds. Along these lines, the
commenter asked the Department to clarify that an institution may delay
the disbursement of an FFEL or Direct Loan until after the 60 percent
point in the payment period, or pay in two substantially equal
installments that coincide with the beginning dates of two consecutive
modules that the student is scheduled to attend within a standard term.
Discussion: Nothing in the HEA or the regulations prohibits an
institution from paying an FFEL or Direct Loan in installments during a
payment period, provided that the disbursements are substantially equal
and that no more than half of the loan amount for the period of
enrollment is disbursed to the borrower prior to the mid-point of the
period of enrollment. However, for an FFEL loan, an institution should
confer with the lender or guaranty agency to confirm that they would
permit such disbursements. For a Direct Loan, an institution may make
such disbursements at the institution's discretion and does not need to
contact the Department. The Department notes that the provisions
allowing an institution to pay a student at such times and in such
amounts as it determines best meet the student's needs also applies to
Perkins Loan funds.
The purpose of the provisions allowing an institution to disburse
Title IV funds in installments within a payment period is to give
institutions the ability to apportion the payment if doing so will be
in the best interest of the student. For example, if a payment period
is particularly long, an institution might choose to pay in multiple
installments to ensure that a student will have funds to pay rent later
in the payment period. However, as a general matter, Title IV funds
must be provided to students in a timely manner to best assist them in
paying their educational expenses. Consequently, an institution may not
delay the disbursement of funds until after the 60 percent point, for
example, to avoid the administrative burden of performing a Return of
Title IV Funds calculation and the requirements that go along with it,
or to prevent the student from having to return funds upon withdrawal.
Change: Section 668.164(b)(1)(ii) is amended to make clear that an
institution may disburse Perkins Loan funds, within each payment
period, at such time and in such amounts as it determines best meets
the student's needs.
Comments: One commenter asked the Department to clarify any
difference between the term ``successfully completes'' as defined in
the NPRM for completion of a payment period in certain types of
educational programs, and the term ``successfully completed'' as used
in the late disbursement provisions under Sec. 668.164(g)(4)(ii). The
commenter believes that the provision for making a late disbursement,
which provides that an institution may not make a second or subsequent
late disbursement of FFEL or Direct Loan funds unless the student
successfully completed the period of enrollment for which the loan was
intended, does not require the student to have passed the coursework
associated with the hours in the period of enrollment. Two commenters
suggested that the Secretary define ``standard terms,'' ``nonstandard
terms,'' and ``substantially equal in length'' in the General
Provisions Regulations under Sec. 668.2 so that these terms would
apply to all of the Title IV programs.
Discussion: The term ``successfully completes,'' or a variation of
that term, has the same meaning for payment period purposes as it does
for making late disbursements, i.e., the institution must consider the
student to have passed the coursework associated with
[[Page 62017]]
the hours in the payment period or period of enrollment.
A standard term, as specifically noted in, for example, Sec. Sec.
668.22(a)(ii)(5) and 690.63(a)(1), is a semester, trimester, or
quarter. By inference, a nonstandard term is something other than that.
The Department does not believe it is necessary to add definitions of
``standard terms'' and ``nonstandard terms'' in regulations that go
beyond these general concepts. The only places the term ``substantially
equal in length'' is used outside of the FFEL and Direct Loan
regulations are where it is specifically needed in Sec. Sec. 668.4 and
668.22 of the General Provisions regulations. The Department believes
it is necessary to define the term in those two sections only.
Therefore, we are adding in these final regulations in Sec. 668.2 the
same definition of ``substantially equal in length'' that we are adding
in Sec. 668.4.
Change: Section 668.22(l) is amended to include a definition of the
term ``substantially equal in length.''
Transferring to a New Program at the Same Institution (Sec. 668.4)
Comments: One commenter asked whether the proposed regulations
allowing a student to be considered to remain in the same payment
period when the student transfers into a second program would apply
when the student transfers from a Business program to an Information
Technology (IT) program at the same institution. In this case, the
student is continuously enrolled, the payment periods are substantially
equal in length, and the charges are the same, but the credits from the
Business program that the student took in that payment period do not
transfer to the IT program.
Discussion: The Department's response, based on these facts, is no.
We intend that Sec. 668.4(g) will address those cases where there is
very little change to a student's academic circumstances and the
student is changing over to the new program in a nearly seamless
manner. In the commenter's case, the coursework in the payment period
the student is transferring out of would not be considered to be
substantially similar to the coursework the student will be taking in
the new program because none of the credits associated with that
coursework transfer over to the new program. Therefore, the institution
must treat the student as a withdrawal from the Business program, and
calculate new payment periods for the student's enrollment in the IT
program. Based on this comment, the Department believes that it would
be beneficial to clarify Sec. 668.4(g).
Changes: Section 668.4(g)(3) is amended to clarify that for an
institution to consider the student to remain in the same payment
period the credits from the payment period the student is transferring
out of must be accepted toward the new program.
Return of Title IV Funds Calculated on a Payment Period Basis
(Sec. Sec. 668.4 and 668.22)
Comment: One commenter did not agree with the proposed change that
would require the use of the payment period that ends later for Return
of Title IV Funds calculations for a student who withdrew from a credit
hour program that is measured in nonstandard terms that are not
substantially equal in length, when the student received aid under both
payment period definitions--one for Title IV grant and Perkins Loan
funds, and one for FFEL and Direct Loan funds. The commenter noted that
a student who received aid under both payment period definitions would
earn a different percentage of aid than a student with the same
withdrawal date who received aid under only the shorter of the two
payment periods. The commenter felt that students with the same
withdrawal date should always earn the same percentage of aid,
irrespective of the type of programs from which the student receives
aid.
Discussion: As stated in the NPRM (72 FR 44626), to simplify the
Return of Title IV Funds calculation and ease administrative burden, we
believe that institutions should use consistent Title IV payment
periods to the extent permitted under the HEA and regulations. However,
as there are two payment period definitions to take into account for
nonstandard term credit hour programs with terms that are not
substantially equal in length, the Department sought a solution that is
as equitable as possible without being exceedingly complicated.
Although, as the commenter points out, a student who received aid under
both payment period definitions would earn a different percentage of
aid than a student with the same withdrawal date who received aid under
only the shorter of the two payment periods, we believe the approach
taken in these regulations is the best solution because the use of the
shorter payment period would be substantially more complicated.
Change: None.
Treatment of Title IV Grant and Loan Funds if a Recipient Does Not
Begin Attendance (Sec. Sec. 668.21, 682.604, and 685.303)
Comments: Three commenters supported the proposed regulations
consolidating the requirements for the treatment of Title IV funds when
a student does not begin attendance. However, two other commenters felt
that the proposed requirement that an institution return the amount of
FFEL and Direct Loan funds paid to the institution on behalf of the
student was new and did not reflect current regulations.
Two commenters suggested that regulatory language be added to
reflect the statements in the preamble to the NPRM that (1)
institutions would not be responsible for returning FFEL and Direct
Loan funds that are disbursed directly to the student by the lender for
a study-abroad program or for a student enrolled in a foreign school,
and (2) a final demand letter must be issued to these students for such
funds.
One commenter believed that the timeframe for an institution to
return Title IV funds should be as soon as possible, but no later than
45 days after the date that the institution becomes aware that the
student will not or has not begun attendance, rather than the proposed
30 days, to match the timeframe in Sec. 668.22 for an institutional
return of funds to the Title IV programs when a student withdraws.
Discussion: The Department notes that although the proposed
requirements in Sec. Sec. 682.604(d)(4)(ii) and 685.303(b)(3)(ii) did
not specifically state that FFEL and Direct Loan funds paid to the
institution on behalf of a student (i.e., parent PLUS loan funds) must
be returned by the institution, the Department has previously
interpreted the requirement that the institution return funds paid by
the student to include parent PLUS loan funds. By including the phrase
``on behalf of'' in Sec. 668.21 we intended to reflect this
longstanding interpretation in the regulations.
We agree with the commenters' suggestions to add regulatory
language to address the treatment of FFEL and Direct Loan funds
disbursed directly to the student by the lender for a study-abroad
program or for a student enrolled in a foreign school when the student
does not begin attendance.
As stated in the NPRM (72 FR 44628), the Department does not
believe that an additional 15 days in the timeframe are necessary
because, unlike the Return of Title IV Funds requirements in Sec.
668.22, no calculation is required to determine
[[Page 62018]]
the amount of funds an institution must return.
Changes: Section 668.21(a)(2)(ii) is amended to make clear that an
institution is not responsible for returning FFEL and Direct Loan funds
that are disbursed directly to the student by the lender for a study-
abroad program or for a student enrolled in a foreign school when the
student does not begin attendance. In addition, Sec. 668.21(a)(2)(ii)
states that a final demand letter must be issued to students for such
funds.
Post-Withdrawal Disbursements of Grant Funds Made Directly to a Student
(Sec. 668.22)
Comments: Four commenters agreed with the proposal to remove the
requirement that an institution notify and obtain the student's
permission prior to making a direct disbursement of any Title IV grant
funds that make up a post-withdrawal disbursement. One commenter
believed the change would help streamline part of a complicated
administrative process. However, one commenter urged the Department to
establish one timeframe for late disbursements, disbursements of Title
IV grant funds that make up a post-withdrawal disbursement, and post-
withdrawal disbursements of Title IV loan funds. Two commenters
believed that an institution should be required to make a direct
disbursement of Title IV grant funds that make up a post-withdrawal
disbursement as soon as possible, but no later than 180 days after the
date of the institution's determination that the student withdrew,
rather than the proposed 30 days, to match the proposed timeframe for
making a late disbursement. One commenter felt that an institution
should be required to make such a disbursement as soon as possible, but
no later than 45 days after the date of the institution's determination
that the student withdrew, rather than the proposed 30 days, to match
the timeframe for an institutional return of funds to the Title IV
programs when a student withdraws. The commenter stated that most
institutions are looking at this process at the same time a Return of
Title IV Funds calculation is being done, so the timeframe should be
the same. Four commenters felt that the requirement for making a post-
withdrawal disbursement of Title IV loan funds should be changed to as
soon as possible, but no later than 180 days after the date of the
institution's determination that the student withdrew, rather than the
existing 120 days, to match the proposed timeframe for making a late
disbursement. Another commenter asked if it was permissible for an
institution not to issue the direct disbursement of Title IV grant
funds that make up a post-withdrawal disbursement if a student should
wish not to receive it. The commenter noted that some students who plan
to transfer to another institution may wish to use their Title IV grant
eligibility at the new institution.
Discussion: Although the Secretary believes that, in the vast
majority of cases, an institution will not need 45 days from the date
it determines that a student withdrew to make a direct disbursement of
Title IV grant funds to a student as a post-withdrawal disbursement,
the Secretary agrees with the comment that making the timeframe
consistent with the 45-day timeframe for the payment of an
institutional return of unearned Title IV funds will give institutions
one less timeframe to take into account. For the same reason, the
Secretary agrees with the comment that the requirement for making a
post-withdrawal disbursement of Title IV loan funds should be changed
to ``as soon as possible, but no later than 180 days after the date of
the institution's determination that the student withdrew'' to match
the timeframe for making a late disbursement. These funds are intended
to cover educational expenses that have already occurred and must be
provided to the student in a timely manner.
The Secretary does not agree with the suggestion that an
institution should have 180 days to make a direct disbursement of Title
IV grant funds to a student as a post-withdrawal disbursement.
Additional time is provided for an institution to make a post-
withdrawal disbursement of loan funds to allow for the required
notification to the student, or parent in the case of a PLUS loan, and
to receive a response. The Secretary emphasizes that an institution
must return or disburse funds as soon as possible after determining
that a student has withdrawn.
An institution must be able to document that its procedures call
for it to get post-withdrawal disbursements to its students as soon as
possible, and that it is consistently following those procedures.
These regulations require an institution to disburse directly to a
student, as soon as possible, but no later than 45 days after the date
of the institution's determination that the student withdrew, any
amount of a post-withdrawal disbursement of grant funds that is not
credited to the student's account. An institution may not delay its
disbursement processes in order to ascertain whether a student wishes
to receive the grant funds to which the student is entitled. However,
while the institution is processing the disbursement it may, at its
discretion, notify the student that it may be beneficial to turn down
all or a portion of the grant funds to preserve the student's grant
eligibility for attendance at another institution. Of course, if a
student independently contacts the institution and declines receipt of
a grant disbursement, the institution is not required to make the
disbursement.
