[Federal Register Volume 64, Number 208 (Thursday, October 28, 1999)]
[Rules and Regulations]
[Pages 58284-58295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28167]



[[Page 58283]]

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Part VI





Department of Education





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34 CFR Part 668 et al.



Student Assistance General Provisions; General Provisions for the 
Federal Perkins Loan Program, Federal Work-Study Program, and Federal 
Supplemental Educational Opportunity Grant Program; Federal Perkins 
Loan Program; Federal Work-Study Programs; Federal Supplemental 
Educational Opportunity Grant Program; and Federal Pell Grant Program; 
Final Rule

  Federal Register / Vol. 64, No. 208 / Thursday October 28, 1999 / 
Rules and Regulations  

[[Page 58284]]



DEPARTMENT OF EDUCATION

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

RIN 1845-AA01


Student Assistance General Provisions; General Provisions for the 
Federal Perkins Loan Program, Federal Work-Study Program, and Federal 
Supplemental Educational Opportunity Grant Program; Federal Perkins 
Loan Program; Federal Work-Study Programs; Federal Supplemental 
Educational Opportunity Grant Program; and Federal Pell Grant Program

AGENCY: Department of Education.

ACTION: Final regulations.

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SUMMARY: These final regulations amend the regulations governing the 
Student Assistance General Provisions, 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 incorporate changes made 
to the Higher Education Act of 1965, as amended (HEA), by the Higher 
Education Amendments of 1998 (1998 Amendments).

DATES: Effective Date: These regulations are effective July 1, 2000.
    Implementation Date: The Secretary has determined, in accordance 
with section 482(c)(2)(A) of the Act, that institutions may, at their 
discretion, choose to implement the provisions of Secs. 673.5(c), 
675.26(a), and 675.26(d)(2)(iii) on or after October 28, 1999. For 
further information see ``Implementation Date of These Regulations'' 
under the SUPPLEMENTARY INFORMATION section of this preamble.

FOR FURTHER INFORMATION CONTACT: Ms. Kathy Gause, U.S. Department of 
Education, 400 Maryland Avenue, SW, Regional Office Building 3, Room 
3045, Washington, DC 20202-5447. Telephone: (202) 708-8242.
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Information Relay Service (FIRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternate format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed above.

SUPPLEMENTARY INFORMATION: These regulations implement certain 
provisions of the 1998 Amendments (Pub. L. 105-244), enacted October 7, 
1998. On August 3, 1999, we published a notice of proposed rulemaking 
(NPRM) in the Federal Register (64 FR 42206). In the NPRM, we proposed 
to amend the Student Assistance General Provisions regulations (part 
668) which apply to all of the Title IV, HEA programs, the General 
Provisions regulations for the Campus-Based programs (part 673), and 
the regulations for the Federal Perkins Loan (part 674), FWS (part 
675), FSEOG (part 676), and the Federal Pell Grant (part 690) programs.
    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:

Student Assistance General Provisions

Section 668.8  Eligible Program and Section 668.32 Student 
Eligibility--General

    The conforming changes to the Student Assistance General Provisions 
regulations resulting from allowing certain students enrolled in a 
postbaccalaureate teacher certificate or licensing program to receive a 
Federal Pell Grant, as proposed in Secs. 668.8(h) and 668.32(c) (page 
42207 of the NPRM).

Section 668.161  Scope and Purpose

    The conforming changes to the Student Assistance General Provisions 
regulations resulting from changing the procedures that institutions 
must follow for paying students under the FWS Program, as proposed 
under Sec. 668.161(a) (page 42207 of the NPRM).

Federal Perkins Loan, Federal Work-Study, and Federal Supplemental 
Educational Opportunity Grant Programs

Section 673.5  Overaward

    The revision of the definition of the term ``resources'' for 
awarding campus-based aid resulting from the change in the definition 
of ``estimated financial assistance'' in determining a student's 
eligibility for subsidized loans, as proposed in Sec. 673.5(c) (page 
42207 of the NPRM).

Sections 674.10, 675.10, and 676.10  Selection of Students

    The requirement that an institution offer less-than-full-time or 
independent students a reasonable portion of the FWS allocation, FSEOG 
allocation, or dollar amount of Federal Perkins Loans made, instead of 
offering five percent of those amounts, as proposed in Secs. 674.10(b), 
675.10(c), and 676.10(b) (pages 42207-42208 of the NPRM).

Federal Work-Study Programs

Section 675.2  Definitions

    The revision of the definition of ``community services,'' as 
proposed in Sec. 675.2(b) (page 42208 of the NPRM).

Section 675.8  Program Participation Agreement

    The elimination of the requirement that an institution employing 
FWS students make equivalent non-FWS jobs reasonably available to all 
students at the institution who want to work, as proposed in Sec. 675.8 
(page 42208 of the NPRM).

Section 675.16  Payments Directly to the Student's Account

    The procedures under which an institution would be allowed, upon 
request of a student, to make payments of FWS funds directly to the 
student's account at a financial institution or to credit the student's 
account at the educational institution, as proposed in Sec. 675.16 
(pages 42208-42209 of the NPRM).

Section 675.18  Use of Funds

    The requirement that increases the minimum percentage of an 
institution's FWS allocation that must be spent on community service 
jobs from five to seven percent, as proposed in Sec. 675.18(g) (page 
42209 of the NPRM).
    The requirement that an institution, in meeting the community 
service requirement, must ensure that one or more of its FWS students 
is employed (1) in a community service reading tutoring project as a 
reading tutor for children who are preschool age or are in elementary 
school, or (2) performing family literacy activities in a community 
service family literacy project, as proposed in Sec. 675.18(g) (page 
42209 of the NPRM).
    The provision of a waiver of the above requirement, as provided in 
Sec. 675.18(g) (pages 42209-42210 of the NPRM).
    The requirement that if an institution employs FWS students as 
reading tutors in elementary schools, the institution, to the extent 
practicable, must give priority to employing students in schools that 
are participating in a reading reform project, as proposed in 
Sec. 675.18(g) (page 42210 of the NPRM).
    The clarification that an institution may pay FWS students for a 
reasonable amount of time spent for training for any FWS employment, as 
proposed in Sec. 675.18(h) (page 42210 of the NPRM).
    The provision that an institution may pay FWS students for a 
reasonable amount of time spent for travel that is

[[Page 58285]]

directly related to employment in community service activities 
(including tutoring in reading and family literacy activities), as 
proposed in Sec. 675.18(h) (page 42210 of the NPRM).

Section 675.20  Eligible Employers and General Conditions and 
Limitation on Employment

    The clarification that FWS employment may include internships, 
practicums, or assistantships (e.g., research or teaching 
assistantships), as proposed in Sec. 675.20(d) (pages 42210-42211 of 
the NPRM).

Section 675.23  Employment Provided by a Private For-Profit 
Organization

    The provision that if a student is employed by a private for-profit 
organization the work that the student performs must be academically 
relevant to the student's educational program only to the maximum 
extent possible, as proposed in Sec. 675.23(b) (page 42211 of the 
NPRM).

Section 675.26  FWS Federal Share Limitations

    The provision that the Federal share of an FWS student's 
compensation may exceed 75 percent, but may not exceed 90 percent, if 
the student is employed at a nonprofit or a public organization that 
cannot afford to pay the regular non-Federal share, as proposed in 
Sec. 675.26(a) (page 42211 of the NPRM).
    The authorization of a Federal share of 100 percent of the FWS 
funds awarded to students by an institution for an award year, if the 
student is performing literacy activities when employed in a family 
literacy project that provides services to families with preschool age 
children or children who are in elementary school, as proposed in 
Sec. 675.26(d) (page 42211 of the NPRM).

