[Federal Register Volume 64, Number 244 (Tuesday, December 21, 1999)]
[Proposed Rules]
[Pages 71552-71565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32918]



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Part II





Department of Education





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34 CFR Part 694



Gaining Early Awareness and Readiness for Undergraduate Programs; 
Proposed Rule

  Federal Register / Vol. 64, No. 244 / Tuesday, December 21, 1999 / 
Proposed Rules  

[[Page 71552]]



DEPARTMENT OF EDUCATION

34 CFR Part 694

RIN 1840-AC82


Gaining Early Awareness and Readiness for Undergraduate Programs

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Proposed regulations.

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SUMMARY: The Secretary proposes to amend the regulations governing the 
Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR 
UP) program. These amendments are needed because the current 
regulations applied only to the fiscal year 1999 competition. These 
proposed regulations will apply to any future GEAR UP competitions and 
were drafted subject to the negotiated rulemaking process required by 
section 492 of the Higher Education Act of 1964 (HEA), as amended.

DATES: We must receive your comments on or before January 20, 2000.

ADDRESSES: Address all comments about these proposed regulations to 
Edward Fuentes, U.S. Department of Education, 1990 K Street, NW., room 
6107, Washington, DC 20006. If you prefer to send your comments through 
the Internet, use the following address: [email protected]. You must 
include the term GEAR UP in the subject line of your electronic 
message.
    If you want to comment on the information collection requirements 
you must send your comments to the Office of Management and Budget at 
the address listed in the Paperwork Reduction Act section of this 
preamble. You may also send a copy of these comments to the Department 
representative named in this section.

FOR FURTHER INFORMATION CONTACT: Lisa Aserkoff, 400 Maryland Ave., SW., 
Room 6E205, Washington, DC 20202. Telephone: (202) 401-6296. 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 in the preceding 
paragraph.

SUPPLEMENTARY INFORMATION:

Invitation to Comment

    We invite you to submit comments regarding these proposed 
regulations. To ensure that your comments have the maximum effect in 
developing the final regulations, we urge you to identify clearly the 
specific section or sections of the proposed regulations that each of 
your comments addresses and to arrange your comments in the same order 
as the proposed regulations. We invite you to assist us in complying 
with the specific requirements of Executive Order 12866 and its overall 
requirement of reducing regulatory burden that might result from these 
proposed regulations. Please let us know of any further opportunities 
we should take to reduce potential costs or increase potential benefits 
while preserving the effective and efficient administration of the 
program.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations in room 6107, 1990 K Street, 
NW., Washington, DC, between the hours of 8:30 a.m. and 4 p.m., Eastern 
time, Monday through Friday of each week except Federal holidays.

Assistance to Individuals With Disabilities in Reviewing the 
Rulemaking Record

    On request, we will supply an appropriate aid, such as a reader or 
print magnifier, to an individual with a disability who needs 
assistance to review the comments or other documents in the public 
rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of aid, you may call (202) 205-
8113 or (202) 260-9585. If you use a TDD, you may call the Federal 
Information Relay Service at 1-800-877-8339.

Background

    Section 403 of the Higher Education Amendments of 1998 
(Amendments), (Public Law 105-244), enacted October 7, 1998, amending 
the Higher Education Act of 1965 (HEA) established the Gaining Early 
Awareness and Readiness for Undergraduate Programs (GEAR UP), a program 
designed to give more low-income students the skills, encouragement, 
and preparation needed to pursue postsecondary education, and to 
strengthen academic programs and student services at participating 
schools.
    On March 2, 1999, we published final regulations implementing GEAR 
UP for fiscal year 1999 (64 FR 10183), using the Department's authority 
under section 437(d) of the General Education Provisions Act to waive 
rulemaking requirements for regulations governing the first grant 
competition under a new or substantially revised program authority (20 
U.S.C. 1232(d)(1)).