Changes: Section 668.22(a)(5)(ii)(B)(1) is changed to require an
institution to make a direct disbursement of Title IV grant funds to a
student as a post-withdrawal disbursement as soon as possible, but no
later than 45 days after the date it determines that a student
withdrew.
Section 668.22(a)(5)(iii)(C) is changed to require that, after
receiving confirmation that a student, or parent in the case of a PLUS
loan, wants a post-withdrawal disbursement of Title IV loan funds
credited to the student's account or disbursed directly, an institution
must make a post-withdrawal disbursement of Title IV loan funds as soon
as possible, but no later than 180 days after the date of the
institution's determination that the student withdrew.
Cash Management--Recovery of Unclaimed Title IV Funds (Sec.
668.164(h))
Comments: With regard to returning Title IV funds for a check that
is not cashed, one commenter asked the Department to clarify (1) how
this provision applies to Federal Work-Study (FWS) payroll checks and
(2) the timeframes and processes for handling FWS funds. Another
commenter from an institution suggested a one-year timeframe for
resolving issues with unclaimed funds to coincide with the
institution's business practice for reviewing, recovering, and
returning Title IV funds.
Discussion: The Department agrees that it would be helpful to
clarify how Sec. 668.164(h) applies to FWS funds. The timeframes and
processes for returning FWS funds are the same as those for other Title
IV funds. However, the FWS funds that must be returned consist of only
the Federal share of the student's payroll check or EFT payment.
With respect to the comment suggesting that we extend to one year
the timeframe for returning unclaimed funds, we continue to believe
that the Federal interest is better protected and the benefits to the
student are greater (the student's loan balance is reduced) when the
uncashed checks or
[[Page 62019]]
undeliverable Title IV payments are returned to the Secretary or FFEL
Program lender sooner rather than later.
Changes: The regulations in Sec. 668.164(h) are amended (1) to
more clearly articulate the timeframes and processes for returning
Title IV funds and (2) to specify that only the Federal share of FWS
funds must be returned to the Secretary.
Cash Management--Minor Prior-Year Charges (Sec. 668.164(d))
Comments: Commenters generally agreed with the proposal to increase
from $100 to $200 the amount of prior-year charges that may be paid
with current-year funds. A few commenters suggested keeping the current
provision that allows an institution to pay for more than $100 (or $200
under the proposed regulations) of prior-year charges if this payment
will not prevent the student from paying current educational costs. One
of these commenters reasoned that as a student progresses through grade
levels the combination of increases in the student's loan amount and
the availability of ACG and SMART funds would enable the student to pay
for both current-year and prior-year charges out of current-year funds.
The commenter suggested that in this situation using the student's
credit balance to pay for any prior-year charges would be more
beneficial to the student than issuing the credit balance to the
student.
Discussion: As discussed in the preamble to the NPRM (72 FR 44629),
the HEA provides that Title IV funds that a student is eligible to
receive for an award year are intended to be used for that award year.
The Department originally promulgated regulations allowing the use of
current year Title IV funds to pay for minor prior-year charges
strictly as an administrative convenience, not as a way for an
institution to circumvent the law by maximizing a student's current-
year awards to pay for accumulated prior-year balances. In exchange for
increasing from $100 to $200 the amount of minor prior-year charges
that may be paid with current-year funds, the negotiated rulemaking
committee agreed to remove the exception that allowed an institution to
pay for more prior-year charges under certain circumstances.
Change: None.
Cash Management--Electronic Disbursements of Title IV Funds (Sec.
668.164(c))
Comment: A commenter suggested expanding the proposed definition of
``bank account'' in Sec. 668.164(c)(2) to include accounts at credit
unions that are insured by the National Credit Union Share Insurance
Fund (NCUSIF).
Discussion: We agree. NCUSIF is an arm of the National Credit Union
Administration (NCUA), which is the independent Federal agency that
charters and supervises Federal credit unions. NCUA, backed by the full
faith and credit of the U.S. government, operates the NCUSIF.
Changes: The definition of ``bank account'' in Sec. 668.164(c)(2)
is amended to include accounts insured by the NCUSIF.
Comment: One commenter suggested extending from 21 to at least 45
days the period during which a student could pick up a check at the
institution. The commenter stated that institutions frequently have
outdated addresses for students and that providing more time for
students either to pick up checks or to arrange another method of
disbursement would be preferable to returning student checks. The
commenter also suggested that direct payments of less than $100 be
exempt from the check-mailing requirement.
Discussion: As mentioned in the preamble to the NPRM (72 FR 44630),
the cases underlying this proposed provision were ones in which an
institution would notify a student that a credit-balance check was
available for immediate pick-up, but there was no check produced by the
institution. Instead, the student would be directed to a Web site where
the student would choose to receive the credit balance in one of three
ways: (1) By an EFT to the student's bank account, (2) by an EFT to a
bank account opened on behalf of the student by the institution, or (3)
by a check. We have no issue with an institution asking a student to go
to a Web site to make a disbursement selection as long as the
institution pays any credit balance to the student within the 14-day
regulatory timeframes regardless of whether the student makes a
selection, chooses not to, or simply neglects to make one. However, we
are concerned that an institution might request and receive Title IV
funds and credit the student's account, but not pay the credit balance
because the student did not make a disbursement selection. The
Department emphasizes that it is the sole responsibility of the
institution to make a timely credit balance payment to a student. This
provision ensures that an institution produces a check that a student
may pick up at a specified location at the institution. If the student
does not pick up the check within 21 days, the institution must mail it
to the student, disburse the credit balance to the student in some
other way, or immediately return the credit-balance funds.
With respect to the comment about exempting direct payments of less
than $100 from the check-mailing requirement, the commenter did not
provide, and we do not see, any basis for an exemption.
Change: None.
Comment: One commenter recommended amending the proposed provision
in Sec. 668.164(c)(3) under which an institution must obtain written
affirmative consent from a student or parent to open a bank account by
permitting the institution to obtain the student's or parent's consent
in accordance with the Electronic Signatures in the Global and National
Commerce Act (E-Sign Act).
Discussion: An institution must comply with the provisions of the
E-Sign Act irrespective of whether those provisions are referenced in
these Title IV regulations. The negotiated rulemaking committee agreed
to include a simple but specific consent requirement in the regulations
instead of relying solely on the E-Sign Act, which may be interpreted
and implemented in different ways.
Change: None.
Comment: One commenter suggested two changes to the proposed
provision under which an institution must ensure that a student has
convenient access to branch offices of the bank or ATMs of the bank or
affiliated bank for the purpose of making free cash withdrawals. First,
the commenter recommended that the term ``affiliated'' be defined to
mean a bank under the same common ownership and control as the bank in
which the account was opened. Second, the commenter suggested defining
the term ``convenient access'' to require that a branch office or ATM
of the bank in which the account was opened be located within 10 miles
of the main campus of an institution, except for students enrolled in a
distance education program offered by the institution.
Discussion: The suggested definition of ``affiliated'' is too
narrow. In the context of these regulations, the term ``affiliated''
means any relationship or arrangement between the bank where an account
is opened and any other bank that permits a student to make free cash
withdrawals from the student's accounts. With regard to convenient
access, we agree that some geographical limits are needed, but these
limits apply only to students who are on or near the institution's
campus. We believe it would be unreasonable to require an institution
to ensure that students enrolled in its distance education
[[Page 62020]]
programs have convenient access to branch offices or ATMs that offer
free cash withdrawals regardless of where those students reside.
Changes: Section 668.164(c)(3)(v) is amended by replacing
``affiliated bank'' with ``another bank.'' Section 668.164(c)(3)(v) is
amended to describe ``convenient access'' as having a branch office of
the bank or an ATM located (1) on the institution's campus, (2) in
institutionally-owned or operated facilities, or (3) immediately
adjacent to and accessible from the campus, consistent with the
definition of ``Public Property'' in Sec. 668.46(a).
Comment: One commenter suggested that the regulations clarify that
service providers who help institutions disburse credit-balance funds
electronically are ``third-party servicers'' as provided in Sec. 668.2
and, therefore, subject to annual audit and financial responsibility
requirements. The commenter contended that a number of service
providers do not comply with these requirements and requested that the
Department act proactively to reduce the Federal financial risk and the
risk posed to the institutions involved.
Discussion: As provided under Sec. 668.23(a)(3) and (c), third-
party servicers for institutions must submit compliance audits but are
not subject to financial standards and are not required to submit
financial audits. If the commenter's description of service providers
refers to banks that enter into agreements with institutions to issue
and service stored-value cards, we have heretofore not considered the
third-party servicer definition in Sec. 668.2 to apply to banking
services provided to institutions.
With regard to any information the commenter may have about any
parties that should, but do not, comply with Title IV regulations, the
commenter should notify the Department's Office of the Inspector
General.
Change: None.
Comments: One commenter disagreed with the provision in Sec.
668.164(c)(3), under which an institution may request, but not require
or rely upon, the student to open a bank account. The commenter
believed that an institution should have the flexibility to require a
student to authorize an EFT, noting that this practice is used by many
employers for payroll purposes.
Discussion: The Department intended to make it easier for an
institution to make EFT payments by removing the requirement in Sec.
668.165(b)(1)(i) that the institution first obtain authorization to
disburse Title IV funds to a bank account designated by the student or
parent. The provisions proposed in Sec. 668.164(c)(3) relate to
situations where the institution opens a bank account on behalf of the
student (or is actively involved in opening the account) for the
purpose of making EFT payments of Title IV funds to that account. For
these cases only, the institution must obtain the consent of the
student or parent before it opens the bank account. In all other cases,
the Department agrees that an institution may establish a policy
requiring a student to provide bank account information or open an
account at a bank of the student's choosing, as long as this policy
does not delay the disbursement of Title IV funds to the student. Thus,
if a student does not provide bank account information or does not
maintain a bank account--e.g., the student does not qualify for a bank
account or refuses to open an account--the institution must
nevertheless disburse the Title IV funds to the student in a timely
manner by some other means.
Changes: Section 668.164(c)(3) is amended to provide that an
institution may establish a policy requiring students to provide bank
account information or open an account at a bank of the student's
choosing.
Cash Management--Late Disbursements (Sec. 668.164(g))
Comment: One commenter representing a guaranty agency urged the
Department to consider an exception appeal process under which a late
disbursement could be made after the proposed 180-day period. The
commenter stated that a student should not be harmed by an oversight or
anomaly in the institution's or lender's process and offered that the
FFEL Program guarantor could monitor and manage this exception process,
eliminating the need for the institution to contact the Department.
Discussion: While we appreciate the guaranty agency's offer, this
change is not being made to respond to a workload issue. Rather, our
experience with providing an exception process for making late
disbursements is that institutions tend to rely on this process rather
than implementing effective administrative controls for making timely
disbursements. We believe that extending the timeframe from 120 days to
180 days provides institutions, lenders, and guaranty agencies more
than sufficient time to identify and make late disbursements to
students who may be affected by oversight and process anomalies.
Change: None.
Loan Cancellation Notice and Affirmative Confirmation of a Loan (Sec.
668.165(a))
Comments: Several commenters agreed with the flexible approach in
the NPRM allowing an institution to either affirmatively confirm that a
student wants a loan or comply with more stringent loan notification
and cancellation provisions. A few commenters requested that the
Department provide examples of an affirmative confirmation of a loan.
Discussion: The Department would consider an affirmative
confirmation to be a student response, either in electronic form or on
paper, accepting the loan or loans offered by the institution. Examples
of affirmative confirmation by a student are an award letter signed by
the student accepting the loan award or a process whereby the student
accesses a secure Web site to inform the institution that the student
accepts the loan.
Change: None.
