[Federal Register Volume 62, Number 167 (Thursday, August 28, 1997)]
[Proposed Rules]
[Pages 45596-45604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22876]


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DEPARTMENT OF DEFENSE

DEPARTMENT OF TRANSPORTATION

Coast Guard

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 21

RIN 2900-AF85


Veterans Education: Suspension and Discontinuance of Payments

AGENCIES: Department of Defense, Department of Transportation (Coast 
Guard), and Department of Veterans Affairs.

ACTION: Proposed rule.

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[[Page 45597]]

SUMMARY: This document proposes to make changes to the education 
regulations. With respect to determinations concerning suspension or 
discontinuance of payments of educational assistance when educational 
institutions (including training establishments) fail to meet 
requirements, it is proposed to require that recommendations first be 
obtained from Committees on Educational Allowances, to establish 
procedural and composition requirements for the Committees, and to 
establish hearing rules for the Committees. In addition, it is proposed 
that appeals of a decision concerning such suspension or discontinuance 
of payments of educational assistance be determined by the Director of 
the Education Service upon request by the affected educational 
institution based on the evidence of record. The proposed changes would 
apply to the following educational assistance programs: Montgomery GI 
Bill--Active Duty, Montgomery GI Bill--Selected Reserve, Survivors' and 
Dependents' Educational Assistance, the Post-Vietnam Era Veterans' 
Educational Assistance Program, and the Educational Assistance Pilot 
Program. The proposed changes appear to be appropriate to ensure proper 
decisionmaking. In addition, nonsubstantive changes would be made for 
the purpose of clarification.

DATES: Comments must be received on or before October 27, 1997.

ADDRESSES: Mail or hand deliver written comments to: Director, Office 
of Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Ave., NW, Room 1154, Washington, DC 20420. Comments should 
indicate that they are submitted in response to ``RIN 2900-AF85.'' All 
written comments will be available for public inspection at the above 
address in the Office of Regulations Management, Room 1158, between the 
hours of 8:00 a.m. and 4:30 p.m., Monday through Friday (except 
holidays).

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

SUPPLEMENTARY INFORMATION: This document proposes to make changes to 
the education regulations in 38 CFR part 21. More specifically, it is 
proposed to make changes to the regulations concerning suspension or 
discontinuance of payments of educational assistance when educational 
institutions (including training establishments) fail to meet 
requirements. The proposed changes would apply to the following 
educational assistance programs: Montgomery GI Bill--Active Duty, 
Montgomery GI Bill--Selected Reserve, Survivors' and Dependents' 
Educational Assistance, the Post-Vietnam Era Veterans' Educational 
Assistance Program (VEAP), and the Educational Assistance Pilot 
Program. The authority for this proposal is contained in 10 U.S.C. 2147 
note and 16136(b); and 38 U.S.C. 501, 3034(a), 3241(a), and 3690.
    Under these programs, veterans, reservists, servicemembers, and 
eligible persons (as statutorily identified for each program) receive 
educational assistance from the Department of Veterans Affairs (VA) 
while attending programs of education. To be eligible for assistance, 
individuals must pursue courses approved by a State approving agency. 
Educational institutions are required to inform VA of certain 
occurrences relating to these programs (e.g., when VA-supported 
students discontinue or reduce training, change programs, or fail to 
progress satisfactorily), and to meet a number of other legal 
requirements. When an educational institution has failed to meet such 
requirements and the State approving agency has not withdrawn course 
approval, the Director of the VA facility of jurisdiction may suspend 
or discontinue payment of educational assistance.
    It is not proposed to change the requirement in the regulations 
that failure by an educational institution to meet requirements 
pertaining to the percentage of students receiving VA educational 
benefits could result in discontinuance of educational assistance to 
new students based on undisputed information submitted by the 
educational institution. (See 38 CFR 21.4201.) However, when an 
educational institution otherwise fails to meet requirements, it is 
proposed that, prior to making determinations concerning suspension or 
discontinuance of educational assistance, the Director of the VA 
facility of jurisdiction will refer the matter to the VA facility's 
Committee on Educational Allowances and receive recommendations 
therefrom. This document also proposes to require that such a referral 
be in writing, contain the reasons for the referral, and be posted in 
the VA facility of jurisdiction. We believe that this would help ensure 
appropriate decisionmaking.
    Currently, a Committee on Educational Allowances must be composed 
of three individuals. It is proposed to require that at least one of 
the individuals be a VA employee familiar with the adjudication of 
claims for benefits administered by the Veterans Benefits 
Administration. VA believes that this is warranted to ensure that the 
committee has sufficient expertise for appropriate recommendations.
    This document also proposes to establish a comprehensive set of 
hearing rules for use by the respective Committees on Educational 
Allowances. This would help ensure uniformity and fairness with respect 
to recommendations made by the committees.
    The current regulations provide for an automatic de novo review in 
VA Central Office by the Central Office Education Training and Review 
Panel of any decision of the Director of the VA facility of 
jurisdiction if the committee's recommendation to the Director is not 
unanimous or if the Director disagrees with the recommendation of the 
committee. It is proposed that the review be based on the evidence of 
record rather than constituting a de novo review. It is also proposed 
that the review be conducted by the Director of the Education Service 
rather than by the Central Office Education Training and Review Panel. 
Further, instead of providing for an automatic review, it is proposed 
that such a review be provided only upon request by the affected 
educational institution. This appears to provide adequate fairness for 
these circumstances and will help to ensure efficiency and uniformity 
in decisionmaking.
    Also, nonsubstantive changes would be made for the purpose of 
clarification.
    The Department of Defense (DOD) and VA are jointly issuing this 
proposal insofar as it relates to VEAP. This program is funded by DOD 
and administered by VA. DOD, the Department of Transportation (Coast 
Guard), and VA are jointly issuing this proposal insofar as it relates 
to the Montgomery GI Bill--Selected Reserve program. This program is 
funded by DOD and the Coast Guard, and is administered by VA. The 
remainder of this proposal is issued solely by VA.
    The Secretary of Defense, the Commandant of the Coast Guard, and 
the Secretary of Veterans Affairs, within their respective 
jurisdictions, hereby certify that the adoption of the proposed 
provisions will not have a significant economic impact on a substantial 
number of small entities as they are defined in the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. Although it is possible that a 
small-entity school could be affected by this rulemaking, the number of 
individuals affected at the