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. For fiscal year 1999, we determined that, to make 
grants under this competition before the funds expired, the use of 
negotiated rulemaking would be impracticable and contrary to the public 
interest under section 492(b)(2) of the HEA.
    The proposed regulations contained in this NPRM were developed 
through the use of negotiated rulemaking. The proposed regulations 
reflect the final consensus of the GEAR UP negotiating committee 
(committee), which was made up of the following members:

California State University System
The College Board
Council of the Great City Schools
Ford Foundation
High School Equivalency Program and the College Assistance Migrant 
Program Association and the National Association for Migrant Education, 
Inc. (a coalition)
Hispanic Association of Colleges and Universities
``I Have a Dream'' Foundation
National Alliance of Black School Educators
National Association for College Admission Counseling
National Association for Equal Opportunity in Higher Education
National Association of Independent Colleges and Universities
National Association of Secondary School Principals and the National 
Forum on Middle-Grades Reform (a coalition)
National Association of State Student Grant and Aid Programs
National Coalition of Title I/Chapter I Parents
National Collaboration for Youth
National Council of Higher Education Loan Programs
National Education Association
United States Chamber of Commerce
United States Department of Education
United States Student Association

As stated in the committee protocols, consensus means that there must 
be no dissent by any member in order for the committee to be considered 
to have reached agreement. Consensus was reached on all of the proposed 
regulations in this document.

[[Page 71553]]

Background

    GEAR UP provides two types of competitive grants: State grants and 
Partnership grants. State grants must provide early college preparation 
and awareness activities through the early intervention component of 
the GEAR UP program and scholarships for participating students through 
the scholarship component of GEAR UP. Partnerships must provide early 
college preparation and awareness activities through the early 
intervention component and are encouraged to provide college 
scholarships, although they are not required to do so.

Section  694.1  Maximum Grant Amounts

    Current Regulations: The current regulations set a maximum amount 
that the Secretary could award each year to a Partnership or a State 
under GEAR UP. For Partnership grants, the maximum amount that the 
Secretary could award each year was calculated by multiplying the 
number of students the Partnership proposes to serve that year, as 
stated in the Partnership's plan, by $800.
    For State grants, the current regulations set the maximum dollar 
amount that the Secretary could award each year at $5 million.
    Proposed regulations: For Partnership grants, the proposed 
regulations would keep the same maximum amount that the Secretary could 
award each year as under current regulations, an amount calculated by 
multiplying the number of students the Partnership proposes to serve 
that year by $800.
    Reasons: Negotiators agreed that this is an appropriate maximum 
average per student, per year, Federal dollar amount to spend under 
GEAR UP. We believe that this maximum average Federal dollar amount per 
student will ensure that the Department can fund a substantial number 
of projects nationwide each year, while still providing for a broad 
range of services for those students served.
    Proposed regulations: For State grants the proposed regulations 
would state that the Secretary establishes the maximum amount that may 
be awarded each fiscal year for a GEAR UP State grant in a notice 
published in the Federal Register. The negotiators recognized that a 
maximum grant amount was necessary to ensure that we could fund a 
substantial number of projects each year, while still providing the 
services necessary to ensure a successful program.
    Several negotiators, however, expressed some concern that the 
maximum amount for the grant was set in regulation. These negotiators 
mentioned changes in funding from Congress for the program as a 
potential reason why there needed to be discretion each year in setting 
the maximum State grant amount. We therefore changed the regulations so 
that the maximum amount that the Secretary could award each year for a 
GEAR UP State grant would be announced each fiscal year in a notice 
published in the Federal Register.

Section 694.2  Students Served By the Cohort Approach Under the Early 
Intervention Component

