Repayment for failure to complete program

Section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a) is amended— (1)in subsection (c), by striking The period and inserting Except as provided in subsection (k), the period; and (2)by adding at the end the following:

(k)

Repayment for failure To complete program

(1)

In general

Except as provided in paragraph (3), if a recipient of a Federal Pell Grant fails to complete the program for which the Federal Pell Grant was awarded within the maximum timeframe for completion of such program, the sum of the amounts of any Federal Pell Grants received by the recipient for the program shall— (A)be treated as a Federal Direct Unsubsidized Stafford Loan under part D; and (B)be subject to repayment, together with interest thereon accruing from the date of the grant award, in accordance with terms and conditions specified by the Secretary. (2)

Period for completion

For purposes of this subsection, the term maximum timeframe, used with respect to the completion of an undergraduate program, has the meaning given such term in paragraph (1) or (2) of section 668.34(b) of title 34, Code of Federal Regulations (as in effect on the date of enactment of this Act), as applicable to such program. (3)

Exceptions

(A)

In general

Paragraph (1) shall not apply with respect to a student who fails to complete a program within the maximum timeframe for completion of such program— (i)because the student enrolls in another program at an institution of higher education— (I)not later than 12 months after the date of the student’s last day of the previous program; and (II)for which the previous program provided substantial preparation; (ii)in the case of a student who has a Federal Pell Grant that is being treated as a loan under paragraph (1) and who meets the requirements of subparagraph (B) of this paragraph, with respect to a subsequent Federal Pell Grant for which the student is eligible and which is awarded beyond such maximum timeframe; or (iii)due to undue hardship, including— (I)active duty military service; (II)the death of a relative of the student; (III)the personal injury or illness of the student; or (IV)other special circumstances as determined by the institution. (B)

Requirements

In order to qualify for the exception under subparagraph (A)(ii) of this paragraph, a student shall— (i)have a Federal Pell Grant that is being treated as a loan under paragraph (1) for which the student has met the loan repayment obligations for not less than 6 months; and (ii)not be an individual described in paragraph (4)(B). (4)

Loss of Federal Pell Grant eligibility

(A)

Default

An individual who is in default of an obligation to repay a Federal Pell Grant that is being treated as a loan under paragraph (1) shall be ineligible to receive a Federal Pell Grant under this section. (B)

Second time dropout

An individual who has received a Federal Pell Grant for enrollment in a program that is being treated as a loan under paragraph (1), and who leaves such program for a second time (other than for a reason described in clause (i) or (iii) of paragraph (3)(A)), shall be ineligible to receive a Federal Pell Grant under this section. (5)

Notice

The Secretary shall ensure that each recipient of a Federal Pell Grant receives notice of the terms of this subsection. (6)

Record

An institution shall keep a record that tracks the progress (including the graduation and default rate) of any student described in paragraph (3)(B) who receives a Federal Pell Grant for enrollment in a program beyond the maximum timeframe for completion of such program.