[[Page 45598]]

school would in all likelihood be an insignificant portion of the 
student body. Also, experience has shown that only one or two schools 
per year would be affected by the provisions of this rulemaking 
concerning suspensions and discontinuance of payments. Therefore, 
pursuant to 5 U.S.C. 605(b), the proposed provisions are exempt from 
the initial and final regulatory flexibility analyses requirements of 
sections 603 and 604.
    The Catalog of Federal Domestic Assistance numbers for programs 
affected by this proposal are 64.117, 64.120, and 64.124. There is no 
Catalog of Federal Domestic Assistance number for the Montgomery GI 
Bill--Selected Reserve program.

List of Subjects in 38 CFR Part 21

    Administrative practice and procedure, Armed forces, Civil rights, 
Claims, Colleges and universities, Conflict of interests, Defense 
Department, Education, Employment, Grant programs--education, Grant 
programs--veterans, Health care, Loan programs--education, Loan 
programs--veterans, Manpower training programs, Reporting and 
recordkeeping requirements, Schools, Travel and transportation 
expenses, Veterans, Vocational education, Vocational rehabilitation.

    Approved: August 21, 1997.
Hershel W. Gober,
Acting Secretary of Veterans Affairs.

    Approved: May 8, 1997.
Normand G. Lezy,
Lieutenant General, USAF Deputy Assistant Secretary (Military Personnel 
Policy).

    Approved: April 24, 1997.
W.C. Donnell,
RADM, USCG Assistant Commandant for Human Resources.

    For the reasons set out in the preamble, 38 CFR part 21, subparts 
D, G, K, and L, is proposed to be amended as set forth below.

PART 21--VOCATIONAL REHABILITATION AND EDUCATION

Subpart D--Administration of Educational Assistance Programs

    1. The authority citation for part 21, subpart D is revised to read 
as follows:

    Authority: 10 U.S.C. 2147 note, ch. 1606; 38 U.S.C. 501(a), chs. 
30, 32, 34, 35, 36, unless otherwise noted.


Sec. 21.4133  [Removed]

    2. Section 21.4133 is removed.


Sec. 21.4134  [Removed]

    3. Section 21.4134 is removed.
    4. In Sec. 21.4135, paragraph (f) is revised; introductory text is 
added to paragraph (j); paragraph (j)(1) is revised; the heading for 
paragraph (k) is revised; introductory text is added to paragraph (k); 
and paragraph (k)(1) is revised, to read as follows:


Sec. 21.4135  Discontinuance dates.

* * * * *
    (f) Discontinued by VA (Secs. 21.4215, 21.4216). If VA discontinues 
payments of educational assistance as provided by Secs. 21.4215(d) and 
21.4216, the effective date of discontinuance will be as follows:
    (1) The date on which payments first were suspended by the Director 
of a VA facility as provided in Sec. 21.4210, if the discontinuance 
were preceded by such a suspension.
    (2) End of the month in which the decision to discontinue is 
effective pursuant to Sec. 21.4215(d), if the Director of a VA facility 
did not suspend payments prior to the discontinuance.

(Authority: 38 U.S.C. 3690)
* * * * *
    (j) Disapproval by State approving agency (Sec. 21.4259(a)). If a 
State approving agency disapproves a course, the date of discontinuance 
of payments to those receiving educational assistance while enrolled in 
the course will be as follows:
    (1) The date on which payments first were suspended by the Director 
of a VA facility as provided in Sec. 21.4210, if disapproval were 
preceded by such a suspension.
* * * * *
    (k) Disapproval by Department of Veterans Affairs (Secs. 21.4215, 
21.4259(c)). If VA disapproves a course, the date of discontinuance of 
payments to those receiving educational assistance while enrolled in 
the course will be as follows:
    (1) Date on which payments first were suspended by the Director of 
a VA facility as provided in Sec. 21.4210, if disapproval were preceded 
by such a suspension.
* * * * *


Sec. 21.4146  [Amended]

    5. Section 21.4146(e) is amended by removing ``Secs. 21.4207 and 
21.4202(b)(4)'' and adding, in its place, ``Secs. 21.4210(g) and 
21.4212''.


Sec. 21.4152  [Amended]

    6. Section 21.4152(b)(2) is amended by removing ``Sec. 21.4202'' 
and adding, in its place, ``Sec. 21.4210(d)''.


Sec. 21.4202  [Amended]

    7. In Sec. 21.4202, paragraphs (a) and (b) are removed and 
reserved.


Sec. 21.4207  [Removed]

    8. Section 21.4207 is removed.


Sec. 21.4208  [Removed]

    9. Section 21.4208 is removed.
    10. Section 21.4210 is added to read as follows:


Sec. 21.4210  Suspension and discontinuance of educational assistance 
payments and of enrollments or reenrollments for pursuit of approved 
courses.

