[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Proposed Rules]
[Pages 49114-49127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23150]




[[Page 49113]]

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Part V





Department of Education





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34 CFR Parts 668, 674, et al.



Higher Education Act of 1965; Student Financial Assistance Programs; 
Federal Regulatory Assistance Review; Proposed Rule

  Federal Register / Vol. 60, No. 183 / Thursday, September 21, 1995 / 
Proposed Rules   

[[Page 49114]]


DEPARTMENT OF EDUCATION

34 CFR Parts 668, 674, 675, 676, 682, 685, and 690

RIN: 1840 AC20


Student Assistance General Provisions, Federal Perkins Loan 
Program, Federal Work-Study Programs, Federal Supplemental Educational 
Opportunity Grant Program, Federal Family Education Loan Program, 
William D. Ford Federal Direct Loan Programs, and Federal Pell Grant 
Program

AGENCY: Department of Education.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: The Secretary proposes to amend the regulations governing the 
student financial assistance programs authorized under title IV of the 
Higher Education Act of 1965, as amended (title IV, HEA programs). 
These programs include the campus-based programs (Federal Perkins Loan, 
Federal Work-Study (FWS), and Federal Supplemental Educational 
Opportunity Grant (FSEOG) programs), the Federal Family Education Loan 
(FFEL) programs, the William D. Ford Federal Direct Loan programs, the 
Federal Pell Grant Program, and the State Student Incentive Grant 
program. These proposed amendments, which eliminate unnecessary 
regulations and improve the existing regulations, are part of a planned 
series of regulatory reform and relief proposals for the title IV, HEA 
programs. The Secretary is proposing these changes in response to the 
President's Regulatory Reform Initiative.
    The Federal student financial assistance programs support the 
National Education Goals by enhancing opportunities for postsecondary 
education. The National Education Goals call for increasing the rate at 
which students graduate from high school and pursue high quality 
postsecondary education and for supporting life-long learning.

DATES: Comments on the proposed regulations must be received on or 
before October 27, 1995.

ADDRESSES: All comments concerning these proposed regulations should be 
addressed to: Harold McCullough, U.S. Department of Education, P.O. Box 
23272, Washington, DC 20026-3272. Comments may also be sent through the 
Internet to [email protected].
    To ensure that public comments have maximum effect in developing 
the final regulations, the Department urges that each comment clearly 
identify the specific section or sections of the regulations that the 
comment addresses and that comments be in the same order as the 
proposed regulations.
    Comments that concern information collection requirements must be 
sent to the Office of Management and Budget at the address listed in 
the Paperwork Reduction Act section of this preamble. A copy of those 
comments may also be sent to the Department representative named above.

FOR FURTHER INFORMATION CONTACT:
    1. For the Student Assistance General Provisions: Claude Denton, 
Student Eligibility and Verification Section, General Provisions Branch 
on (202) 708-7888;
    2. For the Federal Perkins Loan Program: Sylvia R. Ross, Campus-
Based Loan Programs Section, Loans Branch on (202) 708-8242;
    3. For the FWS and FSEOG programs: Kathy S. Gause, Campus-Based 
Programs Section, Grants Branch on (202) 708-4690;
    4. For the FFEL Programs: Ralph Madden, GSL Programs Section, Loans 
Branch on (202) 708-8242;
    5. For the William D. Ford Federal Direct Loan Programs: Doug 
Laine, Direct Loan Policy Group on (202) 708-9406; and
    6. For the Federal Pell Grant Program: Mike Oliver, Pell and State 
Grant Section, Grants Branch on (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: On March 4, 1995, the President directed 
every Federal agency to review its rules and procedures to reduce 
regulatory and paperwork burden, and directed Federal agencies to 
eliminate or revise those regulations that are outdated or otherwise in 
need of reform. Responding to the President's Regulatory Reform 
Initiative, the Secretary announced plans to eliminate or revise 93 
percent of the Department's regulations. To launch the Department's 
reinvention effort, the Secretary published a notice in the May 23, 
1995 Federal Register (60 FR 27223-27226), eliminating more than 30 
percent of the Department's regulations, primarily in areas not related 
to student financial assistance.
    The Secretary is conducting a page-by-page review of all student 
financial assistance regulations to identify those that should be 
eliminated or improved. The Secretary is also considering developing 
proposals for statutory amendments to eliminate unnecessary 
administrative burden.
    As part of his response to the President's regulatory reinvention 
initiative, the Secretary is proposing these amendments to the 
regulations that apply to the title IV, HEA programs. The Secretary 
plans to propose additional reform and relief regulatory amendments for 
the title IV, HEA programs in the upcoming months.
    A description of the major proposed changes follows. The proposed 
changes that apply to more than one program are described first 
followed by descriptions of provisions that apply only to a specific 
program.
    The Federal student financial assistance programs support the 
National Education Goals by enhancing opportunities for postsecondary 
education.

Summary of Proposed Changes

Student Assistance General Provisions

    The Student Assistance General Provisions regulations, 34 CFR part 
668, implement requirements that are common to the title IV, HEA 
programs.

Subpart A--General

Section 668.7  Eligible Student

    The Secretary proposes to remove and reserve the section formerly 
designated as Sec. 668.7, ``Eligible student.'' The ``eligible 
student'' provisions currently provided in Sec. 668.7 would now 
comprise a revised subpart C of 34 CFR part 668.
    The Secretary believes that this relocation will improve regulatory 
organization, provide greater clarity, and improve understanding of 
those provisions.

Subpart B--Standards for Participation in Title IV, HEA Programs

Section 668.19  Financial Aid Transcript

    Under the current regulations, if an institution determines that a 
student previously attended another institution, the institution must 
obtain a financial aid transcript from that other institution. The 
financial aid transcript provides some of the information that enables 
an institution to determine whether an enrolling student is eligible to 
receive title IV, HEA program funds. Thus, the financial aid transcript 
may indicate that a student is in default on a title IV, HEA program 
loan, or owes a repayment on a title IV, HEA program grant or loan. It 
may also help the institution to determine the amount that an eligible 
student is entitled to receive in the current award year by indicating 

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a student's Scheduled Federal Pell Grant award or the amount of FFEL or 
William D. Ford Federal Direct loan funds that the student received in 
the current award year.
    The Secretary proposes an alternative to obtaining a financial aid 
transcript. The Department has been developing the National Student 
Loan Data System (NSLDS), which will contain basically the same 
information that is included on a financial aid transcript. When the 
system becomes fully operational, institutions will be able to obtain 
financial aid history information about an applicant for title IV, HEA 
program assistance from the NSLDS instead of from other institutions 
previously attended by the applicant. Therefore, the Secretary is 
proposing in Sec. 668.19 that when the NSLDS can be used to satisfy 
this purpose, an institution will have the option of obtaining 
information about an enrolling student who has previously attended 
another institution from the NSLDS instead of requesting a financial 
aid transcript from the other institution.
    At the present time, the Secretary anticipates that institutions 
will be able to obtain financial aid transcript information from the 
NSLDS starting with the 1996-97 award year. However, the Secretary is 
proposing in Sec. 668.19 to notify institutions through a Federal 
Register notice when they may begin to use this option.
    After experience demonstrates that the NSLDS is a valid alternative 
to requesting a financial aid transcript from another institution, the 
Secretary anticipates that institutions will use the NSLDS exclusively 
to obtain information and the Secretary will eliminate the financial 
aid transcript requirement.
    The Secretary expects that use of NSLDS will relieve institutions 
of the burden of requesting and compiling information from financial 
aid transcripts. Because financial aid history information will be 
available electronically, obtaining information from the NSLDS will 
also reduce delays in awarding and disbursing title IV, HEA program 
assistance to students.
    While the Secretary is confident that NSLDS data will provide 
accurate and reliable information, there will be instances where an 
institution encounters inconsistencies between NSLDS data and other 
sources of information. If that happens, the institution is expected to 
resolve those conflicts in accordance with Sec. 668.16(f). Resolution 
of inconsistencies can be achieved through use of the financial aid 
transcript or other methods the institution determines to be 
appropriate.

Subpart C--Student Eligibility

    Because of increased statutory requirements affecting a student's 
eligibility to receive title IV, HEA program funds, the Secretary 
believes that the inclusion of all those requirements in one section of 
the regulations has become too cumbersome. Therefore, the Secretary has 
revised and reorganized those requirements into subpart C of 34 CFR 
part 668. The Secretary requests comments on this proposed 
reorganization.

Section 668.33  Student Identification

    The Office of Inspector General recently recommended enhancement of 
the data match with the Social Security Administration (SSA), under 
which SSA would confirm claims of U.S. citizenship by applicants for 
title IV, HEA program funds on their Free Application for Federal 
Student Aid (FAFSA). Currently, the Department and SSA have a data 
match under which SSA confirms the accuracy of social security numbers 
provided by title IV, HEA program applicants.
    The Secretary and SSA have agreed to this expanded data match 
starting with the 1996-97 award year application cycle. Section 668.33 
has provisions to conform these regulations to this internal 
interagency process.
    Operationally, the citizenship aspect of the SSA data match would 
be similar to other data matches. If a student's claim of U.S. citizen 
status is confirmed by SSA, the central processor will generate a 
confirming message on an applicable ``output document,'' such as an 
ISIR or SAR. No further action will be required by either the student 
or institution, absent conflicting information. If the student's claim 
is not confirmed, the student would be advised of the lack of 
confirmation and would be given the opportunity to provide documentary 
evidence to the institution, such as a birth certificate, 
naturalization certificate, or passport, to support his or her 
assertion of citizenship.
    The Secretary proposes, in this section, to allow students to 
satisfy the requirement of filing a Statement of Educational Purpose 
with the institution, by completing the FAFSA, which will include this 
statement starting with the 1996-97 award year. Currently, institutions 
must collect a Statement of Educational Purpose individually from each 
student applying for title IV, HEA program assistance. The Secretary;s 
proposal does not affect current FFEL requirements with regard to this 
statement on loan applications.
    The Secretary proposes to eliminate the model Statement of 
Educational Purpose in the current regulations. A model statement would 
be duplicative because the statement will appear on the FAFSA starting 
with the 1996-97 award year.
    The Secretary also proposes to eliminate the Statement of 
Registration Status because the statement is duplicative. A male 
student's selective service registration status is now confirmed 
through a data match with the Selective Service System. This data match 
eliminates the need for the collection of a separate statement.

