[Federal Register Volume 61, Number 183 (Thursday, September 19, 1996)]
[Proposed Rules]
[Pages 49390-49396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24010]



[[Page 49389]]


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Part III





Department of Education





_______________________________________________________________________



34 CFR Part 668, et al.



Student Assistance General Provisions; Proposed Rule

  Federal Register / Vol. 61, No. 183 / Thursday, September 19, 1996 / 
Proposed Rules  

[[Page 49390]]



DEPARTMENT OF EDUCATION

34 CFR Parts 668, 673, 674, 675, 676, and 690

RIN 1840-AC34


Student Assistance General Provisions; General Provisions for the 
Federal Perkins Loan Program, Federal Work-Study Program, and Federal 
Supplemental Educational Opportunity Grant Program; Federal Perkins 
Loan Program; Federal Work-Study Programs; Federal Supplemental 
Educational Opportunity Grant Program; 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) and the Federal Pell Grant Program. 
These proposed amendments, which eliminate duplicate provisions for the 
student financial assistance programs and consolidate common provisions 
for the campus-based programs, 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.

DATES: Comments must be received on or before October 21, 1996.

ADDRESSES: All comments concerning these proposed regulations should be 
addressed to Nancy Adams, U.S. Department of Education, P.O. Box 23272, 
Washington, D.C. 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.

FOR FURTHER INFORMATION CONTACT:
    1. For the Federal Perkins Loan Program: Gail H. McLarnon, U.S. 
Department of Education, 600 Independence Avenue, S.W., Regional Office 
Building 3, Room 3053, Washington, D.C. 20202-5447. Telephone: (202) 
708-8242.
    2. For the FWS and FSEOG programs: Richard P. Coppage, U.S. 
Department of Education, 600 Independence Avenue, S.W., Regional Office 
Building 3, Room 3053, Washington, D.C. 20202-5447. Telephone: (202) 
708-4690.
    3. For the Federal Pell Grant Program: Daniel J. Sullivan, U.S. 
Department of Education, 600 Independence Avenue, S.W., Regional Office 
Building 3, Room 3053, Washington, D.C. 20202-5447. Telephone: (202) 
708-4607.
    Individuals who use a telecommunications device for the deaf (TDD) 
may call the Federal Information Relay Service (FIRS) at 1-800-877-8339 
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: 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 considering amending these 
regulations by moving the provisions that are common to all three of 
the campus-based programs to a new part 673 of the Department's 
regulations. The Secretary is proposing these changes to eliminate 
duplication in the regulations and to make the regulations easier to 
understand and use in administering the campus-based programs. The 
public is invited to comment on this proposal. 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 published the first part of a planned series 
of regulatory reform and relief measures that apply to the title IV, 
HEA programs on December 1, 1995. These amendments are part of that 
series.
    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.

Summary of Proposed Changes

Campus-Based Programs

    A new part 673 of Title 34 of the Code of Federal Regulations is 
being created to consolidate sections with common provisions contained 
in the Federal Perkins Loan--part 674, the FWS--part 675, and the 
FSEOG--part 676, program regulations.

Sections 674.3, 675.3, and 676.3  Application

    Sections 674.3, 675.3, and 676.3 of the Federal Perkins Loan, FWS, 
and FSEOG program regulations, respectively, provide the procedures for 
an institution to apply for campus-based program funds. The application 
procedures are the same for all three programs. Therefore, the 
Secretary is proposing to delete these sections currently found in 
parts 674, 675, and 676 and consolidate the application procedures into 
the new part 673 under Sec. 673.3.

Sections 674.4, 675.4, and 676.4  Allocation and Reallocation

    The procedures for allocating and reallocating campus-based funds 
are contained in the HEA for the Federal Perkins Loan Program in 
section 462, the FWS Program in section 442, and the FSEOG Program in 
section 413D. The current regulations for allocating and reallocating 
these program funds are common in several areas. Therefore, the 
Secretary is proposing to delete these sections currently found in 
parts 674, 675, and 676 and consolidate the allocation and reallocation 
provisions into the new part 673 under Sec. 673.4.

Sections 674.14, 675.14, and 676.14 Overaward

    A financial aid administrator may not award or disburse aid from a 
campus-based program if that aid, when combined with all other 
resources, would exceed the student's need. Before awarding aid from 
campus-based programs, the aid administrator must take into account the 
aid that the student will receive from other student financial 
assistance programs and other resources that the aid administrator 
knows about or can reasonably anticipate at the time aid is awarded to 
the student. If the student receives additional resources at any time 
during the award period that were not considered in determining the 
student's eligibility for aid, and these resources combined with the 
expected financial

[[Page 49391]]

aid will exceed the student's need, the amount in excess of the 
student's need is considered an overaward.
    Currently Secs. 674.14, 675.14, and 676.14 of the campus-based 
program regulations provide procedures that institutions must follow in 
the event that an overaward situation occurs. The majority of the 
overaward provisions are the same for all three programs. The Secretary 
believes that the provisions are duplicates as presented in the three 
program parts. Therefore, the Secretary is proposing to delete these 
sections from parts 674, 675, and 676 and consolidate them into the new 
part 673 under Sec. 673.5.

