[Federal Register Volume 59, Number 228 (Tuesday, November 29, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29118]


[[Page Unknown]]

[Federal Register: November 29, 1994]


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Part VIII





Department of Education





_______________________________________________________________________



34 CFR Part 668




Student Assistance General Provisions; Final Rule
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DEPARTMENT OF EDUCATION

34 CFR PART 668

RIN 1840-AC10

 
Student Assistance General Provisions

Agency: Department of Education.

Action: Final regulations.

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Summary: The Secretary amends the Student Assistance General Provisions 
regulations, Verification of Student Aid Application Information, to 
conform them to the new Federal Pell Grant Program regulations, to 
clarify the calculation of the net tolerance option, to implement 
technical revisions resulting from the Higher Education Amendments of 
1992 and the Higher Education Technical Amendments of 1993, and to 
reduce the administrative burden associated with verification 
requirements on applicants and institutions. These regulations require 
institutions to have a system for verifying student aid application 
information reported by applicants for use in calculating expected 
family contributions (EFCs) for the Federal Pell Grant, campus-based 
(Federal Perkins Loan, Federal Work-Study (FWS), and Federal 
Supplemental Educational Opportunity Grant (FSEOG)), Federal Stafford 
Loan, and William D. Ford Federal Direct Loan.

EFFECTIVE DATE: These regulations take effect on July 1, 1995. When 
these regulations become effective, they will govern verification of 
student aid application information for any title IV, HEA program 
assistance that may be awarded to any student for award years beginning 
with 1995-96.

FOR FURTHER INFORMATION CONTACT: Lorraine Kennedy, U.S. Department of 
Education, 600 Independence Avenue, S.W., Regional Office Building 3, 
Room 4318, Washington, D.C. 20202-5451. Telephone (202) 708-4601. 
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: Subpart E of the Student Assistance General 
Provisions regulations (34 CFR Part 668) governs the verification of 
the information that is used to calculate an applicant's expected 
family contribution (EFC) as part of the determination of an 
applicant's need for student financial assistance. Based on the need 
analysis formula established in statute, the EFC is the amount that an 
applicant and the applicant's family can reasonably be expected to 
contribute toward the applicant's cost of attendance at an institution 
of higher education.
    The changes in these regulations result from a review of current 
policies and procedures and from recently enacted legislation.
    The Secretary has determined that an increase in the verification 
limitation percentage above 30% would increase the administrative 
burden for all institutions participating in the title IV programs. The 
30% limitation percentage provides an appropriate balance between 
budget cost savings and institutional burden. The Secretary, in section 
668.54, provides clarification of when an institution has performed its 
30% limitation for each award year.
    The Secretary, in an effort to relieve burden, has revised the 
updating requirements in Sec. 668.55(b) to remove the requirement that 
an applicant update his or her application information at the time the 
applicant verifies the information or submits his or her SAR.
    The Secretary proposed to amend Sec. 668.56(a)(5)(i) in a Notice of 
Proposed Rulemaking published in the Federal Register on April 28, 1994 
(59 FR 22066) to further clarify the Department's policy for 
verification of Social Security benefits. The Department does not 
require an institution to document receipt of Social Security benefits 
simply because there is an amount indicated on the application. 
Documentation is only required if the institution has reason to believe 
that the amount reported is incorrect, or that the student or family is 
receiving Social Security benefits that are not being reported.
    On April 28, 1994, and June 22, 1994, the Secretary published 
notices of proposed rulemaking (NPRMs) for part 668 in the Federal 
Register (59 FR 22070 and 59 FR 32264). The NPRMs included a discussion 
of the major issues raised by the proposed changes. The following list 
summarizes those issues and identifies the pages of the preambles to 
the NPRMs on which discussion of those issues may be found.
    Section 668.54 would be amended to place a limitation on the 
percentage of the total applicants whose applications would be required 
to be verified annually by an institution during the award year (page 
22070).
    Section 668.57(c) would be amended to require the signature of the 
applicant and one parent of the dependent student instead of requiring 
signatures of both parents (page 32264).
    Section 668.59 would be amended to change the amount of the dollar 
tolerance option for the Federal Pell Grant, Federal Stafford Loan, 
William D. Ford Federal Direct Loan, and campus-based programs. These 
regulations would require a $400 tolerance option to be used for all 
title IV, HEA programs in place of the current $200 Pell and $800 
Stafford Loan and campus-based tolerance options. The Higher Education 
Amendments of 1992 provided for a single formula for establishing need 
for all title IV student financial assistance programs, so a single 
tolerance level would minimize calculations and burden (page 22070).