Minimum Period for Certifying or Originating a Loan (Sec. Sec. 682.603
and 685.301)
Comments: Several commenters supported the proposed change allowing
transfer students to obtain the remaining portion of their current
annual loan limit for the remaining portion of their program or
academic year. However, one commenter questioned how this would work in
practice. The commenter asked whether the number of transfer credits
accepted or the number of transfer credits earned during the
overlapping loan period would have any bearing on the implementation of
this proposed change. The commenter asked us to consider the example of
a student with a loan period of 11/12/06 to 9/30/07 at a previous
institution that transferred with 18 credits to a new institution where
the student had a loan period of 8/15/07 to 5/25/08. The student
received $2,000 (out of a possible $3,500) at the first institution for
a loan period that overlapped the loan period at the second
institution. The commenter stated that under the previous regulations
the second institution could only provide the student, for the second
loan period of 8/15/07 to 5/25/08, with $1,500, i.e., the difference
between what the student could have received at the first institution
($3,500) and what the student did receive there ($2,000). The commenter
wondered how the second institution could award loan funds to the
student in this example under the proposed regulations.
[[Page 62021]]
Another commenter inquired about the proposed regulation that
allows institutions to certify or originate new loans for students when
they complete a degree program using a loan period of less than an
academic year and then begin another degree program for the remainder
of the same academic year at the same institution. The commenter
suggested that students in non-degree programs should receive similar
treatment. Another commenter asked whether this proposal would address
a student who finished a bachelor's degree and immediately began a
master's degree at the same institution in the same way that it
addressed a student who finished an associate's degree and immediately
began a bachelor's degree.
Another commenter asked us to clarify whether the meaning of the
phrase ``substantially equal in length'' in Sec. Sec. 682.603(g)(4)
and 685.301(c)(4), is applicable to all references in Sec. Sec.
682.603 and 685.301 where that phrase is used.
Discussion: In the first commenter's example, a student, eligible
for $3,500, who received a loan of $2,000 for a loan period of 11/12/06
to 9/30/07 at one institution and who transferred with 18 credits to a
second institution where the student would normally have a loan period
of 8/15/07 to 5/25/08, could, under these final regulations, receive a
loan at the second institution for the balance of the annual loan limit
for the balance of the academic year that started at the first
institution. Neither the number of credits transferred into the second
institution nor the number of credits earned during the overlapping
loan period is relevant. Thus, this student, if otherwise eligible,
could receive a loan of $1500 for a loan period of 8/15/07 to 9/30/07.
Note that if the overlapping loan period were sufficiently short
(perhaps less than a month) some lenders might decline to make a loan.
In that case, the student would not receive a loan for that short
period of time and would end up with a new loan period starting on the
day after the old loan period ended. After the balance of the loan
period from the first institution ends (i.e., starting on 10/1/07), the
student could receive a new loan for a new academic year (or for the
remainder of the program if there were less than an academic year
remaining in the student's program), irrespective of whether the 10/1/
07 date coincided with the start of the student's classes, as long as
the student was enrolled and eligible at that time.
With regard to the comment about whether a student who finished a
bachelor's degree and immediately began a master's degree at the same
institution would be treated in the same way as a student who finished
an associate's degree and immediately began a bachelor's degree, we
note that the regulations do not differentiate between types of degree
programs. And with regard to the suggestion that students in non-degree
programs should be treated the same way as students in degree programs
are treated, we agree that they should be. Accordingly, all situations
are addressed in the same manner when a student finishes one program
for which the student's last loan was for less than an academic year
and immediately starts another program at the same institution. That
is, the institution may certify or originate a loan for the remainder
of the academic year for the remaining balance of the student's annual
loan limit at the loan level associated with the new program.
Finally, because it would more accurately describe our intent, we
agree with the commenter's suggestion to apply the meaning of the
phrase ``substantially equal in length'' to all of Sec. Sec. 682.603
and 685.301.
Changes: Sections 682.603(f)(1)(iii) and 685.301(a)(9)(iii) are
amended by removing the wording that restricted these regulations to
degree programs. Also, we have clarified that the meaning of
``substantially equal in length'' in Sec. Sec. 682.603(g)(4) and
685.301(c)(4) is applicable to all of Sec. Sec. 682.603 and 685.301.
Annual Loan Limit Progression (Sec. Sec. 682.603 and 685.301)
Comments: One commenter stated that a student in a nonstandard term
credit hour program with terms that are substantially equal in length,
where the terms are at least eight weeks in length rather than the
proposed nine weeks in length, should progress to the next loan limit
when the student completes an academic year in calendar time. The
commenter noted that eight-week terms are a natural subdivision of the
16-week standard semester used for traditional students, and should be
treated in the same manner as standard terms.
Another commenter stated that a student in any nonstandard term
credit hour program with terms that are substantially equal in length,
not just those with terms that are at least nine weeks in length,
should progress to the next loan limit when the student completes an
academic year in calendar time. The commenter noted that the
disbursement requirements in the regulations published in the Federal
Register on November 1, 2000 (65 FR 65616), with which these
regulations are supposed to be consistent, did not make such a
distinction. The commenter also noted that a student in a nonstandard
term credit hour program, with terms that are substantially equal in
length but not at least nine weeks in length, does not have to
successfully complete a payment period to advance to the next payment
period. The commenter suggests that the student could progress to the
next payment period even if the student failed some or all of the
courses in the payment period. However, under the proposed changes, the
student who failed some or all of the courses in the payment period
would not progress to the next annual loan limit until the student
successfully completes the failed hours.
One commenter asked the Department to clarify that an institution
may certify or originate a Stafford loan increase for a student
attending a nonstandard term program with substantially equal terms of
the appropriate length when that student's grade level standing
advances and that student gains eligibility for a higher Stafford
annual loan limit during an academic year. The commenter also asked the
Department to clarify whether an institution must prorate the FFEL or
Direct Loan Stafford annual loan limit for a student attending an
undergraduate program offered in nonstandard terms that are
substantially equal in length, and of the appropriate minimum length,
when the student is enrolled in a final period of study consisting of
fewer terms than are in the academic year.
Discussion: The Department proposed the nine-week minimum for
purposes of defining when a single term loan may be made in a
nonstandard term program with terms that are substantially equal in
length. As noted in the preamble to the NPRM (72 FR 44632 and 44633),
the Department believes that the minimum length should be close to the
length of the shortest standard term, a quarter, in order to justify
single term loan certification or origination and standard term-based
annual loan limit progression. We do not believe that eight-week terms
are sufficiently close to 10-week quarters for this expanded purpose.
The commenter is correct that the requirements for completion of a
payment period for purposes of disbursement within the loan period for
students in nonstandard-term credit hour programs with terms that are
substantially equal in length do not distinguish between those terms
that are at least nine weeks in length and those that are not. For
completion of a payment period, all students in nonstandard term credit
hour programs with terms that are substantially equal
[[Page 62022]]
in length, irrespective of the length of those terms, are treated the
same as students in standard term programs. That is, they do not have
to successfully complete (i.e., pass the coursework in) a payment
period to advance to the next payment period. However, the student who
failed to complete the coursework in an academic year would not
progress to the next academic year, and thus regain eligibility for the
next annual loan limit, until the student successfully completes the
failed hours. This restriction has historically been applied to clock
hour programs, non-term credit hour programs, and nonstandard term
credit hour programs. Many of these programs have tended to be shorter
in duration and more focused on providing vocational skills. Although
we have provided more flexibility in making loan disbursements by
payment period for all nonstandard term credit hour programs with terms
that are substantially equal in length within the loan period, we do
not believe that we should extend similar flexibility to these programs
in the area of loan certification or origination and annual loan limit
progression. We believe doing so would result in increasing student
loan indebtedness for students who are not making adequate progress
toward their educational goals and who, as a result, may by at greater
risk of dropping out and defaulting on their student loans.
For the same reason, an institution may not certify or originate a
FFEL or Direct Loan increase for a student attending a nonstandard term
credit hour program with terms substantially equal in length, that are
not at least nine weeks in length, when that student's grade level
standing advances. That is, we would not allow a student to gain
eligibility for a higher Stafford annual loan limit during an academic
year in this situation. Likewise, an undergraduate student attending a
final period of study in any nonstandard term credit hour program is
subject to proration of the annual loan limit while enrolled in the
defined number of terms in the program's academic year but attending
less than the number of credit hours for that defined academic year.
Change: None.
Processing the Borrower's Loan Proceeds and Counseling Borrowers
(Sec. Sec. 682.604 and 685.301)
Comment: None.
Discussion: FFEL and Direct loans may be certified or originated
for a single payment period (e.g., a single semester) for institutions
that measure progress in credit hours and use a semester, trimester, or
quarter system, or have terms that are substantially equal in length
with no term less than nine weeks in length. Sections 682.604(c)(6)(ii)
and 685.301(b)(3)(ii) address the delivery and disbursement of loan
proceeds when a loan is certified or originated for a single payment
period. Basically, loans made for a single payment period must be paid
to the student in two installments. However, in proposing changes to
these sections of the regulations in the NPRM, we inadvertently
included language that would modify that basic requirement for standard
terms and terms that are substantially equal in length with no term
less than nine weeks in length when no change was intended for those
terms. Currently an institution may not make the second payment of
funds until the calendar midpoint of the loan period. The NPRM proposed
to change that requirement to one in which the institution could not
make the second payment of funds until the student successfully
completes half the number of credit or clock hours and half the number
of weeks of instructional time in the payment period. This change was
not intended for standard terms and terms that are substantially equal
in length with no term less than nine weeks in length and, indeed,
would create a situation most of the time for those terms in which a
student would not be able to receive the second half of the loan until
the student was finished with the loan period (e.g., until the student
was finished with the semester for which the student was borrowing
money).
Change: Sections 682.604(c)(6)(ii) and 685.301(b)(3)(ii) are
amended, with respect to the required two deliveries of loan proceeds
(FFEL) and two payments of a loan (Direct Loan) when the loan is made
for a single term, to apply the current requirements for single
(standard) term loans to standard terms and terms that are
substantially equal in length with no term less than nine weeks in
length.
Calculation of a Pell Grant (Sec. Sec. 690.63 and 690.66)
Comment: Several commenters supported the proposed change in the
Pell Grant calculations for programs using credit hours without terms
or clock hours and for correspondence courses using credit hours
without terms. They stated that the proposed changes would provide
greater equity for students attending clock hour institutions by
removing the current double proration of Pell Grant awards that affects
these students in some situations.
Discussion: We appreciate the commenters' support.
Change: None.
Method of Disbursement (Sec. Sec. 690.78 and 691.78)
Comment: None.
Discussion: During our intradepartmental review we found that the
disbursement provisions in Sec. Sec. 690.78 and 691.78 have been
replaced or superseded by the provisions in the Cash Management
Regulations in subpart K of part 668 of the Title IV regulations. This
change was inadvertently omitted from the proposed regulations.
Changes: We have removed and reserved Sec. Sec. 690.78 and 691.78.
Executive Order 12866
Regulatory Impact Analysis
Under Executive Order 12866, the Secretary must determine whether
the regulatory action is ``significant'' and therefore subject to the
requirements of the Executive Order and subject to review by the OMB.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action likely to result in a rule that may
(1) have an annual effect on the economy of $100 million or more, or
adversely affect a sector of the economy, productivity, competition,
jobs, the environment, public health or safety, or State, local or
tribal governments or communities in a material way (also referred to
as an ``economically significant'' rule); (2) create serious
inconsistency or otherwise interfere with an action taken or planned by
another agency; (3) materially alter the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
Pursuant to the terms of the Executive Order, it has been
determined that this final regulatory action will not have an annual
effect on the economy of more than $100 million. Therefore, this action
is not ``economically significant'' and subject to OMB review under
section 3(f)(1) of Executive Order 12866. In the interests of
transparency and public information, the Secretary nonetheless has
assessed the potential costs and benefits of this regulatory action and
has determined the benefits justify the costs. This assessment was
discussed in detail in the NPRM. The Department received no comments on
the regulatory impact analysis portion of the NPRM.
Need for Federal Regulatory Action
These final regulations address a broad range of issues affecting
students,
[[Page 62023]]
borrowers, schools, lenders, guaranty agencies, secondary market
participants, and third-party servicers participating in one or more of
the Perkins Loan, FSEOG, FFEL, Direct Loan, Pell Grant, ACG, and
National SMART Grant programs. Prior to the start of negotiated
rulemaking, a list of proposed regulatory changes was developed from
advice and recommendations by interested parties and organizations
submitted through testimony at public hearings and written comments
submitted directly to the Department of Education in Washington, DC.
Staff within the Office of Postsecondary Education also identified
issues for discussion and negotiation.