Work-Colleges Program (Subpart C)

Section 675.45  Allowable Costs, Federal Share, and Institutional Share

    The provision of more flexibility to Work-Colleges by allowing them 
to use available funds to coordinate and carry out joint projects to 
promote work service learning, and to conduct a comprehensive 
longitudinal study of academic progress and academic and career 
outcomes, as proposed in Sec. 675.45(a) (page 42211 of the NPRM).

Federal Supplemental Educational Opportunity Grant Program

Section 676.18  Use of funds.

    The inclusion of a new authority for an institution to carry up to 
ten percent of its current award year FSEOG allocation forward to spend 
in the next award year and to carry back up to ten percent of its 
current award year allocation to spend in the prior award year, as 
proposed in Sec. 676.18 (pages 42211-42212 of the NPRM).
    The inclusion of a new authority for an institution to carry back 
any portion of its current award year FSEOG funds to make awards to 
students for payment periods that begin on or after May 1 of the prior 
award year but end prior to the start of the current award year, as 
proposed in Sec. 676.18(f) (page 42212 of the NPRM).

Federal Pell Grant Program

Section 690.6  Duration of Student Eligibility--Undergraduate Course of 
Study and Eligible Postbaccalaureate Program

    The provision that extends Federal Pell Grant eligibility to 
certain students enrolled in a postbaccalaureate teacher certificate or 
licensing program even if they have earned a bachelor's degree, as 
proposed in Sec. 690.6 (pages 42212-42213 of the NPRM).

Section 690.7  Institutional Participation

    The provision that an institution is ineligible to participate in 
the Federal Pell Grant Program upon losing its eligibility to 
participate in the FFEL or Direct Loan programs because of its default 
rate, as proposed in Sec. 690.7(c) (page 42213 of the NPRM).

Substantive Changes to the NPRM

    Except for minor editorial and technical revisions, there are no 
differences between the NPRM and these final regulations.

Implementation Date of These Regulations

    Section 482(c) of the Higher Education Act of 1965, as amended (20 
U.S.C. 1089(c)) requires that regulations affecting programs under 
Title IV of the Act be published in final form by November 1 prior to 
the start of the award year in which they apply. However, that section 
also permits the Secretary to designate any regulation as one that an 
entity subject to the regulation may choose to implement earlier. If 
the Secretary designates a regulation for early implementation, he may 
specify when and under what conditions the entity may implement it. 
Under this authority, the Secretary has designated the following 
regulations for early implementation:
    Sec. 673.5(c)--Upon publication, these regulations may be 
implemented by institutions at their discretion. This means that when 
packaging campus-based programs, institutions may exclude as a resource 
any portion of a subsidized Stafford Loan under the FFEL Program or 
Direct Subsidized Loan under the Direct Loan Program that is equal to 
or less than the amount of the student's Montgomery GI Bill--active 
duty veterans education benefits and AmeriCorps education awards or 
post-service benefits paid for the cost of attendance.
    Sec. 675.26(a)--Upon publication, these regulations may be 
implemented by institutions at their discretion. This means that 
institutions may pay a Federal share of up to 90 percent for an FWS 
student employed at a nonprofit or a public organization that can not 
afford to pay the regular non-Federal share under the requirements 
specified by the Secretary.
    Sec. 675.26(d)(2)(iii)--Upon publication, these regulations may be 
implemented by institutions at their discretion. This means that 
institutions may pay a Federal share of up to 100 percent for an FWS 
student performing family literacy activities when employed in a family 
literacy project that provides services to families with preschool age 
children or children who are in elementary school. The waiver of the 
institutional share requirement will no longer be limited to tutoring 
in a family literacy program.

Analysis of Comments and Changes

    The regulations in this document were developed through the use of 
negotiated rulemaking. Section 492 of the HEA requires that, before 
publishing any proposed regulations to implement programs under Title 
IV of the Act, the Secretary obtain public involvement in the 
development of the proposed regulations. After obtaining advice and 
recommendations, the Secretary must conduct a negotiated rulemaking 
process to develop the proposed regulations. All proposed regulations 
must conform to agreements resulting from the negotiated rulemaking 
process unless the Secretary reopens that process or explains any 
departure from the agreements to the negotiated rulemaking 
participants.
    These regulations were published in proposed form on August 3, 1999 
in conformance with the consensus of the negotiated rulemaking 
committee. Under the committee's protocols, consensus meant that no 
member of Committee III dissented from the agreed-upon language. The 
Secretary invited comments on the proposed regulations by September 15, 
and several comments were received. An analysis of the comments 
follows.
    We discuss substantive issues under the sections of the regulations 
to which they pertain. Generally, we do not

[[Page 58286]]

address technical and other minor changes--and suggested changes the 
law does not authorize the Secretary to make.

General

    Comments: A number of commenters representing institutions of 
higher education and organizations submitted joint and individual 
comments that were supportive of our efforts to provide consistency 
among the Title IV, HEA programs and to allow institutions more 
flexibility to assist students. Several commenters stated that there 
are many positive aspects to these proposed regulations.
    Changes: None.

Student Assistance General Provisions and the Federal Pell Grant 
Program

Sections 668.8  Eligible Program, 668.32 Student Eligibility--General, 
and 690.6 Duration of Student Eligibility--Undergraduate Course of 
Study and Eligible Postbaccalaureate Program
    Comments: One commenter requested clarification on whether a 
student enrolled in the type of program offered at the commenter's 
school would qualify for a Federal Pell Grant. The commenter's 
institution does not award a baccalaureate degree in education. 
Students must choose another field of study, but may have a 
concentration in education. The baccalaureate degree the institution 
awards is for that other field of study, not for education.
    The commenter stated that it is also possible for students to enter 
a teacher certification program after they receive their baccalaureate 
degrees and before they begin any graduate study.
    Discussion: As described by the commenter, the student enrolled in 
the institution's baccalaureate degree program would be ineligible to 
receive a Federal Pell Grant under the provisions in Sec. 690.6, but 
may be eligible to receive a Federal Pell Grant as an undergraduate 
student. However, a student enrolled in the institution's teacher 
certification program would be ineligible for a Federal Pell Grant 
award for the reasons discussed below.
    The 1998 Amendments created a very limited exception to the 
requirement that a Federal Pell Grant recipient be an undergraduate 
student. Thus, to qualify for a Federal Pell Grant, a student who has a 
bachelor's degree must first be enrolled in an institution of higher 
education that does not offer a baccalaureate degree in education. 
Second, the student must be enrolled in a postbaccalaureate program 
that (a) consists of the courses required by a State to receive a 
professional certification or licensing credential necessary for 
employment as a teacher in an elementary or secondary school in that 
State, and (b) does not lead to a graduate degree. Third, the student 
must be pursuing an initial teacher certification or licensing 
credential within a State. Fourth, the student must be enrolled as at 
least a half-time student.
    Therefore, the student enrolled in the commenter's baccalaureate 
program does not come within the requirements contained in Sec. 690.6 
because the program in which he or she is enrolled is not a 
postbaccalaureate program. The student enrolled in the commenter's 
teacher certificate program does not meet the requirements of 
Sec. 690.6, even if the courses included in the certificate program are 
required by the State, because the certificate program does not appear 
to be a postbaccalaureate program. An undergraduate program does not 
become a postbaccalaureate program merely because it admits students 
who have baccalaureate degrees.
    Changes: None.
Section 668.161  Scope and Purpose
    Comments: One organization stated that the proposed amendments to 
Sec. 668.161 to indicate that an institution must follow Sec. 675.16 
for paying a student under the FWS Program instead of Secs. 668.164 and 
668.165 make the disbursement procedures under Sec. 668.164 
inapplicable to the FWS Program. The commenter requested clarification 
on whether the definition of disbursement under Sec. 668.164(a)(1) 
still applies to the FWS Program.
    Discussion: We agree with the commenter that the proposed language 
in Sec. 668.161 does not make clear that the definition of disbursement 
in Sec. 668.164 is still applicable to the FWS Program. This definition 
continues to apply to all Title IV, student financial aid programs.
    Changes: We have revised the regulations to clarify that the 
definition of disbursement in Sec. 668.164(a) will continue to apply to 
the FWS Program. Federal Perkins Loan, Federal Work-Study, and Federal 
Supplemental Educational Opportunity Grant Programs.
Section 673.5  Overaward
    Comments: Several commenters, including two organizations, objected 
to the proposal that would change the definition of ``resources'' for 
the campus-based programs.
    Discussion: The proposed regulations would modify the overaward 
provisions in Sec. 673.5 of the regulations for the campus-based 
programs. They would apply in cases where students receive both a 
subsidized loan and veterans education benefits under Title 38, Chapter 
30 (Montgomery GI Bill--active duty) and/or national service education 
awards or post-service benefits under Title I of the National and 
Community Service Act of 1990 (AmeriCorps).
    The statute requires that these benefits must be excluded as 
estimated financial assistance in determining a student's eligibility 
for a subsidized Stafford Loan or Direct Subsidized Loan. However, the 
statute requires that these same benefits must be considered as a 
resource for the campus-based programs, as well as estimated financial 
assistance for unsubsidized loans. The proposed regulations would allow 
an institution, in packaging campus-based aid, to exclude as a resource 
any portion of a subsidized Stafford Loan or Direct Subsidized Loan 
that is equal to or less than the amount of the student's Montgomery GI 
Bill--active duty veterans education benefits and/or AmeriCorps 
education awards or post-service benefits paid for the cost of 
attendance.
    Changes: None.
    Comments: Some commenters stated that the treatment of the 
aforementioned benefits in two different ways in determining a 
student's eligibility is confusing and an administrative burden for 
institutions. They stated that it is extremely difficult for 
institutions to package a student when the student has both subsidized 
loans and campus-based aid. One commenter stated that it would be 
difficult to explain to students why in some cases their benefits are 
treated as a resource, but not in other cases.
    Most of the commenters stated that the proposal would require 
schools that use computerized packaging systems to reprogram their 
financial aid software to determine when to include or exclude all or a 
part of these benefits. Commenters also believed that this requirement 
would result in institutions being forced to implement a verification 
system to determine the type of benefits the student is receiving while 
also determining, on a case-by-case basis, the type and amount of 
benefits that are to be considered as estimated financial assistance. 
They also stated that the issue is further complicated by the fact that 
a student's financial aid package does not always remain the same after 
making initial awards. Changes in resources require recalculating the 
student's eligibility for Federal assistance. Commenters also stated 
that any combination of Montgomery GI Bill benefits, AmeriCorps 
benefits,