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRMs, 74 parties 
submitted comments on the proposed regulations. An analysis of the 
comments and of the changes made in the regulations in response to 
those comments follows.
    Substantive issues are discussed under the regulations to which 
they pertain. Technical and other minor changes--and suggested changes 
that the Secretary is not legally authorized to make under the 
applicable statutory authority--are not addressed.

Section 668.54 Selection of Applications for Verification

    Comments: Several commenters opposed the requirement to verify more 
than 30% of the applications received by the institution. Several other 
commenters suggested that institutions should be required to verify 
less than 30% of the total applications. One commenter suggested 100% 
verification of all applicants selected for verification and does not 
foresee any added verification problems from this approach.
    Discussion: Section 484(f) of the Higher Education Act of 1965, as 
amended, was deleted by the Higher Education Technical Amendments of 
1993. Although the Secretary now has the authority to require 
institutions to verify up to 100% of the applications selected for 
verification on the basis of selection edits, the Secretary has not 
made a determination that responsible management of the programs 
requires 100% verification of selected applications. However, the 
Secretary will undertake additional studies to include an analysis of 
data to determine costs to Federal government, as well as, costs and 
burden to institutions, students, and families, and will consider 
changes to the selection percentage at a later time. At the present 
time, the Secretary believes that any verification limitation 
percentage less than 30% of total applicants received by the 
institution would compromise the Department's ability to detect 
significant levels of error in title IV applications and to prevent 
subsequent overawards and underawards. However, an institution is not 
limited to the verification of 30% of its applicants and may choose to 
verify a higher percentage of applicants, if the institution believes a 
higher percentage is necessary to accurately administer the student 
financial assistance programs.
    Changes: Section 668.54 has been revised to provide that no 
institution is required to verify the applications of more than 30% of 
the total applications for title IV assistance received by the 
institution in any award year.

Section 668.57(c) Acceptable Documentation

    Comments: Several commenters concurred with the Secretary's 
proposal to require the signature of one parent instead of both parents 
of the dependent applicant for verification of household size and 
number of family members enrolled in a postsecondary educational 
institution. Two commenters suggested that the Secretary could remove 
additional burden for applicants, parents, and institutions, if the 
Secretary deleted the provision requiring the parent whose income is 
used in calculating need to be the parent that signs these verification 
statements.
    Discussion: The Secretary agrees that additional burden is imposed 
by requiring the signature of a specified parent rather than would be 
the case if either parent's signature is acceptable. Since this burden 
probably outweighs any benefit derived from requiring the signature of 
the responsible parent, the Secretary has decided to remove the 
proposed provisions requiring the income producing parent to sign these 
statements and, instead, will allow a signature from either parent.
    Changes: Section 668.57(c) has been revised to require the 
signature of the applicant and one parent of dependent students, 
without regard to which parent's income was used in calculating need, 
to verify household size and number of family members enrolled in a 
postsecondary educational institution.

