[Federal Register Volume 61, Number 151 (Monday, August 5, 1996)]
[Proposed Rules]
[Pages 40589-40591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19780]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 1

RIN 2900-AF29


Reduction of Debt Through the Performance of Work-Study Services

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its 
general regulations to provide that the money payable for performance 
of work-study services may be offset against an individual's 
outstanding debt to the United States arising from participation in 
educational and vocational rehabilitation programs VA administers. This 
would help veterans pay outstanding debts to the United States.

DATES: Comments must be received on or before October 4, 1996.

ADDRESSES: Mail or hand deliver written comments to: Director, Office 
of Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Ave., NW., Room 1154, Washington, DC 20420. Comments should 
indicate that they are submitted in response to ``RIN 2900-AF29.'' All 
written comments will be available for public inspection at the above 
address in the Office of Regulations Management, Room 1158, between the 
hours of 8 a.m. and 4:30 p.m., Monday through Friday (except holidays).

FOR FURTHER INFORMATION CONTACT: June C. Schaeffer, Assistant Director 
for Policy and Program Administration, Education Service, Veterans 
Benefits Administration, Department of Veterans Affairs, 810 Vermont 
Ave., NW., Washington, DC 20420, (202) 273-7187.

SUPPLEMENTARY INFORMATION: Participants in some VA education programs 
and in the VA vocational rehabilitation program have been able to 
supplement their educational assistance by performing VA-related work 
services. An eligible individual contracts with VA to perform work and 
receives payment for that work.
    In 1991 the governing statute, 38 U.S.C. 3485, was amended to allow 
VA to adopt a method by which individuals who are indebted to VA for 
overpayments of education or rehabilitation benefits may reduce their 
debt by entering into an agreement to provide work-study services. The 
money otherwise payable for the performance of these services would be 
used to eliminate their outstanding indebtedness. VA is authorized by 
the statute to waive certain requirements of law which normally would 
apply to individuals participating in a work-study program, and to 
waive various provisions of law which apply to payment or offset of a 
debt owed to VA. VA is proposing to exercise this authority as 
described in the proposed rule.
    The statute gives VA authority to waive, in whole or in part, the 
limitations otherwise contained in 38 U.S.C. 3485(a) concerning the 
number of hours and periods during which work-study services can be 
performed. Section 3485(a) permits work-study performance during or 
between enrollment periods, but limits the number of hours to be worked 
to 25 times the number of weeks in the enrollment period. For those 
performing work-study services in order to liquidate a debt, but who 
currently may not be enrolled in school, VA finds no reason to limit 
those work-study contracts by the number of weeks in a school term. 
Thus, VA proposes to waive that restriction. The Department proposes to 
allow maximum flexibility for the debtor while at the same time 
facilitating collection and program administration. Accordingly, 
proposed Sec. 1.929(d) would allow the hours worked to be as much as 40 
times the number of weeks in the contract, while limiting the contract 
period in which the work-study services are to be performed to the 
lesser of the number of weeks needed to liquidate the debt or 52 weeks.
    When an individual is performing work-study services to liquidate a 
debt, VA also is permitted by 38 U.S.C. 3485 to waive its usual 
practice of collection of the debt by offset of other benefits to which 
the individual may be entitled. In order to simplify administration and 
encourage individuals who may have limited cash resources to liquidate 
debt through performance of work-study services, VA has chosen to 
exercise the waiver. This issue is addressed in proposed Sec. 1.929(f).
    The primary purpose of the work-study program is to provide 
eligible persons a means of obtaining additional subsistence or 
educational assistance funds to enable them to continue their programs 
of education. Therefore, VA proposes that in localities where only a 
limited number of work-study positions are available, those individuals 
actually in school will be given preference over those who are not in 
school. This ensures that the granting of work-study contracts to 
debtors to liquidate their debts will not deny deserving persons in 
school who have not defaulted on their obligations to VA the economic