Section 668.34  Student Debts Under the HEA and to the U.S.

    The Secretary is proposing in these regulations to amend and 
reorganize, for clarity and conformity, the provisions under which a 
student who owes a debt under the HEA or to the United States may 
nevertheless be eligible to receive title IV, HEA program assistance. 
Also, the Secretary proposes to conform the regulations to existing 
statutory requirements pertaining to bankruptcy.
    Specifically, these regulations would allow a student who owes a 
debt under the HEA or to the United States to be eligible to receive 
title IV, HEA program funds even though the student (1) is in default 
on a title IV, HEA program loan, (2) inadvertently received a title IV, 
HEA program loan in an amount that exceeded that program's annual or 
aggregate loan limits, (3) owes a repayment on a title IV, HEA program 
grant or loan, or (4) has property subject to a judgment lien for a 
debt owed to the United States.
    Under the proposed regulations, a student who is in default on a 
title IV, HEA program loan would be eligible to receive additional 
title IV, HEA program funds if the student repays the loan in full, or 
makes six consecutive monthly payments on the defaulted loan and makes 
arrangements, satisfactory to the holder of the loan, to repay that 
loan.
    A student who is not in default but inadvertently obtained loan 
funds under a title IV, HEA loan program in an amount that exceeded the 
annual or aggregate loan limits under that program would be eligible to 
receive additional title IV, HEA program funds if the student repays in 
full the excess loan amount or makes arrangements satisfactory to the 
holder of the loan, to repay that excess loan amount.
    A student who receives a grant or loan overpayment under a title 
IV, HEA program would be eligible for additional title IV, HEA program 
funds if the student pays the overpayment in full, or 

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makes arrangements satisfactory to the institution to pay the 
overpayment.
    A student who has property subject to a judgment lien for a debt 
owed to the United States would be eligible for title IV, HEA program 
funds if the student pays the debt in full, or makes arrangements 
satisfactory to the United States to pay the debt.
    In addition, the proposed regulations clarify that the exception 
under bankruptcy law is applicable to a student who is otherwise in 
default on a title IV, HEA program loan, or owes an overpayment on a 
title IV, HEA program grant or loan.
    These proposed changes provide clarification and, to the extent 
allowed by the HEA, consistency in the treatment by institutions of 
applicants for title IV, HEA program assistance who may owe a debt on 
previously awarded title IV aid or when the applicant has had a lien 
placed on another debt owed to the United States. Additionally, they 
provide, in the case of a grant or loan overpayment, flexibility to the 
holder of the debt by allowing for the establishment of satisfactory 
arrangements to repay so that the applicant who demonstrates good faith 
in resolving his or her obligation may regain eligibility for title IV, 
HEA program assistance.

Subpart I--Immigration-Status Confirmation

Section 668.133  Conditions Under Which an Institution Shall Require 
Documentation and Request Secondary Confirmation

    The Secretary proposes to remove the requirement that an 
institution request secondary confirmation from the Immigration and 
Naturalization Service for a student if (1) the student presents 
documents verifying his or her immigration status that are identical to 
documents presented to that institution in a previous year, and (2) 
that institution determined the student to be an eligible noncitizen 
using secondary confirmation of those same documents in a previous 
award year. This waiver of secondary confirmation requirements would 
not apply if the institution has conflicting information or reason to 
doubt the student's claim to be an eligible noncitizen.

Subpart K--Cash Management

Section 668.164    Maintaining Funds

    The Secretary proposes to amend Sec. 668.164(a)(2) to limit the 
requirement that all institutions file a UCC-1 statement for any bank 
account in which title IV, HEA program funds are maintained. 
Specifically, the Secretary proposes to eliminate the UCC-1 filing 
requirement for institutions that (1) disclose clearly in the name of 
the account that Federal funds are maintained in that account, or (2) 
are backed by the full faith and credit of a State. The filing of a 
UCC-1 would only be required for bank accounts of institutions that do 
not satisfy either of these conditions.
    In establishing this requirement, the Secretary sought to use the 
UCC-1 filing process as the means by which an institution publicly 
discloses which of its accounts contain Federal funds. A public 
disclosure reduces the possibility that an unscrupulous institution 
could misrepresent Federal funds as its own funds.
    Upon further review, the Secretary believes that the disclosure 
purposes of the UCC-1 filing requirement are adequately accomplished 
where an institution includes the phrase ``Federal funds'' in the name 
of its accounts. Moreover, the Secretary believes that the UCC-1 filing 
requirement is not appropriate for public institutions because these 
institutions generally do not seek to obtain credit in the same manner 
as private institutions.

Section 668.165  Disbursing Funds

    The Secretary is proposing to modify section 668.165(b)(1) to 
provide an institution as much flexibility as possible with respect to 
how it notifies a student or parent borrower that William D. Ford 
Federal Direct Loan or FFEL program funds have been credited to a 
student's account. Under the current regulations, the institution must 
provide such notification in writing. Under the proposed rules, the 
institution would be able to provide this notification electronically 
or through the use of telecommunication devices. If an institution 
provides the notification through these devices, the institution must 
have a means of documenting that the student or parent received this 
information. For example, if the institution provides this information 
through electronic mail, the institution must ensure that it receives a 
``return receipt'' message from the addressee.
    The Secretary proposes to amend Sec. 668.165(b) (1) and (3) to 
provide that under certain circumstances, and with a student's 
permission, an institution may credit the student's account with title 
IV, HEA program funds to pay for minor institutional charges from a 
prior year. Currently, Sec. 668.165(b)(1) prohibits this practice. This 
prohibition reflects long-standing Department policy and is based on 
the tenet that title IV, HEA program funds are intended to be used to 
pay for educational expenses a student incurs in the period for which 
those funds are provided. The Cash Management regulations published on 
December 1, 1994 merely codified this policy.
    After the publication of these regulations, institutions have 
brought to the Secretary's attention circumstances under which a 
limited exception to this rule may be appropriate. These circumstances 
occur where a student incurs a minor institutional charge late in a 
semester after the institution has released to the student all of his 
or her title IV, HEA program funds. This charge is often not paid by 
the student by the end of the semester and is consequently carried over 
to the next semester. Where that next semester falls within the award 
year, the charges may be paid using the student's title IV, HEA program 
funds. The institutions note, however, that a problem arises where the 
next semester falls in a subsequent award year because many 
institutions have a policy that prevents a student from continuing at 
the institution until all prior year charges are paid. In this case, 
the student's current title IV, HEA program funds may not be used to 
pay the prior year charges even if the amount of these funds exceeds 
all current allowable costs and the student's remaining funds are 
sufficient to pay the prior year charges. While the institutions 
acknowledge that a student's failure to pay institutional charges when 
those charges are due is a problem that may arise regardless of whether 
a student receives title IV, HEA program funds, they maintain that the 
current regulatory prohibition on the payment of prior year charges 
imposes an unnecessary administrative burden and otherwise interferes 
with an institution's ability to resolve this problem with the student.
    After further review, the Department announced on July 11, 1995 
that in the case described above where a balance of title IV, HEA 
program funds remains after the student's current allowable costs are 
paid, an institution may use the student's current title IV, HEA 
program funds to pay for minor prior year charges provided that the 
institution obtains appropriate authorization from a student to do so. 
These proposed regulations merely restate this announced policy.
    The Secretary believes that, as a practical matter, the payment of 
minor prior year charges does not violate the intended use of title IV, 
HEA program funds because the primary purpose of these funds is to 
assist a student in beginning and continuing to pursue his or her 
postsecondary education. However, the Secretary is concerned 

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that the payment of prior year charges may impair a student from 
continuing his or her education at an institution if the amount of 
those charges reduces adversely the amount of title IV, HEA program 
funds that the student would otherwise rely on in meeting his or her 
living expenses and other educational costs. The Secretary believes 
strongly that this would not only violate the intended use of title IV, 
HEA program funds but that it would be a disservice to the student and 
waste of Federal funds. Therefore, although the Secretary does not 
specify the dollar amount of prior year charges that may be paid, the 
Secretary would expect institutions to use the latitude provided under 
this proposal in a reasonable manner.

Campus-Based Programs

Sections 674.2, 675.2 and 676.2  Definitions

    Section 674.2(b) and Sec. 675.2(b) of the Federal Perkins Loan and 
FWS program regulations, respectively, define the terms ``full-time or 
professional student'' and ``full-time undergraduate student'' and 
Sec. 676.2(b) of the FSEOG program regulations defines the term ``full-
time undergraduate student.'' However, Sec. 668.2 of the Student 
Assistance General Provisions regulations contains a definition of the 
term ``full-time student'' that duplicates those definitions. 
Therefore, the Secretary is proposing to eliminate these duplicative 
definitions in Sec. 674.2(b), Sec. 675.2(b) and Sec. 676.2(b) and 
instead incorporate the definition of the term ``full-time student'' 
set forth in Sec. 668.2 for all three of the campus-based programs.

Sections 674.17, 675.17, and 676.17  Federal Interest in Allocated 
Funds

    Section 674.17(a), Sec. 675.17 and Sec. 676.17 of the Federal 
Perkins Loan, FWS, and FSEOG program regulations provide that program 
funds are held in trust for the Secretary and intended student 
beneficiaries and cannot be used or hypothecated for any other purpose. 
These very provisions are included in Sec. 668.161(b) of the Student 
Assistance General Provisions regulations so are not needed in these 
program regulations.
    In the past, the Secretary kept these provisions in program 
regulations even though they were in the Student Assistance General 
Provisions regulations as a reminder of their importance. However, the 
Secretary now believes that the continued presence of redundant 
regulatory provisions in each Title IV, HEA program regulation is no 
longer needed.