[[Page 58287]]

subsidized Stafford loans and campus-based aid will involve manual 
intervention to correct an overaward situation.
    One of the organizations that objected to the proposal expressed 
concern about errors institutions may make in interpreting this 
provision and calculating student awards, and therefore requests that 
institutions be held harmless and not assessed any liabilities until 
the Department can provide guidance on correct implementation.
    Some commenters recommended that we work with Congress to treat 
Montgomery GI Bill benefits and AmeriCorps education awards or post-
service benefits identically for all student aid programs.
    Discussion: We understand the concerns that the commenters have 
regarding handling students that have these benefits along with other 
types of Title IV aid. However, this provision that treats veterans and 
AmeriCorps benefits different for the Title IV programs is the result 
of the change in section 428(a)(2)(C) of the HEA that requires that 
these benefits must be excluded as ``estimated financial assistance'' 
for purposes of subsidized loans.
    Changes: None.
    Comments: One commenter expressed his belief that the order in 
which the student received the financial aid awards determines if the 
student is overawarded and would mean that students with similar need 
and aid may not be treated the same.
    Discussion: Under current campus-based regulations, if a student 
has both a subsidized loan and campus-based aid, the most stringent 
requirement regarding resources becomes operative because the student's 
eligibility for campus-based funds is reduced by the amount of 
subsidized loans as well as any Montgomery GI Bill--active duty 
benefits and AmeriCorps funds, or both, paid for the cost of 
attendance. Thus, students receiving subsidized loans because of the 
new exclusion of these benefits may have their eligibility for campus-
based aid reduced. The negotiated rulemaking committee concluded that 
the proposed change in the definition of ``resources'' for the campus-
based programs is the best solution to allow students to have the full 
advantage of this statutory exclusion of benefits for subsidized loans 
without losing campus-based eligibility.
    We remind the commenters that the use of the proposed regulations 
that would change the definition of ``resources'' for the campus-based 
programs in cases where a student receives both a subsidized loan and 
Montgomery GI Bill--active duty veterans education benefits and/or an 
AmeriCorps education award is an option provided to an institution and 
not a requirement. Unlike the requirements mandated by section 
428(a)(2)(C) of the HEA for subsidized loans, where the definition of 
``estimated financial assistance'' requires the exclusion of these 
benefits, this proposal provides the institution with the flexibility 
to address different packaging issues if the financial aid 
administrator determines that it is necessary to rectify a particular 
situation on a case-by-case basis.
    Changes: None.
    Comment: One commenter also noted that it is frequently difficult 
to identify the specific type of veterans benefits that individual 
veterans may be receiving. This commenter encourages us to work closely 
with the Veterans Administration to develop computer database 
interfaces that will permit this information to be reported on the 
Institutional Student Information Records, or to set up a web site 
similar to the National Student Loan Data System that will permit 
access to this information. Until this can be accomplished, the 
commenter encourages us to seek other means of enabling participating 
institutions to easily identify those veterans receiving Montgomery GI 
Bill education benefits.
    Discussion: Regardless of our campus-based regulations, an 
institution, under the statute, must be able to identify the Montgomery 
GI Bill--active duty benefits and the Americorps funds for students 
applying for subsidized loans. We thank the commenter for the 
suggestion on solutions for identifying veterans benefits. We will 
explore possible systems solutions to address this comment.
    Changes: None.
    Comments: One organization in expressing its support for this 
proposed regulation, noted the confusion caused by the proliferation of 
names by which Direct and FFEL loans are known. The commenter suggested 
that we use the name ``Direct Subsidized Loan'' when referring to the 
Federal Direct Stafford/Ford Loan.
    Discussion: We agree with the commenter that the names for the 
Direct and FFEL loans can be confusing, and that ``Direct Subsidized 
Loan'' is the simplest name to understand when referring to a Federal 
Direct Stafford/Ford Loan.
    Changes: For clarity, we have added the words ``Direct Subsidized 
Loan'' in parenthesis in Sec. 673.5(c)(4) after ``Federal Direct 
Stafford/Ford Loan.''
    Comments: Another commenter also expressed concern with the lack of 
clarification on a required implementation date, which the commenter 
believes could possibly cause institutional liability. One organization 
also sought clarification on when institutions could begin using the 
proposed new definition of ``resources'' for the campus-based programs. 
The organization further recommended that we authorize optional early 
implementation by institutions under the Master Calendar.
    Discussion: In response, the Secretary authorizes optional early 
implementation by institutions of this provision under the Master 
Calendar. Institutions may begin using this new definition for 
``resources'' effective with the publication date of these regulations. 
This authority is discussed in the Dates and Supplementary Information 
sections of this preamble.
    Changes: None.

