[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)]
[Rules and Regulations]
[Pages 60390-60397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30264]



[[Page 60389]]

_______________________________________________________________________

Part IV





Department of Education





_______________________________________________________________________



34 CFR Part 668, et al.



Postsecondary Education: Student Assistance General Provisions; Federal 
Perkins Loan, Federal Work-Study, Federal Supplemental and Federal Pell 
Grant; Final Rule

  Federal Register / Vol. 61, No. 230 / Wednesday, November 27, 1996 / 
Rules and Regulations  

[[Page 60390]]



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 Programs, Federal 
Supplemental Educational Opportunity Grant Program, and Federal Pell 
Grant Program

AGENCY: Department of Education.

ACTION: Final Regulations.

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

SUMMARY: The Secretary amends 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 regulations, 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 measures for the title IV, HEA programs. The 
Secretary made these changes in response to the President's Regulatory 
Reform Initiative.

EFFECTIVE DATE: These regulations take effect on July 1, 1997.

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

SUPPLEMENTARY INFORMATION: 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, on September 19, 1996, the Secretary published a notice of 
proposed rulemaking (NPRM) for parts 668, 673, 674, 675, 676, and 690 
in the Federal Register (61 FR 49389-49396). The NPRM included a 
discussion of the proposed changes that will not be repeated here. The 
following list summarizes those changes and identifies the pages of the 
preamble to the NPRM on which the discussion can be found.

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

    The Secretary proposed to create a new part 673 of 34 CFR to 
consolidate the common provisions of the Federal Perkins Loan Program--
part 674, the FWS Program--part 675, and the FSEOG Program--part 676 of 
program regulations (page 49390).

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

Sections 674.3, 675.3, and 676.3  Application
    The Secretary proposed to delete duplicate provisions from parts 
674, 675, and 676 and consolidate the application procedures into the 
new part 673 under Sec. 673.3 (page 49390).
Sections 674.4, 675.4, and 676.4  Allocation and Reallocation
    The Secretary proposed to delete duplicate provisions from parts 
674, 675, and 676 and consolidate the allocation and reallocation 
provisions into the new part 673 under Sec. 673.4 (page 49390).
Sections 674.14, 675.14, and 676.14  Overaward
    The Secretary proposed to delete duplicate provisions from parts 
674, 675, and 676 and consolidate the overaward provisions for the 
campus-based programs into the new part 673 under Sec. 673.5 (page 
49390-49391).
Sections 674.15, 675.15, 676.15  Coordination with BIA Grants
    The Secretary proposed to delete duplicate provisions from parts 
674, 675, and 676 and consolidate the provisions into the new part 673 
under Sec. 673.6 (page 49391).
Sections 674.18, 675.18, and 676.18 Use of Funds
    The Secretary proposed to delete 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 (page 49391).

Federal Pell Grant Program

    There were no major proposed changes to the Federal Pell Grant 
Program. However, the Secretary proposed some minor technical changes 
as described in the following paragraphs.
Section 690.2  General Definitions
    The Secretary proposed to clarify the definition of ``Annual 
award'' in Sec. 690.2(c) and to remove the definition of ``Comparable 
State income tax return'' because it is obsolete (page 49391).

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 proposed to amend Sec. 690.14 by revising the heading 
of the section and by clarifying paragraph (b)(1) to provide an 
additional reason for recalculating a student's EFC that was

[[Page 60391]]

inadvertently left out of earlier regulations (page 49391).

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 proposed to amend Sec. 690.61(b)(2) by deleting the 
June 30 deadline date for a student to submit the required documents. 
Due to faster electronic data processing, a student now has an extended 
period of time to submit the required documents (page 49391).

Subpart G--Administration of Grant Payments.

Section 690.75  Determination of Eligibility for Payment
    The Secretary proposed to revise 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'' to reflect the changes to the maximum award amount for 
each award year (page 49391).
Section 690.78  Method of Disbursement--by Check or Credit to a 
Student's Account.
    The Secretary proposed to amend Sec. 690.78(c)(2), (c)(3), and 
(c)(4) to allow a student 20 days instead of 15 days after the 
student's enrollment ends in an award year to pick up a Pell Grant 
disbursement for that award year (page 49391).
Section 690.81  Fiscal Control and Fund Accounting Procedures
    The Secretary proposed to delete Sec. 690.81(c) because the 
provisions contained in that paragraph duplicate provisions in 
Sec. 668.161(b) of the Student Assistance General Provisions 
regulations, which cover all of the title IV programs (page 49391).