    Statute: Section 404B(g) of the HEA requires that Partnerships 
provide services to at least one grade level of students, beginning not 
later than the 7th grade. In addition, Partnerships must ensure that 
those services are provided through the 12th grade to students in the 
participating grade levels.
    Current Regulations: The current regulations restate the statutory 
language, but also add language that would require States that choose 
to use the cohort approach to follow the same rules as Partnerships. 
The regulations also established the word ``cohort'' as the term used 
throughout the regulations to refer to the entire grade levels of 
students the Partnership (or State) served.
    Proposed Regulations: The proposed regulations would be the same as 
the current regulations, with one addition. Partnerships, and States 
using the cohort approach, must ensure that supplemental appropriate 
services are targeted to the students with the greatest needs.
    Reasons: The committee discussed the problems associated with 
serving an entire grade level of students in large schools. Several 
negotiators felt that it was important to try to ensure that the 
students who needed the services the most didn't get lost among the 
many other students also served in their school under GEAR UP. The 
committee discussed how to provide those students with appropriate 
services, without violating the statute, which requires that services 
be provided to entire grade levels of students.
    The negotiating committee discussed several variations of language 
initially offered by several negotiators. The language originally 
offered would have required Partnerships to ensure that direct services 
be delivered to the most disadvantaged students within a cohort. 
Several other negotiators, including the Department, while recognizing 
the concerns the language was trying to address, believed that this 
language was not the best way to address those concerns. The committee 
discussed the use of the word ``disadvantaged,'' and wanted to be sure 
that services weren't only targeted at economically disadvantaged 
students.
    In addition, negotiators were concerned about the word 
``delivery,'' and whether it meant that the Partnership had to ensure 
the student actually received all of the services. Several negotiators 
wondered how the Partnership could ensure that each disadvantaged 
student actually receives all of the services if a student adamantly 
refuses, or doesn't show up, and what the consequences would be for a 
Partnership if services were not delivered. By contrast, under the 
proposed regulations, Partnerships would be able to provide services to 
the entire cohort, tailor services to students' needs, and target 
additional services appropriate to students with the greatest needs.
    In addition, several negotiators were concerned that the 
requirement as a whole could be read to imply that not all students in 
the cohort needed to receive services. Several negotiators emphasized 
that one of the most important attributes of the GEAR UP program was 
the whole-grade approach, and the negotiators wanted to be sure that 
the suggested additional language wouldn't lead to Partnerships 
providing services to only some students in a grade.
    The committee then discussed several wording alternatives to 
address these concerns. One negotiator suggested changing 
``disadvantaged'' to ``special needs.'' Some other negotiators, 
however, were concerned that the term ``special needs'' might imply 
only learning or physical disabilities. In addition, some negotiators 
suggested removing ``delivery,'' and instead saying that Partnerships 
must ensure that services were ``targeted to'' certain students. To 
address the concern about the whole-grade approach, the words 
``supplemental appropriate services'' were added, so that it was clear 
that while all students should receive appropriate services, students 
with the greatest needs should get appropriate supplemental services.
    The committee then reached final consensus on a provision that 
requires Partnerships, or States using the cohort approach, to ensure 
that supplemental appropriate services are targeted to the students 
with the greatest needs. The committee believed that this language 
addresses the concern that, in large cohorts, the neediest students 
might ``get lost,'' and might need some extra attention, but still 
makes clear that the

[[Page 71554]]

attention must be in addition to services provided to the entire 
cohort. The committee also believed that referring to ``students with 
the greatest needs'' would be flexible enough to allow individual 
school districts to decide how to determine which students most needed 
the additional services.

Section 694.3  Cohort Requirements

    Statute: Section 404B(g) of the statute requires that Partnerships 
must provide services to at least one grade level of students, 
beginning not later than the 7th grade, in a participating school that 
has a 7th grade and in which at least 50 percent of the students are 
eligible for free or reduced-price lunch under the National School 
Lunch Act (or, if a Partnership determines that it would promote the 
effectiveness of a program, an entire grade level of students, 
beginning not later than the 7th grade, who reside in public housing as 
defined in section 3(b)(1) of the United States Housing Act of 1937).
    Current Regulations: The current regulations restate the statute, 
but divide the requirements into individual paragraphs, to make 
statutory language clearer.
    Proposed Regulations: The proposed regulations would keep the same 
language as in current regulations.
    Reason: The negotiators agreed that the regulatory language would 
help clarify the statutory requirements. The committee discussed 
whether there was any way to provide services to students before they 
reached schools that include a 7th grade. Some negotiators mentioned 
that in some States there were many elementary schools that didn't 
include a 7th grade, but that they felt could still benefit 
tremendously from a program like GEAR UP. The committee discussed this 
at length, but under the statute Partnerships cannot serve students in 
schools that do not include a 7th grade. Additionally, several 
negotiators thought that although others could certainly benefit from 
GEAR UP services, the emphasis of GEAR UP was intended for students in 
middle grades (i.e. schools that include a 7th grade), and wanted to 
ensure that GEAR UP funds reached the population for which they were 
intended. Students benefit most in the middle grades; research shows 
that course and other decisions in the middle grades are critical in 
determining a student's chances of going to college. The definition of 
schools with a 7th grade already includes a broad range of school 
configurations without diluting the program's unique focus on the 
middle grades.