Sections 674.19, 675.19, and 676.19  Fiscal Procedures and Records

    The Secretary proposes to amend Secs. 674.19(e)(4)(v), 
675.19(c)(3), and 676.19(c)(3) of the Federal Perkins Loan, FWS, and 
FSEOG program regulations, respectively, to allow institutions the 
additional flexibility of using optical disk technology in complying 
with recordkeeping requirements. The Secretary believes that the use of 
new technologies such as optical disk is an important tool in reducing 
paper retention at an institution, particularly if an institution keeps 
its records in computer format. The Secretary further believes that 
broadening methods of record retention through the use of optical disk 
will enhance administrative efficiency and increase flexibility by 
providing institutions with a new recordkeeping option that saves time 
and space.

Federal Perkins Loan Program

Section 674.2  Definitions

    The current definition of ``making of a loan'' under Sec. 674.2 of 
the Federal Perkins Loan program regulations includes the burdensome 
requirement of collecting a student's signature each time loan funds 
are advanced. In order to make this definition consistent with the 
changes in signature requirements being proposed in Sec. 674.16, the 
Secretary is proposing to amend this definition by removing the 
reference to a borrower signing for each advance of funds. The 
Secretary proposes to redefine ``making of a loan'' simply as when the 
borrower signs the promissory note and the loan funds are disbursed.

Section 674.16  Making and Disbursing Loans

    In keeping with the Secretary's desire to alleviate administrative 
burden on institutions and to protect students, the Secretary is 
proposing to eliminate the requirement that a student must sign for 
each loan advance under the Federal Perkins Loan Program. The financial 
aid community has commented repeatedly that this is a time-consuming, 
costly, and impractical requirement that often results in long lines of 
students waiting to sign loan documents.
    Under the Secretary's proposal, an institution simply must obtain 
the borrower's signature on a promissory note for each award year 
before it disburses any loan funds under that promissory note for that 
award year. Thus, when he or she signs a promissory note for an award 
year, the student will know the loan amount for that award year. 
Moreover, the student will know when and how those funds will be 
disbursed because the institution is required to provide that 
information to the student under Sec. 668.165 of the Student Assistance 
General Provisions regulations.

Section 674.31  Promissory Note

    The Secretary proposes to amend Sec. 674.31(a) of the Federal 
Perkins Loan Program regulations to indicate that the Secretary will 
provide sample promissory notes to institutions. Institutions may add 
additional items to the sample notes as long as the new items do not 
alter the substance of these sample notes.

Section 674.33  Repayment

    The Secretary is proposing to amend Sec. 674.33(a)(2) of the 
Federal Perkins Loan Program regulations by allowing institutions to 
combine the last scheduled Federal Perkins Loan payment with the next-
to-last payment if the last payment is $25 or less. As currently 
written, in order to combine payments, the last payment must be $15 or 
less. The Secretary believes that allowing institutions to combine a 
last payment of a higher dollar amount will reduce collection costs by 
eliminating the generation of bills for small dollar amounts and also 
significantly improve an institution's success in collecting small loan 
balances.

Section 674.47  Costs Chargeable to the Fund

    The Secretary recently issued a ``Dear Colleague'' Letter regarding 
the limitations on write-offs in the Federal Perkins Loan Program (CB-
95-17). However, the Secretary believes that confusion still exists as 
to what the term ``write-off'' means as it relates to Sec. 674.47(g). 
In an attempt to clarify the Secretary's position and to alleviate 
burden on institutions, the Secretary is proposing to revise 
Sec. 674.47(g) by replacing the term ``write-off'' with the term 
``cessation of collection activity.''
    As the proposed change indicates, an institution may cease 
collection activity on a defaulted account with a balance of less than 
$25. However, the institution must continue to include the loan as in 
default for purposes of calculating its cohort default rate.
    Cessation of collection activity by an institution does not relieve 
the borrower of his or her obligation to repay that loan, and interest 
continues to accrue on the amount on which collection activities cease. 
Moreover, the borrower is still considered in default on that loan and 
therefore remains ineligible for further title IV, HEA program 
assistance and retains an adverse credit rating. 

[[Page 49118]]

    It is the Secretary's long-standing policy to require institutions 
to collect every amount due on an account from the borrower. However, 
the Secretary recognizes that institutions and collection agencies 
experience cost-inefficiencies in their attempts to collect small-
balance, defaulted loan accounts.
    The Secretary recognizes that very small balances frequently occur, 
for example, when a few days of additional interest accrues on the 
final balance, and that billing borrowers for this small remaining 
balance is not cost-effective for institutions as servicing fees often 
exceed the remaining balance. Accordingly, the Secretary is proposing 
to further amend Sec. 674.47 by adding new paragraph (h) to allow 
institutions to cease collection activities and write off loan accounts 
with a balance of less than $1, including outstanding principal, 
accrued interest, collection costs, and late charges.
    The write-off of balances of less than $1 creates a paid-in-full 
status on the loan and, therefore, relieves the borrower of all 
obligations, does not have an adverse effect on the borrower's credit 
rating, does not affect the borrower's eligibility for further title 
IV, HEA program assistance, nor will the loan be included in the 
calculation of an institution's cohort default rate.

Federal Work-Study Programs

Appendix B--Model Off-Campus Agreement

    When an institution enters into a written agreement--a 
contract--with any off-campus agency or company that employs FWS 
students, the institution must make sure the organization is a 
reliable organization with professional direction and staff, and 
that the work to be performed is adequately supervised and 
consistent with the purpose of the FWS Program. Appendix B of the 
current FWS regulations provides a model off-campus agreement. 
Institutions can use this model as a guide in developing their 
agreements.
    In an effort to streamline regulations, the Secretary is 
proposing to eliminate this sample agreement as an appendix to the 
FWS regulations. The Secretary will include a model off-campus 
agreement in the Federal Student Financial Aid Handbook.

Federal Family Education Loan Program, William D. Ford Federal Direct 
Loan Programs

Sections 682.201 and 685.200  Eligible Borrowers

    The Secretary proposes to expand the pool of borrowers under the 
Federal PLUS and Federal Direct PLUS programs to include the spouse of 
a student's parent if that parent remarried. The Secretary is proposing 
this expansion to provide greater flexibility to the student's family 
to enable them to pay for the student's educational costs. The proposed 
extension includes the spouse of the parent if that spouse's income and 
assets would be taken into account in determining the student's 
expected family contribution.

Section 682.600  Agreement Between an Eligible School and the Secretary 
for Participation in the FFEL Programs and Sec. 682.602 Schedule 
Requirements for Courses of Study by Correspondence

    The Secretary believes that the provisions of Sec. 682.600(a) 
through Sec. 682.600(c) duplicate provisions in 34 CFR part 600 or 668 
and are therefore unnecessary. Accordingly, the Secretary has proposed 
to eliminate those provisions in 34 CFR part 682. The provisions 
included in Sec. 682.600(d) that deal with foreign schools are needed 
and the Secretary has proposed to include those provisions in a new 
section, Sec. 682.611.
    Students enrolled in correspondence programs are not eligible to 
receive FFEL Program loans unless they are enrolled in a program that 
leads to an associate, bachelor, or graduate degree. Therefore, the 
Secretary believes that the provisions contained in Sec. 682.602 are no 
longer needed and has proposed to eliminate those provisions.

Federal Pell Grant Program

Subpart A--Scope, Purpose and General Definitions

Section 690.7  Institutional Participation

    The Secretary proposes to revise Sec. 690.7 by deleting current 
paragraph (a)(1) because the provisions contained in that paragraph 
duplicate provisions in 34 CFR part 600 or 668.

Subpart G--Administration of Grants Payments

Section 690.71  Scope, Sec. 690.72 Institutional Participation, 
Sec. 690.73 Termination of Institutional Participation Agreement, and 
Sec. 690.74 Provision of Funds to Institutions

    The Secretary proposes to eliminate the last sentences in 
Secs. 690.71, 690.72, 690.73, and 690.74 because they duplicate 
provisions contained in 34 CFR part 668.

Section 690.83  Submission of Reports

    The Secretary proposes to revise Sec. 690.83 by consolidating in 
one paragraph the procedures that allow institutions to receive payment 
or credit for Federal Pell Grants they previously disbursed if that 
situation is disclosed by an initial audit or program review.

Executive Order 12866

1. Assessment of Costs and Benefits

    These proposed 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 these programs effectively 
and efficiently. Burdens specifically associated with information 
collection requirements, if any, are identified and explained elsewhere 
in this preamble under the heading Paperwork Reduction Act of 1995.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these proposed regulations, the Secretary has 
determined that the benefits of the proposed 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.
    To assist the Department in complying with the specific 
requirements of Executive Order 12866, the Secretary invites comment on 
whether there may be further opportunities to reduce any potential 
costs or increase potential benefits resulting from these regulations 
without impeding the effective and efficient administration of the 
program.

2. Clarity of the Regulations

    Executive Order 12866 requires each agency to write regulations 
that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following: (1) Are the requirements in the proposed regulations 
clearly stated? (2) Do the regulations contain technical terms or other 
wording that interferes with their clarity? (3) Does the format of the 
regulations (grouping and order of sections, use of headings, 
paragraphing, etc.) aid or reduce their clarity? Would the regulations 
be easier to understand if they were divided into more (but shorter) 
sections? (A ``section'' is preceded by the symbol ``Sec. '' and a 
numbered heading, for example, Sec. 674.4 Allocation and reallocation.) 
(4) Is the description of the regulations in the ``Supplementary 
Information'' section of this preamble helpful in understanding the 
regulations? How could this 

[[Page 49119]]
description be more helpful in making the regulations easier to 
understand? (5) What else could the Department do to make the 
regulations easier to understand?
    A copy of any comments that concern how the Department could make 
these proposed regulations easier to understand should be sent to 
Stanley M. Cohen, Regulations Quality Officer, U.S. Department of 
Education, 400 Maryland Avenue, S.W., (Room 5125, FOB-6), Washington, 
D.C. 20202-2241.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities. The small entities affected by these proposed regulations are 
small institutions of postsecondary education. The changes in these 
regulations will not substantially increase institutions--workload or 
costs associated with administering the title IV, HEA programs and, 
therefore, will not have a significant economic impact on a substantial 
number of small entities.