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 regulations address the National Education Goals that call 
for increasing the rate at which students graduate from high school and 
pursue high quality postsecondary education and for supporting life-
long learning.

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRM several 
parties submitted comments on the proposed regulations. An analysis of 
the comments and of the changes in the regulations since the 
publication of the NPRM follows. Please note that this section 
addresses only the proposed regulations on which substantive comments 
were received or regulations that have been substantively changed as a 
result of the Secretary's review.
    Technical and other minor changes--and suggested changes the 
Secretary is not legally authorized to make under the applicable 
statutory authority--are not addressed.

Part 673

    Comments: Seven commenters expressed support for the Secretary's 
efforts to eliminate duplicate provisions and to consolidate common 
procedures in the campus-based program regulations into one section.
    Discussion: The Secretary is encouraged by the expressions of 
support from the public for the activities that are part of the 
President's Regulatory Reinvention Initiative.
    Changes: None.
Section 673.1  Purpose
    Comments: One organization recommended that the Secretary revise 
the definition of the Federal Perkins Loan Program in paragraph (a) to 
refer to neediest undergraduate and graduate students instead of needy 
undergraduate and graduate students.
    Discussion: The Secretary believes that the definition is 
consistent with Secs. 461(a) and 463(a)(9) of the HEA. Section 674.10, 
which describes the selection of students for loans, reflects these 
statutory requirements while giving institutions the flexibility to 
define exceptional need within the unique context of their 
postsecondary population. It is the Secretary's intent to provide 
flexibility and reduce burden for institutions, not to add new 
restrictions.
    Changes: None.
Section 673.5  Overaward
    Comments: One commenter felt strongly that overawards in the 
Federal Perkins Loan Program should be treated the same as overawards 
in the Federal Family Education Loan (FFEL) Program and the William D. 
Ford Federal Direct Loan Program. This commenter believes that 
requiring students to repay overawards immediately rather than adding 
the overaward to the loan balance to be repaid under standard loan 
repayment terms is burdensome and inconsistent with the treatment of 
overawards in the FFEL and Direct Loan programs.
    Discussion: The Secretary recognizes that the treatment of 
overawards in the Federal Perkins Loan Program is different from the 
treatment of overawards in the FFEL and Direct Loan programs. However, 
the Federal Perkins Loan Program is unique in that loans made under 
this program are made from a revolving fund that depends on 
contributions from a Federal Capital Contribution, the institutions own 
matching funds, and the repayment of principal and interest back into 
the fund from Federal Perkins Loan borrowers. The immediate repayment 
of overawards ensures that the Federal Perkins Loan fund is not rapidly 
depleted and that funds are available for future Federal Perkins Loan 
borrowers.
    Changes: None.
Section 673.7  Administrative Cost Allowance
    Comment: One organization commented that Sec. 673.7(b) is an area 
in which institutions should be afforded flexibility in using their own 
procedures. Institutions vary on the time-frames within which they book 
entries on administrative cost allowances (ACA) and, therefore, should 
be given extra time to reflect these bookings in their records. The 
commenter believes that a six-month window of time after the award year 
ends to reflect adjustments and additional entries of ACA against their 
Perkins funds would provide institutions flexibility to use their own 
procedures.
    Discussion: Neither the requirement that institutions charge their 
ACA against program expenditures made during an award year, nor the 
requirement that institutions charge their ACA during the same award 
year in which the expenditures for these costs were made under the 
Federal Perkins Loan Program is a new policy.
    These requirements were previously contained in Sec. 674.18, 
675.18, and 676.18. The Secretary believes allowing institutions that 
administer the campus-based programs to report expenditures during a 
six-month window after an award year has ended would unnecessarily 
complicate the program's financial management and accounting 
procedures. However, adjustments may be made during the FISAP editing 
process, as needed.
    Changes: None.