Sections 674.15, 675.15, 676.15  Coordination With BIA Grants

    Sections 674.15, 675.15, and 676.15 of the Federal Perkins Loan, 
FWS, and FSEOG program regulations provide institutions with the 
procedures to follow when awarding title IV student financial aid to a 
student who is also eligible for a Bureau of Indian Affairs (BIA) 
education grant. Identical procedures are duplicated in all three 
program regulations. The Secretary proposes to delete these identical 
sections from parts 674, 675, and 676 and consolidate the provisions 
into the new part 673 under Sec. 673.6.

Sections 674.18, 675.18, and 676.18  Use of Funds

    Section 674.18(b), 675.18(b), and 676.18(b) of the Federal Perkins 
Loan, FWS, and FSEOG program regulations provide the formula for 
calculating an institution's administrative cost allowance and the 
permissible use of the allowance. Institutions participating in these 
programs are entitled to an allowance to help offset administrative 
costs incurred in the administration of the campus-based programs and 
the Federal Pell Grant program. These costs include salaries, 
furniture, travel, supplies, and equipment and also include the expense 
incurred for carrying out the student consumer information services 
requirements of Subpart D of the Student Assistance General Provisions 
regulations, 34 CFR part 668.
    The formula for calculating this allowance is identical and 
duplicated in all three program regulations. The allowable use of the 
allowance is almost the same in all three program regulations. 
Therefore, the Secretary is proposing to remove these duplicate 
formulas and the allowable use provisions from parts 674, 675, and 676 
and present them in the new part 673 under Sec. 673.7 with a new 
heading of Administrative cost allowance.

Federal Pell Grant Program

    There are no major proposed changes to the Federal Pell Grant 
Program. However, the Secretary plans to make some minor technical 
changes as described in the following paragraphs.

Section 690.2  General Definitions

    The Secretary is proposing to clarify the definition of ``Annual 
award'' in Sec. 690.2(c) to inform institutions of what a Federal Pell 
Grant payment would be under the appropriate Disbursement Schedule for 
a student attending half-time, three-quarter-time, and less-than-half-
time during that academic year. The Secretary also is proposing to 
remove the definition for ``Comparable State income tax return.'' This 
definition predated Sec. 668.57(a)(1) of Subpart E (Verification of 
Student Aid Application Information) of the Student Assistance General 
Provisions regulations, which requires the use of the income tax 
return.
Subpart B--Application Procedures for Determining Expected Family 
Contribution (EFC)

Section 690.14  Request for Recalculation of Expected Family 
Contribution Because of Clerical or Arithmetic Error

    The Secretary is proposing to amend Sec. 690.14 by revising the 
heading of the section to include ``or if the information submitted was 
incorrect'' and by clarifying paragraph (b)(1) to include the phrase 
``or inaccurate information was submitted when the application was 
signed.'' These changes would add an additional reason for 
recalculating a student's EFC that was inadvertently left out of 
earlier regulations.
Subpart F--Determination of Federal Pell Grant Awards

Section 690.61  Submission Process and Deadline for a Student Aid 
Report or Institutional Student Information Record

    The Secretary is proposing to amend Sec. 690.61(b)(2) by deleting 
the June 30 deadline date for a student to submit a valid Student Aid 
Report (SAR) or the institution to obtain a valid Institutional Student 
Information Record (ISIR) and adding ``By the deadline date established 
by the Secretary through publication of a notice in the Federal 
Register.'' Due to faster electronic data processing, a student now has 
an extended period of time to submit the required documents.
Subpart G--Administration of Grant Payments

Section 690.75  Determination of Eligibility for Payment

    The Secretary is proposing to amend Sec. 690.75(e) by deleting 
``the family contribution amount of $3,000'' and adding ``family 
contribution amount at least equal to the maximum authorized award 
amount for the award year.''

Section 690.78  Method of Disbursement--by Check or Credit to a 
Student's Account

    The Secretary is proposing to amend Sec. 690.78 (c)(2), (c)(3), and 
(c)(4) to revise from 15 days to 20 days the timeframes governing 
disbursements. If a student does not pick up the check on time, the 
institution would still be required to pay the student if he or she 
requests payment within 20 days after the last date of enrollment in 
the award year. Also, the Secretary proposes to change from 15 days to 
20 days the time period after which the institution may credit only 
certain items to a student's account and after which the student 
forfeits the right to receive payment. This additional five days would 
give the student a longer time to claim Federal Pell Grant Program 
funds to which he or she is entitled and would help standardize the 
numerous timeframes in the title IV program regulations.