Paperwork Reduction Act of 1995

    Sections 668.19, 668.32, 668.33, 668.34, 668.36, 668.133, 668.164, 
668.165, 674.16, 674.19, 674.31, 674.47, 675.19, 676.19, and 690.83 
contain information collection requirements. As required by the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department of 
Education has submitted a copy of these sections to the Office of 
Management and Budget (OMB) for its review.
    Collection of information: Student Assistance General Provisions--
    Section 668.19--Financial aid transcript--Institutions are required 
to obtain financial aid transcript information for purposes of 
determining student eligibility under these regulations. The 
information to be collected includes: assurances to meet certain 
statutory requirements and specific information regarding a student's 
financial aid history. Institutions need and use the information to 
release title IV, HEA program funds.
    All information is to be collected on a case by case basis for 
those students that previously attended an institution and received 
title IV, HEA program funds. Annual recordkeeping and reporting burden 
contained in the collection of information proposed in these 
regulations are estimated to average .17 hours for 17,600 respondents, 
including the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. The total annual recordkeeping 
and reporting burden equals 2992 hours.
    Section 668.32--Statement of Educational Purpose--The Department 
currently has this section approved under OMB control number for the 
FAFSA (1840-0110). There are no new information collection requirements 
as a result of these regulations.
    Section 668.33--Statement of Registration Status--The Department 
currently has this section approved under OMB control number for the 
FAFSA (1840-0110). There are no new information collection requirements 
as a result of these regulations.
    Section 668.34--Model Statement of Educational Purpose and 
Registration Status--The Department currently has this section approved 
under OMB control number for the FAFSA (1840-0110). There are no new 
information collection requirements as a result of these regulations.
    Section 668.36--Selective Service notification, administrative 
review, and liability--The Department currently has this section 
approved under OMB control number for the FAFSA (1840-0110). There are 
no new information collection requirements as a result of redesignating 
and renaming this section from Sec. 668.35.
    Section 668.133--Conditions under which an institution shall 
require documentation and request secondary confirmation--Institutions 
must require documentation and secondary confirmation with INS for 
purposes of determining student eligibility for noncitizen applicants 
under these regulations. The information to be collected includes: 
specific information regarding a student's residency status and 
documentary evidence. Institutions need and use the information to 
determine a student's eligibility for title IV, HEA program funds.
    All information is to be collected on a case by case basis. Annual 
recordkeeping and reporting burden contained in the collection of 
information proposed in these regulations are estimated to average .25 
hours for 8,000 respondents, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. The total annual recordkeeping and reporting 
burden equals 2000 hours.
    Section 668.164--Maintaining funds--Institutions are required to 
deposit title IV, HEA program funds into a bank account, (1) with the 
words ``Federal funds'' in the title of the account, or (2) be backed 
by the full faith and credit of a state, or (3) file a UCC-1 form with 
the appropriate county and/or State office(s) and maintain a copy of 
that filing in its records to disclose that Federal funds are 
maintained in that bank account under these regulations.
    All information is to be collected on a one time basis if changing 
the title of a bank account, or annually if filing a UCC-1 form. Annual 
recordkeeping and reporting burden contained in the collection of 
information proposed in these regulations are estimated to average 1.23 
hours for 3,634 respondents, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. The total annual recordkeeping and reporting 
burden equals 4470 hours.
    Section 668.165--Disbursing funds--There are no new information 
collection requirements as a result of these regulations.
    Collection of information: Federal Perkins Loan, FWS, and FSEOG 
programs--
    Section 674.16--Making and disbursing loans and section 674.31--
Promissory note--There are no new information collection requirements 
as a result of these regulations.
    Section 674.19, 675.19, and 676.19--Fiscal procedures and records--
The Department currently has these sections approved under OMB control 
number for the FISAP (1840-0073). There are no new information 
collection requirements as a result of these regulations.
    Section 674.47--Costs chargeable to the fund--There are no new 
information collection requirements as a result of these regulations.
    Collection of information: Federal Pell Grant Program--
    Section 690.83--Submission of reports--Institutions must follow 
certain procedures for receiving funds for payment submissions after 
established deadline dates.
    All information is to be collected annually. There are no new 
collection requirements as a result of these regulations. The current 
annual recordkeeping and reporting burden contained in section 690.83 
is estimated to average 41 hours for 400 respondents, including the 
time for reviewing instructions, researching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information. 

[[Page 49120]]
The total annual recordkeeping and reporting burdne equals 16,400 
hours.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, OMB, Room 10235, New Executive 
Office Building, Washington, D.C. 20503; Attention: Desk Officer for 
U.S. Department of Education.
    The Department considers comments by the public on these proposed 
collections of information in--
     Evaluating whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
Department, including whether the information will have a practical 
use;
     Evaluating the accuracy of the Department's estimate of 
the burden of the proposed collections of information, including the 
validity of the methodology and assumptions used;
     Enhancing the quality, usefullness, and clarity of the 
information to be collected; and
     Minimizing the burden of collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology; e.g., permitting 
electronic submission of responses.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to the Department on the 
proposed regulations.

Invitation To Comment

    Interested persons are invited to submit comments and 
recommendations regarding these proposed regulations.
    All comments submitted in response to these proposed regulations 
will be available for public inspection, during and after the comment 
period, in Room 3053, ROB-3, 7th and D Streets, S.W., Washington, D.C., 
between the hours of 8:30 a.m. and 4 p.m., Monday through Friday of 
each week except Federal holidays.

Assessment of Educational Impact

    The Secretary particularly requests 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.

List of Subjects

34 CFR Part 668

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

34 CFR Part 674

    Loan programs--education, Student aid, Reporting and recordkeeping 
requirements.

34 CFR Part 675

    Loan programs--education, Student aid, Reporting and recordkeeping 
requirements.

34 CFR Part 676

    Loan programs--education, Student aid, Reporting and recordkeeping 
requirements.

(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal 
Supplemental Educational Opportunity Grant Program; 84.032 
Consolidation Program; 84.032 Federal Stafford Loan Program; 84.032 
Federal PLUS Program; 84.032 Federal Supplemental Loans for Students 
Program; 84.033 Federal Work-Study Program; 84.038 Federal Perkins 
Loan Program; 84.063 Federal Pell Grant Program; 84.069 Federal 
State Student Incentive Grant Program; 84.268 William D. Ford 
Federal Direct Loan Programs; and 84.272 National Early Intervention 
Scholarship and Partnership Program.)
    Dated: September 13, 1995.
Richard W. Riley,
Secretary of Education.

    The Secretary proposes to amend parts 668, 674, 675, 676, 682, 685, 
and 690 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.


Sec. 668.2  [Amended]

     2. Section 668.2, paragraph (b) is amended by revising the first 
paragraph of the definition of ``Payment period'' to read as follows: 
``With respect to the Federal Pell Grant Program, a payment period as 
defined in 34 CFR 690.3;''


Sec. 668.7  [Amended]

     3. Section 668.7 is removed and reserved.
     4. Section 668.19 is revised to read as follows:


Sec. 668.19  Financial aid transcript.

     (a)(1) An institution shall determine whether a student who is 
applying for assistance under any title IV, HEA program has previously 
attended another eligible institution.
     (2) Before a student who previously attended another eligible 
institution may receive any title IV, HEA program funds--
    (i) The institution must request each institution the student 
previously attended to provide a financial aid transcript to the 
institution the student is, or will be, attending; or
     (ii) The institution may use information obtained from the 
National Student Loan Data System, that would otherwise be provided on 
a financial aid transcript, once the Secretary notifies institutions 
through a notice in the Federal Register that the National Student Loan 
Data System is available for this purpose.
     (3) Except as provided in paragraph (a)(5) of this section, if an 
institution requests a financial aid transcript from each of the 
institutions a student previously attended, until the institution 
receives a financial aid transcript from each of those institutions, 
the requesting institution--
    (i) May withhold payment of Federal Pell Grant and campus-based 
funds to the student;
     (ii) May disburse Federal Pell Grant or campus-based funds to the 
student for one payment period only;
     (iii) May decline to certify the student's Federal Stafford Loan 
application or the parent's Federal PLUS application under the FFEL 
Program;
     (iv) May decline to originate the student's Federal Direct 
Stafford Loan application or the parent's Federal Direct PLUS 
application under the William D. Ford Federal Direct Loan Programs;
     (v) May not release Federal Stafford Loan proceeds to a student or 
Federal PLUS proceeds to a parent or student under the FFEL Program; 
and
    (vi) May not release Federal Direct Stafford Loan proceeds to a 
student or Federal Direct PLUS proceeds to a parent or student under 
the William D. Ford Federal Direct Loan Programs.
     (4)(i) An institution may not hold Federal Stafford, or Federal 
PLUS loan proceeds under paragraph (a)(3) of this section for more than 
45 days. If an institution does not receive all required financial aid 
transcripts for a student within 45 days of the receipt of those 
proceeds, the institution shall return the loan proceeds to the 
appropriate lender.
     (ii) An institution that certifies a Federal Stafford or Federal 
PLUS loan 