[[Page 40590]]

assistance of the work-study benefit, as originally intended by the 
law.
    VA interprets the authorizing statute as permitting it to approve 
only those types of work-study services that are VA-related such as 
working in a VA regional office, working on a school campus with 
veteran's records or in a VA hospital.
    The Secretary of Veterans Affairs hereby certifies that this 
proposed rule, if promulgated, would not have significant economic 
impact on a substantial number of small entities as they are defined in 
the Regulatory Flexibility Act, 5 U.S.C. 601-612. This proposed rule 
would directly affect only individuals and would not directly affect 
small entities. Pursuant to 5 U.S.C. 605(b), the proposed rule, 
therefore, is exempt from the initial and final regulatory flexibility 
analyses requirements of sections 603 and 604.
    This proposed rule has been reviewed by the Office of Management 
and Budget under the provisions of Executive Order 12866.

    The Catalog of Federal Domestic Assistance numbers for the 
programs affected by the proposed rule are 64.111, 64.117, 64.120 
and 64.124.

List of Subjects in 38 CFR Part 1

    Administrative practice and procedure, Cemeteries, Claims, 
Employment, Flags, Freedom of information, Government contracts, 
Government employees, Government property, Inventions and patents, 
Investigations, Privacy, Seals and insignia.

    Approved: April 24, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
    For the reasons set out in the preamble, 38 CFR part 1 is proposed 
to be amended as set forth below:

PART 1--GENERAL PROVISIONS

    1. The authority citation for part 1, Secs. 1.910 to 1.921 
continues to read as follows:

    Authority: Sections 1.910 to 1.921 issued under 72 Stat. 1114; 
38 U.S.C. 501.

    2. Section 1.929 is added to read as follows:


Sec. 1.929  Reduction of debt through performance of work-study 
services.

    (a) Scope. (1) Subject to the provisions of this section VA may 
allow an individual to reduce an indebtedness to the United States 
through offset of benefits to which the individual becomes entitled by 
performance of work-study services under 38 U.S.C. 3485 and 3537 when 
the debt arose by virtue of the individual's participation in a 
benefits program provided under any of the following:
    (i) 38 U.S.C. chapter 30;
    (ii) 38 U.S.C. chapter 31;
    (iii) 38 U.S.C. chapter 32;
    (iv) 38 U.S.C. chapter 34;
    (v) 38 U.S.C. chapter 35;
    (vi) 38 U.S.C. chapter 36 (other than an education loan provided 
under subpart F, part 21 of this title); or
    (vii) 10 U.S.C. chapter 1606 (other than an indebtedness arising 
from a refund penalty imposed under 10 U.S.C. 16135).
    (2) This section shall not apply in any case in which the 
individual has a pending request for waiver of the debt under 
Secs. 1.950 through 1.970.

(Authority: 38 U.S.C. 3485(e)(1); Pub. L. 102-16)

    (b) Selection criteria. If there are more candidates for a work-
study allowance than there are work-study positions available in the 
area in which the services are to be performed:
    (1) VA will give priority to the candidates who are pursuing a 
program of education or rehabilitation.
    (2) Only after all candidates in the area described in paragraph 
(b)(1) of this section either have been given work-study contracts or 
have withdrawn their request for contracts will VA offer contracts to 
those who are not pursuing a program of education or rehabilitation and 
who wish to reduce their indebtedness through performance of work-study 
services.
    (3) VA shall not offer a contract to an individual who is receiving 
compensation from another source for the work-study services the 
individual wishes to perform.
    (4) VA shall not offer a contract to an individual if VA determines 
that the debt can be collected through other means such as collection 
in a lump sum, collection in installments as provided in Sec. 1.917 or 
compromise as provided in Sec. 1.918.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

    (c) Utilization. The work-study services to be performed under a 
debt-liquidation contract will be limited as follows:
    (1) If the individual is concurrently receiving educational 
assistance in a program administered by VA, work-study services are 
limited to those allowed in the educational program under which the 
individual is receiving benefits.
    (2) If the individual is not concurrently receiving educational 
assistance in a program administered by VA, the individual may perform 
only those work-study services and activities which are or were open to 
those students receiving a work-study allowance while pursuing a 
program of education pursuant to the chapter under which the debt was 
incurred.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