Regulatory Alternatives Considered
A broad range of alternatives to the proposed regulations was
considered as part of the negotiated rulemaking process. These
alternatives were reviewed in detail in the NRPM under the Reasons
sections accompanying the discussion of each proposed regulatory
provision. In assessing the budgetary impact of these alternatives, the
Department considered the effect of possible changes on the size or
timing of Federal student aid disbursements. In all cases, the
alternatives considered--which generally dealt with the consolidation
or clarification of existing definitions, procedures, or processes to
simplify program administration--did not have a measurable effect on
Federal costs. No comments or additional information have been received
since the publication of the NPRM to cause the Department to reconsider
this determination.
Benefits
Many of the final regulations consolidate existing regulations,
codify existing interpretations and guidance, or make minor changes
intended to establish consistent definitions or streamline program
operations across the various Federal student aid programs. The
Department determined that the additional clarity and enhanced
efficiency resulting from these changes represent benefits with little
or no countervailing costs or additional burden. This determination is
strongly supported by the fact that the negotiated rulemaking committee
reached consensus on the proposed regulations. No comments or
additional information have been received since the publication of the
NPRM to cause the Department to reconsider this determination.
Benefits provided in these regulations include the clarification or
consolidation of rules or definitions involving enrollment statuses,
independent study for direct assessment programs, cash management
rules, disbursement and payment periods, return of Title IV aid, and
the calculation of Pell Grant awards. None of these provisions were
determined to have a substantial economic impact.
Costs
Because entities affected by these regulations already participate
in the Title IV, HEA programs, these lenders, guaranty agencies, and
institutions of higher education must have already established systems
and procedures in place to meet program eligibility requirements. All
of the final regulations involve changes in specific parameters
associated with existing guidance rather than entirely new
requirements. Accordingly, entities wishing to continue to participate
in the Federal student aid programs have already absorbed most of the
administrative costs related to implementing these final regulations.
Marginal costs associated with these regulations, which are not
expected to be significant, are primarily related to one-time system
changes that are an unavoidable cost of continued program
participation. The provisions impose no costs to individual students
and loan borrowers. None of these provisions were determined to have a
substantial economic impact or impose a significant burden; and no
comments or information has been received since the publication of the
NPRM that would cause the Department to reconsider this determination.
Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and
explain burdens specifically associated with information collection
requirements. See the heading Paperwork Reduction Act of 1995.
Accounting Statement
As required by OMB Circular A-4 (available at http://www.Whitehouse.gov/omb/Circulars/a004/a-4.pdf
), in Table 1 below, we
have prepared an accounting statement showing the classification of the
expenditures associated with the provisions of these final regulations.
This table provides our best estimate of the changes in Federal student
aid payments as a result of these final regulations.
Table 1.--Accounting Statement: Classification of Estimated Savings
[In millions]
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.......................... $0.00
------------------------------------------------------------------------
Regulatory Flexibility Act Certification
The Secretary certifies that these final regulations will not have
a significant economic impact on a substantial number of small
entities. These final regulations would affect institutions of higher
education, lenders, and guaranty agencies that participate in Title IV,
HEA programs and individual students and loan borrowers. The U.S. Small
Business Administration (SBA) Size Standards define these institutions
as ``small entities'' if they are for-profit or nonprofit institutions
with total annual revenue below $5,000,000 or if they are institutions
controlled by governmental entities with populations below 50,000.
Guaranty agencies are State and private nonprofit entities that act as
agents of the Federal government, and as such are not considered
``small entities'' under the Regulatory Flexibility Act. Individuals
are also not defined as ``small entities'' under the Regulatory
Flexibility Act.
A significant percentage of the schools and lenders participating
in the Federal student loan programs meet the definition of ``small
entities.'' While these schools and lenders fall within the SBA size
guidelines, the final regulations do not impose significant new costs
on these entities. In the NPRM the Secretary invited comments from
small institutions as to whether they believe the proposed changes
would have a significant economic impact on them and, if so, requests
evidence to support that belief. The Department received no comments on
the regulatory flexibility act portion of the NPRM.
Paperwork Reduction Act of 1995
This regulation contains information collection requirements that
were reviewed as part of the comment period on the NPRM. The Department
received no comments on the Paperwork Reduction Act portion of the
NPRM.
In regard to other information collection requirements described in
the NPRM, the Paperwork Reduction Act of 1995 does not require a
response to a collection of information unless it displays a valid OMB
control number. We display the valid OMB control numbers assigned to
the collections of
[[Page 62024]]
information in these final regulations at the end of the affected
sections of the regulations.
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 the following site:
http://www.ed.gov/news/fedregister.
To use PDF you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, DC, area at (202) 512-1530.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: http://www.gpoaccess.gov/nara/index.html
.
(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal
Supplemental Educational Opportunity Grant Program; 84.032 Federal
Family Education Loan Program; 84.037 Federal Perkins Loan Program;
84.063 Federal Pell Grant Program; 84.268 William D. Ford Federal
Direct Loan Program; 84.375 Academic Competitiveness Grants; and
84.376 SMART Grants)
List of Subjects
34 CFR Part 668
Administrative practice and procedure, Colleges and universities,
Consumer protection, Education, Grant programs--education, Loan
programs--education, Reporting and recordkeeping requirements, Student
aid, Vocational education.
34 CFR Parts 674 and 676
Administrative practice and procedure, Colleges and universities,
Consumer protection, Education, Employment, Grant programs--education,
Loan programs--education, Reporting and recordkeeping requirements,
Student aid, Vocational education.
34 CFR Parts 682 and 685
Administrative practice and procedure, Colleges and universities,
Education, Loans program--education, Reporting and recordkeeping
requirements, Student aid, Vocational education.
34 CFR Parts 690 and 691
Colleges and universities, Elementary and secondary education,
Grant programs--education, Student aid.
Dated: October 23, 2007.
Margaret Spellings,
Secretary of Education.
0
For the reasons discussed in the preamble, the Secretary amends parts
668, 674, 676, 682, 685, 690, and 691 of title 34 of the Code of
Federal Regulations as follows:
PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS
0
1. The authority citation for part 668 continues to read as follows:
Authority: 20 U.S.C. 1001, 1002, 1003, 1085, 1088, 1091, 1092,
1094, 1099c, and 1099c-1, unless otherwise noted.
0
2. Section 668.2(b) is amended by adding, in alphabetical order, the
definitions Graduate or professional student, Half-time student,
Professional degree, Three-quarter time student, and Undergraduate
student and revising the definition of Full-time student to read as
follows:
Sec. 668.2 General definitions.
* * * * *
(b) * * *
Full-time student: An enrolled student who is carrying a full-time
academic workload, as determined by the institution, under a standard
applicable to all students enrolled in a particular educational
program. The student's workload may include any combination of courses,
work, research, or special studies that the institution considers
sufficient to classify the student as a full-time student. However, for
an undergraduate student, an institution's minimum standard must equal
or exceed one of the following minimum requirements:
(1) For a program that measures progress in credit hours and uses
standard terms (semesters, trimesters, or quarters), 12 semester hours
or 12 quarter hours per academic term.
(2) For a program that measures progress in credit hours and does
not use terms, 24 semester hours or 36 quarter hours over the weeks of
instructional time in the academic year, or the prorated equivalent if
the program is less than one academic year.
(3) For a program that measures progress in credit hours and uses
nonstandard terms (terms other than semesters, trimesters or quarters)
the number of credits determined by--
(i) Dividing the number of weeks of instructional time in the term
by the number of weeks of instructional time in the program's academic
year; and
(ii) Multiplying the fraction determined under paragraph (3)(i) of
this definition by the number of credit hours in the program's academic
year.
(4) For a program that measures progress in clock hours, 24 clock
hours per week.
(5) A series of courses or seminars that equals 12 semester hours
or 12 quarter hours in a maximum of 18 weeks.
(6) The work portion of a cooperative education program in which
the amount of work performed is equivalent to the academic workload of
a full-time student.
(7) For correspondence coursework, a full-time courseload must be--
(i) Commensurate with the full-time definitions listed in
paragraphs (1) through (6) of this definition; and
(ii) At least one-half of the coursework must be made up of non-
correspondence coursework that meets one-half of the institution's
requirement for full-time students.
(Authority: 20 U.S.C. 1082 and 1088)
* * * * *
Graduate or professional student: A student who--
(1) Is not receiving title IV aid as an undergraduate student for
the same period of enrollment;
(2) Is enrolled in a program or course above the baccalaureate
level or is enrolled in a program leading to a professional degree; and
(3) Has completed the equivalent of at least three years of full-
time study either prior to entrance into the program or as part of the
program itself.
(Authority: 20 U.S.C. 1082 and 1088)
Half-time student: (1) Except as provided in paragraph (2) of this
definition, an enrolled student who is carrying a half-time academic
workload, as determined by the institution, that amounts to at least
half of the workload of the applicable minimum requirement outlined in
the definition of a full-time student.
(2) A student enrolled solely in a program of study by
correspondence who is carrying a workload of at least 12 hours of work
per week, or is earning at least six credit hours per semester,
trimester, or quarter. However, regardless of the work, no student
[[Page 62025]]
enrolled solely in correspondence study is considered more than a half-
time student.
(Authority: 20 U.S.C. 1082 and 1088)
* * * * *
Professional degree: A degree that signifies both completion of the
academic requirements for beginning practice in a given profession and
a level of professional skill beyond that normally required for a
bachelor's degree. Professional licensure is also generally required.
Examples of a professional degree include but are not limited to
Pharmacy (Pharm.D.), Dentistry (D.D.S. or D.M.D.), Veterinary Medicine
(D.V.M.), Chiropractic (D.C. or D.C.M.), Law (L.L.B. or J.D.), Medicine
(M.D.), Optometry (O.D.), Osteopathic Medicine (D.O.), Podiatry
(D.P.M., D.P., or Pod.D.), and Theology (M.Div., or M.H.L.).
(Authority: 20 U.S.C. 1082 and 1088)
* * * * *
Three-quarter time student: An enrolled student who is carrying a
three-quarter-time academic workload, as determined by the institution,
that amounts to at least three quarters of the work of the applicable
minimum requirement outlined in the definition of a full-time student.
(Authority: 20 U.S.C. 1082 and 1088)
* * * * *
Undergraduate student: (1) A student who is enrolled in an
undergraduate course of study that usually does not exceed four years,
or is enrolled in a longer program designed to lead to a degree at the
baccalaureate level. For purposes of 34 CFR 690.6(c)(5) students who
have completed a baccalaureate program of study and who are
subsequently completing a State-required teacher certification program
are treated as undergraduates.
(2) In addition to meeting the definition in paragraph (1) of this
definition, a student is only considered an undergraduate for purposes
of the Federal Supplemental Educational Opportunity Grant (FSEOG)
Program, the Federal Pell Grant Program, the Academic Competitiveness
Grant (ACG) Program, and National Science and Mathematics Access to
Retain Talent (SMART) Grant Program if the student has not yet earned a
baccalaureate or professional degree. However, for purposes of 34 CFR
690.6(c)(5) students who have completed a baccalaureate program of
study and who are subsequently completing a State-required teacher
certification program are treated as undergraduates.
(3) For purposes of dual degree programs that allow individuals to
complete a bachelor's degree and either a graduate or professional
degree within the same program, a student is considered an
undergraduate student for at least the first three years of that
program.
(4) A student enrolled in a four to five year program designed to
lead to an undergraduate degree. A student enrolled in a program of any
other, longer length is considered an undergraduate student for only
the first four years of that program.
(Authority: 20 U.S.C. 1082 and 1088)
* * * * *
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3. Section 668.4 is revised to read as follows:
Sec. 668.4 Payment period.
(a) Payment periods for an eligible program that measures progress
in credit hours and uses standard terms or nonstandard terms that are
substantially equal in length. For a student enrolled in an eligible
program that measures progress in credit hours and uses standard terms
(semesters, trimesters, or quarters), or for a student enrolled in an
eligible program that measures progress in credit hours and uses
nonstandard terms that are substantially equal in length, the payment
period is the academic term.