    (a) Overview. (1) VA may pay educational assistance to an 
individual eligible for such assistance under 10 U.S.C. chapter 1606, 
or 38 U.S.C. chapter 30, 32, 35, or 36, only if the individual is 
pursuing a course approved in accordance with the provisions of 38 
U.S.C. chapter 36. In general, courses are approved for this purpose by 
a State approving agency designated to do so (or by VA in some 
instances). Notwithstanding such approval, however, VA, as provided in 
paragraphs (b), (c), and (d) of this section, may suspend, discontinue, 
or deny payment of benefits to any or all otherwise eligible 
individuals for pursuit of courses or training approved under 38 U.S.C. 
chapter 36.
    (2) For the purposes of this section and the purposes of 
Secs. 21.4211 through 21.4216, except as otherwise expressly stated to 
the contrary--
    (i) The term course includes an apprenticeship or other on-job 
training program;
    (ii) The term educational institution includes a training 
establishment; and
    (iii) Reference to action suspending, discontinuing, or otherwise 
denying enrollment or reenrollment means such action with respect to 
providing educational assistance under the chapters listed in paragraph 
(a)(1) of this section. (Authority: 10 U.S.C. 16136(b); 38 U.S.C. 
3034(a), 3241(a), 3452, 3671, 3690)
    (b) Denial of payment in individual cases. VA may deny payment of 
educational assistance to a specific individual for pursuit of a course 
or courses if, following an examination of the individual's case, VA 
has credible evidence affecting that individual that--
    (1) The course fails to meet any of the requirements of 10 U.S.C. 
chapter 1606, or 38 U.S.C. chapter 30, 32, 34, 35, or 36; or
    (2) The educational institution offering the individual's course 
has violated any of those requirements of law.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 
3690(b)(1), 3690(b)(2))

    (c) Notice in individual cases. Except as provided in paragraph (e) 
of this section, when VA denies payment of

[[Page 45599]]

educational assistance to an individual under paragraph (b) of this 
section, VA will provide concurrent written notice to the individual. 
The notice shall state--
    (1) The adverse action;
    (2) The reasons for the action; and
    (3) The individual's right to an opportunity to be heard thereon in 
accordance with part 19 of this title.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Actions affecting groups. (1) The Director of the VA facility 
of jurisdiction may suspend payments of educational assistance to all 
veterans, servicemembers, reservists, or eligible persons already 
enrolled in a course, and may disapprove all further enrollments or 
reenrollments of individuals seeking VA educational assistance for 
pursuit of the course. The decision to take such action, except as 
provided in paragraph (d)(2) of this section, must be based on evidence 
of a substantial pattern of veterans, servicemembers, reservists, or 
eligible persons enrolled in the course receiving educational 
assistance to which they are not entitled because:
    (i) One or more of the course approval requirements of 38 U.S.C. 
chapter 36 are not met, including the course approval requirements 
specified in Secs. 21.4253, 21.4254, 21.4261, 21.4262, 21.4263, and 
21.4264; or
    (ii) The educational institution offering the course has violated 
one or more of the recordkeeping or reporting requirements of 10 U.S.C. 
chapter 1606, or of 38 U.S.C. chapters 30, 32, 34, 35, and 36. These 
violations may include, but are not limited to, the following:
    (A) Willful and knowing submission of false reports or 
certifications concerning students or courses of education;
    (B) Failure to report to VA a veteran's, servicemember's, 
reservist's, or eligible person's reduction, discontinuance, or 
termination of education or training; or
    (C) Submission of improper or incorrect reports in such number, 
manner, or period of time as to indicate negligence on its part, 
including failure to maintain an adequate reporting or recordkeeping 
system.
    (2) The Director also may make a decision to take the action 
described in paragraph (d)(1) of this section when the Director has 
evidence that one or more prohibited assignments of benefits have 
occurred at an educational institution as a result of that educational 
institution's policy. This decision may be made regardless of whether 
there is a substantial pattern of erroneous payments at the educational 
institution. See Sec. 21.4146.
    (3) The Director may disapprove the enrollment of all individuals 
not already enrolled in an educational institution (which for the 
purposes of this paragraph does not include a training establishment) 
when the Director finds that the educational institution:
    (i) Has charged or received from veterans, servicemembers, 
reservists, or eligible persons an amount for tuition and fees in 
excess of the amount similarly circumstanced nonveterans are required 
to pay for the same course; or
    (ii) Has instituted a policy or practice with respect to the 
payment of tuition, fees, or other charges that substantially denies to 
veterans, servicemembers, reservists, or eligible persons the benefits 
of advance payment of educational assistance authorized to such 
individuals under Secs. 21.4138(d), 21.7140(a), and 21.7640(d); or
    (iii) Has used erroneous, deceptive, or misleading practices as set 
forth in Sec. 21.4252(h).

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 
3680A(d), 3684, 3685, 3690, 3696, 5301)

    (e) Actions that must accompany a mass suspension of educational 
assistance payments or suspension of approval of enrollments and 
reenrollments in a course or educational institution. (1) The Director 
of the VA facility of jurisdiction may suspend payment of educational 
assistance and may suspend approval of new enrollments and 
reenrollments as provided in paragraph (d) of this section, only after:
    (i) The Director notifies in writing the State approving agency 
concerned and the educational institution of any failure to meet the 
approval requirements and any violation of recordkeeping or reporting 
requirements; and
    (ii) The educational institution--
    (A) Refuses to take corrective action; or
    (B) Does not take corrective action within 60 days (or 90 days if 
permitted by the Director).
    (2) Not less than 30 days before the Director acts to make a mass 
suspension of payments of educational assistance and/or suspend 
approval of new enrollments and reenrollments, the Director will, to 
the maximum extent feasible, provide written notice to each veteran, 
servicemember, reservist, and eligible person enrolled in the affected 
courses. The notice will:
    (i) State the Director's intent to suspend payments and/or suspend 
approval of new enrollments and reenrollments unless the educational 
institution takes corrective action;
    (ii) Give the reasons why the Director intends to suspend payments 
and/or suspend approval of new enrollments and reenrollments; and
    (iii) State the date on which the Director intends to suspend 
payments and/or suspend approval of new enrollments and reenrollments.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690(b))

