[Federal Register Volume 59, Number 19 (Friday, January 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1692]


[Federal Register: January 28, 1994]


_______________________________________________________________________

Part IV





Department of Education





_______________________________________________________________________



34 CFR Part 692



State Student Incentive Grant Program; Rule
DEPARTMENT OF EDUCATION

34 CFR Part 692

RIN 1840-AB72


State Student Incentive Grant Program

AGENCY: Department of Education.

ACTION: Final regulations.

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

SUMMARY: The Secretary amends the State Student Incentive Grant (SSIG) 
Program regulations to clarify them, to make minor technical changes, 
and to implement statutory changes made by the Higher Education 
Amendments of 1992 to the Higher Education Act of 1965, as amended 
(HEA).

EFFECTIVE DATE: These regulations take effect either 45 days after 
publication in the Federal Register or later if the Congress takes 
certain adjournments. If you want to know the effective date of these 
regulations, call or write the Department of Education contact person. 
A document announcing the effective date will be published in the 
Federal Register.

FOR FURTHER INFORMATION CONTACT: Dan Sullivan, U.S. Department of 
Education, 400 Maryland Avenue, SW., room 4018, ROB-3, Washington, DC 
20202-5447. Telephone: (202) 708-4607. Individuals who use a 
telecommunications device for the deaf (TDD) may call the Federal 
Information Relay Service (FIRS) at 1-800-877-8339 between 8 a.m. and 8 
p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: The Secretary is revising the existing SSIG 
Program regulations to implement statutory changes required by the 
Higher Education Amendments of 1992, enacted July 23, 1992 (Pub. L. 
102-325) (1992 amendments), which amend the HEA. These revised 
regulations also change the SSIG Program regulations to reduce burden 
and clarify existing rules.
    The SSIG Program provides financial incentives for States to 
establish and to maintain financial assistance programs that make 
grants and provide work-study assistance to students with substantial 
financial need.
    The SSIG Program supports National Education Goal 5, which calls 
for every adult American to be literate and possess the knowledge and 
skills necessary to compete in a global economy and exercise the rights 
and responsibilities of citizenship.
    On July 2, 1993, the Secretary published a notice of proposed 
rulemaking (NPRM) for this program in the Federal Register (58 FR 
36110). The major issues addressed by the proposed regulations are 
discussed in the preamble to the NPRM. There are two major differences 
between the NPRM and the final regulations. The first change is to 
revise the allotment formula above the ``hold-harmless'' allotment of 
Federal funds each State received in fiscal year 1979 under the SSIG 
Program. The ``hold-harmless'' amount of Federal funds is the SSIG 
Program allotment each State received in fiscal year 1979. Under 
section 415B(a)(1) of the program statute, if an appropriation exceeds 
the fiscal year 1979 appropriation, each State still would continue to 
receive at least its ``hold-harmless'' amount regardless of the results 
of the allotment formula. Based on the comments received, a change was 
made in the final regulations to revise the allotment formula above the 
``hold-harmless'' level by redefining the term ``deemed eligible.'' The 
Secretary determines the number of students ``deemed eligible'' to 
participate in a State's SSIG Program by dividing the amount of each 
State's SSIG expenditures, including both its Federal allotment and the 
State-appropriated funds matching the allotment, by the average grant 
award per student of all participating States. The Secretary determines 
the ``average grant award per student'' by dividing the total number of 
student recipients for all States into the total amount of SSIG 
expenditures for all States, including both the Federal allotment and 
the State-appropriated funds matching the allotment. In making this 
determination, the Secretary uses the most recently available data 
reported by each State. The Secretary will allot additional SSIG funds 
to States above their ``hold-harmless'' amounts by using the following 
steps:
    (1) Calculate the States' number of students ``deemed eligible'' to 
participate in a State's SSIG Program by dividing the amount of each 
State's SSIG funds expenditures, including both its Federal allotment 
and the State-appropriated funds matching the allotment, by the average 
grant award per student of all participating States.
    (2) Calculate the States' projected allotments by dividing each 
State's number of students ``deemed eligible'' by the total number of 
students ``deemed eligible'' for all States, and then multiply that 
number by the appropriation.
    (3) Compare each State's projected allotment calculated in step 2 
to its ``hold-harmless'' amount and select only States where the 
projected allotment exceeds the ``hold-harmless'' amount.
    (4) For the States selected in step 3, calculate the amount the 
Secretary will allot above the ``hold-harmless'' amount to each of 
these States by dividing each of the selected State's number of 
students ``deemed eligible'' by the total ``deemed eligible'' students 
for all of the selected States and then multiply that number by the 
amount of the appropriation above the total ``hold-harmless'' amount.
    The other change under Sec. 692.41(b) provides that, upon a showing 
of good cause, the Secretary may approve a State's definition for 
``independent student'' that varies from that term as defined in 
section 480(d) of the HEA.