Federal Work-Study Programs

Section 675.2  Definitions
    Comments: One commenter stated that on-campus facilities should 
count as community service employers even if the service is provided 
only for students, faculty, staff, and their families, because these 
individuals pay taxes and also are part of the ``local community.''
    Discussion: The statute states that the definition of ``community 
services'' now includes child care services provided on campus that are 
``open and accessible to the community.'' A university or college in 
and of itself is not considered the community for this purpose. 
Therefore, if the service is provided only to students, faculty, staff, 
and their families, an FWS job does not meet the definition of 
``community service.'' As stated in the NPRM (page 42208), these 
regulations are not proposing to set a numerical count or percentage 
requirement for institutions to demonstrate public use of on-campus 
services.
    Changes: None.
Section 675.16  Payments Directly to the Student's Account
    Comments: One organization commented that the proposed regulations 
governing the application of a student's FWS earnings to his or her 
institutional account are far too prescriptive. The commenter believes 
the procedure will discourage institutions from offering students this 
option, and that implementation will

[[Page 58288]]

create a significant cost and administrative burden for institutions. 
The same commenter believes the current cash management regulations 
(Subpart K) provides sufficient protection for the student and 
recommends that these proposed regulations be rescinded and 
institutions be referred to the existing cash management regulations.
    Discussion: Prior to the 1998 Amendments, the FWS regulations 
prohibited an institution from directly transferring the Federal share 
of FWS earnings to a student's account at the institution. The 1998 
Amendments broadened the institution's authority concerning students 
who want their FWS earnings credited to their accounts at the 
institution to cover institutional charges. The commenter is correct 
that the Subpart K--Cash Management regulations already regulated 
disbursement procedures for all other Title IV, HEA program funds. We 
do not agree with the commenter that the proposed regulations in 
Sec. 675.16 will discourage institutions from offering students this 
option, and that implementation will create a significant cost and 
administrative burden for institutions. We believe that it was 
important to make a distinction between FWS Program funds and other 
Title IV program funds. In the FWS Program students hold jobs and their 
compensation is earned and governed by the same applicable Federal, 
State, or local laws as any other type of earnings from employment. We 
also believe that it will be less confusing to have the FWS 
disbursement procedures in the FWS Program regulations.
    Changes: None.
    Comments: Another commenter noted that in most cases students 
receiving FWS funds are notified of the amount of the award on the 
financial aid award letter sent to them by the institution. This 
commenter asks us to clarify that an award letter sent to the student 
by the institution meets the requirement for notifying the student of 
the amount of FWS compensation he or she is authorized to earn.
    Discussion: We are aware that providing a student with a notice of 
the amount of funds he or she is eligible to earn, and how and when the 
FWS funds will be paid is standard institutional practice and required 
by regulations. The award letter, as used by many institutions, meets 
the requirement for notification to a student of the amount of FWS 
compensation he or she is authorized to earn. It was not our intent to 
confuse the public in Sec. 675.16 by implying that an additional notice 
is required. Because FWS funds are earned compensation, we concluded 
that the requirement for the notice should be reiterated in the new 
provisions in Sec. 675.16.
    Changes: None.
    Comments: Another organization stated that the proposed regulations 
in Sec. 675.16 are not clear about what would be required if the 
student rescinds an authorization to hold excess FWS earnings. The 
commenter observed that Sec. 675.16(a)(4) allows a student to authorize 
an institution to credit FWS funds to the student's institutional 
account and also allows a student to authorize an institution to hold 
excess FWS funds (credit balances). The commenter noted that 
Sec. 675.16(a)(7) generally requires that a credit balance consisting 
of FWS funds be paid out to the student within 14 days, presumably if 
the student authorizes crediting the account but does not authorize 
holding excess funds. Section 675.16(a)(6)(i) states that if any 
authorization allowed under Sec. 675.16(a)(4) is modified, the 
modification takes effect on the date received. The commenter asked 
whether the institution has up to 14 days to process the FWS credit 
balance after a student rescinds his or her authorization that allowed 
an institution to hold excess FWS funds.
    Discussion: We agree with the commenter that the proposed language 
in the regulations in Sec. 675.16 is not clear about what would be 
required if the student rescinds an authorization to hold excess FWS 
earnings. Our intent is that the excess FWS funds must be paid by the 
institution to the student as soon as possible, but not later than 14 
days after the student rescinds an authorization to hold excess funds.
    Changes: We have revised the regulations and added a new 
Sec. 675.16(a)(9) to reflect that if a student cancels the written 
authorization to hold excess FWS funds, the institution must pay those 
funds to the student as soon as possible but no later than 14 days 
after the institution receives that cancellation notice.
Sections 675.18  Use of Funds and 675.26 FWS Federal Share Limitations
    New reading tutoring and family literacy project requirement 
(Sec. 675.18(g)(1) and waiver of FWS institutional-share requirement 
for literacy activities (Sec. 675.26(d)(2).
    Comments: A commenter representing an organization requested 
clarification on the wording in Sec. 675.18(g)(1)(ii) that refers to a 
family literacy project that employs students ``in family literacy 
activities.'' The commenter stated that the statute simply requires 
students to be employed in a family literacy project and is silent on 
whether students must be engaged in family literacy activities. The 
commenter stated that the statute authorizes a 100 percent Federal 
share for FWS students employed in a family literacy project, and the 
proposed language in Sec. 675.26(d)(2)(iii) reflects the statute in 
that it only requires the student to be employed in a family literacy 
project, as long as the project provides certain services.
    Discussion: For purposes of employment in a family literacy 
project, both of the following new statutory provisions require that 
the student be performing family literacy activities.
    Amended section 443(b)(2) of the HEA requires, that beginning with 
the 2000-2001 award year, an institution must ensure that in meeting 
the FWS community service requirement at least one or more of its FWS 
students is employed (1) in a reading tutoring project as a reading 
tutor for children who are preschool age or are in elementary school, 
or (2) performing family literacy activities in a family literacy 
project.
    Amended section 443(d)(3) of the HEA provides that, beginning with 
the 2000-2001 award year, an institution may pay a Federal share of 
compensation that exceeds 75 percent to students employed (1) in a 
reading tutoring project as a reading tutor for children who are 
preschool age or are in elementary school, or (2) performing family 
literacy activities in a family literacy project.
    We agree that the different proposed language used in 
Sec. 675.18(g)(2)(ii) and Sec. 675.26(d)(2)(iii) is confusing. The HEA 
is specific on the reference to family literacy activities. The new FWS 
community service requirement in section 443(b) of the HEA does require 
that the family literacy project employ one or more FWS students in 
family literacy activities. Further, the new authority in section 
443(d) of the HEA to pay a Federal share of up to 100 percent of the 
compensation earned by a student employed in a family literacy project 
also requires the student to be performing family literacy activities.
    In accordance with the amended statute, these regulations amend 
Sec. 675.18(g)(1)(ii) to require that, beginning July 1, 2000, an 
institution must ensure that one or more of its FWS students is 
employed (1) in a reading tutoring project as a reading tutor for 
children who are preschool age or are in elementary school, or (2) 
performing family literacy activities in a family literacy project.
    We have changed Sec. 675.26(d)(2)(iii) of these regulations to 
clarify that the waiver of the institutional-share

[[Page 58289]]