    (f) Actions in cases indicating submission of false, misleading, or 
fraudulent claims or statements. The Director of the VA facility of 
jurisdiction will take the following action, as indicated, that may be 
in addition to suspending payments or further approval of enrollments 
or reenrollments in a course or educational institution.
    (1) If the Director has evidence indicating that an educational 
institution has willfully submitted a false or misleading claim, or 
that a veteran, servicemember, reservist, eligible person, or other 
person, with the complicity of an educational institution, has 
submitted such a claim, the Director will make a complete report of the 
facts of the case to the appropriate State approving agency and to the 
Office of Inspector General for appropriate action.
    (2) If the Director believes that an educational institution has 
submitted a false, fictitious, or fraudulent claim or written statement 
within the meaning of the Program Fraud Civil Remedies Act (31 U.S.C. 
3801-3812) or that a veteran, servicemember, reservist, eligible 
person, or other person, with the complicity of an educational 
institution, has submitted such a claim or made such a written 
statement, the Director will follow the procedures in part 42 of this 
title.

(Authority: 10 U.S.C. 16136(b); 31 U.S.C. 3801-3812; 38 U.S.C. 
3034(a), 3241(a), 3690(d))

    (g) Referral to the Committee on Educational Allowances. If the 
Director of the VA facility of jurisdiction suspends payment of 
educational assistance to, or suspends approval of the enrollment or 
reenrollment of, individuals in any course or courses as provided in 
paragraph (d) of this section, the Director will refer the matter to 
the Committee on Educational Allowances as provided in Sec. 21.4212.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (h) Withdrawal of referral to Committee on Educational Allowances. 
(1) If, following a suspension of payments and/or of approval of 
enrollments or reenrollments, the Director of the VA facility of 
jurisdiction determines that the conditions which

[[Page 45600]]

justified the suspension have been corrected, and the State approving 
agency has not withdrawn or suspended approval of the course or 
courses, the Director may resume payments to and/or approval of 
enrollments or reenrollments of the affected veterans, servicemembers, 
reservists, or eligible persons. If the case has already been referred 
to the Committee on Educational Allowances under paragraph (g) of this 
section at the time such action is taken, the Director will advise the 
Committee that the original referral is withdrawn.
    (2) If, following a referral to the Committee on Educational 
Allowances, the Director finds that the State approving agency will 
suspend or withdraw approval, the Director may, if otherwise 
appropriate, advise the Committee that the original referral is 
withdrawn.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    11. Section 21.4211 is added to read as follows:


Sec. 21.4211  Composition, jurisdiction, and duties of Committee on 
Educational Allowances.

    (a) Authority. VA is authorized by 38 U.S.C. 3690 to discontinue 
educational benefits to veterans, servicemembers, reservists, or 
eligible persons when VA finds that the program of education or course 
in which such individuals are enrolled fails to meet any of the 
requirements of 38 U.S.C. chapter 30, 32, 34, 35, or 36, or 10 U.S.C. 
chapter 1606, or the regulations in this part, or when VA finds an 
educational institution or training establishment has violated any such 
statute or regulation, or fails to meet any such statutory or 
regulatory requirement. Sections 21.4210 and 21.4216 implement that 
authority. This section provides for establishment of a Committee on 
Educational Allowances within each VA facility of jurisdiction whose 
findings of fact and recommendations will be provided to the Director 
of that VA facility, to whom such authority to discontinue educational 
benefits or disapprove enrollments or reenrollments has been delegated.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (b) Purpose. (1) The Committee on Educational Allowances is 
established to assist the Director of the VA facility of jurisdiction 
in reaching a conclusion as to whether, in a specific case, educational 
assistance to all individuals enrolled in any course or courses offered 
by the educational institution should be discontinued and, if 
appropriate, whether approval of all further enrollments or 
reenrollments in those courses should be denied to veterans, 
servicemembers, reservists, or other eligible persons pursuing those 
courses under programs administered by VA because a requirement of 38 
U.S.C. chapter 30, 32, 34, 35, or 36, or 10 U.S.C. chapter 1606, or the 
regulations in this part is not being met or a provision of such 
statute or regulation has been violated.
    (2) The function of the Committee on Educational Allowances is to 
develop facts and recommend action to be taken on the basis of the 
facts found. A hearing before the Committee is not in the nature of a 
trial in a court of law. Instead, it is an administrative inquiry 
designed to create a full and complete record upon which a 
recommendation can be made as to whether the Director should 
discontinue payment of educational benefits and/or deny approval of new 
enrollments or reenrollments. Both the interested educational 
institution and VA Regional Counsel, or designee, representing VA, will 
be afforded the opportunity to present to the Committee any evidence, 
argument, or other material considered pertinent.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (c) Jurisdiction. The Committee on Educational Allowances will 
consider only those cases which are referred in accordance with 
Secs. 21.4210(g) and 21.4212.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Committee members. The Committee on Educational Allowances will 
consist of three employees of the VA facility of jurisdiction, at least 
one of whom is familiar with the adjudication of claims for benefits 
administered by the Veterans Benefits Administration. The Director of 
the VA facility of jurisdiction will designate a Chairperson. In the 
event that any member becomes unable to serve for any reason, the 
Director may appoint a replacement member. Before the Committee resumes 
its proceedings, the new member will be given an opportunity to apprise 
himself or herself of the actions and testimony already taken by the 
Committee.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (e) Duties and responsibilities of the Committee. (1) The function 
of the Committee on Educational Allowances is to make recommendations 
to the Director of the VA facility of jurisdiction in connection with 
specific cases referred for consideration as provided in 
Secs. 21.4210(g) and 21.4212.
    (2) The performance of this function will include:
    (i) Hearing testimony or argument from witnesses or representatives 
of educational institutions and VA, as appropriate, when such persons 
appear personally before the Committee;
    (ii) Receiving and reviewing all the evidence, testimony, briefs, 
statements, and records included in each case; and
    (iii) Furnishing the Director of the VA facility of jurisdiction a 
written statement setting forth specifically the question or questions 
considered, a summation of the essential facts of record, 
recommendations as to issues referred for consideration by the 
Committee, and the basis therefor. In any case where there is not 
unanimity, both the majority and the minority views and recommendations 
will be furnished.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    12. Section 21.4212 is added to read as follows:


Sec. 21.4212  Referral to Committee on Educational Allowances.

    (a) Form and content of referral to Committee. When the Director of 
the VA facility of jurisdiction refers a case to the Committee on 
Educational Allowances, as provided in Sec. 21.4210(g), the referral 
will be in writing and will--
    (1) State the approval, reporting, recordkeeping, or other criteria 
of statute or regulation which the Director has cause to believe the 
educational institution has violated;
    (2) Describe the substantial pattern of veterans, servicemembers, 
reservists, or eligible persons receiving educational assistance to 
which they are not entitled which the Director has cause to believe 
exists, if applicable;
    (3) Outline the nature of the evidence relied on by the Director in 
reaching the conclusions of paragraphs (a)(1) and (a)(2) of this 
section;
    (4) Describe the Director's efforts to obtain corrective action and 
the results of those efforts; and
    (5) Ask the Committee on Educational Allowances to perform the 
functions described in Secs. 21.4211, 21.4213, and 21.4214 and to 
recommend to the Director whether educational assistance payable to 
individuals pursuing the courses in question should be discontinued and 
approval of new enrollments or reenrollments denied.
    (b) Notice of the referral. (1) At the time of referral the 
Director will--
    (i) Send notice of the referral, including a copy of the referral

[[Page 45601]]

document, by certified mail to the educational institution. The notice 
will include statements that the Committee on Educational Allowances 
will conduct a hearing; that the educational institution has the right 
to appear before the Committee and be represented at the hearing to be 
scheduled; and that, if the educational institution intends to appear 
at the hearing, it must notify the Committee within 60 days of the date 
of mailing of the notice;
    (ii) Provide an information copy of the notice and referral 
document to the State approving agency of jurisdiction; and
    (iii) Place a copy of the notice and referral document on display 
at the VA facility of jurisdiction for review by any interested party 
or parties.
    (2) The Director will provide a copy of the notice and referral 
document to the VA Regional Counsel, or designee, of jurisdiction, who 
will represent VA before the Committee on Educational Allowances.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    13. Section 21.4213 is added to read as follows:


Sec. 21.4213  Notice of hearing by Committee on Educational Allowances.

    (a) Content of hearing notice. In any case referred to the 
Committee on Educational Allowances for consideration, a hearing will 
be held. If, as provided in Sec. 21.4212(b), the educational 
institution has timely notified the Committee of its intent to 
participate in the hearing, the educational institution will be 
notified by certified letter from the Chairperson of the date when the 
hearing will be held. This hearing notification will inform the 
educational institution of--
    (1) The time and place of the hearing;
    (2) The matters to be considered;
    (3) The right of the educational institution to appear at the 
hearing with representation by counsel, to present witnesses, to offer 
testimony, to present arguments, and/or to submit a written statement 
or brief; and
    (4) The complete hearing rules and procedures.
    (b) Expenses connected with hearing. The notice also will inform 
the educational institution that VA will not pay any expenses incurred 
by the educational institution resulting from its participation in the 
hearing, including the expenses of counsel or witnesses on behalf of 
the educational institution.
    (c) Publication of hearing notice. Notice of the hearing will be 
published in the Federal Register, which will constitute notice to any 
interested individuals, and will indicate that, while such individuals 
may attend and observe the hearing, they may not participate unless 
called as witnesses by VA or the educational institution.

(Authority: 10 U.S.C. 16136; 38 U.S.C. 3034(a), 3241(a), 3690)

    14. Section 21.4214 is added to read as follows:


Sec. 21.4214  Hearing rules and procedures for Committee on Educational 
Allowances.