[[Page 49121]]
application before receiving all required financial aid transcripts 
shall return to the lender the appropriate amount of any Federal 
Stafford or Federal PLUS loan proceeds for the student if it receives a 
financial aid transcript indicating that the student is not eligible 
for all, or a part, of the loan proceeds.
     (5) An institution may disburse title IV, HEA program funds to a 
student without receiving a financial aid transcript from an eligible 
institution the student previously attended if the institution the 
student previously attended--
    (i) Has closed, and information concerning the student's receipt of 
title IV, HEA program assistance for attendance at that institution is 
not available;
     (ii) Is not located in a State; or
     (iii) Provides the disbursing institution with the written 
certification described in paragraph (b)(2)(ii) of this section.
     (b) Upon request, each institution located in a State shall 
promptly provide to the institution that requested a financial aid 
transcript--
    (1) All information in its possession concerning whether the 
student in question attended institutions other than itself and the 
requesting institution; and
     (2)(i) A financial aid transcript for that student, if the student 
received or benefited from any title IV, HEA program assistance while 
attending the institution; or
     (ii) A written certification that--
    (A) The student did not receive or benefit from any title IV, HEA 
program assistance while attending the institution; or
     (B) The transcript would cover only years for which the 
institution no longer has records and is no longer required to keep 
records under the applicable title IV, HEA program recordkeeping 
requirements.
     (c) An institution must disclose on a financial aid transcript for 
a student--
    (1) The student's name and social security number;
     (2) To the extent that the institution is aware, whether the 
student is in default on any title IV, HEA loan;
     (3) Whether the student owes an overpayment on any grant made 
under the Federal Pell Grant or FSEOG programs and, to the extent that 
the institution is aware, the SSIG Program, for attendance at the 
institution;
     (4) For the award year for which a financial aid transcript is 
requested--
    (i) The student's scheduled Federal Pell Grant award;
     (ii) The amount of Federal Pell Grant funds disbursed to the 
student;
     (iii) The amount of loans made under the National Defense Student 
Loan, Direct Loan, and Federal Perkins Loan programs; and
     (iv) The amount of loans made under the FFEL and William D. Ford 
Federal Direct Loan programs; and
     (5) The aggregate amount of loans under the title IV, HEA loan 
programs for attendance at the institution.
     (d)(1) A financial aid transcript must be signed by an official 
authorized by the institution to disclose information in connection 
with title IV, HEA programs.
     (2) An institution must base the information it includes on 
financial aid transcripts on records it maintains under the title IV, 
HEA programs' recordkeeping requirements.
     5. The heading for Sec. 668.21 is revised to read as follows:


 668.21  Treatment of Federal Perkins Loan, FSEOG, and Federal Pell 
Grant program funds if the recipient withdraws, drops out, or is 
expelled before his or her first day of class.


Sec. 668.22  [Amended]

     6. Section 668.22 is amended by removing paragraph (h)(1)(i) and 
redesignating paragraphs (h)(1)(ii) through (xiii) as paragraphs 
(h)(1)(i) through (xii), respectively.
    7.-8. Subpart C is revised to read as follows:

Subpart C--Student Eligibility

Sec.
668.31  Scope.
668.32  Student enrollment.
668.33  Student identification.
668.34  Student debts under the HEA and to the U.S.
668.35  Program-specific requirements.
668.36  Selective Service notification, administrative review, and 
liability.

Subpart C--Student Eligibility


Sec. 668.31  Scope.

     This subpart establishes rules by which a student establishes 
eligibility for assistance under the title IV, HEA programs. In order 
to qualify as an eligible student, a student must meet all applicable 
requirements in this subpart.

(Authority: 20 U.S.C. 1091)


Sec. 668.32  Student enrollment.

     A student is eligible to receive assistance under the title IV, 
HEA programs if the student--
     (a)(1) Is a regular student enrolled or accepted for enrollment in 
an eligible program at an eligible institution;
    (2) For purposes of the FFEL or William D. Ford Federal Direct Loan 
programs, is enrolled for no longer than one twelve-month period as at 
least a half-time student in a course of study necessary for enrollment 
in an eligible program; or
     (3) For purposes of the Federal Perkins Loan, FWS, FFEL, or 
William D. Ford Federal Direct Loan programs, is enrolled or accepted 
for enrollment as at least a half-time student at an eligible 
institution in a program necessary for a professional credential or 
certification from a State that is required for employment as a teacher 
in an elementary school or secondary school in that State;
     (b) Is not enrolled in either an elementary or secondary school;
     (c)(1) Has a high school diploma or its recognized equivalent;
     (2) Has obtained within 12 months before the date the student 
initially receives title IV, HEA program funds, a passing score 
specified by the Secretary on an approved, independently administered 
test, in accordance with subpart J of this part; or
     (3) Is enrolled in an eligible institution that participates in a 
State process approved by the Secretary under subpart J of this part;
     (d) Maintains satisfactory progress in his or her course of study 
according to the institution's published standards of satisfactory 
progress that satisfy the provisions of Sec. 668.16(e). To make a 
determination that a student is maintaining satisfactory progress, an 
institution shall--
    (1) At a minimum, review the student's academic progress at the end 
of each academic year;
     (2) If the student is enrolled in a program of study of more than 
two academic years, at the end of the student's second year of 
attendance, determine that the student--
    (i) Has at least a cumulative grade point average of ``C'' or its 
equivalent, or has academic standing consistent with the institution's 
graduation requirements; or
     (ii) Failed to have at least a cumulative grade point average of 
``C'' or its equivalent, or academic standing consistent with its 
graduation requirements because of--
    (A) The death of a relative of the student;
     (B) An injury or illness of the student; or
     (C) Other special circumstances; or
    (3) Is not making satisfactory progress at the end of the second 
academic year, but at the end of a subsequent grading period comes into 
compliance with the institution's requirements for graduation. The 
institution may consider the student as making satisfactory progress 
beginning with the next grading period; 

[[Page 49122]]

     (e) Is enrolled in an educational program leading to an associate, 
bachelor's, or graduate degree, if enrolled in telecommunications or 
correspondence courses; and
     (f) If engaged in a study-abroad program, (which need not be 
required as part of the student's degree program)--
     (1) Maintains enrollment in an eligible institution during his or 
her study-abroad program; and
     (2) Enrolls in a study-abroad program that has been approved for 
academic credit by the eligible institution at which the student is 
enrolled.

(Authority: 20 U.S.C. 1091)


Sec. 668.33  Student identification.

     A student is eligible to receive assistance under the title IV, 
HEA programs if the student--
     (a) Citizenship status. (1) Has confirmed status as a U.S. citizen 
or national as a result of a data match with the Social Security 
Administration;
    (2) In the absence of confirmation as provided in paragraph (a)(1) 
of this section, and within a deadline to be set by the institution of 
no less than 30 days from the date the institution is notified of the 
results of the data match, has provided documented evidence that he or 
she is a U.S. citizen or national;
     (3) Provides evidence from the U.S. Immigration and Naturalization 
Service that he or she--
    (i) Is a permanent resident of the United States; or
     (ii) Is in the United States for other than a temporary purpose 
with the intention of becoming a citizen or permanent resident; or
     (4) For purposes of the FWS, FSEOG, and Federal Pell Grant 
programs--
    (i) Is a citizen of the Federated States of Micronesia, the 
Republic of the Marshall Islands, or the Republic of Palau, and attends 
an eligible institution of higher education in a State or a public or 
nonprofit private institution of higher education in the Federated 
States of Micronesia, the Republic of the Marshall Islands, or the 
Republic of Palau; or
     (ii) Meets the requirements of paragraph (a)(1), (a)(2), or (a)(3) 
of this section and attends an eligible public or nonprofit private 
institution of higher education in the Federated States of Micronesia, 
the Republic of the Marshall Islands, or the Republic of Palau;
     (b) Selective Service. (1) Has confirmed registration with 
Selective Service as a result of a data match with the Selective 
Service System; or
    (2) In the absence of confirmation as provided in paragraph (b)(1) 
of this section and within a deadline to be set by the institution of 
no less than 30 days from the date the institution is notified of the 
results of the data match, has provided evidence of compliance with, or 
exemption from, Selective Service registration requirements. An 
institution may establish that a student is exempt from Selective 
Service registration requirements if the institution determines, based 
on clear and unambiguous evidence, that--
    (i) The student is not, or was not required to be, registered with 
Selective Service; or
    (ii) The student--
    (A) Was required to be registered with the Selective Service prior 
to age 26;
    (B) Is now at least 26 years old;
    (C) Failed to register with the Selective Service prior to age 26; 
and
    (D)(1) Demonstrates to the institution that he did not knowingly 
and willfully fail to register with the Selective Service. The 
Secretary considers that a student satisfies this requirement by 
obtaining and presenting to the institution an advisory opinion from 
the Selective Service System that does not dispute the student's claim 
that he did not knowingly and willfully fail to register, and the 
institution does not have uncontroverted evidence that the student 
knowingly and willfully failed to register; or
    (2) Served as a member of one of the U.S. Armed Forces on active 
duty and received a DD Form 214, ``Certificate of Release or Discharge 
from Active Duty'' showing military service with other than the Reserve 
Forces and National Guard;
    (iii) The student is enrolled in an officer procurement program the 
curriculum of which has been approved by the Secretary of Defense at 
the following institutions:
    (A) The Citadel, Charleston, South Carolina;
    (B) North Georgia College, Dahlonega, Georgia;
    (C) Norwich University, Northfield, Vermont; or
    (D) Virginia Military Institute, Lexington, Virginia;
    (iv) The student is a commissioned officer of the Public Health 
Service or a member of the Reserve of the Public Health Service who is 
on active duty as provided in section 6(a)(2) of the Military Selective 
Service Act; or
    (v) The student was unable to present himself for registration for 
reasons beyond his control, such as being hospitalized, 
institutionalized, or incarcerated;
    (c) Incarcerated students. For purposes of the Federal Perkins 
Loan, FFEL, and William D. Ford Federal Direct Loan programs, is not an 
incarcerated student at the time funds are delivered or disbursed;
    (d) Social security number. Except for the residents of the 
Republic of the Marshall Islands, the Federated States of Micronesia, 
or the Republic of Palau, has a correct social security number that has 
been verified by an eligible institution, which shall enforce the 
following conditions:
    (1) An institution may not deny, reduce, delay or terminate a 
student's eligibility for assistance under the title IV, HEA programs 
because social security number verification is pending.
    (2) If the institution receives an output document indicating that 
the Secretary has determined that the student's social security number 
is correct, the institution may not require the student to produce 
other evidence to confirm that the student's social security number is 
correct, unless the institution--
    (i) Has documentation that conflicts with the social security 
number status reported on the output document; or
    (ii) Has reason to believe the output document is incorrect.
    (3) If the institution receives an output document indicating that 
the Secretary has determined that the social security number provided 
by the student is incorrect, or that the Secretary was unable to 
confirm that the social security number provided by the student is 
correct, the institution--
    (i) Shall provide the student an opportunity, within a deadline of 
at least 30 days from the date the institution is notified of the 
results of the data match, to provide clear and convincing evidence to 
verify that the student has a correct social security number;
    (ii) May disburse any combination of title IV, HEA program funds, 
employ the student under the FWS Program, certify a Federal Stafford, 
Federal PLUS, or originate a William D. Ford Federal Direct Loan 
application for the student upon making, based on the evidence provided 
for in paragraph (d)(3)(i) of this section, a determination that the 
social security number provided by the otherwise eligible student to 
the institution is correct; and
    (iii) Shall ensure that the student reports his or her correct 
social security number to the Secretary if the correct social security 
number differs from the social security number previously reported by 
the student to the Secretary.
    (4) If a student fails to submit the documentation by the deadline 
established in accordance with paragraph (d)(3)(i) of this section, the 
institution need not disburse to the student, or certify the student as 
eligible 