[[Page 60392]]

Federal Pell Grant Program

Section 690.78  Method of Disbursement--by Check or Credit to a 
Student's Account
    Comments: One commenter recommended that the Secretary move the 
treatment of what the commenter described as ``late disbursements'' 
from Sec. 690.78(c)(1) through (c)(5) to Sec. 668.164 of the General 
Provisions regulations. The commenter also believes that 
Secs. 690.78(c)(2), (c)(3), and (c)(4) are in conflict with the 
proposed late disbursement provisions in Sec. 668.164(g).
    Discussion: The Secretary does not believe that Sec. 690.78 (c)(2), 
(c)(3), and (c)(4) are in conflict with the late disbursement 
provisions in Sec. 668.164(g). The late disbursement provisions in 
Sec. 668.164(g) apply only to ineligible students who are ineligible 
solely because they withdraw or are no longer enrolled at an 
institution. The provisions in Sec. 690.78(c)(2), (c)(3), and (c)(4) 
deal with eligible students as well as ineligible students. The latter 
provisions also relate to the ability of a student to claim a Federal 
Pell Grant award rather than the making of late disbursements to 
students. However, the Secretary agrees with the commenter that it 
would be useful in Sec. 690.78(c) to reference the late disbursement 
provisions in Sec. 668.164.
    Changes: Section 690.78(c)(6) is revised to reference the late 
disbursement provisions in Sec. 668.164.

Additional Changes

Section 675.26  FWS Federal Share Limitations
    The Secretary is providing for an additional waiver of the FWS 
institutional-share requirement in Sec. 675.26. The Secretary will 
authorize a Federal share of 100 percent of the compensation earned by 
a student during an award year if all of the following criteria are 
met--
    1. The work performed by the student is for the institution itself, 
for a Federal, State, or local public agency, or for a private 
nonprofit organization; and
    2. The student is employed as a reading tutor for children who are 
in preschool through elementary school.
    This regulatory change will provide an institution with the 
flexibility needed to respond to the President's ``America Reads'' 
Challenge, which will mobilize resources to ensure that all children 
can read independently by the end of the third grade. Forty percent of 
children are not reading well enough by the end of third grade. 
Children who cannot read early and well are hampered at the very start 
of their education and for the rest of their lives. This effort to 
tutor young children in reading can unlock the children's potential to 
learn and empower them throughout their lives. The investment in our 
youth is an investment in this country's future.
    The Secretary strongly encourages all institutions to place FWS 
students as reading tutors for children. The placement of students in 
FWS jobs as reading tutors for children is an important way for 
institutions to meet the community service expenditure requirement 
under the FWS Program, serve the needs of the community, and give the 
FWS students a rewarding and enriching experience. The programs that 
provide this reading tutoring for children may take place during the 
children's school hours; or after school, on weekends, or in the 
summer, in order to extend the learning time. The institution may 
construct its own reading tutor program or become involved with 
existing community programs. The new waiver of the FWS institutional-
share requirement provided in Sec. 675.26 does not require the 
institution to make a request for the waiver. Also, the institution has 
the option of continuing to provide an institutional share and 
determining the amount of that share.
    While institutions will not receive increased FWS allocations for 
this initiative and will be expected to meet the 100 percent Federal 
share from their normal FWS allocations, the Secretary notes that many 
institutions will receive substantially increased FWS allocations for 
the 1997-98 award year due to the higher FWS appropriations for FY 97. 
The Secretary believes that these increased FWS allocations will enable 
many institutions to support this initiative actively by providing 100 
percent Federal share funding for the employment of FWS students as 
reading tutors.
    It is also important to note that the Secretary continues the 
current exception that authorizes a Federal share of 100 percent of the 
compensation earned by students enrolled at institutions designated as 
an eligible institution under the Strengthening Institutions Program, 
the Strengthening Historically Black Colleges and Universities Program, 
or the Strengthening Historically Black Graduate Institutions Program.

Executive Order 12866

1. Assessment of Costs and Benefits

    These final 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 final regulations are those 
resulting from statutory requirements and those determined by the 
Secretary to be necessary for administering this program effectively 
and efficiently.
    Thus, in assessing the potential costs and benefits--both 
quantitative and qualitative--of these final regulations, the Secretary 
has determined that the benefits of the final regulations justify the 
costs.
    Potential costs and benefits of the final regulations are discussed 
elsewhere in this preamble.

Paperwork Reduction Act of 1995

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

Waiver of Proposed Rulemaking

    In accordance with section 437 of the General Education Provisions 
Act (20 U.S.C. 1232) and the Administrative Procedure Act (5 U.S.C. 
553), it is the practice of the Secretary to offer interested parties 
the opportunity to comment on proposed regulations. However, revising 
Sec. 675.26(d) will increase institutional flexibility and help to meet 
an important educational need for reading tutors without imposing any 
burden on the affected parties. The Secretary is specifically 
authorized under section 443(b)(5) of the Higher Education Act of 1965, 
as amended (42 U.S.C. 2753(b)(5)) to determine, through the 
promulgation of regulations, that the Federal share of compensation for 
FWS students may exceed 75 percent if required in furtherance of the 
purposes of the program. The Secretary has made such a determination in 
this case. For these reasons, the Secretary has determined, pursuant to 
5 U.S.C. 553(b)(B), that public comment on the amendment to 
Sec. 675.26(d) is unnecessary and contrary to the public interest.