Section 668.59 Consequences of a Change in Application Information

    Comments: A number of commenters agreed with the proposed $400 
tolerance for all title IV, HEA programs. Several commenters felt that 
the $400 tolerance will improve consistency across title IV, HEA 
programs and reduce overawards. Two commenters stated that the change 
will make it easier for institutions to administer financial aid.
    A few commenters proposed that the tolerance be placed at $600 
rather than $400 to reduce the number of cases in which a financial aid 
officer would need to recalculate an award. Two commenters stated that 
a $600 tolerance is appropriate for consistency in applying tolerance 
levels, and because multitude of variables used in calculating student 
need justifies a higher tolerance amount. One commenter stated that 
students who file for financial aid early use estimated IRS tax forms 
and that many taxpayers do not file tax returns in January, so that the 
$400 tolerance will result in an increased number of recalculated 
financial aid forms. Three commenters supported retaining the current a 
$200 tolerance for the Federal Pell Grant and $800 tolerance for the 
Federal Stafford Loan and campus-based programs.
    Discussion: The Secretary agrees with the commenters concerning the 
desirability of minimizing recalculations and burden, but is also 
concerned about the accuracy of title IV, HEA awards. The Secretary has 
determined that $400 is the appropriate tolerance amount for errors in 
single dollar items in the title IV, HEA programs rather than $600, 
because a $400 error in any given dollar item is the largest error that 
would not result in a change in the applicant's award. The Secretary 
recognizes that the lower tolerance amount represents a relatively 
higher level of burden, and has decided to partially offset the higher 
burden through use of a net tolerance. In this calculation, the 
tolerance amount shall be the difference between the corrected sum of 
AGI plus untaxed income minus U.S. income taxes paid and the 
uncorrected sum of AGI plus untaxed income minus U.S. income taxes 
paid. For example, a student's $2500 AGI is corrected to read $3000, 
and the student's $300 entry for U.S. income taxes paid is corrected to 
read $400. The student's untaxed income remains the same in both 
calculations at $300. Therefore, the student's corrected sum of AGI 
plus untaxed income minus U.S. income taxes paid is $2900, and the 
student's uncorrected sum using the same calculation is $2500, leaving 
a net difference of $400, which is within the allowable tolerance.
    Therefore, the Secretary has decided to adopt the proposed $400 
tolerance for all title IV, HEA programs in Sec. 668.59, as published 
in the NPRM. The Secretary considers the value of this simplification 
of the regulations to outweigh any potential loss of flexibility.
    Changes: Section 668.59 has been revised to provide for a $400 net 
tolerance option for all applications for title IV, HEA programs with 
dollar errors.

Executive Order 12866

    These regulations have been reviewed in accordance with Executive 
Order 12866. Under the terms of the order the Secretary has assessed 
the potential costs and benefits of this regulatory action.
    The potential costs associated with the proposed regulations are 
those resulting from statutory requirements and those determined by the 
Secretary to be necessary for administering this program effectively 
and efficiently.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these final regulations, the Secretary has 
determined the benefits of the final regulations justify the costs.
    The Secretary has also determined that this regulatory action does 
not unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.

Assessment of Educational Impact

    In the notice of proposed rulemaking, the Secretary requested 
comments on whether the proposed regulations 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 rules 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 668

    Administrative practice and procedure, Colleges and Universities, 
Consumer protection, Education, Grant programs--education, Loan 
programs--education, Reporting and recordkeeping requirements, Student 
aid.

    (Catalog of Federal Domestic Assistance Numbers: Federal 
Supplemental Educational Opportunity Grant Program, 84.007; Federal 
Stafford Loan Program, 84.032; Federal PLUS Loan Program, 84.032; 
Federal Work-Study Program, 84.033; Federal Perkins Loan Program, 
84.038; Federal Pell Grant Program, 84.063; William D. Ford Federal 
Direct Loan Program, 84.268)

    Dated: November 21, 1994.
Richard W. Riley,
Secretary of Education.
    The Secretary amends Part 668 of Title 34 of the Code of Federal 
Regulations as follows:

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

    1. The authority citation for Part 668 continues to read as 
follows:

    Authority: 20 U.S.C. 1085, 1088, 1091, 1092, 1094, and 1141, 
unless otherwise noted.

    2. Section 668.52 is amended by revising the definition of 
``Institutional student information report'' to read as follows:


Sec. 668.52  Definitions.

* * * * *
    Institutional student information report as defined in 34 CFR 690.2 
for purposes of the Federal Pell Grant, campus-based, Federal Stafford 
Loan, and William D. Ford Federal Direct Loan programs.
* * * * *
    3. Section 668.53 is amended by revising paragraphs (a)(3) and 
(a)(5) to read as follows:


Sec. 668.53  Policies and procedures.

    (a) * * *
    (3) The method by which the institution notifies an applicant of 
the results of verification if, as a result of verification, the 
applicant's EFC changes and results in a change in the applicant's 
award or loan;
* * * * *
    (5) The procedures for making referrals under Sec. 668.16.
* * * * *
    4. Section 668.54 is amended by revising paragraphs (a)(2) and 
(b)(2)(v), by redesignating paragraphs (b)(2)(vi) and (b)(2)(vii) as 
paragraphs (b)(2)(vii) and (b)(2)(viii), by adding a new paragraph 
(b)(2)(vi), and by revising redesignated paragraph (b)(2)(viii) to read 
as follows:


Sec. 668.54  Selection of applications for verification.