[[Page 49123]]
for, any title IV, HEA program funds for that period of enrollment or 
award year; employ the student under the FWS Program; certify a Federal 
Stafford, or Federal PLUS; or originate a William D. Ford Federal 
Direct Loan for the student for that period of enrollment.
    (5) If the Secretary determines that the social security number 
provided to an institution by a student is incorrect, and the 
institution has not made a determination under paragraph (d)(3) of this 
section, and a loan has been guaranteed for the student under FFEL 
Program, the institution shall notify and instruct the lender and 
guaranty agency making and guaranteeing the loan, respectively, to 
cease further disbursements of the loan, until the Secretary or the 
institution determines that the social security number provided by the 
student is correct, but the guaranty may not be voided or otherwise 
nullified with respect to disbursements made before the date that the 
lender and the guaranty agency receive the notice.
    (6) Nothing in this section permits the Secretary to take any 
compliance, disallowance, penalty or other regulatory action against--
    (i) Any institution of higher education with respect to any error 
in a social security number, unless the error was the result of fraud 
on the part of the institution; or
    (ii) Any student with respect to any error in a social security 
number, unless the error was a result of fraud on the part of the 
student; and
    (e) Statement of Educational Purpose. Has filed a Statement of 
Educational Purpose with the institution, or under the FFEL Program, 
with the lender, in accordance with instructions of the Secretary.

(Authority: 20 U.S.C. 1091)


Sec. 668.34  Student debts under the HEA and to the U.S.

    (a) Except as provided under paragraphs (b) through (g) of this 
section, a student is ineligible to receive title IV, HEA program funds 
if the student--
    (1) Is in default on a loan made under a title IV, HEA loan 
program;
    (2) Has inadvertently obtained loan funds under a title IV, HEA 
loan program in an amount that exceeded the annual or aggregate loan 
limits under that program;
    (3) Received a grant or loan overpayment under a title IV, HEA 
grant program; or
    (4) Has property subject to a judgment lien for a debt owed to the 
United States.
    (b) A student who is in default on a loan made under a title IV, 
HEA loan program may nevertheless be eligible to receive title IV, HEA 
program funds if the student--
    (1) Repays the loan in full; or
    (2)(i) Makes at least six consecutive monthly payments on the 
defaulted loan; and
    (ii) Makes arrangements, satisfactory to the holder of the loan, to 
repay the loan balance.
    (c) A student who is not in default on a loan made under a title 
IV, HEA loan program but has inadvertently obtained loan funds under a 
title IV, HEA loan program in an amount that exceeded the annual or 
aggregate loan limits under that program may nevertheless be eligible 
to receive title IV, HEA program funds if the student--
    (1) Repays in full the excess loan amount; or
    (2) Makes arrangements, satisfactory to the holder of the loan, to 
repay that excess loan amount.
    (d)(1) A student who receives a grant or loan overpayment under a 
title IV, HEA program may nevertheless be eligible to receive title IV, 
HEA program funds if the student--
    (i) Pays the overpayment in full; or
    (ii) Makes arrangements, satisfactory to the institution, to pay 
the overpayment.
    (2) If a student's grant or loan payments exceed the amount he or 
she is eligible to receive, he or she has received a grant or loan 
overpayment.
    (e) A student who has property subject to a judgment lien for a 
debt owed to the United States may nevertheless be eligible to receive 
title IV, HEA programs funds if the student--
    (1) Pays the debt in full; or
    (2) Makes arrangements, satisfactory to the United States, to pay 
the debt.
    (f)(1) The Secretary considers that a student does not receive a 
Federal Pell Grant overpayment during an award year if the institution 
can eliminate that overpayment by adjusting subsequent Federal Pell 
Grant payments in the same award year.
    (2) The Secretary considers that a student does not receive a 
Federal Perkins Loan, FSEOG or SSIG overpayment during an award year if 
the institution can eliminate that overpayment by adjusting subsequent 
title IV, HEA program (other than Federal Pell Grant) disbursements in 
the same award year.
    (g) A student who otherwise is in default on a loan made under a 
title IV, HEA loan program or who otherwise owes an overpayment on a 
title IV, HEA program grant or loan is not considered to be in default 
or owe an overpayment if the student--
    (1) Obtains a judicial determination that the debt has been 
discharged or is dischargeable in bankruptcy; or
    (2) Demonstrates to the holder of the debt that--
    (i) When the student filed the petition for bankruptcy relief, the 
loan, or demand for the payment of the grant overpayment, had been 
outstanding for the period required under 11 U.S.C. 523(a)(8)(A), 
exclusive of applicable suspensions of the repayment period for either 
debt of the kind defined in 34 CFR 682.402(m); and
    (ii) The debt is otherwise qualifies for discharge under applicable 
bankruptcy law.

(Authority: 20 U.S.C. 1091 and 11 U.S.C. 523 and 525)


Sec. 668.35  Program-specific requirements.

     A student is eligible to receive assistance under the campus-
based, FFEL, William D. Ford Federal Direct Loan, and Federal Pell 
Grant programs if the student has financial need, if applicable, and 
otherwise meets the student eligibility requirements of--
    (a) For purposes of the Federal Perkins Loan Program, 34 CFR 674.9;
     (b) For purposes of the FWS Program, 34 CFR 675.9;
     (c) For purposes of the FSEOG Program, 34 CFR 676.9;
     (d) For purposes of the FFEL Program, 34 CFR 682.201;
     (e) For purposes of the William D. Ford Federal Direct Loan 
Programs, 34 CFR 685.200;
     (f) For purposes of the Federal Pell Grant Program, 34 CFR 690.75; 
or
     (g) For purposes of the SSIG Program, 34 CFR 692.40.

(Authority: 20 U.S.C. 1091)


Sec. 668.36  Selective Service notification, administrative review, and 
liability.

     (a) General. Before denying aid to any student under any title IV, 
HEA program who is required by law to register with the Selective 
Service, but fails to do so, the institution shall inform that student 
in writing that he or she will be denied title IV, HEA program 
assistance.
    (b) Selective Service notification. (1) A student notified under 
paragraph (a) of this section who has not registered, although required 
to do so, may establish his eligibility for title IV, HEA program 
assistance for the award year in which he was notified under paragraph 
(a) of this section by registering with Selective Service before the 
end of that award year.
     (2) A student notified under paragraph (a) of this section who is 
not required to register with the Selective Service may establish his 
or her eligibility for title IV, HEA program 

[[Page 49124]]
assistance for the award year in which he was notified under paragraph 
(a) of this section by providing evidence of exemption within 30 days 
of the receipt of the notice or the end of the same award year, 
whichever is later.
    (c) Administrative review. (1) A student who is required to 
register with Selective Service, claims that he is registered with 
Selective Service, and has been denied title IV, HEA program assistance 
because he has not proven to the satisfaction of the institution that 
he has complied with that requirement, may seek a hearing from the 
Secretary by filing a request in writing with the Secretary. The 
student must submit with that request--
     (i) A statement that he is in compliance with registration 
requirements;
     (ii) A concise statement of the reasons why he has not been able 
to prove that he is in compliance with those requirements; and
     (iii) Copies of all material that he has already supplied to the 
institution to verify his compliance.
     (2) The Secretary provides an opportunity for a hearing to a 
student who--
    (i) Asserts that he is in compliance with registration 
requirements; and
    (ii) Files a written request for a hearing in accordance with 
paragraph (c)(1) of this section within the award year for which he was 
denied title IV, HEA program assistance or within 30 days following the 
end of the payment period, whichever is later.
     (3) An official designated by the Secretary shall conduct any 
hearing held under paragraph (c)(2) of this section. The sole purpose 
of this hearing is the determination of compliance with registration 
requirements. At this hearing, the student retains the burden of 
proving compliance, by credible evidence, with the requirements of the 
Military Selective Service Act. The designated official may not 
consider challenges based on constitutional or other grounds to the 
requirements that a student state and verify, if required, compliance 
with registration requirements, or to those registration requirements 
themselves.
     (4) Any determination of compliance made under this section is 
final unless reopened by the Secretary and revised on the basis of 
additional evidence.
    (5) Any determination of compliance made under this section is 
binding only for purposes of determining eligibility for title IV, HEA 
program assistance.
     (d) Liability.  An institution is liable for any title IV aid 
provided to a student who was required to register, but who was not 
registered, if--
     (1) The institution made its determination that the student was 
not required to register on the basis of ambiguous information 
regarding his status under registration law; or
     (2)(i) The institution had conflicting information about whether 
the student was required to register; and
    (ii) Its determination that the student was not required to 
register was not reasonable in the light of all available information.

(Authority: 50 U.S.C. App. 462)

     9. Section 668.133 is amended by revising paragraph (b) to read as 
follows:


Sec. 668.133  Conditions under which an institution shall require 
documentation and request secondary confirmation.