Section 694.4  Changes in the Cohort

    Current regulations: Under current regulations, a Partnership or 
State that chooses to use a cohort approach must serve, as part of the 
cohort, any additional students who may have enrolled in the 
participating school, at the grade level of the students in the cohort, 
after the cohort began receiving GEAR UP services. The current 
regulations also provide that if, after completing the last grade level 
offered by the school at which the cohort began to receive GEAR UP 
services, not all the students in the cohort move on to the same 
school, the Partnership or the State may, but is not required to, 
provide services to all of those students. However, the Partnership or 
State must continue to provide GEAR UP services to at least those 
students in the cohort who attend subsequent participating schools that 
enroll a substantial majority of the students in the cohort.
    Proposed Regulations: The proposed regulations would keep the same 
language as in the current regulations to address the students a 
Partnership or State must serve when there are changes in the cohort.
    Reasons: The committee agreed that any new student who enrolls in a 
participating school and joins a GEAR UP cohort before the cohort 
completes the GEAR UP program in that school, should have the 
opportunity to benefit from the direct services the other cohort 
students are receiving. The committee also agreed that some students 
who began in the cohort are likely to leave the participating school as 
well, and that GEAR UP programs should not be required to serve those 
students.
    The committee also recognized that as the cohort moves on to a 
subsequent participating school (for example, a high school), a single 
middle-grades school could feed into more than one high school. Some 
cohorts may, therefore, eventually be distributed among several 
schools. The committee agreed that Partnerships or States should be 
required to continue providing GEAR UP services to at least those 
students in the cohort that attend participating schools that enroll a 
substantial majority of the students in the cohort. In doing so, the 
maximum number of students from the original cohort would continue to 
receive services, without placing an undue burden on Partnerships or 
States.

Sections 694.5 and 694.6 Serving Private School Students

    Current Regulations: The current regulations outline the 
requirements a Partnership or State must meet if it chooses to provide 
services to private school students under the program's early 
intervention component. The regulations are based on private school 
student participation requirements generally applicable to most 
elementary and secondary education programs carried out by the 
Department.
    Proposed Regulations: The proposed regulations would keep the 
language from current regulations for providing services to private 
school students under the program's early intervention component.
    Reasons: The committee agreed that regulations are necessary to 
ensure that Federal funds are used for educational services that are 
secular, neutral, and nonideological.

Section 694.7  Matching Requirements

    Statute: Under section 404C(b) of the HEA, the Secretary may not 
approve a GEAR UP plan unless the plan provides that the Partnership or 
State will provide, from State, local, institutional, or private funds, 
not less than 50 percent of the cost of the program, in cash or in 
kind. Section 404C(b) also gives the Secretary the authority to modify, 
by regulation, the 50 percent requirement for Partnerships.
    Current Regulations: The current regulations require a Partnership 
to state in its application the percentage of the cost of the GEAR UP 
project for each year that the Partnership will provide from non-
Federal funds, and then to comply with the matching percentage stated 
in the application for each year of the project period. Under current 
regulations, a Partnership must also provide at least 20% of the cost 
of the project from non-Federal funds for any year in the project 
period, and the non-Federal share of the cost of the GEAR UP project 
must be at least 50% of the total cost over the project period.
    Proposed regulations: The proposed regulations would keep the 
requirement that the non-Federal share of the cost of the GEAR UP 
project be not less than 50 percent of the total cost over the project 
period. However, the proposed regulations would permit a match lower 
than 50 percent, but not lower than 30 percent, for Partnerships with 
three or fewer institutions of higher education as members, and in 
which the fiscal agent is (1) eligible to receive funds under Title V, 
Part B of Title III, or section 316 or 317 of the HEA, or (2) a local 
educational agency. In addition, to qualify for the lower match, the 
Partnership would have to include only participating schools with a 7th 
grade in which at least 75 percent of the students are eligible for 
free or reduced-price lunch under the National School Lunch Act; and 
only local educational agencies