requirement is for an FWS student performing family literacy activities 
when employed in a family literacy project that provides services to 
families with preschool age children or children who are in elementary 
school.
    Changes: We have revised the language in Sec. 675.26(d)(2)(iii) to 
make this language consistent with the family literacy activities 
language used in Sec. 675.18(g)(1)(ii). This change also follows the 
language provided in the statute that the FWS student must perform 
family literacy activities when employed in a family literacy project.
    Comments: The same commenter also requested clarification of the 
effective date on which institutions may pay a 100 percent Federal 
share for family literacy employment in addition to tutoring.
    Discussion: The Secretary is authorizing optional early 
implementation of the new institutional-share waiver for an FWS student 
performing family literacy activities when employed in a family 
literacy project. Effective with the publication date of these 
regulations institutions may begin to pay a Federal share of 
compensation that exceeds 75 percent to a student performing family 
literacy activities that are not limited just to tutoring. This 
authority is discussed in the Dates and the Supplementary Information 
sections of the preamble.
    Changes: None.
    Comments: The commenter further requested clarification on whether 
indirect services in a family literacy project would qualify the 
employment: (1) as community service; (2) as satisfying the separate 
family literacy project requirement; and/or (3) as eligible for the 100 
percent Federal share?
    Discussion: We are not defining ``family literacy activities'' for 
purposes of the new community service requirement in 
Sec. 675.18(g)(1)(ii) or the new waiver of the institutional-share 
requirement in Sec. 675.26(d)(2)(iii). We are providing reasonable 
flexibility to institutions to determine the job description and duties 
for an FWS student performing family literacy activities. Under the 
revised statute and regulations, the jobs in family literacy projects 
are not limited to just students employed as tutors. For example, the 
family literacy activities may include an FWS student training tutors, 
performing administrative tasks such as coordinating the tutors, or 
working as an instructional aide who prepares the materials for the 
project. However, it would not be reasonable to include janitorial or 
building repair jobs for the project as family literacy activities.
    Under Sec. 675.26(d)(2)(iii), to qualify for the new FWS waiver of 
the institutional-share, the family literacy activities job does not 
have to be community service. For example, the family literacy 
activities could be open to only institutional staff and their 
families. However, under Sec. 675.18(g)(1)(ii), an FWS student's job as 
a reading tutor in a required reading tutoring project or job 
performing family literacy activities in a required family literacy 
project must be considered community service.
    The definition of ``community services'' in Sec. 675.2 does not 
require that the service provided by the FWS student be ``direct'' to 
be considered community service. The services must be open and 
accessible to the community. A service is considered open to the 
community if the service is publicized to the community and the general 
public uses the service. A university or college in and of itself is 
not considered the community for this purpose.
    In determining whether the FWS student's employment provides 
community service, the institution must always consider whether the 
service provided by the student primarily benefits the community as 
opposed to the agency or institution. For example, if an FWS student 
was hired to take care of the grounds for the administrative offices of 
the private nonprofit agency that provides the family literacy project, 
that job would not be community service. It is important to note that 
this job would also not be considered to be performing family literacy 
activities.
    Changes: None.
Waiver--Employment of Students as Reading Tutors or in a Family 
Literacy Project (Sec. 675.18(g)(2))
    Comments: As stated in the discussion for the previous comments, 
beginning July 1, 2000, an institution must ensure that one or more of 
its FWS students is employed (1) in a reading tutoring project as a 
reading tutor for children who are preschool age or are in elementary 
school, or (2) performing family literacy activities in a family 
literacy project. Section 443(b)(2) of the HEA grants the Secretary 
waiver authority with respect to both of these requirements if the 
Secretary determines that enforcing them would cause hardship for 
students at an institution.
    Several institutions commented that their academic programs are 
solely focused on health professions programs with a majority of either 
graduate or first-professional degree students attending their 
institutions. They stated that they are ``single-purpose institutions'' 
providing degrees in health professions (e.g., nursing, occupational 
therapy, medical technicians, biological sciences, dentistry, medicine, 
pharmacy, dental hygiene, physical therapy, clinical nutrition, medical 
technology). The institutions have no problem meeting and exceeding the 
community service percentage requirement for FWS. However, students in 
these programs actively seek community service activities that involve 
health care (e.g., the homeless medical clinic). The graduate and 
professional programs are rigorous and time-consuming, and the nature 
and demands of their academic programs do not support their employment 
in area elementary and secondary schools as reading tutors. Students 
are typically in classes from 8 a.m. to 5 p.m. One of these commenters 
stated that it is common for students to be available to work FWS jobs 
only on evenings or weekends, and if literacy tutor positions are not 
available in the time frames that students can work because of academic 
requirements, penalties should not be assessed.
    Another of these commenters stated that the proposed reading 
tutoring/family literacy placement would strain their resources to 
create, monitor and staff the necessary support mechanisms to implement 
a component that students, faculty and staff are currently not geared 
to provide (as a health professions institution). Several of the 
institutions that focus primarily on health professions requested that 
the final regulations provide clear guidance to institutions on what 
would be viewed as a hardship and steps the institution must take to 
qualify for a waiver. One of these commenters requested that we 
consider granting an automatic waiver of the reading tutoring/family 
literacy placement requirement for ``single-purpose institutions.''
    Discussion: We do not foresee many instances in which a waiver of 
the reading tutoring and family literacy activities requirement would 
be granted. However, we are sensitive to the commenters' concerns and 
will evaluate situations involving institutions that specialize in 
health professions or other single areas of study, along with other 
waiver requests, if they are submitted during the waiver process. To 
allow flexibility to consider all factors that are valid reasons for a 
waiver, we are not specifying the circumstances that would receive a 
waiver in these final regulations.
    In the Spring of 2000, the Department plans to issue a Dear Partner 
Letter

[[Page 58290]]

regarding the waiver process that will provide procedures and time 
frames for institutions to request waivers of the community service 
and/or the reading tutor/family literacy activities requirements for 
the 2000-2001 award year. We intend to notify institutions of our 
decision on their waiver requests prior to the start of the 2000-2001 
award year so as not to cause any disruptions to institutions' award 
processes. Institutions should keep in mind that a waiver will be 
granted if they provide evidence that enforcing the requirement would 
cause a hardship for students at the institution. The fact that it may 
be difficult for the institution to comply with this provision is not 
in and of itself a basis for granting a waiver.
    Changes: None.
    Comments: One commenter expressed opposition to the new reading 
tutoring and family literacy project requirement by stating that it 
seems that schools are being forced more and more to implement ``social 
policy'' as a consequence of accessing Title IV funds. The commenter 
stated that the commenter trains career oriented and vocationally 
focused students who are not interested in these types of projects. 
Therefore, the commenter suggested that the entire reading tutoring and 
family literacy project requirement be waived and that we focus more on 
simplifying the HEA rather than complicating the regulations with 
social initiatives.
    Discussion: Reading is a fundamental skill for learning and many 
American school children have trouble learning how to read. The FWS 
students not only help children read better by giving them extra 
learning time, they also build confidence and boost motivation. 
Research shows that children whose parents work with them on literacy 
skills during early childhood have a better chance of reading well and 
independently.
    Student achievement in reading and mathematics in the United States 
is below the international average. There is a growing interest among 
many professionals in technical, mathematical and scientific fields to 
share their enthusiasm and knowledge about mathematics with school 
children. College students, particularly those with an affinity for 
mathematics and science, seek opportunities to mesh their interests 
with their commitment to community service. Students who need help in 
mastering the fundamentals of reading and mathematics in elementary and 
middle school can benefit from extra help, personal attention, and 
additional learning time.
    We believe that participation in these community service activities 
can help to serve the needs of the community and give FWS students a 
rewarding and enriching experience. College students participating as 
tutors of reading and math may decide to pursue teaching as a career, 
based on successful tutoring experiences. This investment in our youth 
is an investment in this country's future. We believe that the efforts 
associated with regulations for FWS students to tutor children in 
reading and math, and work in family literacy activities, are justified 
by the benefits of preparing children to compete in the global economy 
and ensuring our Nation's economic growth.
    Changes: None.
Payment for Time Spent in Training and Travel (Sec. 675.18(h))
    Comments: One commenter expressed concern about the ability of time 
cards to demonstrate travel time when the student is employed in 
community service. This commenter suggested that we leave this 
regulation as flexible as possible by allowing a simple statement from 
the student attached to an already existing time card that only lists 
hours worked. Another commenter also questioned the requirement that 
travel time be designated separately on timesheet records, and 
suggested that the supervisor's signature certifying the accuracy of 
the timesheet record should be adequate documentation.
    Discussion: The Department's policy does require that the time 
spent for travel that is directly related to employment in community 
service activities be reported on the student's FWS time record as the 
hours worked are also reported. We recommend that institutions use a 
time record that shows a separation for the time spent in travel from 
hours worked. This enables those hours to be monitored by a supervisor 
to ensure that the hours are reasonable and maintains the integrity of 
the FWS Program.
    Changes: None.
    Comments: A commenter objected to the differential treatment of FWS 
earnings for training and travel. The commenter believes that the 
differential treatment of earnings for training and travel time for 
standard off-campus FWS positions and those designated as community 
service are inequitable and administratively cumbersome. That commenter 
recommends that the treatment of earnings for travel and training be 
consistent across all off-campus FWS employment positions.
    Discussion: The proposed regulations do not represent a change in 
our policy to allow FWS students to be paid wages during a training 
period conducted for a reasonable length of time for any FWS 
employment. The examples of math or reading tutors as positions that 
may require longer training periods were not used in the preamble to 
the NPRM (page 42210) to imply that an FWS student could not be paid 
for a training period in other types of FWS jobs. This policy applies 
whether the student is employed in community service activities or not.
    With regard to payment for travel time, the HEA at section 
443(b)(2)(A) clearly provides that beginning with the 1999-2000 award 
year, institutions will be allowed to pay students for a reasonable 
amount of time spent for travel that is directly related to employment 
in community service activities. We do not have authority to allow 
institutions to pay for travel time for any other types of FWS jobs.
    Changes: None.