Section 690.81  Fiscal Control and Fund Accounting Procedures

    The Secretary is proposing to delete Sec. 690.81(c) because the 
provisions contained in this paragraph duplicate provisions in 34 CFR 
668.161(b) of the Student Assistance General Provisions regulations, 
which cover all of the title IV programs.

Goals 2000: Educate America Act

    The Goals 2000: Educate America Act (Goals 2000) focuses the 
Nation's education reform efforts on the eight National Education Goals 
and provides a framework for meeting them. Goals 2000 promotes new 
partnerships to strengthen schools and expands the Department's 
capacities for helping communities to exchange ideas and obtain 
information needed to achieve the goals.
    These proposed regulations would address the National Education 
Goal that calls for increasing the rate at which students graduate from 
high school and pursue high quality postsecondary education and for 
supporting life-long learning.

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Executive Order 12866

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 proposed regulations contain technical terms 
or other wording that interferes with their clarity? (3) Does the 
format of the proposed regulations (grouping and order of sections, use 
of headings, paragraphing, etc.) aid or reduce their clarity? Would the 
proposed 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. 674.18 Use of 
funds.) (4) Is the description of the proposed regulations in the 
``Supplementary Information'' section of this preamble helpful in 
understanding the proposed regulations? How could this description be 
more helpful in making the proposed regulations easier to understand? 
(5) What else could the Department do to make the proposed 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, 600 Independence Avenue, S.W., (Room 5100, FB-10B), 
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 that would be affected by these proposed 
regulations are small institutions of postsecondary education. The 
proposed changes in these regulations would not substantially increase 
institutions' workload or costs associated with administering the title 
IV, HEA programs and, therefore, would not have a significant economic 
impact on a substantial number of small entities.

Paperwork Reduction Act of 1995

    These proposed regulations have been examined under the Paperwork 
Reduction Act of 1995 and have been found to contain no new information 
collection requirements.

Intergovernmental Review

    The Federal Supplemental Educational Opportunity Grant Program is 
subject to the requirements of Executive Order 12372 and the 
regulations in 34 CFR part 79. The objective of the Executive order is 
to foster an intergovernmental partnership and a strengthened 
federalism by relying on processes developed by State and local 
governments for coordination and review of proposed Federal financial 
assistance.
    In accordance with the order, this document is intended to provide 
early notification of the Department's specific plans and actions for 
this program.
    The Federal Perkins Loan, FWS, and Federal Pell Grant programs are 
not subject to the requirements of Executive Order 12372 and the 
regulations in 34 CFR part 79.

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 3045, ROB-3, 7th and D Streets, S.W., Washington, D.C., 
between the hours of 8:30 a.m. and 4:00 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.

34 CFR part 673

    Loan programs--education, Grant programs--education, Student aid.

34 CFR part 674

    Loan programs--education, Student aid.

34 CFR part 675

    Loan programs--education, Student aid.

34 CFR part 676

    Grant programs--education, Student aid.

34 CFR part 690

    Grant programs--education, Student aid.

    Dated: September 16, 1996.
Richard W. Riley,
Secretary of Education.

(Catalog of Federal Domestic Assistance Numbers: 84.007 Federal 
Supplemental Educational Opportunity Grant Program; 84.033 Federal 
Work-Study Program; 84.038 Federal Perkins Loan Program; and 84.063 
Federal Pell Grant Program)

    The Secretary proposes to amend chapter VI of Title 34 of the Code 
of Federal Regulations as follows:
    1. A new part 673 is added to read as follows:

PART 673--GENERAL PROVISIONS FOR THE FEDERAL PERKINS LOAN PROGRAM, 
FEDERAL WORK-STUDY PROGRAM, AND FEDERAL SUPPLEMENTAL EDUCATIONAL 
OPPORTUNITY GRANT PROGRAM

Subpart A--Purpose and Scope

Sec.
673.1  Purpose.
673.2  Applicability of regulations.
Subpart B--General Provisions for the Federal Perkins Loan, FWS, and 
FSEOG programs
673.3  Application.
673.4  Allocation and reallocation.
673.5  Overaward.
673.6  Coordination with BIA grants.
673.7  Administrative cost allowance.

    Authority: 20 U.S.C. 421-429, 1070b-1070b-3, 1087aa-1087ii; 42 
U.S.C. 2751-2756b, unless otherwise noted.

Subpart A--Purpose and Scope


Sec. 673.1  Purpose.