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in which at least 50 percent of the students enrolled are eligible for 
free or reduced-price lunch under the National School Lunch Act.
    Reasons: The committee agreed that generally the 50 percent 
matching requirement over the entire project period gives Partnerships 
broad flexibility in terms of the amount of the project cost that the 
Partnership must provide for each year of the project. The success of 
any project depends in part upon strong community support. The 50 
percent requirement helps to ensure that the GEAR UP project has strong 
community support, that all members of the Partnership contribute to 
the program, in cash or in kind, and that the Partnership can be 
sustained, even after Federal funds are no longer available, through 
strong community Partnerships, with support from all partners. The 
Department also suggested that the poorest and very rural communities 
were able to meet the match in the fiscal year 1999 competition.
    Several negotiators, however, felt that the 50 percent match 
precluded some of the poorest communities from applying, because they 
wouldn't have the resources to meet the 50 percent match. The committee 
discussed a variety of options to address this problem.
    One negotiator suggested a waiver of the match. If that wouldn't be 
possible, the negotiator suggested a minimum match of 20 percent 
throughout the life of the grant. The negotiator was concerned that 
many colleges and universities, especially those that serve low-income 
students, were already burdened by matching requirements of other 
programs, even where there is flexibility to substitute in-kind 
services for dollars. Several other negotiators, including the 
Department, felt that a minimum match of 20 percent throughout the life 
of the grant was too low, and that other members of the Partnership 
could and needed to provide more. These negotiators stressed that 
Partnerships would not need to use cash to meet the match, but could do 
so through in-kind contributions, which, in spite of the negotiator's 
concerns, should serve to alleviate the burden.
    Another option presented by some negotiators was that Partnerships 
could be eligible for a 25 percent match if they served only elementary 
and secondary schools in which at least 50 percent of the students 
enrolled were eligible for free or reduced-price lunch under the 
National School Lunch Act, and if they served only LEAs in which at 
least 50 percent of the students enrolled were eligible for free or 
reduced-price lunch under the National School Lunch Act.
    A third option presented to the committee would have permitted the 
Secretary to give special consideration to Partnerships with respect to 
the match either before the Partnership's application was approved or 
after a grant was awarded. For pre-approval special consideration, a 
Partnership would apply for special consideration for a match less than 
50 percent, and would receive notification from the Secretary as to 
whether their request was granted within 30 days of the application 
deadline. Whether the request was pre-approval, or post-award, there 
would be two circumstances under which a Partnership could apply for 
special consideration. The first circumstance would be if an emergency, 
such as a natural disaster, occurred where the Partnership was located 
that would warrant a lower match.
    The other circumstance that could allow a Partnership to apply for 
a lower match would be if there were within the Partnership systemic 
issues that could preclude the Partnership from being able to meet the 
match. To qualify for the lower match, the Partnership would have to 
show that, in spite of its limited resources, it had an ongoing 
commitment to serving the educational needs of targeted students. The 
Partnership would also have to show that it had no access to adequate 
fiscal resources, or that it was geographically isolated. Finally, this 
would be available only in geographic areas in which at least 75 
percent of the students were eligible for free or reduced-price lunch, 
or in which there was a high unemployment rate.
    The negotiators felt that the provision that appears in the 
proposed regulations was the best option available. Several negotiators 
didn't want the first option of either a waiver or a minimum 20 percent 
match throughout the life of the grant. These negotiators felt that a 
waiver would be too logistically burdensome, both for the Secretary and 
for the applicant. These negotiators also felt that a minimum of 20 
percent over the life of the grant was too low.
    Negotiators also didn't agree to the second option, because they 
felt it could allow too many applicants to take advantage of a reduced 
match, which would weaken the projects and mean more Federal money 
would be spent per project, and fewer projects could be funded.
    Negotiators felt that the third option was not the best option for 
a couple of reasons. One reason is that this option would have required 
both the applicants and the Department to spend significant amounts of 
time determining whether the applicants were in fact eligible for the 
lower match, since the criteria to qualify for the lower match were 
subjective and extremely detailed. In addition, this option would have 
required the Secretary to make individual determinations as to whether 
an applicant qualified for the lower match.
    Negotiators, including the Department, preferred an approach that 
provided a lower match for an easily definable group of applicants. 
Negotiators felt that this approach would be less burdensome, both for 
applicants and for the Department, and would still provide a lower 
match for the applicants that needed it most.
    One negotiator argued that the group of institutions of higher 
education eligible for the lower match in the proposed regulations 
should be expanded to include institutions eligible to receive funds 
under all of Part A of title III of the HEA, instead of just sections 
316 and 317. Other negotiators, including the Department, felt that the 
proposed regulations were sufficiently broad to allow a significant 
number of Partnerships to be eligible for the reduced match and further 
believed that including the institutions the negotiator suggested would 
expand the exception so broadly that it would become the rule.