    (a) Rule 1. The Chairperson of the Committee on Educational 
Allowances will be in charge of the proceedings, will administer oaths 
or affirmations to witnesses, and will be responsible for the official 
conduct of the hearing. A majority of the members of the Committee will 
constitute a quorum. No party to the proceedings may conduct a voir 
dire of the Committee members.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (b) Rule 2. At the opening of the hearing, the Chairperson of the 
Committee on Educational Allowances will inform the educational 
institution of the purpose of the hearing, the nature of the evidence 
of record relating to the asserted failures or violations, and the 
applicable provisions of law and VA regulations. The Chairperson will 
advise the VA Regional Counsel, or designee, representing VA, that the 
Committee on Educational Allowances will entertain any relevant 
evidence or witnesses which VA Counsel presents to the Committee and 
which would substantiate a decision by the Committee to recommend that 
the Director of the VA facility of jurisdiction take an adverse action 
on the issues submitted for its review. The educational institution 
will be advised of its right to present any evidence, relevant to the 
issues submitted for the Committee's review, by oral or documentary 
evidence; to submit rebuttal evidence; to present and cross-examine 
witnesses; and to make such statements as may be appropriate on its 
behalf for a true and full disclosure of the facts. VA Counsel will be 
allowed to cross-examine any witnesses offered by the educational 
institution and to reply to any written briefs or arguments submitted 
to the Committee.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (c) Rule 3. Any testimony or evidence, either oral or written, 
which the Committee on Educational Allowances deems to be of probative 
value in deciding the question at issue will be admitted in evidence. 
While irrelevant, immaterial, or unduly repetitious evidence, 
testimony, or arguments should be excluded, reasonable latitude will be 
permitted with respect to the relevancy, materiality, and competency of 
evidence. In most instances the evidence will consist of official 
records of the educational institution and VA, and these documents may 
be attested to and introduced by affidavit; but the introduction of 
oral testimony by the educational institution or by VA will be allowed, 
as appropriate, in any instance where the educational institution or VA 
Counsel desires. VA, however, will neither subpoena any witness on 
behalf of the educational institution for such purposes nor bear any 
expenses in connection with the appearance of such witness. In 
instances where the evidence reasonably available consists of signed 
written statements, secondary or hearsay evidence, etc., such evidence 
may be introduced into the record and will be given the weight and 
consideration which the circumstances warrant.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Rule 4. A verbatim stenographic or recorded transcript of the 
hearing will be made. This transcript will become a permanent part of 
the record, and a copy will be furnished to the educational institution 
and the VA Counsel at the conclusion of the proceeding, unless 
furnishing of the copy of the transcript is waived by the educational 
institution.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (e) Rule 5. The Chairperson of the Committee on Educational 
Allowances will identify all exhibits in the order of introduction or 
receipt (numerically for VA exhibits and alphabetically for exhibits 
introduced by the educational institution). All such original exhibits 
or documents shall be attached to the original of the transcript. VA 
shall make photocopies or certified copies and attach them to the copy 
of the transcript furnished to the educational institution and the VA 
Counsel. The original transcript will accompany the Committee's 
recommendation to the Director of the VA facility of jurisdiction along 
with all exhibits, briefs, or written statements received by the 
Committee during the course of the proceedings. Such documents should 
be clearly marked to indicate which were received into evidence and 
relied upon by the Committee in making its recommendations.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)


[[Page 45602]]


    (f) Rule 6. The Committee on Educational Allowances, at its 
discretion, may reasonably limit the number of persons appearing at the 
hearing, including any affected individuals presented as witnesses by 
VA or the educational institution.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (g) Rule 7. Any person who is presented to testify will be required 
to be duly placed under oath or affirmation by the Chairperson of the 
Committee on Educational Allowances. If an official of the educational 
institution desires to present a statement personally, the individual 
will be required to be placed under oath or affirmation. The 
Chairperson will advise each witness that the Committee understands 
that he or she is voluntarily appearing before the Committee; that any 
testimony or statement given will be considered as being completely 
voluntary; and that no one has authority to require the individual to 
make any statement or answer any question against his or her will 
before the Committee, except that a person called as a witness on 
behalf of either VA or the educational institution must be willing to 
submit to cross-examination with respect to testimony given. Each 
witness will also be advised that his or her testimony or statement, if 
false, even though voluntary, may subject him or her to prosecution 
under Federal statutes.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (h) Rule 8. Any member of the Committee on Educational Allowances 
may question any witness presented to testify at the hearing or either 
a representative of the educational institution or the VA Counsel 
concerning matters that are relevant to the question at issue. 
Generally, questioning by a Committee member will be limited to the 
extent of clarifying information on the facts and issues involved.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (i) Rule 9. If the educational institution fails to timely notify 
the Committee of its intent to participate in a hearing or if a 
representative of the educational institution is scheduled to appear 
for a hearing but, without good cause, fails to appear either in person 
or by writing, the Committee will proceed with the hearing and will 
review the case on the basis of the evidence of record which shall be 
presented by the VA Counsel.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (j) Rule 10. Any objection by an authorized representative of the 
educational institution or the VA Counsel on a ruling by the 
Chairperson of the Committee on Educational Allowances regarding the 
admissibility of testimony or other evidence submitted will be made a 
matter of record, together with the substance in brief of the testimony 
intended or other evidence concerned. If the other evidence concerned 
is in the form of an affidavit or other document, it may be accepted 
for filing as a future reference if it is later ruled admissible as 
part of the record of the hearing.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (k) Rule 11. Objections relating to the jurisdiction or membership 
of the Committee on Educational Allowances or the constitutionality of 
statutes or the constitutionality of, or statutory authority for, VA 
regulations, are not before the Committee for decision. The time of the 
Committee will not be used to hear arguments in this regard. However, 
any such matters outside the province of the Committee may be the 
subject of a brief or a letter for consideration by the VA Office of 
General Counsel upon completion of the hearing. The ruling of such 
authority upon such issues will be obtained and included in the record 
before the Committee's recommendations are submitted to the Director of 
the VA facility of jurisdiction. If the VA General Counsel's ruling on 
such legal issues necessitates reopening the proceeding, that shall be 
done before the Committee makes its recommendations to the Director of 
the VA facility of jurisdiction.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (l) Rule 12. The hearing will be open to the public.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (m) Rule 13. The hearing will be conducted in an orderly manner 
with dignity and decorum. The conduct of members of the Committee on 
Educational Allowances, the VA Counsel, and any representatives of the 
educational institution shall be characterized by appropriate 
impartiality, fairness, and cooperation. The Chairperson of the 
Committee shall take such action as may be necessary, including 
suspension of the hearing or the removal of the offending person from 
the hearing room for misbehavior, disorderly conduct, or the persistent 
disregard of the Chairperson's ruling. Where this occurs, the 
Chairperson will point out that the Committee is entitled to every 
possible consideration in order that the case may be presented clearly 
and fully, which may be accomplished only through observance of orderly 
procedures.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (n) Rule 14. The Chairperson of the Committee on Educational 
Allowances will conduct the hearing proceedings in such a manner that 
will protect from disclosure information which tends to disclose or 
compromise investigative sources or methods or which would violate the 
privacy of any individual. The salient facts, which form the basis of 
charges, may be disclosed and discussed without revealing the source.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (o) Rule 15. At the close of the hearing, the Chairperson of the 
Committee on Educational Allowances shall inform the appropriate 
representative of the educational institution that the arguments and 
the evidence presented will be given careful consideration; and that 
notice of the decision of the Director of the VA facility of 
jurisdiction, together with the Committee's recommendations, will be 
furnished to the educational institution and the VA Counsel at the 
earliest possible time. The Chairperson will also indicate that notice 
of the Director's decision will be published in the Federal Register 
for the information of all other interested persons.