    This part governs the following three programs authorized by title 
IV of the Higher Education Act of 1965, as amended (HEA) that 
participating institutions administer:
    (a) The Federal Perkins Loan Program, which encourages the making 
of loans by institutions to needy undergraduate and graduate students 
to help pay for the students' cost of education.
    (b) The Federal Work-Study (FWS) Program, which encourages the 
part-time employment of undergraduate and graduate students who need 
the income to help pay for the students' costs of education and which 
encourages FWS recipients to participate in community service 
activities.
    (c) The Federal Supplemental Educational Opportunity Grant (FSEOG) 
Program, which encourages the providing of grants to exceptionally 
needy undergraduate students to help pay for the students' cost of 
education.


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(Authority: 20 U.S.C. 421-429, 1070b-1070b-3, 1087aa-1087ii; 42 
U.S.C. 2751-2756b)


Sec. 673.2  Applicability of regulations.

    The participating institution is responsible for administering 
these programs in accordance with the regulations in this part and the 
applicable program regulations in 34 CFR part 674, 675, or 676.

(Authority: 20 U.S.C. 421-429, 1070b-1070b-3, 1087aa-1087ii; 42 
U.S.C. 2751-2756b)

Subpart B--General Provisions for the Federal Perkins Loan, FWS, 
and FSEOG Programs


Sec. 673.3  Application.

    (a) To participate in the Federal Perkins Loan, FWS, or FSEOG 
programs, an institution shall file an application before the deadline 
date established annually by the Secretary through publication of a 
notice in the Federal Register.
    (b) The application for the Federal Perkins Loan, FWS, and FSEOG 
programs must be on a form approved by the Secretary and must contain 
the information needed by the Secretary to determine the institution's 
allocation or reallocation of funds under sections 462, 442, and 413D 
of the HEA, respectively.

(Authority: 20 U.S.C. 1070b-3, 1087bb; 42 U.S.C. 2752)


Sec. 673.4  Allocation and reallocation.

    (a) Allocation and reallocation of Federal Perkins Loan funds. (1) 
The Secretary allocates Federal capital contributions to institutions 
participating in the Federal Perkins Loan Program in accordance with 
section 462 of the HEA.
    (2) The Secretary reallocates Federal capital contributions to 
institutions participating in the Federal Perkins Loan Program by--
    (i) Reallocating 80 percent of the total funds available in 
accordance with section 462(j) of the HEA; and
    (ii) Reallocating 20 percent of the total funds available in a 
manner that best carries out the purposes of the Federal Perkins Loan 
Program.
    (b) Allocation and reallocation of FWS funds. The Secretary 
allocates and reallocates funds to institutions participating in the 
FWS Program in accordance with section 442 of the HEA.
    (c) Allocation and reallocation of FSEOG funds. (1) The Secretary 
allocates funds to institutions participating in the FSEOG Program in 
accordance with section 413D of the HEA.
    (2) The Secretary reallocates funds to institutions participating 
in the FSEOG Program in a manner that best carries out the purposes of 
the FSEOG Program.
    (d) General allocation and reallocation--(1) Categories. As used in 
section 462 (Federal Perkins Loan Program), section 442 (FWS Program), 
and section 413D (FSEOG Program) of the HEA, ``Eligible institutions 
offering comparable programs of instruction'' means institutions that 
are being compared with the applicant institution and that fall within 
one of the following six categories:
    (i) Cosmetology.
    (ii) Business.
    (iii) Trade/Technical.
    (iv) Art Schools.
    (v) Other Proprietary Institutions.
    (vi) Non-Proprietary Institutions.
    (2) Payments to institutions. The Secretary allocates funds for a 
specific period of time. The Secretary pays an institution its 
allocation in periodic installments as determined by the Secretary.
    (3) Unexpended funds. (i) If an institution returns more than 10 
percent of its Federal Perkins Loan, FWS, or FSEOG allocation for an 
award year, the Secretary reduces the institution's allocation for that 
program for the second succeeding award year by the dollar amount 
returned.
    (ii) The Secretary may waive the provision of paragraph (d)(3)(i) 
of this section for a specific institution if the Secretary finds that 
enforcement would be contrary to the interests of the program.
    (iii) The Secretary considers enforcement of paragraph (d)(3)(i) of 
this section to be contrary to the interest of the program only if the 
institution returns more than 10 percent of its allocation due to 
circumstances beyond the institution's control that are not expected to 
recur.
    (e) Anticipated collections of Federal Perkins Loan funds.
    (1) For the purposes of calculating an institution's share of any 
excess allocation of Federal Perkins Loan funds, an institution's 
anticipated collections are equal to the amount that was collected 
during the second year preceding the beginning of the award period 
multiplied by 1.21.
    (2) The Secretary may waive the provision of paragraph (e)(1) of 
this section for any institution that has a cohort default rate that 
does not exceed 7.5 percent.
    (f) Authority to expend FWS funds after the award year. Except as 
specifically provided in 34 CFR 675.18 (b), (c), and (f), an 
institution may not use funds allocated or reallocated for an award 
year--
    (1) To meet FWS wage obligations incurred with regard to an award 
of FWS employment made for any other award year; or
    (2) To satisfy any other obligation incurred after the end of the 
designated award year.
    (g) Authority to expend FSEOG funds after the award year. Except as 
specifically provided in 34 CFR 676.16(e), an institution shall not use 
funds allocated or reallocated for an award year--
    (1) To make FSEOG disbursements to students in any subsequent award 
year; or
    (2) To satisfy any other obligation incurred after the end of the 
designated award year.