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 (1) all 
children will start school ready to learn and that student achievement 
will be enhanced; (2) call for increasing the rate at which students 
graduate from high school and pursue high quality postsecondary 
education and for supporting life-long learning; (3) every adult 
American will be literate and will possess the knowledge and skills 
necessary to compete in a global economy and exercise the rights and 
responsibilities of citizenship; and (4) the Nation's teaching force 
will have access to programs for the continued improvement of their 
professional skills and the opportunity to acquire the knowledge and 
skills needed to instruct and prepare all American students for the 
next century. The regulations in Sec. 675.18(g) further the objectives 
of these Goals by requiring FWS student participation in reading 
tutoring and in family literacy projects where the family is recognized 
as an institution for education and learning and the parent is 
recognized as their children's first teachers. The objectives of the 
Goals are also addressed by extending eligibility for Federal Pell 
Grants to those students who are pursuing a teacher certification or 
licensing credential through a State

[[Page 58291]]

approved non-degree postbaccalaureate program.

Executive Order 12866

    We have reviewed these final regulations in accordance with 
Executive Order 12866. Under the terms of the order we have 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 we have determined to 
be necessary for administering these programs effectively and 
efficiently.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these final regulations, we have determined that 
the benefits of the regulations justify the costs.
    We have also determined that this regulatory action does not unduly 
interfere with State, local, and tribal governments in the exercise of 
their governmental functions.
    We discussed the potential costs and benefits of these final 
regulations in the preamble to the NPRM on page 42213.

Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995 does not require you to respond 
to a collection of information unless it displays a valid OMB control 
number. We display the valid OMB control numbers assigned to the 
collections of information in these final regulations at the end of the 
affected sections of the regulations.

Intergovernmental Review

    The Federal Supplemental Educational Opportunity Grant program is 
subject to Executive Order 12372 and the regulations in 34 CFR part 79. 
The objective of the Executive order is to foster an intergovernmental 
partnership and a strengthened federalism by relying on processes 
developed by State and local governments for coordination and review of 
proposed Federal financial assistance.
    In accordance with the order, we intend this document to provide 
early notification of the Department's specific plans and actions for 
this program.
    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 we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Electronic Access to This Document

    You may view this document in text or Adobe Portable Document 
Format (PDF) on the Internet at the following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/legislation/HEA/rulemaking/
http://ifap.ed.gov/csb__html/fedlreg.htm

    To use the PDF you must have the Adobe Acrobat Reader Program with 
Search, which is available free at the first of the previous sites. If 
you have questions about using the PDF, call the U.S. Government 
Printing Office (GPO) toll free, at 1-888-293-6498; or in the 
Washington, D.C., area at (202) 512-1530.

    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at:

http://www.access.gpo.gov/nara/index.html

(Catalog of Federal Domestic Assistance Numbers: 84.033 Federal 
Work-Study Program; 84.037 Federal Perkins Loan Program; 84.007 
Federal Supplemental Educational Opportunity Grant Program; and 
84.063 Federal Pell Grant Program)

List of Subjects

34 CFR Part 668

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

34 CFR Part 673, 674, 675, and 676

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

34 CFR Part 690

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

    Dated: October 20, 1999.
Richard W. Riley,
Secretary of Education.
    For the reasons stated in the preamble, the Secretary amends title 
34 of the Code of Federal Regulations by amending Parts 668, 673, 674, 
675, 676, and 690 as follows:

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

    1. The authority citation for Part 668 continues to read as 
follows:

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

    2. Section 668.8 is amended by revising paragraph (h) to read as 
follows:


Sec. 668.8  Eligible program.

* * * * *
    (h) Eligibility for Federal Pell Grant and FSEOG programs. In 
addition to satisfying other relevant provisions of this section--
    (1) An educational program qualifies as an eligible program for 
purposes of the Federal Pell Grant Program only if the educational 
program is an undergraduate program or a postbaccalaureate teacher 
certificate or licensing program as described in 34 CFR 690.6(c); and
    (2) An educational program qualifies as an eligible program for 
purposes of the FSEOG Program only if the educational program is an 
undergraduate program.
* * * * *
    3. Section 668.32 is amended by revising paragraph (c) to read as 
follows:


Sec. 668.32  Student eligibility--general.

* * * * *
    (c)(1) For purposes of the FSEOG Program, does not have a 
baccalaureate or first professional degree;
    (2) For purposes of the Federal Pell Grant Program--
    (i)(A) Does not have a baccalaureate or first professional degree; 
or
    (B) Is enrolled in a postbaccalaureate teacher certificate or 
licensing program as described in 34 CFR 690.6(c); and
    (ii) Is not incarcerated in a Federal or State penal institution; 
and
    (3) For purposes of the Federal Perkins Loan, FFEL, and Direct Loan 
programs, is not incarcerated;
* * * * *
    4. Section 668.161 is amended by revising paragraph (a)(4) to read 
as follows:


Sec. 668.161  Scope and purpose.

    (a) * * *
    (4) FWS Program. An institution must follow the disbursement 
procedures in 34 CFR 675.16 for paying a student his or her wages under 
the FWS Program instead of the disbursement procedures in 
Secs. 668.164(b) through (g) and 668.165.
* * * * *

[[Page 58292]]

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

    5. The authority citation for part 673 continues to read as 
follows:

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

    6. Section 673.5 is amended by revising paragraph (c)(1) 
introductory text and paragraph (c)(1)(ix); by redesignating paragraphs 
(c)(1)(x) and (c)(1)(xi) as paragraphs (c)(1)(xi) and (c)(1)(xii), 
respectively; by adding new paragraphs (c)(1)(x) and (c)(4); and by 
revising the OMB control number following the section to read as 
follows:


Sec. 673.5  Overaward.

* * * * *
    (c) Resources. (1) Except as provided in paragraphs (c)(2), (c)(3), 
and (c)(4) of this section, the Secretary considers that ``resources'' 
include, but are not limited to, any--
* * * * *
    (ix) Veterans educational benefits paid under Chapters 30, 31, 32, 
and 35 of title 38 of the United States Code;
    (x) National service education awards or post-service benefits paid 
for the cost of attendance under title I of the National and Community 
Service Act of 1990 (AmeriCorps);
* * * * *
    (4) The institution may exclude as a resource any portion of a 
Federal Direct Stafford/Ford Loan (Direct Subsidized Loan) and 
subsidized Federal Stafford Loan that is equal to or less than the 
amount of a student's veterans education benefits paid under Chapter 30 
of title 38 of the United States Code (Montgomery GI Bill) and national 
service education awards or post service benefits paid for the cost of 
attendance under title I of the National and Community Service Act of 
1990 (AmeriCorps).
* * * * *
(Approved by the Office of Management and Budget under control 
number 1845-0019)

PART 674--FEDERAL PERKINS LOAN PROGRAM

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

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

    8. Section 674.10 is amended by revising paragraph (b) to read as 
follows:


Sec. 674.10  Selection of students for loans.