    (Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 
3690)

    (p) Rule 16. In making its findings of facts and recommendations, 
the Committee on Educational Allowances will consider only questions 
which are referred to it by the Director of the VA facility of 
jurisdiction as being at issue and which are within the jurisdiction of 
the Committee.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    15. Section 21.4215 is added to read as follows:


Sec. 21.4215  Decision of Director of VA facility of jurisdiction.

    (a) Decision. The Director of the VA facility of jurisdiction will 
render a written decision on the issue of discontinuance of payments of 
benefits and/or denial of further enrollments or reenrollments in the 
course or courses at the educational institution which was the subject 
of the Committee on Educational Allowances proceedings.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)


[[Page 45603]]


    (b) Basis of decision. (1) The decision of the Director of the VA 
facility of jurisdiction will be based upon all admissible evidence of 
record, including--
    (i) The recommendations of the Committee on Educational Allowances;
    (ii) The hearing transcript and the documents admitted in evidence; 
and
    (iii) The ruling on legal issues referred to appropriate authority.
    (2) The decision will clearly describe the evidence and state the 
facts on which the decision is based and, in the event that the 
decision differs from the recommendations of the Committee on 
Educational Allowances, will give the reasons and facts relied upon by 
the Director in deciding not to follow the Committee majority's 
recommendations.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (c) Correction of deficiencies. If the Director of the VA facility 
of jurisdiction believes that the record provided for review is 
incomplete or for any reason should be reopened, before rendering a 
decision he or she will order VA staff to gather any additional 
necessary evidence and will notify the educational institution that it 
may comment upon the new evidence added. The Director will then notify 
the educational institution as to whether the matter will be 
resubmitted to the Committee on Educational Allowances for further 
proceedings, on the basis of the new circumstances. If the matter is 
referred back to the Committee, the Director will defer a decision 
until he or she has received the Committee's new recommendations based 
upon all of the evidence of record.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (d) Effective date. If the decision of the Director of the VA 
facility of jurisdiction is adverse to the educational institution, the 
decision shall indicate specifically the effective date of each adverse 
action covered by the decision.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    (e) Notification of decision. (1) The Director of the VA facility 
of jurisdiction shall send a copy of the decision to the educational 
institution by certified mail, return receipt requested. A copy of the 
decision also will be provided by regular mail to the institution's 
legal representative of record, if any. If the decision is adverse to 
the educational institution, the Director will enclose a notice of the 
educational institution's right to have the Director, Education Service 
review the decision.
    (2) The Director of the VA facility of jurisdiction will also send 
a copy of the decision to:
    (i) The State approving agency; and
    (ii) VA Counsel.
    (3) The Director of the VA facility of jurisdiction shall post a 
copy of the decision at the VA facility of jurisdiction. A copy of the 
decision shall be published in the Federal Register.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

    16. Section 21.4216 is added to read as follows:


Sec. 21.4216  Review of decision of Director of VA facility of 
jurisdiction.

    (a) Decision is subject to review by Director, Education Service. A 
review by the Director, Education Service of a decision of a Director 
of a VA facility of jurisdiction to terminate payments or disapprove 
new enrollments or reenrollments, when requested by the educational 
institution, will be based on the evidence of record when the Director 
of the VA facility of jurisdiction made that decision. It will not be 
de novo in nature and no hearing on review will be held.
    (b) Authority of Director, Education Service. The Director, 
Education Service has the authority to affirm, reverse, or remand the 
original decision. In the case of such a review, the reviewing 
official's decision, other than a remand, shall become the final 
Department decision on the issue presented.
    (c) Notice of decision of Director, Education Service is required. 
Notice of the reviewing official's decision will be provided to the 
interested parties and published in the Federal Register, in the same 
manner as is provided in Sec. 21.4215(e) for decisions of the Director 
of the VA facility of jurisdiction, for the information of all 
concerned.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

Subpart G--Post-Vietnam Era Veterans' Educational Assistance Under 
38 U.S.C. Chapter 32

    17. The authority citation for part 21, subpart G, is revised to 
read as follows:

    Authority: 38 U.S.C. 501(a), chs. 32, 36, unless otherwise 
noted.