Section 694.8  Fiscal Agents for Partnerships

    Statute: Section 404B(d) of the statute requires that a Partnership 
designate an Institution of Higher Education (IHE) or a Local 
Educational Agency (LEA) as the fiscal agent for the partnership.
    Current Regulations: The current regulations restate the statutory 
language and add that the IHE must be an IHE that is not pervasively 
sectarian.
    Proposed Regulations: The proposed regulations would keep the 
language from the current regulations, but would add language 
clarifying that although the IHE or LEA must be the fiscal agent, any 
member of the Partnership can organize the project.
    Reasons: Several negotiators wanted to clarify in the regulations 
that other members of the Partnership, such as community-based 
organizations, though not eligible to be the fiscal agent, could still 
be a driving force in a Partnership. Some negotiators felt that without 
the clarifying language, organizations other than IHEs and LEAs might 
think they couldn't play a significant organizational role in the 
Partnership and might be less inclined to join the Partnership.

[[Page 71556]]

Section 694.9  Maximum Indirect Cost Rates for States and LEAs

    Current Regulations: Although the current regulations don't address 
indirect cost rates, we addressed indirect cost rates in the 
application package for GEAR UP. We determined that GEAR UP projects 
were educational training grants under 34 CFR 74.562. Consistent with 
that provision in EDGAR, a recipient was limited to the maximum of 
eight percent or the rate permitted by an applicant's negotiated cost 
rate agreement, whichever was less. This rate did not apply to costs 
incurred by State agencies or LEAs.
    Proposed Regulations: Under the proposed regulations, the same rule 
that applies to applicants other than State agencies or LEAs under 34 
CFR 74.562 would also apply to State agencies and LEAs, so that all 
grant recipients' maximum indirect cost rates would be limited to the 
lesser of the rate established by the negotiated indirect cost 
agreement, or eight percent of a modified total direct cost base.
    Reasons: While both negotiators and the Department recognize that 
indirect costs are both real and legitimate, they also believe that 
having large amounts of funds compensate partners for their general 
overhead and related expenses is inconsistent with the purpose of the 
program. The negotiating committee agreed that the eight percent 
maximum on indirect cost reimbursement is a fair percentage that still 
allows significant funds to be available for direct grant services.

Section 694.10  Requirements for Awards Under the Scholarship Component

Section 694.10(a)  Amount of Scholarship

    Statute: Section 404E of the HEA requires States that participate 
in GEAR UP to establish or maintain a financial assistance program that 
awards scholarships to students. The minimum scholarship amount for 
each fiscal year must not be less than the lesser of 75 percent of the 
average cost of attendance for an in-State student, in a 4-year program 
of instruction, at public IHEs in the State, or the maximum Federal 
Pell Grant funded under section 401 of the HEA for the fiscal year.
    Section 404E also requires that GEAR UP scholarships under this 
section may not be considered for the purpose of awarding Federal grant 
assistance under title IV of the HEA, except that the total amount of 
student financial assistance awarded may not exceed a student's total 
cost of attendance.
    Current Regulations: The current regulations include the 
requirements outlining the minimum scholarship amount, and add that 
cost of attendance is to be determined under section 472 of the HEA.
    The current regulations also require a State, or Partnership that 
chooses to participate in the scholarship component under section 404E, 
to ensure that it will not award a GEAR UP scholarship to a student in 
an amount that, in combination with other student financial assistance 
under title IV of the HEA, exceeds cost of attendance, again as defined 
by section 472 of the HEA.
    The current regulations further require that a State or Partnership 
must reduce the scholarship amount proportionally for any student who 
receives a GEAR UP scholarship and attends an institution on a less 
than full-time basis during any academic year.
    Proposed regulations: The proposed regulations would remain the 
same as the current regulations with respect to the minimum scholarship 
amount required. The proposed regulations would describe the statutory 
requirements, and would keep section 472 of the HEA as the means of 
determining cost of attendance for establishing the minimum award 
amount.
    The proposed regulations would no longer require a reduction in the 
scholarship amount for students attending institutions on a less than 
full-time basis during an academic year. Instead, the proposed 
regulations would allow a State or Partnership to reduce the 
scholarship amount to students attending less than full-time, but in no 
case could the percentage reduction in the scholarship be greater than 
the percentage reduction in tuition and fees charged to that student.
    Reasons: The negotiators believed that the language in the current 
regulations regarding the reduction of a scholarship award for students 
who attend an institution on a less than full-time basis needed to be 
changed. The negotiators didn't think that the regulations should 
require that the reduction in scholarship be proportional. Several 
negotiators pointed out that, at some institutions, a student could 
attend less than full-time but still be required to pay full-time 
tuition and fees. In addition, a student may attend less than full-time 
but may still have to be on campus each day of the week, so 
transportation costs could be the same regardless of whether a student 
is attending full- or part-time.
    The negotiators therefore decided that a student's scholarship 
shouldn't necessarily be reduced proportionately when a student attends 
an institution on a less than full-time basis. The negotiators thought 
it would be better for the student if the State or Partnership had the 
discretion as to whether to reduce the scholarship and if so by how 
much. However, in no case could the percentage reduction in the 
scholarship be greater than the percentage reduction in tuition and 
fees charged to the student. For example, if a student attends an 
institution less than full-time, and the student's tuition and fees are 
reduced by 25%, then the State or Partnership could, if it chose, 
reduce the GEAR UP scholarship by no more than 25%. The negotiators 
felt this was the best way to ensure that students who decided to 
attend less than full-time could still cover at least the same amount 
of their tuition and fees with the their GEAR UP scholarships.