Analysis of Comments and Changes

    Fifteen commenters responded to the Secretary's invitation to 
comment on the NPRM. The following is an analysis of comments and 
changes in the regulations since publication of the NPRM. Substantative 
issues are discussed under the section of the regulations to which they 
pertain. Technical and other minor changes to the language published in 
the NPRM--and requests for changes the Secretary is not legally 
authorized to make under the applicable statutory authority--may not be 
addressed.

Section 692.10  How Does the Secretary Allot Funds to the States?

    Comment: Three commenters agreed with the revision in 
Sec. 692.10(b) of the proposed regulations to redefine students who are 
``deemed eligible'' to participate in the SSIG Program as students who 
were reported by the State as SSIG recipients in the most recently 
available performance report data.
    Several commenters objected to the use of State-reported SSIG 
recipients in the most recently available performance report data as 
students who are ``deemed eligible'' to participate in the SSIG 
Program. These commenters believed that the number of recipients could 
be easily manipulated by States by inflating the number of awards to 
students. Rather than provide substantial awards to the most needy 
students, States could inflate the number of students deemed eligible 
by providing smaller awards to a larger number of students in order to 
receive a larger share of program funding above the hold-harmless 
amount.
    A few commenters believed that the current allotment formula for 
awarding SSIG funds above the hold-harmless amount should not be 
amended. These commenters felt that the current allotment formula based 
on the enrollment data for each State is more objective and meaningful 
in distributing funds for the SSIG Program.
    Two commenters recommended that the allotment formula above the 
hold-harmless level should be based on the amount of funds actually 
expended by each State to match its Federal allotment.
    Discussion: The Secretary is amending the current allotment formula 
for awarding funds above the hold-harmless level because it does not 
conform to section 415B(a)(1) of the HEA. Section 415B(a)(1) was 
amended by the Higher Education Amendments of 1986 (Pub. L. 99-498), 
but the SSIG Program regulations were not amended to conform with this 
statutory change.
    The Secretary is changing the allotment formula for funds above the 
hold-harmless level to one that counts, for purposes of making 
allotments to States, the number of students ``deemed eligible'' to 
participate in a State's SSIG Program as determined by the following 
formula. The Secretary divides the amount of each State's SSIG 
expenditures, including both its Federal allotment and the State-
appropriated funds matching the allotment, by the average grant award 
per student of all participating States in the most recent award year 
as reported by the State. The Secretary determines the ``average grant 
award per student'' by dividing the total number of student recipients 
for all States into the total amount of SSIG expenditures for all 
States, including both the Federal allotment and the State-appropriated 
funds matching the allotment.
    In the past, the Secretary has provided extreme flexibility to 
States in implementing the SSIG Program statute. It is the Secretary's 
experience that mere head counts do not accurately reflect the 
participation of States in the joint Federal-State SSIG Program. 
Moreover, this change responds to the concerns raised by some 
commenters that States might manipulate a head-count of recipients and 
the concerns raised by other commenters that funding should be based on 
the actual matching expenditures of the States. Furthermore, the 
Secretary collects the Federal and State SSIG funding data and average 
grant award per student from each State's most recent SSIG Program 
performance report. By using the most recently available performance 
report data, the States will not be required to conduct a new data 
collection.
    Under section 415B(a)(1) of the program statute, this formula would 
be used only if an appropriation exceeds the fiscal year 1979 
appropriation. Each State still receives at least its ``hold-harmless'' 
amount. The Secretary believes that by considering the amount of State 
SSIG expenditures in the calculation of the number of students ``deemed 
eligible,'' States are provided with incentive to increase the amount 
of funds they allocate to their SSIG Programs. In this way, States that 
provide more State dollars will receive more Federal SSIG funds above 
the ``hold-harmless'' amount, the allotment each State received in 
fiscal year 1979 under the SSIG Program. For States to exceed the 
allotment of funds beyond the ``hold harmless'' amount, States would 
have to elect to include more of their State grant funds under the SSIG 
Program in their calculation under Sec. 692.10(b).
    The Secretary believes that the change encourages the inclusion of 
additional State funds in the SSIG Program and, as a result, would 
stabilize the grant funds available to students from the States. The 
Secretary also believes that the revised formula provides for the best 
use of Federal funds under the program by: (1) Rewarding States that 
have made a strong commitment of their State grant funds to the SSIG 
Program as reflected by the States' amount of State grant funds; and 
(2) encouraging States to maintain or expand their commitment of their 
level of expenditures for State grant programs.
    Changes: A change has been made. The Secretary has amended 
Sec. 692.10(b) to provide that the Secretary determines the number of 
students ``deemed eligible'' to participate in a State's SSIG Program 
by dividing the amount of each State's SSIG expenditures, including 
both its Federal allotment and the State-appropriated funds matching 
the allotment, by the average grant award per student of all 
participating States. The Secretary determines the ``average grant 
award per student'' by dividing the total number of student recipients 
for all States into the total amount of SSIG expenditures for all 
States, including both the Federal allotment and the State-appropriated 
funds matching the allotment. In making this determination, the 
Secretary uses the most recently available data reported by each State.