(Authority: 20 U.S.C. 1070b-3, 1087bb; 42 U.S.C. 2752)


Sec. 673.5  Overaward.

    (a) Overaward prohibited. (1) Federal Perkins Loan and FSEOG 
Programs. An institution may only award or disburse a Federal Perkins 
loan or an FSEOG to a student if that loan or the FSEOG, combined with 
the other resources the student receives, does not exceed the student's 
financial need.
    (2) FWS Program. An institution may only award FWS employment to a 
student if the award, combined with the other resources the student 
receives, does not exceed the student's financial need.
    (b) Awarding and disbursement. (1) When awarding and disbursing a 
Federal Perkins loan or an FSEOG or awarding FWS employment to a 
student, the institution shall take into account those resources it--
    (i) Can reasonably anticipate at the time it awards Federal Perkins 
Loan funds, an FSEOG, or FWS funds to the student;
    (ii) Makes available to its students; or
    (iii) Otherwise knows about.
    (2) If a student receives resources at any time during the award 
period that were not considered in calculating the Federal Perkins Loan 
amount or the FWS or FSEOG award, and the total resources including the 
loan, the FSEOG, or the prospective FWS wages exceed the student's 
need, the overaward is the amount that exceeds need.
    (c) Resources. (1) Except as provided in paragraph (c)(2) of this 
section, the Secretary considers that ``resources'' include, but are 
not limited to, any--
    (i) Funds a student is entitled to receive from a Federal Grant;
    (ii) William D. Ford Federal Direct Loans;

[[Page 49394]]

    (iii) Federal Family Education Loans;
    (iv) Long-term loans, including Federal Perkins loans made by the 
institution;
    (v) Grants, including FSEOGs, State grants, and ROTC subsistence 
allowances;
    (vi) Scholarships, including athletic scholarships and ROTC 
scholarships;
    (vii) Waiver of tuition and fees;
    (viii) Fellowships or assistantships;
    (ix) Veterans benefits;
    (x) Net earnings from need-based employment; and
    (xi) Insurance programs for the student's education.
    (2) The Secretary does not consider as a resource--
    (i) Any portion of the resources described in paragraph (c)(1) of 
this section that are included in the student's expected family 
contribution (EFC); and
    (ii) Earnings from non-need-based employment.
    (3) The institution may treat a Federal Direct PLUS Loan, a Federal 
PLUS Loan, a Federal Direct Unsubsidized Stafford/Ford Loan, a Federal 
Unsubsidized Stafford Loan, or a State-sponsored or private loan as a 
substitute for a student's EFC. However, if the sum of the loan amounts 
received exceeds the student's EFC, the excess is a resource.
    (d) Treatment of resources in excess of need--General. An 
institution shall take the following steps if it learns that a student 
has received additional resources not included in the calculation of 
Federal Perkins Loan, FWS, or FSEOG eligibility that would result in 
the student's total resources exceeding his or her financial need by 
more than $300:
    (1) The institution shall decide whether the student has increased 
financial need that was unanticipated when it awarded financial aid to 
the student. If the student demonstrates increased financial need and 
the total resources do not exceed this increased need by more than 
$300, no further action is necessary.
    (2) If the student's total resources still exceed his or her need 
by more than $300, as recalculated pursuant to paragraph (d)(1) of this 
section, the institution shall cancel any undisbursed loan or grant 
(other than a Pell Grant).
    (3) Federal Perkins loan and FSEOG overpayment. If the student's 
total resources still exceed his or her need by more than $300, after 
the institution takes the steps required in paragraphs (d) (1) and (2) 
of this section, the institution shall consider the amount by which the 
resources exceed the student's financial need by more than $300 as an 
overpayment.
    (e) Termination of FWS employment. (1) An institution may fund a 
student's FWS employment with FWS funds only until the amount of the 
FWS award has been earned or until the student's financial need, as 
recalculated under paragraph (d)(1) of this section, is met.
    (2) Notwithstanding the provisions of paragraph (e)(1) of this 
section, an institution may provide additional FWS funding to a student 
whose need has been met until that student's cumulative earnings from 
all need-based employment occurring subsequent to the time his or her 
financial need has been met exceed $300.
    (f) Liability for and recovery of Federal Perkins loans and FSEOG 
overpayments. (1) A student is liable for any Federal Perkins loan or 
FSEOG overpayment made to him or her.
    (2) The institution is also liable for a Federal Perkins loan or 
FSEOG overpayment if the overpayment occurred because the institution 
failed to follow the procedures in this part, 34 CFR part 668, 34 CFR 
part 674 and 34 CFR part 676. The institution shall restore an amount 
equal to the overpayment and any administrative cost allowance claimed 
on that amount to its loan fund for a Federal Perkins loan overpayment 
or to its FSEOG account for an FSEOG overpayment if it cannot collect 
the overpayment from the student.
    (3) If an institution makes a Federal Perkins loan or FSEOG 
overpayment for which it is not liable, it shall help the Secretary 
recover the overpayment by promptly attempting to recover the 
overpayment by sending a written notice to the student requesting 
repayment of the overawarded funds. The notice must state that failure 
to make that repayment or to make arrangements, satisfactory to the 
holder of the overpayment debt, to pay the overpayment renders the 
student ineligible for further title IV aid until final resolution of 
the overpayment.
    (4) If a student objects to the institution's Federal Perkins loan 
or FSEOG overpayment determination on the grounds that it is erroneous, 
the institution shall consider any information provided by the student 
and determine whether the objection is warranted.
    (5) Referral of FSEOG overpayments. (i) If the student fails to 
repay an FSEOG overpayment or make arrangements, satisfactory to the 
holder of the overpayment debt, to pay the FSEOG overpayment after 
taking the action required by paragraphs (f)(3) and, if applicable, 
(f)(4) of this section, and the Federal share of the FSEOG overpayment 
is $25.00 or more, the institution shall notify the Secretary 
identifying the Federal share of the FSEOG overpayment, the student's 
name, most recent address, telephone number, and any other relevant 
information. After notifying the Secretary under this section, the 
institution need make no further recovery efforts of FSEOG 
overpayments.
    (ii) If an institution fails in its attempt to collect the 
overpayment and the Federal share of the FSEOG overpayment is less than 
$25.00, the institution need make no further recovery efforts of the 
FSEOG overpayment.