(b) Payment periods for an eligible program that measures progress
in credit hours and uses nonstandard terms that are not substantially
equal in length. For a student enrolled in an eligible program that
measures progress in credit hours and uses nonstandard terms that are
not substantially equal in length--
(1) For Pell Grant, ACG, National SMART Grant, FSEOG, and Perkins
Loan program funds, the payment period is the academic term;
(2) For FFEL and Direct Loan program funds--
(i) For a student enrolled in an eligible program that is one
academic year or less in length--
(A) The first payment period is the period of time in which the
student successfully completes half of the number of credit hours in
the program and half of the number of weeks of instructional time in
the program; and
(B) The second payment period is the period of time in which the
student successfully completes the program; and
(ii) For a student enrolled in an eligible program that is more
than one academic year in length--
(A) For the first academic year and any subsequent full academic
year--
(1) The first payment period is the period of time in which the
student successfully completes half of the number of credit hours in
the academic year and half of the number of weeks of instructional time
in the academic year; and
(2) The second payment period is the period of time in which the
student successfully completes the academic year;
(B) For any remaining portion of an eligible program that is more
than half an academic year but less than a full academic year in
length--
(1) The first payment period is the period of time in which the
student successfully completes half of the number of credit hours in
the remaining portion of the program and half of the number of weeks of
instructional time remaining in the program; and
(2) The second payment period is the period of time in which the
student successfully completes the remainder of the program; and
(C) For any remaining portion of an eligible program that is not
more than half an academic year, the payment period is the remainder of
the program.
(c) Payment periods for an eligible program that measures progress
in credit hours and does not have academic terms or for a program that
measures progress in clock hours. (1) For a student enrolled in an
eligible program that is one academic year or less in length--
(i) The first payment period is the period of time in which the
student successfully completes half of the number of credit hours or
clock hours, as applicable, in the program and half of the number of
weeks of instructional time in the program; and
(ii) The second payment period is the period of time in which the
student successfully completes the program or the remainder of the
program.
(2) For a student enrolled in an eligible program that is more than
one academic year in length--
(i) For the first academic year and any subsequent full academic
year--
(A) The first payment period is the period of time in which the
student successfully completes half of the number of credit hours or
clock hours, as applicable, in the academic year and half of the number
of weeks of instructional time in the academic year; and
(B) The second payment period is the period of time in which the
student successfully completes the academic year;
(ii) For any remaining portion of an eligible program that is more
than half an academic year but less than a full academic year in
length--
(A) The first payment period is the period of time in which the
student
[[Page 62026]]
successfully completes half of the number of credit hours or clock
hours, as applicable, in the remaining portion of the program and half
of the number of weeks of instructional time remaining in the program;
and
(B) The second payment period is the period of time in which the
student successfully completes the remainder of the program; and
(iii) For any remaining portion of an eligible program that is not
more than half an academic year, the payment period is the remainder of
the program.
(3) For purposes of paragraphs (c)(1) and (c)(2) of this section,
if an institution is unable to determine when a student has
successfully completed half of the credit hours or clock hours in a
program, academic year, or remainder of a program, the student is
considered to begin the second payment period of the program, academic
year, or remainder of a program at the later of the date, as determined
by the institution, on which the student has successfully completed--
(i) Half of the academic coursework in the program, academic year,
or remainder of the program; or
(ii) Half of the number of weeks of instructional time in the
program, academic year, or remainder of the program.
(d) Application of the cohort default rate exemption.
Notwithstanding paragraphs (a), (b), and (c) of this section, if 34 CFR
682.604(c)(10) or 34 CFR 685.301(b)(8) applies to an eligible program
that measures progress in credit hours and uses nonstandard terms, an
eligible program that measures progress in credit hours and does not
have academic terms, or an eligible program that measures progress in
clock hours, the payment period for purposes of FFEL and Direct Loan
funds is the loan period for those portions of the program to which 34
CFR 682.604(c)(10) or 34 CFR 685.301(b)(8) applies.
(e) Excused absences. For purposes of this section, in determining
whether a student successfully completes the clock hours in a payment
period, an institution may include clock hours for which the student
has an excused absence (i.e., an absence that a student does not have
to make up) if--
(1) The institution has a written policy that permits excused
absences; and
(2) The number of excused absences under the written policy for
purposes of this paragraph (e) does not exceed the lesser of--
(i) The policy on excused absences of the institution's accrediting
agency or, if the institution has more than one accrediting agency, the
agency designated under 34 CFR 600.11(b);
(ii) The policy on excused absences of any State agency that
licenses the institution or otherwise legally authorizes the
institution to operate in the State; or
(iii) Ten percent of the clock hours in the payment period.
(f) Re-entry within 180 days. If a student withdraws from a program
described in paragraph (c) of this section during a payment period and
then reenters the same program within 180 days, the student remains in
that same payment period when he or she returns and, subject to
conditions established by the Secretary or by the FFEL lender or
guaranty agency, is eligible to receive any title IV, HEA program funds
for which he or she was eligible prior to withdrawal, including funds
that were returned by the institution or student under the provisions
of Sec. 668.22.
(g) Re-entry after 180 days or transfer. (1) Except as provided in
paragraph (g)(3) of this section, and subject to the conditions of
paragraph (g)(2) of this section, an institution calculates new payment
periods for the remainder of a student's program based on paragraph (c)
of this section, for a student who withdraws from a program described
in paragraph (c) of this section, and--
(i) Reenters that program after 180 days;
(ii) Transfers into another program at the same institution within
any time period; or
(iii) Transfers into a program at another institution within any
time period.
(2) For a student described in paragraph (g)(1) of this section--
(i) For the purpose of calculating payment periods only, the length
of the program is the number of credit hours and the number of weeks of
instructional time, or the number of clock hours and the number of
weeks of instructional time, that the student has remaining in the
program he or she enters or reenters; and
(ii) If the remaining hours and weeks constitute half of an
academic year or less, the remaining hours constitute one payment
period.
(3) Notwithstanding the provisions of paragraph (g)(1) of this
section, an institution may consider a student who transfers into
another program at the same institution to remain in the same payment
period if--
(i) The student is continuously enrolled at the institution;
(ii) The coursework in the payment period the student is
transferring out of is substantially similar to the coursework the
student will be taking when he or she first transfers into the new
program;
(iii) The payment periods are substantially equal in length in
weeks of instructional time and credit hours or clock hours, as
applicable;
(iv) There are little or no changes in institutional charges
associated with the payment period to the student; and
(v) The credits from the payment period the student is transferring
out of are accepted toward the new program.
(h) Definitions. For purposes of this section--
(1) Terms are substantially equal in length if no term in the
program is more than two weeks of instructional time longer than any
other term in that program; and
(2) A student successfully completes credit hours or clock hours if
the institution considers the student to have passed the coursework
associated with those hours.
(Authority: 20 U.S.C. 1070 et seq.)
0
4. Section 668.10 is amended by:
0
A. In paragraph (a)(3)(ii), removing the word ``or'' immediately after
the reference ``668.4(a)'' and adding, in its place, the punctuation
``,'', and by adding the words ``, or (c),'' immediately after the
parenthetical ``(b)''.
0
B. Revising paragraph (a)(3)(iii).
0
C. Removing paragraphs (a)(3)(v) and (3)(vi).
The revision reads as follows:
Sec. 668.10 Direct assessment programs.
(a) * * *
(3) * * *
(iii) A week of instructional time in a direct assessment program
is any seven-day period in which at least one day of educational
activity occurs. Educational activity in a direct assessment program
includes regularly scheduled learning sessions, faculty-guided
independent study, consultations with a faculty mentor, development of
an academic action plan addressed to the competencies identified by the
institution, or, in combination with any of the foregoing, assessments.
It does not include credit for life experience. For purposes of direct
assessment programs, independent study occurs when a student follows a
course of study with predefined objectives but works with a faculty
member to decide how the student is going to meet those objectives. The
student and faculty member agree on what the student will do (e.g.,
required readings, research, and work products), how the student's work
will be evaluated, and on what the relative timeframe for completion of
the work will be. The student must interact with the faculty member on
a regular
[[Page 62027]]
and substantive basis to assure progress within the course or program.
* * * * *
0
5. Section 668.21 is revised to read as follows:
Sec. 668.21 Treatment of title IV grant and loan funds if the
recipient does not begin attendance at the institution.
(a) If a student does not begin attendance in a payment period or
period of enrollment--
(1) The institution must return all title IV, HEA program funds
that were credited to the student's account at the institution or
disbursed directly to the student for that payment period or period of
enrollment, for Federal Perkins Loan, FSEOG, Federal Pell Grant, ACG,
and National SMART Grant program funds; and
(2) For FFEL and Direct Loan funds--
(i)(A) The institution must return all FFEL and Direct Loan funds
that were credited to the student's account at the institution for that
payment period or period of enrollment; and
(B) The institution must return the amount of payments made
directly by or on behalf of the student to the institution for that
payment period or period of enrollment, up to the total amount of the
loan funds disbursed;
(ii) For remaining amounts of FFEL or Direct Loan funds disbursed
directly to the student for that payment period or period of
enrollment, including funds that are disbursed directly to the student
by the lender for a study-abroad program in accordance with Sec.
682.207(b)(1)(v)(C)(1) or for a student enrolled in a foreign school in
accordance with Sec. 682.207(b)(1)(v)(D), the institution is not
responsible for returning the funds, but must immediately notify the
lender or the Secretary, as appropriate, when it becomes aware that the
student will not or has not begun attendance so that the lender or
Secretary will issue a final demand letter to the borrower in
accordance with 34 CFR 682.412 or 34 CFR 685.211, as appropriate; and
(iii) Notwithstanding paragraph (a)(2)(ii) of this section, if an
institution knew that a student would not begin attendance prior to
disbursing FFEL or Direct Loan funds directly to the student for that
payment period or period of enrollment (e.g., the student notified the
institution that he or she would not attend, or the institution
expelled the student), the institution must return those funds.
(b) The institution must return those funds for which it is
responsible under paragraph (a) of this section to the respective title
IV, HEA program as soon as possible, but no later than 30 days after
the date that the institution becomes aware that the student will not
or has not begun attendance.
(c) For purposes of this section, the Secretary considers that a
student has not begun attendance in a payment period or period of
enrollment if the institution is unable to document the student's
attendance at any class during the payment period or period of
enrollment.
(d) In accordance with procedures established by the Secretary or
FFEL Program lender, an institution returns title IV, HEA funds timely
if--
(1) The institution deposits or transfers the funds into the bank
account it maintains under Sec. 668.163 as soon as possible, but no
later than 30 days after the date that the institution becomes aware
that the student will not or has not begun attendance;
(2) The institution initiates an electronic funds transfer (EFT) as
soon as possible, but no later than 30 days after the date that the
institution becomes aware that the student will not or has not begun
attendance;
(3) The institution initiates an electronic transaction, as soon as
possible, but no later than 30 days after the date that the institution
becomes aware that the student will not or has not begun attendance,
that informs an FFEL lender to adjust the borrower's loan account for
the amount returned; or
(4) The institution issues a check as soon as possible, but no
later than 30 days after the date that the institution becomes aware
that the student will not or has not begun attendance. An institution
does not satisfy this requirement if--
(i) The institution's records show that the check was issued more
than 30 days after the date that the institution becomes aware that the
student will not or has not begun attendance; or
(ii) The date on the cancelled check shows that the bank used by
the Secretary or FFEL Program lender endorsed that check more than 45
days after the date that the institution becomes aware that the student
will not or has not begun attendance.
(Authority: 20 U.S.C. 1094)
0
6. Section 668.22 is amended by:
0
A. Revising paragraph (a)(5).
0
B. Adding paragraphs (e)(5)(iii) and (l)(5).
The revision and additions read as follows:
Sec. 668.22 Treatment of title IV funds when a student withdraws.
(a) * * *
(5)(i) A post-withdrawal disbursement must be made from available
grant funds before available loan funds.
(ii)(A) If outstanding charges exist on the student's account, the
institution may credit the student's account up to the amount of
outstanding charges with all or a portion of any--
(1) Grant funds that make up the post-withdrawal disbursement in
accordance with Sec. 668.164(d)(1) and (d)(2); and
(2) Loan funds that make up the post-withdrawal disbursement in
accordance with Sec. 668.164(d)(1), (d)(2), and (d)(3) only after
obtaining confirmation from the student or parent in the case of a
parent PLUS loan, that they still wish to have the loan funds disbursed
in accordance with paragraph (a)(5)(iii) of this section.