Section 692.21  What Requirements Must Be Met by a State Program?

    Comment: One commenter stated that the Secretary should clarify 
Sec. 692.21(e) concerning whether fees may or may not be collected in 
the case of decentralized State grant programs under which institutions 
award State grant funds as well as institutional aid.
    Discussion: If there is a fee for submitting and processing the 
State information on a form to make a determination of financial need 
under the SSIG Program, the fee must be payable to the State regardless 
of whether the information may also be used for institutional aid. In 
the case of a decentralized State grant program under which 
institutions participating in the State's SSIG Program award State 
grant funds, funds awarded under these programs are still considered to 
be State aid and not institutional aid. It is the responsibility of 
each State to ensure that institutions participating in the State's 
SSIG Program conform with this requirement.
    Changes: None.
    Comment: Two commenters stated that the term ``reasonable'' as 
listed in Sec. 692.21(g) should be clearly defined by the Secretary 
with some specific parameters provided.
    Discussion: Section 692.21(g) provides that, if a State awards 
grants to independent students or to students who are less-than-full-
time students enrolled in an institution of higher education, a 
reasonable portion of the State's allocation must be awarded to those 
students. The Secretary believes that in order to provide the States 
with the maximum amount of flexibility under this provision, no 
specific parameters for the term ``reasonable'' should be provided. The 
Secretary on a case-by-case basis, if necessary, will determine the 
reasonableness of the allocation.
    Changes: None.
    Comment: A few commenters believed that under Sec. 692.21(g), the 
Secretary requires that a State must award SSIG Program grants to 
independent students or to students who are less-than-full-time 
students in reasonable proportion to the State's allocation of SSIG 
Program funds.
    One commenter believed it was unwise to reserve a portion of very 
limited need-based grant aid for less-than-full-time students because 
of the overwhelming numbers of very needy full-time students who cannot 
be served due to lack of adequate funding.
    Discussion: Section 692.21(g) provides that, if a State awards 
grants to independent students or to students who are less-than-full-
time students enrolled in an institution of higher education, a 
reasonable portion of the State's allocation must be awarded to those 
students. Neither the program statute nor Sec. 692.21(g) requires a 
State to award grants to independent students or students who are less-
than-full-time. If the State's allocation from the Secretary is based 
on a formula that includes the financial need of students who are 
independent or attend an institution less-than-full-time, then the 
State must ensure that those students receive a reasonable proportion 
of SSIG funds.
    Changes: None.