* * * * *
    (b) Exclusions from secondary confirmation. (1) An institution may 
not require the student to produce the documentation requested under 
Sec. 668.33(a)(3) and may not request that INS perform secondary 
confirmation, if--
    (i) The student demonstrates eligibility under the provisions of 
Sec. 668.33(a)(4); and
    (ii) The institution does not have conflicting documentation or 
reason to believe that the student's claim of eligible noncitizen 
status is incorrect.
    (2) An institution receiving documentation required under 
Sec. 668.33(a)(3) from a student need not request that INS perform 
secondary confirmation for that student, if--
    (i) The documents submitted by the student are identical to 
documents received by the institution in a previous award year and for 
which secondary confirmation was performed;
    (ii) Based on the results of secondary confirmation, the 
institution determined the student to be an eligible noncitizen for a 
previous award year; and
    (iii) The institution does not have conflicting documentation or 
reason to believe that the student's claim of eligible noncitizen 
status for the current award year is incorrect.
* * * * *
    10. Section 668.164 is amended by revising paragraph (a) to read as 
follows:


Sec. 668.164  Maintaining funds.

    (a) General. (1) The requirements in this section apply only to 
title IV, HEA program funds an institution receives under the campus-
based, William D. Ford Federal Direct Loan, Federal Pell Grant, and 
SSIG programs. An institution that receives FFEL program funds through 
electronic funds transfer or by master check must maintain those funds 
as provided under 34 CFR 682.207(b).
    (2)(i) Except as provided in paragraph (e) of this section, an 
institution is not required to maintain a separate account for title 
IV, HEA program funds. For funds an institution receives under the 
campus-based, William D. Ford Federal Direct Student Loan, Federal Pell 
Grant, and SSIG programs, an institution must maintain a bank account 
that meets the requirements under paragraphs (b) or (c) of this 
section. In establishing the bank account, an institution must--
    (ii) Ensure that the name of the account discloses clearly that 
Federal funds are maintained in that account; or
    (iii)(A) Notify the bank of the accounts that contain Federal funds 
and retain a record of that notice in its recordkeeping system; and
    (B) Except for an institution that is backed by the full faith and 
credit of a State, file with the appropriate State or municipal 
government entity a UCC-1 statement disclosing that the account 
contains Federal funds and maintain a copy of that statement in its 
records.
* * * * *
    11. Section 668.165 is amended by revising paragraph (b)(1); by 
removing the word ``and'' at the end of paragraph (b)(3)(iv)(A); by 
removing the period at the end of paragraph (b)(3)(iv)(B) and adding in 
its place ``; and''; and by adding new paragraph (b)(3)(iv)(C) to read 
as follows:


Sec. 668.165  Disbursing funds.

* * * * *
    (b) Crediting a student's account--(1) General. In crediting the 
student's account with title IV, HEA program funds, the institution may 
apply those funds only to allowable charges described under paragraph 
(b)(3) of this section. An institution must notify expeditiously a 
student or parent borrower, in writing, electronically, or by other 
means that the institution has credited the student's account with FFEL 
or William D. Ford Federal Direct Loan program funds.
* * * * *
    (3) * * *
    (iv) * * *
    (C) Provided that a student has or will have a title IV, HEA credit 
balance as determined under paragraph (b)(2) of this section, minor 
institutional charges assessed the student in a prior award year or 
period of enrollment. For purposes of this paragraph, minor 
institutional charges are limited to an amount that does not, or will 
not, monetarily impair the student from paying for his or her room, 
board, transportation, or other education-related expenses.
* * * * * 

[[Page 49125]]



Sec. 668.1  [Amended]

    12. In Sec. 668.1, paragraph (c)(11), remove ``FDSL'' and add in 
its place ``William D. Ford Federal Direct Loan Programs''.


Sec. 668.2  [Amended]

    13. In Sec. 668.2, paragraph (b) in the definitions of ``Federal 
Direct PLUS loan'' and ``Federal Direct Stafford loan'' remove 
``Federal Direct Student Program'' and add in its place ``William D. 
Ford Federal Direct Loan Programs''; in the definition of ``Federal 
Direct Student loan'' remove ``Federal Direct Student loan'' and add in 
its place ``William D. Ford Federal Direct loan''; and in the 
definition of ``Federal Direct Student Loan (FDSL) program'' remove 
``Federal Direct Student Loan (FDSL) program'' and add in its place 
``William D. Ford Federal Direct Loan Programs''; and remove the 
definition of ``Income Contingent Loan (ICL) program''.


Sec. 668.13  [Amended]

    14. In Sec. 668.13, paragraph (a)(4)(i) remove ``Federal Pell Grant 
Program, the campus-based programs, the FDSL program, or the Federal 
Stafford Loan, Federal SLS, or Federal PLUS Program'' and add in its 
place ``campus-based programs, the Federal Stafford Loan, Federal PLUS 
programs, the William D. Ford Federal Direct Loan Programs, or the 
Federal Pell Grant Program''.


Sec. 668.21  [Amended]

    15. In Sec. 668.21, in the heading and in paragraph (a)(1), 
respectively, remove ``Pell Grant, SEOG, ICL, and Perkins Loan'' and 
add in its place ``Federal Perkins Loan, FSEOG, and Federal Pell 
Grant''.


Sec. 668.22  [Amended]

    16. In Sec. 668.22, paragraphs (c)(2)(ii) and (g)(2)(ii)(B) remove 
``Federal Direct Student Loan Program'' and add in its place ``William 
D. Ford Federal Direct Loan Programs''.


Sec. 668.23  [Amended]

    17. In Sec. 668.23, paragraphs (a) introductory language and 
(c)(1)(i) remove ``FDSL'' and add in its place ``William D. Ford 
Federal Direct Loan''.


Sec. 668.26  [Amended]

    18. In Sec. 668.26, paragraph (b)(4) remove ``FDSL'' and add in its 
place ``William D. Ford Federal Direct Loan''; in paragraph (b)(6) 
remove ``National Defense/Direct Student Loan and ICL.'' and add in its 
place ``National Defense Student Loan and Direct Loan programs''; in 
paragraph (d)(1) remove ``or PAS Program''; in paragraph (d)(3) remove 
``FDSL'' and ``Federal Direct Student loan'', respectively, and add in 
its place ``William D. Ford Federal Direct Loan'', respectively; in 
paragraph (d)(3)(i) remove ``FDSL'' and add in its place ``William D. 
Ford Federal Direct Loan''; and in paragraph (e)(1) remove ``and PAS 
programs'' and add in its place ``Program''.


Sec. 668.43  [Amended]

    19. In Sec. 668.43, paragraph (c)(6) remove ``Federal Direct 
Student Loan'' and add in its place ``William D. Ford Federal Direct 
Loan''.


Sec. 668.51  [Amended]

    20. In Sec. 668.51, paragraph (a) remove ``FDSL'' and add in its 
place ``William D. Ford Federal Direct Loan''.


Sec. 668.52  [Amended]

    21. In Sec. 668.52, in the definition of ``Student aid 
application'' remove ``Federal Direct Loan'' and add in its place 
``William D. Ford Federal Direct Loan''.


Sec. 668.54  [Amended]

    22. In Sec. 668.54, paragraph (a)(2)(i) remove ``Federal Pell 
Grant, Federal Direct Student Loan, campus-based, and Federal Stafford 
Loan'' and add in its place ``campus-based, Federal Stafford Loan, 
William D. Ford Federal Direct Loan, and Federal Pell Grant''.


Sec. 668.55  [Amended]

    23. In Sec. 668.55, paragraph (c) remove ``Federal Pell Grant, 
campus-based, Federal Stafford Loan, or FDSL'' and add in its place 
``campus-based, Federal Stafford Loan, William D. Ford Federal Direct 
Loan, or Federal Pell Grant''; in paragraphs (c)(1) and (c)(2) remove 
``Federal Pell Grant, campus-based, or FDSL'', respectively, and add in 
its place ``campus-based, William D. Ford Federal Direct Loan, or 
Federal Pell Grant'', respectively.


Sec. 668.58  [Amended]

    24. In Sec. 668.58, paragraph (a)(1)(i) remove ``Federal Pell 
Grant, campus-based, or need-based ICL'' and add in its place ``campus-
based, or Federal Pell Grant''; in paragraph (a)(2)(i) remove ``Federal 
Pell Grant and campus-based'' and add in its place ``campus-based and 
Federal Pell Grant''; and in paragraph (a)(2)(iii)(A) add ``origination 
of the applicant's'' before ``William''; and add ``originate the'' 
before ``William''.


Sec. 668.59  [Amended]

    25. In Sec. 668.59, paragraph (d)(1) add ``s'' to ``Program''.


Sec. 668.60  [Amended]

    26. In Sec. 668.60, paragraph (b) remove ``FDSL'' and add in its 
place ``William D. Ford Federal Direct Loan''; in paragraphs 
(b)(1)(i)(A) and (b)(1)(iii), respectively, remove ``FDSL, or FSEOG'' 
and add in its place ``FSEOG, or William D. Ford Federal Direct Loan'', 
respectively; and in paragraph (d) remove ``FDSL, or Federal Stafford 
Loan'' and add in its place ``Federal Stafford Loan, or William D. Ford 
Federal Direct Loan''.


Sec. 668.61  [Amended]

    27. In Sec. 668.61, paragraph (a)(2)(ii)(B) remove ``Federal Pell 
Grant, Federal Perkins Loan, FDSL, or FSEOG'' and add in its place 
``Federal Perkins Loan, FSEOG, William D. Ford Federal Direct Loan, or 
Federal Pell Grant''.


Sec. 668.161  [Amended]

    28. In Sec. 668.161, paragraph (a)(4) remove ``Federal Pell Grant, 
PAS, FSEOG, Federal Perkins Loan, FWS, Direct Loan, and FFEL'' and add 
in its place ``Federal Perkins Loan, FWS, FSEOG, FFEL, William D. Ford 
Federal Direct Loan, and Federal Pell Grant''.


Sec. 668.162  [Amended]

    29. In Sec. 668.162 in the definition of ``Disburse'' in paragraph 
(1)(i) add ``William D. Ford Federal'' before ``Direct''; in paragraph 
(1)(ii) remove ``Direct Loan or FFEL'' and add in its place ``FFEL or 
William D. Ford Federal Direct Loan''; and in the definition of 
``Period of enrollment'' add ``William D. Ford Federal'' before 
``Direct''.