    (a) * * *
    (2)(i) An institution shall require each applicant whose 
application is selected for verification on the basis of edits 
specified by the Secretary, to verify all of the applicable items 
specified in Sec. 668.56, except that no institution is required to 
verify the applications of more than 30 percent of its total number of 
applicants for assistance under the Federal Pell Grant, Federal Direct 
Student Loan, campus-based, and Federal Stafford Loan programs in an 
award year.
    (ii) An institution may only include those applicants selected for 
verification by the Secretary in its calculation of 30 percent of total 
applicants.
    (b) * * *
    (2) * * *
    (v) An applicant whose parents' address is unknown and cannot be 
obtained by the applicant.
    (vi) An applicant who is a dependent student, both of whose parents 
are deceased or are physically or mentally incapacitated.
* * * * *
    (viii) An applicant who transfers to the institution, had 
previously completed the verification process at the institution from 
which he or she transferred, and applies for assistance on the same 
application used at the previous institution, if the current 
institution obtains a letter from the previous institution stating that 
it has verified the applicant's information, the transaction number of 
the verified application, and, if relevant, the provision used in 
Sec. 668.59 for not recalculating the applicant's EFC.
* * * * *
    5. Section 668.55 is amended by revising paragraph (b) to read as 
follows:


Sec. 668.55  Updating information.

* * * * *
    (b) If the number of family members in the applicant's household or 
the number of those household members attending postsecondary 
educational institutions changes for a reason other than a change in 
the applicant's marital status, an applicant who is selected for 
verification shall update the information contained in his or her 
application regarding those factors so that the information is correct 
as of the day the applicant verifies the information.
* * * * *
    6. Section 668.56 is amended by revising paragraph (a)(5)(i) to 
read as follows:


Sec. 668.56  Items to be verified.

    (a) * * *
    (5) * * *
    (i) Social Security benefits if the institution has reason to 
believe that those benefits were received and were not reported or were 
incorrectly reported;
* * * * *
    7. Section 668.57 is amended by revising paragraphs (a)(3) 
introductory text, (c)(1) introductory text, and (d)(2) to read as 
follows:


Sec. 668.57  Acceptable documentation.

    (a) * * *
    (3) An institution shall accept, in lieu of an income tax return or 
an IRS listing of tax account information of an individual whose income 
was used in calculating the EFC of an applicant, the documentation set 
forth in paragraph (a)(4) of this section if the individual for the 
base year--
* * * * *
    (c) Number of family household members enrolled in postsecondary 
institutions. (1) Except as provided in Sec. 668.56(b), (c), (d), and 
(e), an institution shall require an applicant selected for 
verification to verify annually information included on the application 
regarding the number of household members in the applicant's family 
enrolled on at least a half-time basis in postsecondary institutions. 
The institution shall require the applicant to verify the information 
by submitting a statement signed by the applicant and one of the 
applicant's parents, if the applicant is a dependent student, or by the 
applicant, and the applicant's spouse, if married, if the applicant is 
an independent student, listing--
* * * * *
    (d) * * *
    (2) Social Security benefits if the institution has reason to 
believe that those benefits were received and were not reported, or 
that the applicant has incorrectly reported Social Security benefits 
received by the applicant, the applicant's parents, or any other 
children of the applicant's parents who are members of the applicant's 
household, in the case of a dependent student, or by the applicant, the 
applicant's spouse, or the applicant's children in the case of an 
independent student. The applicant shall verify Social Security 
benefits by submitting a document from the Social Security 
Administration showing the amount of benefits received in the 
appropriate calendar year for the appropriate individuals listed above 
or, at the institution's option, a statement signed by both the 
applicant and the applicant's parent, in the case of a dependent 
student, or by the applicant, in the case of an independent student, 
certifying that the amount listed on the applicant's aid application is 
correct; and
* * * * *
    8. Section 668.59 is amended by removing paragraphs (a)(2) and 
redesignating paragraph (a)(3) as paragraph (a)(2), by revising 
paragraph (a)(1) introductory text, by revising redesignated paragraph 
(a)(2) introductory text, removing the word ``and'' at the end of 
redesignated paragraph (a)(2)(i) and at the end of paragraph (c)(2)(i), 
by revising redesignated paragraph (a)(2)(ii), by revising paragraphs 
(b)(1) and (c)(2)(ii), and by revising paragraph (d) to read as 
follows:


Sec. 668.59  Consequences of a change in application information.