Section 694.10(b)  Scholarships and Pell Grant Recipients

    Statute: Section 404E requires the Secretary to ensure that States 
place a priority on awarding scholarships to students who will receive 
a Federal Pell Grant for the academic year for which the GEAR UP 
scholarship is awarded.
    Current Regulations: Under the current regulations, a State, or a 
Partnership that chooses to participate in the scholarship component 
under section 404E of the HEA, must award GEAR UP scholarships to 
students who are eligible for a GEAR UP scholarship, and who will 
receive a Federal Pell Grant for the academic year for which the GEAR 
UP scholarship is being awarded. If the State or Partnership still has 
funds remaining after awarding scholarships to those students, it may 
award scholarships to other eligible students (who will not receive a 
Federal Pell Grant) after considering the need of those students for 
GEAR UP scholarships.
    Proposed Regulations: The proposed regulations would make two 
substantive changes to the current regulations. First, the proposed 
regulations would add students ``who are eligible to receive'' a 
Federal Pell Grant, rather than just ``who will receive'' a Federal 
Pell Grant. Second, the proposed regulations would change ``academic 
year'' to ``award year.'' With the exception of these two changes, the 
proposed regulations are substantively the same as the current 
regulations.
    Reasons: Under the proposed regulations, a State or Partnership 
would have to award GEAR UP scholarships first to students who will 
receive, or are eligible to receive, a Federal Pell Grant during the 
award year in which the GEAR UP scholarship is being awarded. 
Negotiators felt that

[[Page 71557]]

eligibility was crucial because in many cases it would be very 
difficult to tell whether a student would actually receive a Federal 
Pell Grant at the time the GEAR UP scholarship award would be made. The 
negotiators felt therefore that it was important to include that a 
student could be eligible to receive a Pell Grant in order to be 
eligible for the statutory Pell Grant priority. Negotiators felt that 
eligibility for a Pell Grant still showed that the student was 
exceptionally needy and therefore deserving of a priority for a GEAR UP 
scholarship.
    In addition, the negotiators changed ``academic year'' to ``award 
year.'' Several negotiators felt that using award year would be more 
appropriate, because student financial aid is generally provided based 
on an award year, and not an academic year.
    The committee also agreed that we would not read the language as it 
appears in the proposed regulations (i.e. ``first'' and ``during the 
award year'') to penalize a State or Partnership that awarded all of 
its scholarships at the appropriate time and subsequently additional 
students became eligible for Pell Grants. Although a State or 
Partnership must first award scholarships to students they know to be 
eligible for a Pell Grant, they are not required to award scholarships 
later for students whom they couldn't have known would be eligible for 
a Pell Grant at the time the scholarships were awarded.

Section 694.10(c)  Continuation Scholarships

    Current Regulations: Under the current regulations, a State or a 
Partnership must award continuation scholarships in successive award 
years to each student who received an initial scholarship and who 
continues to be eligible for a scholarship.
    Proposed Regulations: The proposed regulations would remain 
substantively the same as the current regulations.
    Reasons: Negotiators felt that it was important to assure students 
that once they received a scholarship, it would remain available to 
them for as long as they remained eligible. Because GEAR UP is a 
program for low-income students, negotiators wanted to be sure that 
students wouldn't suddenly need to find alternate ways to fund their 
education after they'd been awarded a scholarship. Negotiators felt it 
was important not to deter these students from going to college because 
there was no guarantee that there would be money available for them 
after they had completed a year or more of college. With these 
regulations, GEAR UP students who receive a GEAR UP scholarship can be 
assured that for as long as they remain eligible, they will receive 
GEAR UP scholarship money.
    Additionally, negotiators discussed whether grantees would still be 
required to provide continuation scholarships if Federal funding was 
discontinued during the life of the grant. We clarified for the 
negotiators that if Federal funding were discontinued during the life 
of the grant, we wouldn't require grantees to continue to come up with 
their share of the funds. If Federal funding is provided throughout the 
life of the grant, however, a grantee would be obligated to provide 
continuation scholarships to students who remain eligible for 
scholarships even after the grant period has ended.