Sec. 668.165  [Amended]

    30. In Sec. 668.165, paragraph (c)(2)(ii) remove ``Direct Loan and 
FFEL'' and add in its place ``FFEL and William D. Ford Federal Direct 
Loan''; and in paragraph (c)(3) add ``William D. Ford Federal'' before 
``Direct''.


Sec. 668.166  [Amended]

    31. In Sec. 668.166, paragraph (b)(3) add ``William D. Ford 
Federal'' before ``Direct''.
* * * * *

PART 674--FEDERAL PERKINS LOAN PROGRAM

    32. The authority citation for part 674 continues to read as 
follows:

    Authority: 20 U.S.C. 1087aa-1087ii and 20 U.S.C. 421-429, unless 
otherwise noted.

    33. Section 674.2 paragraph (a) is amended by adding, in 
alphabetical order, ``Full-time student''.
    34. Section 674.2 paragraph (b) is amended by removing the 
definitions of ``Full-time graduate or professional student'' and 
``Full-time undergraduate student''; and by revising the definition of 
``Making of a loan'' to read as follows: 

[[Page 49126]]



Sec. 674.2  Definitions.

* * * * *
    (b) * * *
    Making of a loan: When the borrower signs the promissory note and 
the loan funds are disbursed.
* * * * *
    35. Section 674.16 is amended by revising paragraph (d) to read as 
follows:


Sec. 674.16  Making and disbursing loans.

* * * * *
    (d)(1) The institution shall disburse funds to a student or the 
student's account in accordance with 34 CFR 668.165.
    (2) The institution shall obtain the borrower's signature on a 
promissory note for each award year before it disburses any loan funds 
to the borrower under that note for that award year.
* * * * *


Sec. 674.17  [AMENDED]

    36. Section 674.17 is amended by removing paragraph (a) and by 
redesignating paragraphs (b)(1), (b)(1)(i), (b)(1)(ii), (b)(1)(iii), 
(b)(2), (b)(3), (b)(4), (b)(4)(i), (b)(4)(ii), and (5) as paragraphs 
(a), (a)(1), (a)(2), (a)(3), (b), (c), (d), (d)(1), (d)(2), and (e), 
respectively.
    37. Section 674.19 is amended by revising paragraph (e)(4)(v) to 
read as follows:


Sec. 674.19  Fiscal procedures and records.

* * * * *
    (e) * * *
    (4) * * *
    (v) An institution may keep the records required in this section on 
microforms, optical disk, other machine readable format, or it may keep 
its records in computer format. If an institution keeps its records in 
computer format it shall maintain, in either hard copy, microforms, 
optical disk, or other machine readable format, the source documents 
supporting the computer input.
* * * * *
    38. Section 674.31 is amended by redesignating paragraph (a)(2) as 
paragraph (a)(3); and by adding a new paragraph (a)(2) to read as 
follows:


Sec. 674.31  Promissory note.

* * * * *
    (a) * * *
    (2) The Secretary provides sample promissory notes to participating 
institutions. The institution may not change the substance of these 
sample notes.
* * * * *


Sec. 674.33  [Amended]

    39. Section 674.33, paragraph (a)(2) is amended by removing ``$15'' 
and adding in its place ``$25''.
    40. Section 674.47 is amended by revising paragraph (g) and by 
adding a new paragraph (h) to read as follows:


Sec. 674.47  Costs chargeable to the fund.

* * * * *
    (g) Cessation of collection activity of defaulted accounts. (1) An 
institution may cease collection activity of a defaulted account with a 
balance of less than $25, including outstanding principal, accrued 
interest, collection costs, and late charges.
    (2) An institution that ceases collection activity under paragraph 
(g)(1) of this section may no longer include the amount of the account 
as an asset of the Fund.
    (h) Write-offs of accounts of less than $1. Notwithstanding any 
other provision in this subpart, an institution may write off an 
account with a balance of less than $1, including outstanding 
principal, accrued interest, collection costs, and late charges.
* * * * *

PART 675--FEDERAL WORK-STUDY PROGRAMS

    41. The authority citation for part 675 continues to read as 
follows:

    Authority: 42 U.S.C. 2571-2756b, unless otherwise noted.


Sec. 675.2  [Amended]

    42. Section 675.2, paragraph (a) is amended by adding in 
alphabetical order, ``Full-time student''.
    43. Section 675.2, paragraph (b) is amended by removing the 
definitions of ``Full-time graduate or professional student'' and 
``Full-time undergraduate student''.


Sec. 675.17  [Removed]

    44. Section 675.17 is removed and reserved.
    45. Section 675.19 is amended by revising paragraph (c)(3) to read 
as follows:


Sec. 675.19  Fiscal procedures and records.

* * * * *
    (c) * * *
    (3) An institution may keep the records required in this section on 
microforms, optical disk, other machine readable format, or it may keep 
its records in computer format. If an institution keeps its records in 
computer format it shall maintain, in either hard copy, microforms, 
optical disk, or other machine readable format, the source documents 
supporting the computer input.
* * * * *

Appendix B to Part 675--[Removed]

    46. Appendix B to part 675--Model Off-Campus Agreement is removed.

PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT 
PROGRAM

    47. The authority citation for part 676 continues to read as 
follows:

    Authority: 20 U.S.C. 1070b-1070-3, unless otherwise noted.


Sec. 676.2  [Amended]

    48. Section 676.2, paragraph (a) is amended by adding in 
alphabetical order, ``Full-time student''.
    49. Section 676.2, paragraph (b) is amended by removing the 
definition of ``Full-time undergraduate student''.


Sec. 676.17  [Removed]

    50. Section 676.17 is removed and reserved.
    51. Section 676.19 is amended by revising paragraph (c)(3) to read 
as follows:


Sec. 676.19  Fiscal procedures and records.

* * * * *
    (c) * * *
    (3) An institution may keep the records required in this section on 
microforms, optical disk, other machine readable format, or it may keep 
its records in computer format. If an institution keeps its records in 
computer format it shall maintain, in either hard copy, microforms, 
optical disk, or other machine readable format, the source documents 
supporting the computer input.
* * * * *

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

    52. The authority citation for part 682 continues to read as 
follows:

    Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.

    53. Section 682.201, paragraph (b) is amended by redesignating 
paragraphs (b)(1) through (b)(8) as paragraphs (b)(1)(i) through 
(b)(1)(viii), respectively; by redesignating the introductory sentence 
as paragraph (b)(1); and by adding a new paragraph (b)(2) to read as 
follows:


Sec. 682.201  Eligible borrowers.

* * * * *
    (b) * * *
    (2) For purposes of paragraph (b)(1) of this section, a ``parent'' 
includes the 

[[Page 49127]]
individuals described in the definition of the term ``parent'' in 34 
CFR 668.2 and the spouse of a parent who remarried, if that spouse's 
income and assets are taken into account when calculating a dependent 
student's expected family contribution.


Sec. 682.600  [Removed]

    54. Section 682.600 is removed and reserved.


Sec. 682.602  [Removed]

    55. Section 682.602 is removed and reserved.
    56. A new Sec. 682.611 is added to read as follows:


Sec. 682.611  Foreign schools.

    A foreign school shall comply with the regulations in this part 
except to the extent that the Secretary states in these regulations or 
in other official publications or documents that those schools do not 
have to comply.

(Authority: 20 U.S.C. 1077, 1078, 1078-1, 1078-2, 1078-3, 1082, 
1088, and 1094)

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAMS

    57. The authority citation for part 685 continues to read as 
follows:

    Authority: 20 U.S.C. 1078a et seq., unless otherwise noted.

     58. Section 685.200, paragraph (b) is amended by redesignating 
paragraphs (b)(1) through (b)(7) as paragraphs (b)(1)(i) through 
(b)(1)(vii), respectively; by redesignating the introductory sentence 
as paragraph (b)(1); and by adding a new paragraph (b)(2) to read as 
follows:


Sec. 685.200  Borrower eligibility.

* * * * *
    (b) * * *
    (2) For purposes of paragraph (b)(1) of this section, a ``parent'' 
includes the individuals described in the definition of the term 
``parent'' in 34 CFR 668.2 and the spouse of a parent who remarried, if 
that spouse's income and assets are taken into account when calculating 
a dependent student's expected family contribution.
* * * * *

PART 690--FEDERAL PELL GRANT PROGRAM

    59. The authority citation for part 690 continues to read as 
follows:

    Authority: 20 U.S.C. 1070a, unless otherwise noted.


Sec. 690.7  [Amended]

    60. Section 690.7, paragraph (a)(1) is removed and paragraph (a)(2) 
is redesignated as paragraph (a).


Sec. 690.71  [Amended]

    61. Section 690.71 is amended by removing the second sentence.


Secs. 690.72, 690.73, 690.74  [Removed]

    62. Sections 690.72, 690.73, and 690.74 are removed and reserved.


Sec. 690.83  [Amended]

     63. Section 690.83 is amended by removing paragraph (c); by 
redesignating paragraphs (d) and (e) as paragraphs (c) and (d), 
respectively; by removing in redesignated paragraph (c), ``paragraphs 
(a), (b) or (c) of this section'' and adding, in its place, 
``paragraphs (a) or (b) of this section''; and by removing in 
redesignated paragraph (d)(1), ``Notwithstanding paragraphs (a), (b), 
(c)(1) or (2), or (d) of this section'' and adding, in its place, 
``Notwithstanding paragraphs (a), (b), or (c) of this section''; by 
removing in redesignated paragraph (d)(1) ``(e)'' and adding, in its 
place, ``(d)''; by adding in redesignated paragraph (d)(2) ``or program 
review,'' after ``34 CFR 668.23(c),'', and ``or program review'' after 
``audit'' in the last sentence.

[FR Doc. 95-23150 Filed 9-20-95; 8:45 am]
BILLING CODE 4000-01-P