(Approved by the Office of Management and Budget under control 
number 1840-0535)

(Authority: 20 U.S.C. 1070b-1, 1087dd, and 1087hh; 42 U.S.C. 2753)


Sec. 673.6  Coordination with BIA grants.

    (a) Coordination of BIA grants with Federal Perkins Loans, FWS 
awards, or FSEOGs. To determine the amount of a Federal Perkins Loan, 
FWS compensation, or an FSEOG for a student who is also eligible for a 
Bureau of Indian Affairs (BIA) education grant, an institution shall 
prepare a package of student aid--
    (1) From resources other than the BIA education grant the student 
has received or is expected to receive; and
    (2) That is consistent in type and amount with packages prepared 
for students in similar circumstances who are not eligible for a BIA 
education grant.
    (b) (1) The BIA education grant, whether received by the student 
before or after the preparation of the student aid package, supplements 
the student aid package specified in paragraph (a) of this section.
    (2) No adjustment may be made to the student aid package as long as 
the total of the package and the BIA education grant is less than the 
institution's determination of that student's financial need.
    (c) (1) If the BIA education grant, when combined with other aid in 
the package, exceeds the student's need, the excess must be deducted 
from the other assistance (except for Federal Pell Grants), not from 
the BIA education grant.
    (2) The institution shall deduct the excess in the following 
sequence: loans, work-study awards, and grants other than Federal Pell 
Grants. However, the institution may change the sequence if requested 
to do so by a student and the institution believes the change benefits 
the student.
    (d) To determine the financial need of a student who is also 
eligible for a BIA

[[Page 49395]]

education grant, a financial aid administrator is encouraged to consult 
with area officials in charge of BIA postsecondary financial aid.

(Authority: 20 U.S.C. 1070b-1, 1087dd; 42 U.S.C. 2753)


Sec. 673.7  Administrative cost allowance.