(B)(1) The institution must disburse directly to a student any
amount of a post-withdrawal disbursement of grant funds that is not
credited to the student's account. The institution must make the
disbursement as soon as possible, but no later than 45 days after the
date of the institution's determination that the student withdrew, as
defined in paragraph (l)(3) of this section.
(2) The institution must offer to disburse directly to a student,
or parent in the case of a parent PLUS loan, any amount of a post-
withdrawal disbursement of loan funds that is not credited to the
student's account, in accordance with paragraph (a)(5)(iii) of this
section.
(3) The institution must make a direct disbursement of any loan
funds that make up the post-withdrawal disbursement only after
obtaining the student's, or parent's in the case of a parent PLUS loan,
confirmation that the student or parent still wishes to have the loan
funds disbursed in accordance with paragraph (a)(5)(iii) of this
section.
(iii)(A) The institution must provide within 30 days of the date of
the institution's determination that the student withdrew, as defined
in paragraph (l)(3) of this section, a written notification to the
student, or parent in the case of parent PLUS loan, that--
(1) Requests confirmation of any post-withdrawal disbursement of
loan funds that the institution wishes to credit to the student's
account in accordance with paragraph (a)(5)(ii)(A)(2) of this section,
identifying the type and amount of those loan funds and explaining that
a student, or parent in the case of a parent PLUS loan, may accept or
decline some or all of those funds;
(2) Requests confirmation of any post-withdrawal disbursement of
loan funds that the student, or parent in the case of a parent PLUS
loan, can receive as a direct disbursement, identifying the type and
amount of these title IV funds and explaining that the student, or
[[Page 62028]]
parent in the case of a parent PLUS loan, may accept or decline some or
all of those funds;
(3) Explains that a student, or parent in the case of a parent PLUS
loan, who does not confirm that a post-withdrawal disbursement of loan
funds may be credited to the student's account may not receive any of
those loan funds as a direct disbursement unless the institution
concurs;
(4) Explains the obligation of the student, or parent in the case
of a parent PLUS loan, to repay any loan funds he or she chooses to
have disbursed; and
(5) Advises the student, or parent in the case of a parent PLUS
loan, that no post-withdrawal disbursement of loan funds will be made,
unless the institution chooses to make a post-withdrawal disbursement
based on a late response in accordance with paragraph (a)(5)(iii)(C) of
this section, if the student or parent in the case of a parent PLUS
loan, does not respond within 14 days of the date that the institution
sent the notification, or a later deadline set by the institution.
(B) The deadline for a student, or parent in the case of a parent
PLUS loan, to accept a post-withdrawal disbursement under paragraph
(a)(5)(iii)(A) of this section must be the same for both a confirmation
of a direct disbursement of the post-withdrawal disbursement of loan
funds and a confirmation of a post-withdrawal disbursement of loan
funds to be credited to the student's account.
(C) If the student, or parent in the case of a parent PLUS loan,
submits a timely response that confirms that they wish to receive all
or a portion of a direct disbursement of the post-withdrawal
disbursement of loan funds, or confirms that a post-withdrawal
disbursement of loan funds may be credited to the student's account,
the institution must disburse the funds in the manner specified by the
student, or parent in the case of a parent PLUS loan, as soon as
possible, but no later than 180 days after the date of the
institution's determination that the student withdrew, as defined in
paragraph (l)(3) of this section.
(D) If a student, or parent in the case of a parent PLUS loan,
submits a late response to the institution's notice requesting
confirmation, the institution may make the post-withdrawal disbursement
of loan funds as instructed by the student, or parent in the case of a
parent PLUS loan (provided the institution disburses all the funds
accepted by the student, or parent in the case of a parent PLUS loan),
or decline to do so.
(E) If a student, or parent in the case of a parent PLUS loan,
submits a late response to the institution and the institution does not
choose to make the post-withdrawal disbursement of loan funds, the
institution must inform the student, or parent in the case of a parent
PLUS loan, in writing of the outcome of the post-withdrawal
disbursement request.
(F) If the student, or parent in the case of a parent PLUS loan,
does not respond to the institution's notice, no portion of the post-
withdrawal disbursement of loan funds that the institution wishes to
credit to the student's account, nor any portion of loan funds that
would be disbursed directly to the student, or parent in the case of a
parent PLUS loan, may be disbursed.
(iv) An institution must document in the student's file the result
of any notification made in accordance with paragraph (a)(5)(iii) of
this section of the student's right to cancel all or a portion of loan
funds or of the student's right to accept or decline loan funds, and
the final determination made concerning the disbursement.
* * * * *
(e) * * *
(5) * * *
(iii) For a program that measures progress in credit hours and uses
nonstandard terms that are not substantially equal in length, if the
institution uses the payment period to determine the treatment of title
IV grant or loan funds for a category of students found in paragraph
(e)(5)(ii)(B) of this section, the institution must--
(A)(1) For students in the category who are disbursed or could have
been disbursed aid using both the payment period definition in Sec.
668.4(b)(1) and the payment period definition in Sec. 668.4(b)(2), use
the payment period during which the student withdrew that ends later;
and
(2) If in the payment period that ends later there are funds that
have been or could have been disbursed from overlapping payment
periods, the institution must include in the return calculation any
funds that can be attributed to the payment period that ends later; and
(B) For students in the category who are disbursed or could have
been disbursed aid using only the payment period definition in Sec.
668.4(b)(1) or the payment period definition in Sec. 668.4(b)(2), use
the payment period definition for which title IV, HEA program funds
were disbursed for a student's calculation under this section.
* * * * *
(l) * * *
(5) Terms are ``substantially equal in length'' if no term in the
program is more than two weeks of instructional time longer than any
other term in that program.
* * * * *
0
7. Section 668.161 is amended by revising paragraph (b) to read as
follows:
Sec. 668.161 Scope and purpose.
* * * * *
(b) Federal interest in title IV, HEA program funds. Except for
funds received by an institution for administrative expenses and for
funds used for the Job Location and Development Program under the FWS
Programs, funds received by an institution under the title IV, HEA
programs are held in trust for the intended student beneficiaries, the
Secretary, or lender or a guaranty agency under the FFEL programs. The
institution, as a trustee of Federal funds, may not use or hypothecate
(i.e., use as collateral) title IV, HEA program funds for any other
purpose.
* * * * *
0
8. Section 668.164 is amended by:
0
A. Revising paragraphs (b), (c), and (d).
0
B. Revising paragraph (g)(4)(i).
0
C. Adding a new paragraph (h).
The revisions and addition read as follows:
Sec. 668.164 Disbursing funds.
* * * * *
(b) Disbursements by payment period. (1) Except as provided in
paragraph (b)(2) of this section, an institution must disburse title
IV, HEA program funds on a payment period basis. An institution must
disburse title IV, HEA program funds once each payment period unless--
(i) For FFEL and Direct Loan funds, 34 CFR 682.604(c)(6)(ii) or 34
CFR 685.301(b)(3) applies;
(ii) For Federal Perkins Loan, FSEOG, Federal Pell Grant, ACG, and
National SMART Grant funds, an institution chooses to make more than
one disbursement in each payment period in accordance with 34 CFR
674.16(b)(3), 34 CFR 676.16(a)(3), 34 CFR 690.76, or 34 CFR 691.76, as
applicable; or
(iii) Other program regulations allow or require otherwise.
(2) The provisions of paragraph (b)(1) of this section do not apply
to the disbursement of FWS Program funds.
(3) Except as provided in paragraph (g) of this section, an
institution may disburse title IV, HEA program funds to a student or
parent for a payment period only if the student is enrolled for classes
for that payment period and is eligible to receive those funds.
[[Page 62029]]
(c) Direct payments. (1) An institution pays a student or parent
directly by--
(i) Releasing to the student or parent a check provided by a lender
to the institution under the FFEL Program;
(ii) Issuing a check payable to and requiring the endorsement of
the student or parent. An institution issues a check on the date that
it--
(A) Mails the check to the student or parent; or
(B) Notifies the student that the check is available for immediate
pickup at a specified location at the institution. The institution may
hold the check for up to 21 days after the date it notifies the
student. If the student does not pick up the check within this 21-day
period, the institution must immediately mail the check to the student
or parent, initiate an EFT to the student's or parent's bank account,
or return the funds to the appropriate title IV, HEA program;
(iii) Initiating an EFT to a bank account designated by the student
or parent; or
(iv) Dispensing cash for which the institution obtains a signed
receipt from the student or parent.
(2) For purposes of this section, ``bank account'' means an account
insured by the Federal Deposit Insurance Corporation (FDIC) or the
National Credit Union Share Insurance Fund (NCUSIF). This account may
be a checking, savings, or similar account that underlies a stored-
value card or other transaction device.
(3) An institution may establish a policy requiring its students to
provide bank account information or open an account at a bank of their
choosing as long as this policy does not delay the disbursement of
title IV, HEA program funds to students. Consequently, if a student
does not comply with the institution's policy, the institution must
nevertheless disburse the funds to the student using a method described
in paragraph (c) of this section in accordance with any timeframes
required under subpart k of this part. In cases where the institution
opens a bank account on behalf of a student or parent, establishes a
process the student or parent follows to open a bank account, or
similarly assists the student or parent in opening a bank account, the
institution must--
(i) Obtain in writing affirmative consent from the student or
parent to open that account;
(ii) Before the account is opened, inform the student or parent of
the terms and conditions associated with accepting and using the
account;
(iii) Not make any claims against the funds in the account without
the written permission of the student or parent, except for correcting
an error in transferring the funds in accordance with banking
protocols;
(iv) Ensure that the student or parent does not incur any cost in
opening the account or initially receiving any type of debit card,
stored-value card, other type of automated teller machine (ATM) card,
or similar transaction device that is used to access the funds in that
account;
(v) Ensure that the student has convenient access to a branch
office of the bank or an ATM of the bank in which the account was
opened (or an ATM of another bank), so that the student does not incur
any cost in making cash withdrawals from that office or these ATMs.
This branch office or these ATMs must be located on the institution's
campus, in institutionally-owned or operated facilities, or, consistent
with the meaning of the term ``Public Property'' as defined in Sec.
668.46(a), immediately adjacent to and accessible from the campus;
(vi) Ensure that the debit, stored-value or ATM card, or other
device can be widely used, e.g., the institution may not limit the use
of the card or device to particular vendors; and
(vii) Not market or portray the account, card, or device as a
credit card or credit instrument, or subsequently convert the account,
card, or device to a credit card or credit instrument.
(d) Crediting a student's account at the institution. An
institution may use title IV, HEA program funds to credit a student's
account at the institution to satisfy--
(1) Current year charges for--
(i) Tuition and fees;
(ii) Board, if the student contracts with the institution for
board;
(iii) Room, if the student contracts with the institution for room;
and
(iv) If the institution obtains the student's or parent's
authorization under Sec. 668.165(b), other educationally related
charges incurred by the student at the institution; and
(2) Prior award year charges for a total of not more than $200
for--
(i) Tuition and fees, room, or board; and
(ii) If the institution obtains the student's or parent's
authorization under Sec. 668.165(b), other educationally related
charges incurred by the student at the institution.
* * * * *
(g) * * *
(4) * * *
(i) An institution may not make a late disbursement later than 180
days after the date of the institution's determination that the student
withdrew, as provided in Sec. 668.22, or for a student who did not
withdraw, 180 days after the date the student otherwise becomes
ineligible.
* * * * *
(h) Returning funds. (1) Notwithstanding any State law (such as a
law that allows funds to escheat to the State), an institution must
return to the Secretary, lender, or guaranty agency, any title IV, HEA
program funds, except FWS program funds, that it attempts to disburse
directly to a student or parent but the student or parent does not
receive or negotiate those funds. For FWS program funds, the
institution is required to return only the Federal portion of the
payroll disbursement.
(2) If an institution attempts to disburse the funds by check and
the check is not cashed, the institution must return the funds no later
than 240 days after the date it issued that check.
(3)(i) If a check is returned to the institution, or an EFT is
rejected, the institution may make additional attempts to disburse the
funds, provided that those attempts are made not later than 45 days
after the funds were returned or rejected. In cases where the
institution does not make another attempt, the funds must be returned
before the end of this 45 day period; and
(ii) No later than the 240 day period described in paragraph (h)(2)
of this section, the institution must cease any additional disbursement
attempts and immediately return those funds.