Section 692.21 What Requirements Must be met by a State Program? and 
Section 692.41 What Standards May a State Use to Determine Substantial 
Financial Need?

    Comment: Several commenters objected to the proposed requirement in 
Sec. 692.41(b) that States use the term ``independent student'' as 
defined by section 480(d) of the HEA in a State's own need-analysis 
system or a need-analysis system combining the State's system with the 
Federal system under part F of title IV of the HEA in order to obtain 
the Secretary's approval of the State's system.
    Some commenters believed that the use of the Federal definition 
infringes upon the State's right to set priorities for administering 
State grant funds and would limit the State's flexibility in awarding 
these funds.
    Some commenters also believed that they should have the flexibility 
to use their own State statutory or regulatory definition of 
``independent student'' and report any variance with the Federal 
definition on the State's annual application to participate in the 
program.
    One commenter was concerned that, if the regulations are adopted as 
proposed, the States should be given an opportunity to amend their 
statutory or regulatory definitions of ``independent student'' to 
conform with the Federal definition by making the effective date of the 
provision begin with the 1995-96 award year. This effective date would 
provide the States with time to amend their statutory or regulatory 
independent student definitions to conform with the Federal definition.
    One commenter was concerned regarding whether the students selected 
for SSIG matching purposes by a State would reflect the proportion of 
independent students in the State program. The commenter believed that 
the Secretary could achieve the intent of the Higher Education 
Amendments of 1992 by allowing States to submit changes to their 
applications and programs. Each State's application would specify the 
proportion of independent students as defined in the State's approved 
need-analysis system which are in the base used to allocate funds and 
the means by which the State would ensure a proportionate distribution 
of SSIG Program funds to independent students.
    Discussion: The Secretary agrees with the concerns raised by 
commenters who believed that the proposed requirement in Sec. 692.41(b) 
would create difficulties for some States in administering the SSIG 
Program. The Secretary, therefore, is revising Sec. 692.41(b) to 
provide that, upon the review and approval of the Secretary, a State 
may use its own definition for ``independent student'' that varies from 
the Federal definition of the term as defined in section 480(d) of the 
HEA. The Secretary will approve a variant definition on a case-by-case 
basis. States that wish to use a variant definition of ``independent 
student,'' other than the Federal definition, must provide information 
concerning their ``independent student'' definition at the time of 
application for program funds that includes a justification, with 
accompanying supporting documentation, demonstrating ``good cause'' as 
to why the Secretary should approve the variant definition.
    The Secretary believes that States that have a valid reason to use 
a different independent student definition should be accommodated, as 
long as the use of a different definition is reasonably justified and 
does not place significant additional reporting burdens on applicants. 
The Secretary believes that a valid reason for requesting a variance 
might include that excessive costs to the State are incurred in 
implementing the Federal definition. The Secretary will also take into 
consideration in approving a definition the extent to which the new 
definition imposes additional data requirements beyond those provided 
for by the Federal definition and the Federal Need Analysis Methodology 
authorized under part F of title IV of the HEA. For example, a State, 
rather than adopt a new definition, may decide, with the Secretary's 
approval, to use the Federal definition except for the professional 
judgment provision in section 480(d)(7) of the HEA.
    The Secretary also agrees with the concerns raised by a commenter 
regarding whether a State, in selecting students for the SSIG Program 
matching purposes, would accurately reflect the proportion of 
independent students to all students in the State program. The 
Secretary believes that the State SSIG Program student funding should 
be comparable to the overall State program, if the entire State program 
is not contained in the State SSIG Program. However, the Secretary does 
not wish to place any unnecessary burdens on States. Therefore, the 
Secretary is providing a new paragraph (j) in Sec. 692.21. Under 
Sec. 692.21(j) the proportion of SSIG Program funds awarded to 
independent students, including both the Federal allotment and the 
State funds matching the allotment, must be, to the extent practicable, 
the same proportion of funds awarded independent students as is in the 
State program or programs of which the State's SSIG Program is a part.
    Changes: Two changes have been made. The Secretary amends 
Sec. 692.41(b) to provide that he may approve, on a case-by-case basis, 
the use of a definition of ``independent student'' that varies from the 
term defined in section 480(d) of the HEA if a State demonstrates 
``good cause'' as to why a variance should be approved.
    The Secretary also amends Sec. 692.21 by adding a new paragraph (j) 
to provide that, to the extent practicable, the proportion of the funds 
awarded to independent students in the SSIG Program shall be the same 
proportion of funds awarded to independent students as is in the State 
program or programs of which the State's SSIG Program is a part.