    (a) An institution participating in the Federal Perkins Loan, FWS, 
or FSEOG programs is entitled to an administrative cost allowance for 
an award year if it advances funds under the Federal Perkins Loan 
Program, provides FWS employment, or awards grants under the FSEOG 
Program to students in that year.
    (b) An institution may charge the administrative cost allowance 
calculated in accordance with paragraph (c) of this section for an 
award year against--
    (1) The Federal Perkins Loan Fund, if the institution advances 
funds under the Federal Perkins Loan Program to students in that award 
year;
    (2) The FWS allocation, if the institution provides FWS employment 
to students in that award year; or
    (3) The FSEOG allocation, if the institution awards grants to 
students under the FSEOG program in that award year.
    (c) For any award year, the amount of the allowance equals--
    (1) Five percent of the first $2,750,000 of the institution's total 
expenditures to students in that award year under the FWS, FSEOG and 
the Federal Perkins Loan programs; plus
    (2) Four percent of its expenditures to students that are greater 
than $2,750,000 but less than $5,500,000; plus
    (3) Three percent of its expenditures to students that are 
$5,500,000 or more.
    (d) The institution shall not include, when calculating the 
allowance in paragraph (c) of this section, the amount of loans made 
under the Federal Perkins Loan Program that it assigns during the award 
year to the Secretary under section 463(a)(6) of the HEA.
    (e) An institution shall use its allowance to offset its cost of 
administering the Federal Pell Grant, FWS, FSEOG, and Federal Perkins 
Loan programs. Administrative costs also include the expenses incurred 
for carrying out the student consumer information services requirements 
of Subpart D of the Student Assistance General Provisions regulations, 
34 CFR part 668.
    (f) An institution may use up to 10 percent of the allowance, as 
calculated under paragraph (c) of this section, that is attributable to 
the institution's expenditures under the FWS program to pay the 
administrative costs of conducting its program of community service. 
These costs may include the costs of--
    (1) Developing mechanisms to assure the academic quality of a 
student's experience;
    (2) Assuring student access to educational resources, expertise, 
and supervision necessary to achieve community service objectives; and
    (3) Collaborating with public and private nonprofit agencies and 
programs assisted under the National and Community Service Act of 1990 
in the planning, development, and administration of these programs.
    (g) If an institution charges any administrative cost allowance 
against its Federal Perkins Loan Fund, it must charge these costs 
during the same award year in which the expenditures for these costs 
were made.

(Authority: 20 U.S.C. 1087cc, 20 U.S.C. 1096, 42 U.S.C. 2753, and 20 
U.S.C. 1070b-2)

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

    2. The authority citation for part 668 continues to read as 
follows:

    Authority: 20 U.S.C. 1085, 1088, 1091, 1092, 1094, 1099c, and 
1141, unless otherwise noted.


Sec. 668.1  [Amended]

    3. Section 668.1, paragraph (c)(4) is amended by adding ``673 and'' 
before ``676'' and adding an ``s'' to the word ``part''; paragraph 
(c)(10) is amended by adding ``673 and'' before ``675'' and adding an 
``s'' to the word ``part''; and paragraph (c)(12) is amended by adding 
``673 and'' before ``674'' and adding an ``s'' to the word ``part''.


Sec. 668.2  [Amended]

    4. Section 668.2, in paragraph (b) amend the definition of 
``Campus-based programs'' in paragraph (1) by adding ``673 and'' before 
``674'' and adding an ``s'' to the word ``part''; in paragraph (2) add 
``673 and'' before ``675'' and add an ``s'' to the word ``part''; and 
in paragraph (3) add ``673 and'' before ``676'' and add an ``s'' to the 
word ``part''.


Sec. 668.22  [Amended]

    5. Section 668.22, paragraph (g)(3)(i) is amended by removing 
``674, 675, 676,''.

PART 674--FEDERAL PERKINS LOAN PROGRAM

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

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


Sec. 674.3  [Removed]

    7. Section 674.3 is removed and reserved.


Sec. 674.4  [Removed]

    8. Section 674.4 is removed and reserved.


Sec. 674.8  [Amended]

    9. Section 674.8 is amended by removing in paragraph (b)(2), 
``Sec. 674.18(b)'' and adding in its place ``34 CFR 673.7''.


Sec. 674.14  [Removed]

    10. Section 674.14 is removed and reserved.


Sec. 674.15  [Removed]

    11. Section 674.15 is removed and reserved.


Sec. 674.18  [Amended]

    12. Section 674.18 is amended by removing paragraph (b) and by 
redesignating paragraph (c) as paragraph (b).

PART 675--FEDERAL WORK-STUDY PROGRAM

    13. The authority citation for part 675 is revised to read as 
follows:

    Authority: 42 U.S.C. 2751-2756b, unless otherwise noted.


Sec. 675.3  [Removed]

    14. Section 675.3 is removed and reserved.


Sec. 675.4  [Removed]

    15. Section 675.4 is removed and reserved.


Sec. 675.14  [Removed]

    16. Section 675.14 is removed and reserved.


Sec. 675.15  [Removed]

    17. Section 675.15 is removed and reserved.


Sec. 675.18  [Amended]

    18. Section 675.18 is amended by removing paragraph (b) and by 
redesignating paragraphs (c), (d), (e), (f), (g), and (h) as paragraphs 
(b), (c), (d), (e), (f), and (g), respectively.