    (a) * * *
    (1) Except as provided in paragraph (a)(2) of this section, if the 
information on an application changes as a result of the verification 
process, the institution shall require the applicant to resubmit his or 
her application information to the Secretary for corrections if--
* * * * *
    (2) An institution need not require an applicant to resubmit his or 
her application information to the Secretary, recalculate an 
applicant's EFC, or adjust an applicant's Federal Pell Grant award if, 
as a result of the verification process, the institution finds--
* * * * *
    (ii) No dollar amount in excess of $400 as calculated by the net 
difference between the corrected sum of Adjusted Gross Income (AGI) 
plus untaxed income minus U.S. taxes paid and the uncorrected sum of 
Adjusted Gross Income (AGI) plus untaxed income minus U.S. taxes paid.
    (b) * * *
    (1) If an institution does not recalculate an applicant's EFC under 
the provisions of paragraph (a)(2) of this section, the institution 
shall calculate and disburse the applicant's Pell Grant award on the 
basis of the applicant's original EFC.
    (c) * * *
    (2) * * *
    (ii) No dollar amount in excess of $400 as calculated by the net 
difference between the corrected sum of Adjusted Gross Income (AGI) 
plus untaxed income minus U.S. taxes paid and the uncorrected sum of 
Adjusted Gross Income (AGI) plus untaxed income minus U.S. taxes paid.
* * * * *
    (d)(1) If the institution selects an applicant for verification for 
an award year who previously received a loan under the William D. Ford 
Federal Direct Loan Program for that award year, and as a result of 
verification the loan amount is reduced, the institution shall comply 
with the procedures for notifying the borrower and lender specified in 
Sec. 668.61(a).
    (2) If the institution selects an applicant for verification for an 
award year who previously received a loan under the Federal Stafford 
Loan Program for that award year, and as a result of verification the 
loan amount is reduced, the institution shall comply with the 
procedures for notifying the borrower and lender specified in 
Sec. 668.61(b) and Sec. 682.604(h).
* * * * *
    9. Section 668.60 is amended by revising paragraph (c)(2) 
introductory text to read as follows:


Sec. 668.60  Deadlines for submitting documentation and the 
consequences of failing to provide documentation.

* * * * *
    (c) * * *
    (2) If the applicant does not provide to the institution the 
requested documentation and, if necessary, a verified SAR or the 
institution does not receive a verified ISIR, within the additional 
time period referenced in paragraph (c)(1) of this section, the 
applicant--
* * * * *


Secs. 668.51, 668.55, 668.58, 668.59, 668.60, 668.61  [Amended]

    10. In 34 CFR Part 668 add the words ``or William D. Ford Federal 
Direct Loan'' after the words ``Federal Stafford Loan,'' in the 
following places each time they appear:
    a. Section 668.55(c)(2);
    b. Section 668.58(a)(2)(iii)(A), (a)(2)(iii)(B) (twice), (c), 
(d)(1) and (2);
    c. Section 668.59(c) introductory text, (c)(1)(ii);
    d. Section 668.60(b)(1)(i)(C), (b)(1)(i)(D), (b)(1)(ii); and
    f. Section 668.61(b).
* * * * *


Secs. 668.51, 668.52, 668.55, 668.60, 668.61  [Amended]

    11. In 668.51(a) remove the term ``Presidential Access Scholarship 
and Partnership Program (PAS).''
    12. In 34 CFR Part 668 remove the term ``PAS'' in the following 
places:
    a. Section 668.52 Institutional student information report and in 
the definition for Student aid application; and
    b. Section 668.55(c) introductory text, (c)(1), (c)(2); and
    c. Section 668.60(b), (b)(1)(i)(A), (b)(1)(iii), (d); and
    d. Section 668.61(a)(2)(ii)(B).

[FR Doc. 94-29118 Filed 11-28-94; 8:45 am]
BILLING CODE 4000-01-P