Intergovernmental Review

    Some of these programs are 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.

[[Page 60393]]

    In accordance with the order, this document is intended to provide 
early notification of the Department's specific plans and actions for 
these programs.
    The Federal Perkins Loan, Federal Work-Study, and Federal Pell 
Grant programs are not subject to the requirements of Executive Order 
12372 and the regulations in 34 CFR Part 79.

Assessment of Educational Impact

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

List of Subjects

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 690

    Grant programs--education, Student aid.

(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.)

    Dated: November 21, 1996.
Richard W. Riley,
Secretary of Education.
    The Secretary amends 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, and 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 their 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 their cost 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 their cost of education.

(Authority: 20 U.S.C. 421-429, 1070b-1070b-3, and 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 parts 674, 675, and 676.

(Authority: 20 U.S.C. 421-429, 1070b-1070b-3, and 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 and 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:

[[Page 60394]]

    (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 provides an institution its 
allocation in accordance with the payment methods described in 34 CFR 
668.162.
    (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 by 
the institution 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. 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. Except as specifically 
provided in 34 CFR 668.164(g), an institution shall not use funds 
allocated or reallocated for an award year--
    (1) To make FSEOG disbursements to students in any other 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 and 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 Pell 
Grant;
    (ii) William D. Ford Federal Direct Loans;
    (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) Waivers 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 calculation of 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 Federal 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.

[[Page 60395]]

    (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, or 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 paragraph (f)(3) and, if applicable, 
paragraph (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 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 and 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; and
    (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 administrative costs 
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 administrative costs 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 administrative 
costs 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

[[Page 60396]]

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

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 continues 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.
    19. Section 675.26 is amended by revising paragraph (d) to read as 
follows:


Sec. 675.26  FWS Federal Share Limitations.

* * * * *
    (d) For each award year, the Secretary authorizes a Federal share 
of 100 percent of the compensation earned by a student under this part 
if the work performed by the student is for the institution itself, for 
a Federal, State or local public agency, or for a private nonprofit 
organization, and
    (1) The institution in which the student is enrolled--
    (i) Is designated as an eligible institution under the 
Strengthening Institutions program (34 CFR part 607), the Strengthening 
Historically Black Colleges and Universities program (34 CFR part 608), 
or the Strengthening Historically Black Graduate Institutions program 
(34 CFR part 609); and
    (ii) Requests that increased Federal share as part of its regular 
FWS funding application for that year; or
    (2) The student is employed as a reading tutor for children who are 
in preschool through elementary school.


Sec. 675.49  [Amended]

    20. 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

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

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


Sec. 676.3  [Removed]

    22. Section 676.3 is removed and reserved.


Sec. 676.4  [Removed]

    23. Section 676.4 is removed and reserved.


Sec. 676.14  [Removed]

    24. Section 676.14 is removed and reserved.


Sec. 676.15  [Removed]

    25. Section 676.15 is removed and reserved.


Sec. 676.16  [Amended]

    26. 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]

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

PART 690--FEDERAL PELL GRANT PROGRAM

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

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

    29. 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

[[Page 60397]]

for a full academic year in an award year.
* * * * *
    30. 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]

    31. Section 690.12(b)(1) is amended by removing ``a copy of''.
    32. 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)

    33. 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 that the Secretary 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 that the Secretary 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.
* * * * *
    34. Section 690.61 is amended by revising paragraphs (a)(1)(ii) and 
(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]

    35. Section 690.75 (a)(2) is amended by adding ``in an eligible 
program'' after ``enrolled''; and paragraph (e), introductory text 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''.
    36. In Section 690.78 paragraph (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''; paragraph (c)(4) is 
amended by removing ``15'' and adding, in its place, ``20''; and a new 
paragraph (c)(6) is added to read as follows:


Sec. 690.78  Method of disbursement--by check or credit to a student's 
account.

* * * * *
    (c) * * *
    (6) An institution shall make a late disbursement to an ineligible 
student in accordance with the provisions in 34 CFR 668.164(g).
* * * * *


Sec. 690.81  [Amended]

    37. Section 690.81 is amended by removing paragraph (c).
[FR Doc. 96-30264 Filed 11-26-96; 8:45 am]
BILLING CODE 4000-01-P