* * * * *
0
9. Section 668.165 is amended by:
0
A. Revising paragraph (a).
0
B. Revising paragraph (b)(1).
The revisions read as follows:
Sec. 668.165 Notices and authorizations.
(a) Notices. (1) Before an institution disburses title IV, HEA
program funds for any award year, the institution must notify a student
of the amount of funds that the student or his or her parent can expect
to receive under each title IV, HEA program, and how and when those
funds will be disbursed. If those funds include Direct Loan or FFEL
Program funds, the notice must indicate which funds are from subsidized
loans and which are from unsubsidized loans.
(2) Except in the case of a post-withdrawal disbursement made in
accordance with Sec. 668.22(a)(5), if an institution credits a
student's account at the institution with Direct Loan, FFEL, or Federal
Perkins Loan Program funds, the institution must notify the student or
parent of--
(i) The anticipated date and amount of the disbursement;
(ii) The student's right or parent's right to cancel all or a
portion of that
[[Page 62030]]
loan or loan disbursement and have the loan proceeds returned to the
holder of that loan. However, if the institution releases a check
provided by a lender under the FFEL Program, the institution is not
required to provide this information; and
(iii) The procedures and time by which the student or parent must
notify the institution that he or she wishes to cancel the loan or loan
disbursement.
(3) The institution must provide the notice described in paragraph
(a)(2) of this section in writing--
(i) No earlier than 30 days before, and no later than 30 days
after, crediting the student's account at the institution, if the
institution obtains affirmative confirmation from the student under
paragraph (a)(6)(i) of this section; or
(ii) No earlier than 30 days before, and no later than seven days
after, crediting the student account at the institution, if the
institution does not obtain affirmative confirmation from the student
under paragraph (a)(6)(i) of this section.
(4)(i) A student or parent must inform the institution if he or she
wishes to cancel all or a portion of a loan or loan disbursement.
(ii) The institution must return the loan proceeds, cancel the
loan, or do both, in accordance with program regulations provided that
the institution receives a loan cancellation request--
(A) The later of the first day of a payment period or 14 days after
the date it notifies the student or parent of his or her right to
cancel all or a portion of a loan, if the institution obtains
affirmative confirmation from the student under paragraph (a)(6)(i) of
this section; or
(B) Within 30 days of the date the institution notifies the student
or parent of his or her right to cancel all or a portion of a loan, if
the institution does not obtain affirmative confirmation from the
student under paragraph (a)(6)(i) of this section.
(iii) If a student or parent requests a loan cancellation after the
period set forth in paragraph (a)(4)(ii)(A) or (B) of this section, the
institution may return the loan proceeds, cancel the loan, or do both,
in accordance with program regulations.
(5) An institution must inform the student or parent in writing
regarding the outcome of any cancellation request.
(6) For purposes of this section--
(i) Affirmative confirmation is a process under which an
institution obtains written confirmation of the types and amounts of
title IV, HEA program loans that a student wants for an award year
before the institution credits the student's account with those loan
funds; and
(ii) An institution is not required to return any loan proceeds
that it disbursed directly to a student or parent.
(b) * * *
(1) If an institution obtains written authorization from a student
or parent, as applicable, the institution may--
(i) Use the student's or parent's title IV, HEA program funds to
pay for charges described in Sec. 668.164(d)(2) that are included in
that authorization; and
(ii) Except if prohibited by the Secretary under the reimbursement
or cash monitoring payment method, hold on behalf of the student or
parent any title IV, HEA program, funds that would otherwise be paid
directly to the student or parent under Sec. 668.164(e). Under this
provision, the institution may issue a stored-value card or other
similar device that allows the student or parent to access those funds
at his or her discretion to pay for educationally related expenses.
* * * * *
0
10. Section 668.166 is revised to read as follows:
Sec. 668.166 Excess cash.
(a) General. (1) The Secretary considers excess cash to be any
amount of title IV, HEA program funds, other than Federal Perkins Loan
Program funds, that an institution does not disburse to students or
parents by the end of the third business day following the date the
institution--
(i) Received those funds from the Secretary; or
(ii) Deposited or transferred to its Federal account previously
disbursed title IV, HEA program funds received from the Secretary, such
as those resulting from award adjustments, recoveries, or
cancellations.
(2) The provisions of this section do not apply to the title IV,
HEA program funds that an institution receives from the Secretary under
the just-in-time payment method.
(b) Excess cash tolerances. An institution may maintain for up to
seven days an amount of excess cash that does not exceed one percent of
the total amount of funds the institution drew down in the prior award
year. The institution must return immediately to the Secretary any
amount of excess cash over the one-percent tolerance and any amount
remaining in its account after the seven-day tolerance period.
(c) Consequences for maintaining excess cash. Upon a finding that
an institution maintains excess cash for any amount or timeframe over
that allowed in the tolerance provisions in paragraph (b) of this
section, the actions the Secretary may take include, but are not
limited to--
(1) Requiring the institution to reimburse the Secretary for the
costs the Secretary incurred in providing that excess cash to the
institution; and
(2) Providing funds to the institution under the reimbursement
payment method or cash monitoring payment method described in Sec.
668.163(d) and (e), respectively.
(Authority: 20 U.S.C. 1094)
PART 674--FEDERAL PERKINS LOAN PROGRAM
0
11. The authority citation for part 674 continues to read as follows:
Authority: 20 U.S.C. 1087aa-1087hh and 20 U.S.C. 421-429 unless
otherwise noted.
Sec. 674.2 [Amended]
0
12. Section 674.2 is amended by:
0
A. In paragraph (a), adding to its list, in alphabetical order, the
terms Graduate or professional student, Half-time student, and
Undergraduate student.
0
B. In paragraph (b), removing the definitions for Graduate or
professional student, Half-time graduate or professional student, Half-
time Undergraduate student, and Undergraduate student.
Sec. 674.16 [Amended]
0
13. Section 674.16 is amended by removing paragraph (g) and
redesignating paragraphs (h) and (i) as paragraphs (g) and (h),
respectively.
PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT
PROGRAM
0
14. The authority citation for part 676 continues to read as follows:
Authority: 20 U.S.C. 1070b-1070b-3, unless otherwise noted.
Sec. 676.2 [Amended]
0
15. Section 676.2 is amended by:
0
A. In paragraph (a), adding to its list, in alphabetical order, the
term Undergraduate student.
0
B. In paragraph (b), removing the definition for Undergraduate student.
Sec. 676.16 [Amended]
0
16. Section 676.16 is amended by removing paragraph (e) and
redesignating paragraph (f) as paragraph (e).
PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM
0
17. The authority citation for part 682 continues to read as follows:
[[Page 62031]]
Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.
0
18. Section 682.200 is amended by:
0
A. In paragraph (a)(1), adding to its list, in alphabetical order, the
terms Graduate and professional student, Half-time student, and
Undergraduate student.
0
B. In paragraph (b), removing the definitions for Graduate or
professional student, Half-time student, and Undergraduate student and
revising the definition of Period of Enrollment.
The revision reads as follows:
Sec. 682.200 Definitions.
* * * * *
(b) * * *
Period of enrollment. The period for which a Stafford, SLS, or PLUS
loan is intended. The period of enrollment must coincide with one or
more bona fide academic terms established by the school for which
institutional charges are generally assessed (e.g., a semester,
trimester, or quarter in weeks of instructional time, an academic year,
or the length of the student's program of study in weeks of
instructional time). The period of enrollment is also referred to as
the loan period.
* * * * *
Sec. 682.207 [Amended]
0
19. Section 682.207(e) is amended by removing the parenthetical
``(10)'' and adding, in its place, the parenthetical ``(8)''.
Sec. 682.208 [Amended]
0
20. Section 682.208(f)(1)(iii)(A) is amended by removing the figure
``Sec. 682.604(d)(4)'' and adding, in its place, the figure ``34 CFR
668.21(a)(2)(ii)''.
0
21. Section 682.603 is amended by:
0
A. Revising paragraph (f)(1).
0
B. Redesignating paragraphs (g), (h), and (i) as paragraphs (h), (i),
and (j), respectively.
0
C. Adding a new paragraph (g).
0
D. In the introductory text of newly redesignated paragraph (h)(1) and
the text of newly redesignated paragraph (h)(2), removing the
parenthetical ``(10)'' and adding, in its place, the parenthetical
``(8)''.
The revision and addition read as follows:
Sec. 682.603 Certification by a participating school in connection
with a loan application.
* * * * *
(f)(1)(i) The minimum period of enrollment for which a school may
certify a loan application is--
(A) At a school that measures academic progress in credit hours and
uses a semester, trimester, or quarter system, or has terms that are
substantially equal in length with no term less than nine weeks in
length, a single term (e.g., a semester or quarter); or
(B) Except as provided in paragraphs (f)(1)(ii) or (iii) of this
section, at a school that measures academic progress in clock hours, or
measures academic progress in credit hours but does not use a semester,
trimester, or quarter system and does not have terms that are
substantially equal in length with no term less than nine weeks in
length, the lesser of--
(1) The length of the student's program (or the remaining portion
of that program if the student has less than the full program
remaining) at the school; or
(2) The academic year as defined by the school in accordance with
34 CFR 668.3.
(ii) For a student who transfers into a school with credit or clock
hours from another school, and the prior school certified or originated
a loan for a period of enrollment that overlaps the period of
enrollment at the new school, the new school may certify a loan for the
remaining portion of the program or academic year. In this case the
school may certify a loan for an amount that does not exceed the
remaining balance of the student's annual loan limit.
(iii) For a student who completes a program at a school, where the
student's last loan to complete that program had been for less than an
academic year, and the student then begins a new program at the same
school, the school may certify a loan for the remainder of the academic
year. In this case the school may certify a loan for an amount that
does not exceed the remaining balance of the student's annual loan
limit at the loan level associated with the new program.
* * * * *
(g)(1) If a school measures academic progress in an educational
program in credit hours and uses either standard terms (semesters,
trimesters, or quarters) or nonstandard terms that are substantially
equal in length, and each term is at least nine weeks of instructional
time in length, a student is considered to have completed an academic
year and progresses to the next annual loan limit when the academic
year calendar period has elapsed.
(2) If a school measures academic progress in an educational
program in credit hours and uses nonstandard terms that are not
substantially equal in length or each term is not at least nine weeks
of instructional time in length, or measures academic progress in
credit hours and does not have academic terms, a student is considered
to have completed an academic year and progresses to the next annual
loan limit at the later of--
(i) The student's completion of the weeks of instructional time in
the student's academic year; or
(ii) The date, as determined by the school, that the student has
successfully completed the academic coursework in the student's
academic year.
(3) If a school measures academic progress in an educational
program in clock hours, a student is considered to have completed an
academic year and progresses to the next annual loan limit at the later
of--
(i) The student's completion of the weeks of instructional time in
the student's academic year; or
(ii) The date, as determined by the school, that the student has
successfully completed the clock hours in the student's academic year.
(4) For purposes of this section, terms in a loan period are
substantially equal in length if no term in the loan period is more
than two weeks of instructional time longer than any other term in that
loan period.
* * * * *
0
22. Section 682.604 is amended by:
0
A. Revising paragraph (c)(6).
0
B. Removing paragraphs (c)(7) and (c)(8).
0
C. Redesignating paragraphs (c)(9), (c)(10), and (c)(11) as paragraphs
(c)(7), (c)(8), and (c)(9), respectively.
0
D. In newly redesignated paragraph (c)(9), removing the parenthetical
``(g)'' and adding, in its place, the parenthetical ``(h)''.
0
E. Revising paragraph (d)(3).
0
F. Removing paragraph (d)(4).
The revisions read as follows:
Sec. 682.604 Processing the borrower's loan proceeds and counseling
borrowers.
* * * * *
(c) * * *
(6) Unless the provision of Sec. 682.207(d) applies--
(i) If a loan period is more than one payment period, the school
must deliver loan proceeds at least once in each payment period; and
(ii) If a loan period is one payment period, the school must make
at least two deliveries of loan proceeds during that payment period.