Assessment of Educational Impact

    In the notice of proposed rulemaking, the Secretary requested 
comments on whether the proposed regulations in this document would 
require transmission of information that is being gathered by or is 
available from any other agency or authority of the United States.
    Based on the response to the proposed regulations and on its own 
review, the Department has determined that the regulations in this 
document do not require transmission of information that is being 
gathered by or is available from any other agency or authority of the 
United States.

List of Subjects in 34 CFR Part 692

    Grant programs--education, Postsecondary education, State 
administered--education, Student Aid--education, Reporting and 
recordkeeping requirements.

(Catalog of Federal Domestic Assistance Number 84.096, State Student 
Incentive Grant Program)

    Dated: January 14, 1994.
Richard W. Riley,
Secretary of Education.

    The Secretary amends part 692 of title 34 of the Code of Federal 
Regulations as follows:

PART 692--STATE STUDENT INCENTIVE GRANT PROGRAM

    1. The authority citation for part 692 is revised to read as 
follows:

    Authority: 20 U.S.C. 1070c through 1070c-4, unless otherwise 
noted.
 * * * * *
    2. Section 692.3 is amended by revising paragraphs (b) and (d) to 
read as follows:


Sec. 692.3  What regulations apply to the State Student Incentive Grant 
Program?

* * * * *
    (b) The Education Department General Administrative Regulations 
(EDGAR) as follows:
    (1) 34 CFR 75.60-75.62 (Ineligibility of Certain Individuals to 
Receive Assistance).
    (2) 34 CFR part 76 (State-Administered Programs).
    (3) 34 CFR part 77 (Definitions That Apply to Department 
Regulations).
    (4) 34 CFR part 79 (Intergovernmental Review of Department of 
Education Programs and Activities).
    (5) 34 CFR part 80 (Uniform Administrative Requirements for Grants 
and Cooperative Agreements to State and Local Governments).
    (6) 34 CFR part 82 (New Restrictions on Lobbying).
    (7) 34 CFR part 85 (Governmentwide Debarment and Suspension 
(Nonprocurement) and Governmentwide Requirements for Drug-Free 
Workplace (Grants)).
    (8) 34 CFR part 86 (Drug-Free Schools and Campuses).
 * * * * *
    (d) The Student Assistance General Provisions in 34 CFR part 668.

(Authority: 20 U.S.C. 1070c-1070c-4)

    3. In Sec. 692.4, paragraph (a) is amended by removing the terms, 
``Academic year (Sec. 668.2)'', ``Campus-based programs (Sec. 668.2)'', 
``Guaranteed Student Loan Program (Sec. 668.2)'', ``Income Contingent 
Loan Program (Sec. 668.2)'', ``Pell Grant Program (Sec. 668.2)'', 
``PLUS Program (Sec. 668.2)'', and ``Postsecondary vocational 
institution (Sec. 668.5)''; by redesignating paragraph (b) as paragraph 
(c); and by adding a new paragraph (b) to read as follows:


Sec. 692.4  What definitions apply to the State Student Incentive Grant 
Program?