* * * * *
    (b) If an institution's allocation of Federal Capital Contribution 
is directly or indirectly based in part on the financial need 
demonstrated by students attending the institution as less-than-full-
time or independent students, a reasonable portion of the dollar amount 
of loans made under this part must be offered to those students.
* * * * *

PART 675--FEDERAL WORK-STUDY PROGRAMS

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

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

    10. In Sec. 675.2 paragraph (b) is amended by revising paragraphs 
(1) and (3) of the definition of ``community services'' to read as 
follows:


Sec. 675.2  Definitions.

* * * * *
    (b) * * *
    Community services * * *
    (1) Such fields as health care, child care (including child care 
services provided on campus that are open and accessible to the 
community), literacy training, education (including tutorial services), 
welfare, social services, transportation, housing and neighborhood 
improvement, public safety, crime prevention and control, recreation, 
rural development, and community improvement;
* * * * *
    (3) Support services to students with disabilities, including 
students with disabilities who are enrolled at the institution; and
* * * * *


Sec. 675.8  [Amended]

    11. Section 675.8 is amended by removing paragraph (d), and 
redesignating paragraphs (e), (f), and (g) as paragraphs (d), (e), and 
(f), respectively.
    12. Section 675.10 is amended by revising paragraph (c), and by 
revising the OMB control number following the section to read as 
follows:


Sec. 675.10  Selection of students for FWS employment.

* * * * *
    (c) Part-time and independent students. If an institution's 
allocation of FWS funds is directly or indirectly based in part on the 
financial need demonstrated by students attending the institution as 
less-than-full-time or independent students, a reasonable portion of 
the allocation must be offered to those students.

(Approved by the Office of Management and Budget under control 
number 1845-0019)

    13. Section 675.16 is amended to read as follows by:
    (a.) Redesignating paragraphs (a)(2), (a)(3), and (a)(4), as 
paragraphs (a)(10), (a)(11), and (a)(12), respectively;
    (b.) Revising paragraph (a)(1) and adding new paragraphs (a)(2) 
through (a)(9);
    (c.) In newly redesignated paragraph (a)(11), removing ``wages 
are'' and adding, in its place, ``compensation is'';
    (d.) In newly redesignated paragraph (a)(12), removing ``wages'' 
and adding, in its place, ``compensation'';
    (e.) Revising paragraph (b)(1);
    (f.) In paragraphs (b)(2), (b)(3), and (c), removing ``shall'' and 
adding, in its place, ``must''; and
    (g.) Revising the OMB control number following the section.


Sec. 675.16  Payments to students.

    (a)(1) An institution must pay a student FWS compensation at least 
once a month.
    (2) Before an institution makes an initial disbursement of FWS 
compensation to a student for an award period, the institution must 
notify the student of the amount of funds the student is authorized to 
earn, and how and when the FWS compensation will be paid.
    (3) An institution must pay FWS compensation to a student by--
    (i) Check or similar instrument that the student can cash on his or 
her own endorsement;
    (ii) Initiating an electronic funds transfer (EFT) to a bank 
account designated by the student after obtaining the authorization 
described in paragraph (a)(4)(i) of this section;
    (iii) Crediting the student's account at the institution after 
obtaining the authorization described in paragraph (a)(4)(i) of this 
section. The institution may only credit the student's account at the 
institution to satisfy current award year charges for--
    (A) Tuition and fees;
    (B) Board, if the student contracts with the institution for board;
    (C) Room, if the student contracts with the institution for room; 
and
    (D) Other institutionally provided educationally related goods and 
services; or
    (iv) Crediting the student's account at the institution to satisfy 
minor prior award year authorized charges if these charges are less 
than $100 or if the payment of these charges does not, and will not, 
prevent the student from paying his or her current educational costs 
after obtaining the authorization described in paragraph (a)(4)(i) of 
this section.

[[Page 58293]]

    (4)(i) Except for the noncash contributions allowed under 
paragraphs (b)(2) and (b)(3) of this section, an institution must 
obtain a separate written authorization from the student if the student 
is paid FWS compensation by--
    (A) Crediting the student's account at the institution; or (B) 
Initiating an EFT to a bank account designated by the student.
    (ii) If an institution obtains a written authorization from the 
student, the institution may hold excess FWS funds under paragraph 
(a)(8) of this section.
    (iii) The institution must obtain and use the written authorization 
in accordance with the requirements of paragraphs (a)(5) and (a)(6) of 
this section.
    (5) In obtaining the student's written authorization described in 
paragraph (a)(4) of this section, an institution--
    (i) May not require or coerce the student to provide that 
authorization;
    (ii) Must allow the student to cancel or modify that authorization 
at any time; and
    (iii) Must clearly explain to the student how it will carry out 
that activity.
    (6)(i) If a student modifies the written authorization described in 
paragraph (a)(4) of this section, the modification takes effect on the 
date the institution receives the modification notice.
    (ii) If a student cancels the written authorization described in 
paragraph (a)(4)(i)(A) of this section, the institution may use the FWS 
compensation to pay only those authorized charges incurred by the 
student before the institution received the notice.
    (7) If an institution pays a student FWS compensation by crediting 
the student's account, and the result is a credit balance, the 
institution must pay the credit balance directly to the student as soon 
as possible but no later than 14 days after the balance occurred on the 
account.
    (8) Except if prohibited by the Secretary under the reimbursement 
payment method, an institution may hold, on behalf of the student, FWS 
funds that would otherwise be paid directly to the student under 
paragraph (a)(7) of this section, if the institution obtains the 
authorization described in paragraph (a)(4)(ii) of this section. If an 
institution holds excess FWS funds, the institution must--
    (i) Identify the amount of FWS funds the institution holds for each 
student in a subsidiary ledger account designated for that purpose;
    (ii) Maintain, at all times, cash in its bank account in an amount 
at least equal to the amount of FWS funds the institution holds for the 
student; and
    (iii) Pay any remaining balance by the end of the institution's 
final FWS payroll period for an award period.
    (9) If a student cancels the written authorization as described in 
paragraph (a)(4)(ii) of this section to hold excess FWS funds, the 
institution must pay those funds directly to the student as soon as 
possible but no later than 14 days after the institution receives that 
cancellation notice.
* * * * *
    (b)(1) Except for the noncash contributions allowed under paragraph 
(b)(2) or (b)(3) of this section, an institution must pay the student 
its share of his or her FWS compensation at the same time it pays the 
Federal share.
* * * * *
(Approved by the Office of Management and Budget under control 
number 1845-0019)

    14. Section 675.18 is amended as follows by:
    (A) Revising paragraph (a)(2);
    (B) In paragraph (f), removing, ``May 15'' and adding, in its 
place, ``May 1'';
    (C) Revising paragraphs (g)(1) and (g)(2); and adding new 
paragraphs (g)(3) and (h).


Sec. 675.18  Use of funds.