Sec. 675.49  [Amended]

    19. Section 675.49 is amended by adding the words ``34 CFR part 673 
and'' before the words ``this part 675''.

PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT 
PROGRAM

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

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

[[Page 49396]]

Sec. 676.3  [Removed]

    21. Section 676.3 is removed and reserved.


Sec. 676.4  [Removed]

    22. Section 676.4 is removed and reserved.


Sec. 676.14  [Removed]

    23. Section 676.14 is removed and reserved.


Sec. 676.15  [Removed]

    24. Section 676.15 is removed and reserved.


Sec. 676.16  [Amended]

    25. Section 676.16 is amended by removing in paragraph (e)(1) and 
(e)(2) ``(f)'' and adding in its place ``(e)''.


Sec. 676.18  [Amended]

    26. Section 676.18 is amended by removing paragraph (b) and by 
redesignating paragraph (c) as paragraph (b).

PART 690--FEDERAL PELL GRANT PROGRAM

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

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

    28. Section 690.2, paragraph (c) is amended by removing the 
definition of ``Comparable State income tax return'' and by revising 
the definition of ``Annual award'' to read as follows:


Sec. 690.2  General definitions.

* * * * *
(c) * * *
    Annual award: The Federal Pell Grant award amount a full-time 
student would receive under the Payment Schedule for a full academic 
year in an award year, and the amount a three-quarter-time, half-time, 
and less-than-half-time student would receive under the appropriate 
Disbursement Schedule for being enrolled in that enrollment status for 
a full academic year in an award year.
* * * * *
    29. Section 690.10(b) is revised to read as follows:


Sec. 690.10  Administrative cost allowance to participating schools.

* * * * *
    (b) All funds an institution receives under this section must be 
used solely to pay the institution's cost of administering the Federal 
Pell Grant, Federal Perkins Loan, Federal Work-Study, and Federal 
Supplemental Educational Opportunity Grant programs.
* * * * *


Sec. 690.12  [Amended]

    30. Section 690.12(b)(1) is amended by removing ``a copy of''.
    31. Section 690.13 is revised to read as follows:


Sec. 690.13  Notification of expected family contribution.

    The Secretary sends a student's application information and EFC as 
calculated by the central processor to the student on an SAR and allows 
each institution designated by the student to obtain an ISIR for that 
student.

(Approved by the Office of Management and Budget under control 
number 1840-0681)

(Authority: 20 U.S.C. 1070a)

    32. Section 690.14 is amended by removing paragraphs (b)(1)and 
(b)(2); by redesignating paragraph (b)(3) introductory text as 
paragraph (c) introductory text; by redesignating paragraph (b)(3)(i) 
as paragraph (c)(1); by redesignating paragraph (b)(3)(ii) as paragraph 
(c)(2); by redesignating paragraph (b)(4) as paragraph (d); and by 
revising the heading and paragraphs (a) and (b) to read as follows:


Sec. 690.14  Applicant's request to recalculate expected family 
contribution because of a clerical or arithmetic error or the 
submission of inaccurate information.

    (a) An applicant may request the Secretary to recalculate his or 
her expected family contribution if--
    (1) He or she believes a clerical or arithmetic error has occurred; 
or
    (2) The information he or she submitted was inaccurate when the 
application was signed.
    (b) The applicant shall request the Secretary to make the 
recalculation described in paragraph (a) of this section by--
    (1) Having his or her institution transmit that request to the 
Secretary under EDE; or
    (2) Sending to the Secretary an approved form, certified by the 
student, and one of the student's parents if the student is a dependent 
student.
* * * * *
    33. Section 690.61 is amended by revising paragraphs (a)(1)(ii) and 
paragraph (b)(2) to read as follows:


Sec. 690.61  Disbursement conditions and deadlines.

    (a) * * *
    (1) * * *
    (ii) The institution obtains a valid ISIR for the student.
* * * * *
    (b) * * *
    (2) By the deadline date established by the Secretary through 
publication of a notice in the Federal Register.
* * * * *


Sec. 690.75  [Amended]

    34. Section 690.75 (a)(2) is amended by adding ``in an eligible 
program'' after ``enrolled''; and paragraph (e) is amended by removing 
the phrase ``an expected family contribution of at least $3,000'' and 
adding in its place ``an expected family contribution amount at least 
equal to the maximum authorized award amount for the award year''.


Sec. 690.78  [Amended]

    35. Section 690.78 (c)(2) is amended by removing ``15'' and adding 
in its place ``20''; paragraph (c)(3) is amended by removing ``15'' and 
adding in its place ``20''; and paragraph (c)(4) is amended by removing 
``15'' and adding in its place ``20''.


Sec. 690.81  [Amended]

    36. Section 690.81 is amended by removing paragraph (c).

[FR Doc. 96-24010 Filed 9-18-96; 8:45 am]
BILLING CODE 4000-01-P