 * * * * *
    (b) Definitions in the HEA. The following terms used in this part 
are defined in section 481(a), (b), (c), and (d) of the HEA:

Academic year
Institution of higher education
Postsecondary vocational institution
Proprietary institution of higher education
 * * * * *
    4. Section 692.10 is amended by revising paragraph (b) to read as 
follows:


Sec. 692.10  How does the Secretary allot funds to the States?

* * * * *
    (b) For the purpose of paragraph (a)(1) of this section, the 
Secretary determines the number of students ``deemed eligible'' to 
participate in a State's SSIG Program by dividing the amount of that 
State's SSIG expenditures, including both its Federal allotment and the 
State-appropriated funds matching the allotment, by the average grant 
award per student of all participating States. The Secretary determines 
the ``average grant award per student'' by dividing the total number of 
student recipients for all States into the total amount of SSIG 
expenditures for all States, including both the Federal allotments and 
the State-appropriated funds matching those allotments. In making this 
determination, the Secretary uses the most current available data 
reported by each State.
    5. Section 692.21 is amended by removing the periods after 
paragraphs (a) and (d); adding semi-colons after paragraphs (a) and 
(d); redesignating paragraphs (e), (f), (g), (h), and (i) as paragraphs 
(f), (g), (h), (i), and (k), respectively; adding new paragraphs (e) 
and (j); revising paragraphs (b), (c), and redesignated pargraphs (g), 
and (i); and revising the Office of Management and Budget control 
number at the end of the section to read as follows:


Sec. 692.21  What requirements must be met by a State program?

* * * * *
    (b) Provides assistance only to students who meet the eligibility 
requirements in Sec. 692.40;
    (c) Provides that assistance under this program to a full-time 
student will not be more than $5,000 for each academic year;
* * * * *
    (e) Provides that no student or parent shall be charged a fee that 
is payable to an organization other than the State for the purpose of 
collecting data to make a determination of financial need in accordance 
with paragraph (d) of this section;
* * * * *
    (g) Provides that, if a State awards grants to independent students 
or to students who are less-than-full-time students enrolled in an 
institution of higher education, a reasonable portion of the State's 
allocation must be awarded to those students;
* * * * *
    (i) Provides for State expenditures under the State program of an 
amount that is not less than--
    (1) The average annual aggregate expenditures for the preceding 
three fiscal years; or
    (2) The average annual expenditure per full-time equivalent student 
for those years;
    (j) Provides that, to the extent practicable, the proportion of the 
funds awarded to independent students in the SSIG Program shall be the 
same proportion of funds awarded to independent students as is in the 
State program or programs of which the State's SSIG Program is a part; 
and
* * * * *
(Approved by the Office of Management and Budget under control 
number 1840-0660)
* * * * *
    6. Section 692.30 is amended by removing the first of the duplicate 
paragraphs (e)(2).
    7. Section 692.41 is amended by redesignating paragraphs (a), (b), 
and (c) as paragraphs (a) (1), (2), and (3), respectively; by 
designating the introductory text as the introductory text of paragraph 
(a); by revising paragraph (a)(1); and by adding a new paragraph (b), 
to read as follows:


Sec. 692.41  What standards may a State use to determine substantial 
financial need?

    (a) * * *
    (1) A system for determining a student's financial need under part 
F of title IV of the HEA;
* * * * *
    (b) The Secretary generally approves a need-analysis system under 
paragraph (a) (2) or (3) of this section only if the need-analysis 
system applies the term ``independent student'' as defined under 
section 480(d) of the HEA. However, for good cause shown, the Secretary 
may approve, on a case-by-case basis, a State's need analysis system 
that uses a definition for ``independent student'' that varies from 
that term as defined in section 480(d) of the HEA.
* * * * *
[FR Doc. 94-1692 Filed 1-27-94; 8:45 am]
BILLING CODE 4000-01-P