Sec. 21.5130  [Amended]

    18. In Sec. 21.5130, paragraphs (b) and (c) are removed, and 
paragraphs (d), (e), (f), and (g) are redesignated as paragraphs (b), 
(c), (d), and (e), respectively.
    19. In Sec. 21.5200, the introductory text is amended by removing 
``in the same manner as they are applied in the administration of 
chapters 34 and 36''; paragraph (h) is removed; paragraph (j) is 
redesignated as paragraph (h); and paragraph (i) is revised and 
paragraphs (j), (k), (l), (m), (n), and (o) are added, to read as 
follows:


Sec. 21.5200  Schools.

* * * * *
    (i) Section 21.4210--Suspension and discontinuance of educational 
assistance payments and of enrollments or reenrollments for pursuit of 
approved courses.
    (j) Section 21.4211--Composition, jurisdiction and duties of 
Committee on Educational Allowances.
    (k) Section 21.4212--Referral to Committee on Educational 
Allowances.
    (l) Section 21.4213--Notice of hearing by Committee on Educational 
Allowances.
    (m) Section 21.4214--Hearing rules and procedures for Committee on 
Educational Allowances.
    (n) Section 21.4215--Decision of Director of VA facility of 
jurisdiction.
    (o) Section 21.4216--Review of decision of Director of VA facility 
of jurisdiction.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3034(a), 3241(a), 3690)

Subpart K--All Volunteer Force Educational Assistance Program 
(Montgomery GI Bill--Active Duty)

    20. The authority citation for part 21, subpart K, is revised to 
read as follows:

    Authority: 38 U.S.C. 501(a), chs. 30, 36, unless otherwise 
noted.

    21. Section 21.7133 is revised to read as follows:


Sec. 21.7133  Suspension or discontinuance of payments.

    VA may suspend or discontinue payments of educational assistance. 
In doing so, VA will apply Secs. 21.4210 through 21.4216.

(Authority: 38 U.S.C. 3034, 3690)


Sec. 21.7135  [Amended]

    22. In Sec. 21.7135, paragraph (i) introductory text and paragraph 
(i)(2) are amended by removing ``Sec. 21.4207'' and adding, in its 
place, ``Sec. 21.4211 (d) and (g)''; and paragraphs (i)(1), (j)(1), and 
(k)(1) are amended by removing ``Sec. 21.4134'' wherever it appears, 
and adding, in its place, ``Sec. 21.4210''.
    23. In Sec. 21.7158, the section heading, paragraph (b)(2), and the 
authority citation for paragraph (b) are revised, to read as follows:


Sec. 21.7158  False, late, or missing reports.

* * * * *
    (b) * * *

[[Page 45604]]

    (2) If an educational institution or training establishment 
willfully and knowingly submits a false report or certification, VA may 
disapprove that institution's or establishment's courses for further 
enrollments and may discontinue educational assistance to veterans and 
servicemembers already enrolled. In doing so, VA will apply 
Secs. 21.4210 through 21.4216.

(Authority: 38 U.S.C. 3034, 3690)

Subpart L--Educational Assistance for Members of the Selected 
Reserve

    24. The authority citation for part 21, subpart L, is revised to 
read as follows:

    Authority: 10 U.S.C. ch. 1606; 38 U.S.C. 501(a), ch. 36, unless 
otherwise noted.


Sec. 21.7624  [Amended]

    25. Section 21.7624(b) is amended by removing ``21.4202(b)'' and 
adding, in its place, ``21.4210(b)''.
    26. Section 21.7633 is revised to read as follows:


Sec. 21.7633  Suspension or discontinuance of payments.

    VA may suspend or discontinue payments of educational assistance. 
In doing so, VA will apply Secs. 21.4210 through 21.4216.

(Authority: 10 U.S.C 16136(b); 38 U.S.C. 3690)


Sec. 21.7635  [Amended]

    27. In Sec. 21.7635, the introductory text of paragraph (e) is 
amended by removing ``Sec. 21.4207 of this part'', and adding, in its 
place, ``Sec. 21.4211 (d) and (g)''; paragraph (e)(2) is amended by 
removing ``Sec. 21.4207 of this part'', and adding, in its place, 
``Sec. 21.4211 (d) and (g)''; and paragraphs (e)(1), (f)(1), and (g)(1) 
are amended by removing ``Sec. 21.4134 of this part'' wherever it 
appears, and adding, in its place, ``Sec. 21.4210''.
    28. In Sec. 21.7658, paragraph (b)(1) introductory text is amended 
by removing ``negligent'' and adding, in its place, ``negligent:''; 
paragraph (b)(1)(i) is amended by removing ``institution of higher 
learning to report,'' and adding, in its place, ``educational 
institution to report'' and by removing ``reservist,'' and adding, in 
its place, ``reservist;''; paragraph (b)(1)(ii) is amended by removing 
``Sec. 21.7644(b) of this part'' and adding, in its place, 
``Sec. 21.7644(c)''; and the section heading, the heading of paragraph 
(b), and paragraph (b)(2) are revised to read as follows:


Sec. 21.7658  False, late, or missing reports.

* * * * *
    (b) Educational institution or training establishment. * * *
    (2) If an educational institution or training establishment 
willfully and knowingly submits a false report or certification, VA may 
disapprove that institution's or establishment's courses for further 
enrollments and may discontinue educational assistance to reservists 
already enrolled. In doing so, VA will apply Secs. 21.4210 through 
21.4216.

(Authority: 10 U.S.C. 16136(b); 38 U.S.C. 3690)
[FR Doc. 97-22876 Filed 8-27-97; 8:45 am]
BILLING CODE 8320-01-P