    (d) Contract to perform services. (1) The work-study services 
performed to reduce indebtedness shall be performed pursuant to a 
contract between the individual and VA.
    (2) The individual shall perform the work-study services required 
by the contract at the place or places designated by VA.
    (3) The number of hours of services to be performed under the 
contract must be sufficient to enable the individual to become entitled 
to a sum large enough to liquidate the debt by offset.
    (4) The number of weeks in the contract will not exceed the lesser 
of--
    (i) The number of weeks of services the individual needs to perform 
to liquidate his or her debt; or
    (ii) 52.
    (5) In determining the number of hours per week and the number of 
weeks under paragraphs (d)(3) and (d)(4) of this section necessary to 
liquidate the debt, VA will use the amount of the account receivable, 
including all accrued interest, administrative costs and marshall fees 
outstanding on the date the contract is offered to the individual and 
all accrued interest, administrative costs and marshall fees VA 
estimates will have become outstanding on the debt on the date the debt 
is to be liquidated.
    (6) The contract will automatically terminate after the total 
amount of the individual's indebtedness described in paragraph (d)(5) 
of this section has been recouped, waived, or otherwise liquidated. An 
individual performing work-study services under a contract to liquidate 
a debt is released from the contract if the debt is liquidated by other 
means.
    (7) The contract to perform work-study services for the purpose of 
liquidating indebtedness will be terminated if:
    (i) The individual is liquidating his or her debt under this 
section while receiving either an educational assistance allowance for 
further pursuit of a program of education or a subsistence allowance 
for further pursuit of a program of rehabilitation;
    (ii) The individual terminates or reduces the rate of pursuit of 
his or her program of education or rehabilitation; and

[[Page 40591]]

    (iii) The termination or reduction causes an account receivable as 
a debt owed by the individual.
    (8) VA may terminate the contract at any time the individual fails 
to perform the services required by the contract in a satisfactory 
manner.

(Authority: 38 U.S.C. 3485(e), 7104(a); Pub. L. 102-16)

    (e) Reduction of indebtedness. (1) In return for the individual's 
agreement to perform hours of services totaling not more than 40 times 
the number of weeks in the contract, VA will reduce the eligible 
person's outstanding indebtedness by an amount equal to the higher of--
    (i) The hourly minimum wage in effect under section 6(a) of the 
Fair Labor Standards Act of 1938 times the number of hours the 
individual works; or
    (ii) The hourly minimum wage under comparable law of the State in 
which the services are performed times the number of hours the 
individual works.
    (2) VA will reduce the individual's debt by the amount of the money 
earned for the performance of work-study services after the completion 
of each 50 hours of services (or in the case of any remaining hours 
required by the contract, the amount for those hours).

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

    (f) Suspension of collections by offset. Notwithstanding the 
provisions of Sec. 1.912a, during the period covered by the work-study 
debt-liquidation contract with the individual, VA will ordinarily 
suspend the collection by offset of a debt described in paragraph 
(a)(1) of this section. However, the individual may voluntarily permit 
VA to collect part of the debt through offset against other benefits 
payable while the individual is performing work-study services. If the 
contract is terminated before its scheduled completion date, and the 
debt has not been liquidated, collection through offset against other 
benefits payable will resume on the date the contract terminates.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

    (g) Payment for additional hours. (1) If an individual, without 
fault on his or her part, performs work-study services for which 
payment may not be authorized, including services performed after 
termination of the contract, VA will pay the individual at the 
applicable hourly minimum wage for such services as the Director of the 
VA field station of jurisdiction determines were satisfactorily 
performed.
    (2) The Director of the VA field station of jurisdiction shall 
determine whether the individual was without fault. In making this 
decision he or she shall consider all evidence of record and any 
additional evidence which the individual wishes to submit.

(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)
[FR Doc. 96-19780 Filed 8-2-96; 8:45 am]
BILLING CODE 8520-01-P