    (a) * * *
    (2) Paying administrative expenses as provided for in 34 CFR 673.7;
* * * * *
    (g) Community service. (1) For the 2000-2001 award year and 
subsequent award years, an institution must use at least seven percent 
of the sum of its initial and supplemental FWS allocations for an award 
year to compensate students employed in community service activities. 
In meeting this community service requirement, an institution must 
include at least one--
    (i) Reading tutoring project that employs one or more FWS students 
as reading tutors for children who are preschool age or are in 
elementary school; or
    (ii) Family literacy project that employs one or more FWS students 
in family literacy activities.
    (2) The Secretary may waive the requirements in paragraph (g)(1) of 
this section if the Secretary determines that an institution has 
demonstrated that enforcing the requirements in paragraph (g)(1) of 
this section would cause a hardship for students at the institution.
    (3) To the extent practicable, in providing reading tutors for 
children under paragraph (g)(1)(i), an institution must--
    (i) Give priority to the employment of students to tutor in reading 
in schools that are participating in a reading reform project that--
    (A) Is designed to train teachers how to teach reading on the basis 
of scientifically-based research on reading; and
    (B) Is funded under the Elementary and Secondary Education Act of 
1965; and
    (ii) Ensure that any student who is employed in a school 
participating in a reading reform project described in paragraph 
(g)(3)(i) of this section receives training from the employing school 
in the instructional practices used by the school.
    (h) Payment for time spent in training and travel. (1) For any 
award year, an institution may pay students for a reasonable amount of 
time spent for training that is directly related to FWS employment.
    (2) Beginning with the 1999-2000 award year, an institution may pay 
students for a reasonable amount of time spent for travel that is 
directly related to employment in community service activities 
(including tutoring in reading and family literacy activities).
    15. Section 675.20 is amended by adding a new paragraph (d), and by 
revising the OMB control number following the section to read as 
follows:


Sec. 675.20  Eligible employers and general conditions and limitation 
on employment.

* * * * *
    (d) Academic credit and work-study. (1) A student may be employed 
under the FWS program and also receive academic credit for the work 
performed. Those jobs include, but are not limited to, work performed 
when the student is--
    (i) Enrolled in an internship;
    (ii) Enrolled in a practicum; or
    (iii) Employed in a research, teaching, or other assistantship.
    (2) A student employed in an FWS job and receiving academic credit 
for that job may not be--
    (i) Paid less than he or she would be if no academic credit were 
received;
    (ii) Paid for receiving instruction in a classroom, laboratory, or 
other academic setting; and
    (iii) Paid unless the employer would normally pay the person for 
the same position.
(Approved by the Office of Management and Budget under control number 
1845-0019)
    16. Section 675.23 is amended by revising paragraph (b)(1) to read 
as follows:


Sec. 675.23  Employment provided by a private for-profit organization.

* * * * *

[[Page 58294]]

    (b) * * *
    (1) The work that the student performs must be academically 
relevant to the student's educational program, to the maximum extent 
practicable; and
* * * * *
    17. Section 675.26 is amended by revising paragraph (a)(1), by 
redesignating paragraphs (a)(2) and (a)(3) as paragraphs (a)(3) and 
(a)(4), by adding a new paragraph (a)(2), and by revising paragraph 
(d)(2)(iii) to read as follows:


Sec. 675.26  FWS Federal share limitations.

    (a)(1) The Federal share of FWS compensation paid to a student 
employed other than by a private for-profit organization, as described 
in Sec. 675.23, may not exceed 75 percent unless the Secretary approves 
a higher share under paragraph (a)(2) or (d) of this section.
    (2) The Federal share of the compensation paid to a student may 
exceed 75 percent, but may not exceed 90 percent, if--
    (i) The student is employed at a private nonprofit organization or 
a Federal, State, or local public agency that--
    (A) Is not a part of, and is not owned, operated, or controlled by, 
or under common ownership, operation, or control with, the institution;
    (B) Is selected by the institution on an individual case-by-case 
basis;
    (C) Would otherwise be unable to afford the costs of this 
employment; and
    (ii) The number of students compensated under paragraph (a)(2)(i) 
of this section is not more than 10 percent of the total number of 
students paid under the FWS Program at the institution.
* * * * *
    (d) * * *
    (2) * * *
    (iii) The student is performing family literacy activities in a 
family literacy project that provides services to families with 
preschool age children or children who are in elementary school; or
* * * * *

Subpart C--Work-Colleges Program

    18. Section 675.45 is amended by adding new paragraphs (a)(5) and 
(a)(6) to read as follows:


Sec. 675.45  Allowable costs, Federal share, and institutional share.

    (a) * * *
    (5) Coordinate and carry out joint projects and activities to 
promote work service learning.
    (6) Carry out a comprehensive, longitudinal study of student 
academic progress and academic and career outcomes, relative to student 
self-sufficiency in financing their higher education, repayment of 
student loans, continued community service, kind and quality of service 
performed, and career choice and community service selected after 
graduation.
* * * * *

PART 676--SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT PROGRAM

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

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

    20. Section 676.10 is amended by revising paragraph (b) to read as 
follows:


Sec. 676.10  Selection of students for FSEOG awards.

* * * * *
    (b) Part-time and independent students. If an institution's 
allocation of FSEOG funds is directly or indirectly based in part on 
the financial need demonstrated by students attending the institution 
as less-than-full-time or independent students, a reasonable portion of 
the allocation must be offered to those students.
    21. Section 676.18 is amended by revising paragraph (a)(2), and 
adding new paragraphs (c), (d), (e) and (f) to read as follows:


Sec. 676.18  Use of funds.

    (a) * * *
    (2) Paying administrative expenses as provided for in 34 CFR 673.7.
* * * * *
    (c) Carry forward funds. (1) An institution may carry forward and 
expend in the next award year up to 10 percent of the sum of its 
initial and supplemental FSEOG allocations for the current award year.
    (2) Before an institution may spend its current year FSEOG 
allocation, it must spend any funds carried forward from the previous 
year.
    (d) Carry back funds. An institution may carry back and expend in 
the previous award year up to 10 percent of the sum of its initial and 
supplemental FSEOG allocations for the current award year. The 
institution's official allocation letter represents the Secretary's 
approval to carry back funds.
    (e) Use of funds carried forward and carried back. An institution 
may use the funds carried forward or carried back under paragraphs (c) 
and (d) of this section, respectively, for activities described in 
paragraph (a) of this section.
    (f) Carry back funds for summer FSEOG awards. An institution may 
carry back and expend in the previous award year any portion of its 
initial and supplemental FSEOG allocations for the current award year 
to make awards to eligible students for payment periods that begin on 
or after May 1 of the previous award year but end prior to the 
beginning of the current award year.

PART 690--FEDERAL PELL GRANT PROGRAM

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

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

    23. Section 690.6 is amended by revising the heading and paragraph 
(a), and adding new paragraphs (c) and (d) to read as follows:


Sec. 690.6  Duration of student eligibility--undergraduate course of 
study and eligible postbaccalaureate program.

    (a) Except as provided in paragraphs (c) and (d) of this section, a 
student is eligible to receive a Federal Pell Grant for the period of 
time required to complete his or her first undergraduate baccalaureate 
course of study.
* * * * *
    (c) An otherwise eligible student who has a baccalaureate degree 
and is enrolled in a postbaccalaureate program is eligible to receive a 
Federal Pell Grant for the period of time necessary to complete the 
program if--
    (1) The postbaccalaureate program consists of courses that are 
required by a State for the student to receive a professional 
certification or licensing credential that is required for employment 
as a teacher in an elementary or secondary school in that State;
    (2) The postbaccalaureate program does not lead to a graduate 
degree;
    (3) The institution offering the postbaccalaureate program does not 
also offer a baccalaureate degree in education;
    (4) The student is enrolled as at least a half-time student; and
    (5) The student is pursuing an initial teacher certification or 
licensing credential within a State.
    (d) An institution must treat a student who receives a Federal Pell 
Grant under paragraph (c) of this section as an undergraduate student 
enrolled in an undergraduate program for title IV purposes.
    24. In Sec. 690.7 paragraph (c) is redesignated as paragraph (d), 
and a new paragraph (c) is added to read as follows:

[[Page 58295]]

Sec. 690.7  Institutional participation.

* * * * *
    (c)(1) If an institution loses its eligibility to participate in 
the FFEL or Direct Loan program under the provisions of 34 CFR 668.17, 
it also loses its eligibility to participate in the Federal Pell Grant 
Program for the same period of time.
    (2) That loss of eligibility must be in accordance with the 
provisions of 34 CFR 668.17(b).
* * * * *
[FR Doc. 99-28167 Filed 10-27-99; 8:45 am]
BILLING CODE 4000-01-U