(A) For a loan certified under Sec. 682.603(f)(1)(i)(A), the
school may not make the second delivery until the calendar midpoint
between the first and last scheduled days of class of the loan period;
or
[[Page 62032]]
(B) For a loan certified under Sec. 682.603(f)(1)(i)(B), the
school may not make the second delivery until the student successfully
completes half of the number of credit hours or clock hours and half of
the number of weeks of instructional time in the payment period.
* * * * *
(d) * * *
(3) If a student does not begin attendance in the period of
enrollment--
(i) Disbursed loan proceeds must be handled in accordance with 34
CFR 668.21; and
(ii) Undelivered loan funds held by the school must be handled in
accordance with 34 CFR 668.167.
* * * * *
PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM
0
23. The authority citation for part 685 continues to read as follows:
Authority: 20 U.S.C. 1087a et seq., unless otherwise noted.
0
24. Section 685.102 is amended by:
0
A. In paragraph (a)(1), adding to its list, in alphabetical order, the
terms Full-time student, Graduate or professional student, Half-time
student, and Undergraduate student.
0
B. In paragraph (a)(3), removing from its list, the terms Full-time
student, Graduate or professional student, and Undergraduate student.
0
C. In paragraph (b), removing the definition of Half-time student and
revising the definition of Period of enrollment.
The revision reads as follows:
Sec. 685.102 Definitions.
* * * * *
(b) * * *
Period of enrollment: The period for which a Direct Subsidized,
Direct Unsubsidized, or Direct PLUS Loan is intended. The period of
enrollment must coincide with one or more bona fide academic terms
established by the school for which institutional charges are generally
assessed (e.g., a semester, trimester, or quarter in weeks of
instructional time; an academic year; or the length of the program of
study in weeks of instructional time). The period of enrollment is also
referred to as the loan period.
* * * * *
0
25. Section 685.301 is amended by:
0
A. Redesignating paragraph (a)(9)(ii) as paragraph (a)(9)(iv).
0
B. Revising paragraph (a)(9)(i).
0
C. Adding new paragraphs (a)(9)(ii) and (iii).
0
D. Revising paragraphs (b)(2) and (b)(3).
0
E. Removing paragraphs (b)(5) and (b)(6).
0
F. Redesignating paragraphs (b)(7) and (b)(8) as paragraphs (b)(5) and
(b)(6), respectively.
0
G. Redesignating paragraphs (c) and (d) as paragraphs (d) and (e),
respectively.
0
H. Adding a new paragraph (c).
The revisions and additions read as follows:
Sec. 685.301 Origination of a loan by a Direct Loan Program school.
(a) * * *
(9)(i) The minimum period of enrollment for which a school may
originate a Direct Loan application is--
(A) At a school that measures academic progress in credit hours and
uses a semester, trimester, or quarter system, or has terms that are
substantially equal in length with no term less than nine weeks in
length, a single academic term (e.g., a semester or quarter); or
(B) Except as provided in paragraph (a)(9)(ii) or (iii) of this
section, at a school that measures academic progress in clock hours, or
measures academic progress in credit hours but does not use a semester,
trimester, or quarter system and does not have terms that are
substantially equal in length with no term less than nine weeks in
length, the lesser of--
(1) The length of the student's program (or the remaining portion
of that program if the student has less than the full program
remaining) at the school; or
(2) The academic year as defined by the school in accordance with
34 CFR 668.3.
(ii) For a student who transfers into a school with credit or clock
hours from another school, and the prior school originated or certified
a loan for a period of enrollment that overlaps the period of
enrollment at the new school, the new school may originate a loan for
the remaining portion of the program or academic year. In this case the
school may originate a loan for an amount that does not exceed the
remaining balance of the student's annual loan limit.
(iii) For a student who completes a program at a school, where the
student's last loan to complete that program had been for less than an
academic year, and the student then begins a new program at the same
school, the school may originate a loan for the remainder of the
academic year. In this case the school may originate a loan for an
amount that does not exceed the remaining balance of the student's
annual loan limit at the loan level associated with the new program.
* * * * *
(b) * * *
(2) An institution must disburse the loan proceeds on a payment
period basis in accordance with 34 CFR 668.164(b).
(3) Unless paragraphs (b)(4) or (b)(8) of this section applies--
(i) If a loan period is more than one payment period, the school
must disburse loan proceeds at least once in each payment period; and
(ii) If a loan period is one payment period, the school must make
at least two disbursements during that payment period.
(A) For a loan originated under Sec. 685.301(a)(9)(i)(A), the
school may not make the second disbursement until the calendar midpoint
between the first and last scheduled days of class of the loan period;
or
(B) For a loan originated under Sec. 685.301(a)(9)(i)(B), the
school may not make the second disbursement until the student
successfully completes half of the number of credit hours or clock
hours and half of the number of weeks of instructional time in the
payment period.
* * * * *
(c) Annual loan limit progression based on completion of an
academic year. (1) If a school measures academic progress in an
educational program in credit hours and uses either standard terms
(semesters, trimesters, or quarters) or nonstandard terms that are
substantially equal in length, and each term is at least nine weeks of
instructional time in length, a student is considered to have completed
an academic year and progresses to the next annual loan limit when the
academic year calendar period has elapsed.
(2) If a school measures academic progress in an educational
program in credit hours and uses nonstandard terms that are not
substantially equal in length or each term is not at least nine weeks
of instructional time in length, or measures academic progress in
credit hours and does not have academic terms, a student is considered
to have completed an academic year and progresses to the next annual
loan limit at the later of--
(i) The student's completion of the weeks of instructional time in
the student's academic year; or
(ii) The date, as determined by the school, that the student has
successfully completed the academic coursework in the student's
academic year.
(3) If a school measures academic progress in an educational
program in
[[Page 62033]]
clock hours, a student is considered to have completed an academic year
and progresses to the next annual loan limit at the later of--
(i) The student's completion of the weeks of instructional time in
the student's academic year; or
(ii) The date, as determined by the school, that the student has
successfully completed the clock hours in the student's academic year.
(4) For purposes of this section, terms in a loan period are
substantially equal in length if no term in the loan period is more
than two weeks of instructional time longer than any other term in that
loan period.
* * * * *
0
26. Section 685.303 is amended by revising paragraph (b)(3) to read as
follows:
Sec. 685.303 Processing loan proceeds.
* * * * *
(b) * * *
(3) If a student does not begin attendance in the period of
enrollment, disbursed loan proceeds must be handled in accordance with
34 CFR 668.21.
* * * * *
PART 690--FEDERAL PELL GRANT PROGRAM
0
27. The authority citation for part 690 continues to read as follows:
Authority: 20 U.S.C. 1070a, unless otherwise noted.
Sec. 690.2 [Amended]
0
28. Section 690.2 is amended by:
0
A. In paragraph (b), adding to its list, in alphabetical order, the
terms Half-time student, Three-quarter-time student, and Undergraduate
student.
0
B. In paragraph (c), removing the definitions for Half-time student,
Less-than-half-time student, Three-quarter-time student, and
Undergraduate student.
0
29. Section 690.63 is amended by revising paragraphs (a)(1) and (e) to
read as follows:
Sec. 690.63 Calculation of a Federal Pell Grant for a payment period.
(a)(1) Programs using standard terms with at least 30 weeks of
instructional time. A student's Federal Pell Grant for a payment period
is calculated under paragraphs (b) or (d) of this section if--
(i) The student is enrolled in an eligible program that--
(A) Measures progress in credit hours;
(B) Is offered in semesters, trimesters, or quarters; and
(C) Requires the student to enroll for at least 12 credit hours in
each term in the award year to qualify as a full-time student; and
(ii) The program uses an academic calendar that provides at least
30 weeks of instructional time in--
(A) Two semesters or trimesters in the fall through the following
spring, or three quarters in the fall, winter, and spring, none of
which overlaps any other term (including a summer term) in the program;
or
(B) Any two semesters or trimesters, or any three quarters where--
(1) The institution starts its terms for different cohorts of
students on a periodic basis (e.g., monthly);
(2) The program is offered exclusively in semesters, trimesters, or
quarters; and
(3) Students are not allowed to be enrolled simultaneously in
overlapping terms and must stay with the cohort in which they start
unless they withdraw from a term (or skip a term) and re-enroll in a
subsequent term.
* * * * *
(e) Programs using credit hours without terms or clock hours. The
Federal Pell Grant for a payment period for a student in a program
using credit hours without terms or using clock hours is calculated
by--
(1) Determining the student's Scheduled Federal Pell Grant using
the Payment Schedule; and
(2) Multiplying the amount determined under paragraph (e)(1) of
this section by the lesser of--
(i)
[GRAPHIC] [TIFF OMITTED] TR01NO07.000
or
(ii)
[GRAPHIC] [TIFF OMITTED] TR01NO07.001
* * * * *
0
30. Section 690.66 is amended by revising paragraph (a) to read as
follows:
Sec. 690.66 Correspondence study.
(a) An institution calculates the Federal Pell Grant for a payment
period for a student in a program of study offered by correspondence
courses without terms, but not including any residential component,
by--
(1) Determining the student's annual award using the half-time
Disbursement Schedule; and
(2) Multiplying the annual award determined from the Disbursement
Schedule for a half-time student by the lesser of--
(i)
[GRAPHIC] [TIFF OMITTED] TR01NO07.002
or
(ii)
[[Page 62034]]
[GRAPHIC] [TIFF OMITTED] TR01NO07.003
* * * * *
Sec. 690.78 [Removed]
0
31. Section 690.78 is removed and reserved.
* * * * *
PART 691--ACADEMIC COMPETITIVENESS GRANT (ACG) AND NATIONAL SCIENCE
AND MATHEMATICS ACCESS TO RETAIN TALENT GRANT (NATIONAL SMART
GRANT) PROGRAMS
0
32. The authority citation for part 691 continues to read as follows:
Authority: 20 U.S.C. 1070a-1, unless otherwise noted.
Sec. 691.2 [Amended]
0
33. Section 691.2 is amended by:
0
A. In paragraph (b), adding to its list, in alphabetical order, the
term Undergraduate student.
0
B. In paragraph (d), removing the definition for Undergraduate student.
Sec. 691.8 [Amended]
0
34. Section 691.8 is amended by removing paragraph (c).
0
35. Section 691.63 is amended by:
0
A. Revising paragraphs (a)(1) and (e).
0
B. In paragraph (h)(2), removing the words ``, and, for a credit-hour
program, weeks of instructional time,'' and, adding in their place, the
words `` and weeks of instructional time''.
The revisions read as follows:
Sec. 691.63 Calculation of a grant for a payment period.
(a)(1) Programs using standard terms with at least 30 weeks of
instructional time. A student's grant for a payment period is
calculated under paragraphs (b) or (d) of this section if--
(i) The student is enrolled in an eligible program that--
(A) Measures progress in credit hours;
(B) Is offered in semesters, trimesters, or quarters; and
(C) Requires the student to enroll for at least 12 credit hours in
each term in the award year to qualify as a full-time student; and
(ii) The program uses an academic calendar that provides at least
30 weeks of instructional time in--
(A) Two semesters or trimesters in the fall through the following
spring, or three quarters in the fall, winter, and spring, none of
which overlaps any other term (including a summer term) in the program;
or
(B) Any two semesters or trimesters, or any three quarters where--
(1) The institution starts its terms for different cohorts of
students on a periodic basis (e.g., monthly);
(2) The program is offered exclusively in semesters, trimesters, or
quarters; and
(3) Students are not allowed to be enrolled simultaneously in
overlapping terms and must stay with the cohort in which they start
unless they withdraw from a term (or skip a term) and re-enroll in a
subsequent term.
* * * * *
(e) Programs using credit hours without terms or clock hours. The
grant for a payment period for a student in a program using credit
hours without terms or using clock hours is calculated by--
(1) Determining that the student is attending at least full-time;
(2) Determining the student's ACG or National SMART Grant Scheduled
Award; and
(3) Multiplying the ACG or National SMART Grant amount determined
under paragraph (e)(2) of this section by the lesser of--
(i)
[GRAPHIC] [TIFF OMITTED] TR01NO07.004
or
(ii)
[GRAPHIC] [TIFF OMITTED] TR01NO07.005
* * * * *
Sec. 691.78 [Removed]
0
36. Section 691.78 is removed and reserved.
[FR Doc. E7-21083 Filed 10-31-07; 8:45 am]
BILLING CODE 4000-01-P
Attachments/Enclosures:
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