Section 694.11  Disclosure Requirements Regarding an Institution's 
Treatment of a GEAR UP Scholarship in Relation to Other Student 
Financial Assistance

    Statute: Under section 404E of the HEA, scholarships provided under 
section 404E may not be considered for the purpose of awarding Federal 
grant assistance under title IV, except that in no case may the total 
amount of financial assistance awarded to a student under title IV 
exceed that student's total cost of attendance.
    In addition, section 404C of the HEA requires that the plan that a 
State or Partnership submits to be eligible for a GEAR UP grant must 
contain provisions designed to ensure that funds provided under GEAR UP 
will supplement and not supplant funds expended for existing programs.
    Current regulations: The current regulations essentially reiterate 
the statutory provision that a GEAR UP scholarship must not be 
considered in the determination of a student's eligibility for other 
grant assistance provided under title IV of the HEA. In addition, the 
current regulations established the order in which postsecondary 
student financial assistance must be awarded for each recipient of a 
GEAR UP scholarship.
    Proposed regulations: The proposed regulations would modify the 
current regulations. Under the proposed regulations, an institution may 
have to disclose its policy for the treatment of a GEAR UP scholarship 
in relation to other student financial assistance. An institution would 
not be required to disclose its policy for the treatment of a GEAR UP 
scholarship in relation to other financial assistance if the 
institution's policy meets certain criteria. The first criterion would 
be that the GEAR UP scholarship must not be considered in the 
determination of a student's eligibility for other grant assistance 
provided under title IV of the HEA, as required by section 404E of the 
statute. The second criterion is that an institution must also have a 
policy under which the GEAR UP scholarship does not supplant other 
public or institutional gift aid that the student would otherwise have 
been eligible to receive.
    The final criterion for non-disclosure is that an institution must 
follow certain procedures when a student receives an overaward of 
student financial aid. A GEAR UP scholarship, in combination with other 
student financial assistance awarded under any title IV HEA program and 
any other grant or scholarship assistance, may not exceed the student's 
cost of attendance. If that combination does exceed the student's cost 
of attendance, the institution must, before reducing public or 
institutional gift aid, reduce other assistance to zero, by the amount 
in excess of cost of attendance, in a prescribed order. The institution 
must first reduce loans, then need-based employment, and then the GEAR 
UP scholarship before reducing public or institutional gift aid, except 
that the institution may reduce need-based employment first and loans 
second at the election of the student. This would mean that both the 
student and the institution would have to agree to reduce the need-
based employment first and loans second.
    The proposed regulations would therefore require an institution to 
reduce each category of assistance (i.e. loans, need-based employment, 
the GEAR UP scholarships) to zero, by the amount in excess of cost of 
attendance, before reducing the next category. For example, if a 
student's award package exceeds cost of attendance by $500 and the 
student has $400 in loans, the institution would have to reduce the 
loans to zero and then reduce the need-based employment by $100 to 
ensure that the package wouldn't exceed cost of attendance.
    The proposed regulations would allow an institution to reduce its 
institutional aid before reducing a GEAR UP scholarship only if it 
determines in writing that there are exceptional circumstances related 
to the GEAR UP student's institutional aid that are unique to that GEAR 
UP student. For example, an exceptional circumstance could occur if 
it's clear that allowing the institution to spend the GEAR UP money and 
reduce the student's institutional award would benefit the GEAR UP 
student. What would be key to the determination of whether something is 
an exceptional

[[Page 71558]]

circumstance is the institution's alternative use of funds that would 
otherwise be made available to the GEAR UP student in a financial aid 
package. An exceptional circumstance could exist if the institution 
commits the institutional aid to make a grant for the future benefit of 
that student, such as graduate school or if the institution spends the 
money on a special curriculum or extra support for that student.
    If exceptional circumstances do exist and an institution does 
reduce the GEAR UP student's institutional aid before the GEAR UP 
scholarship, the institution must document and maintain in the GEAR UP 
student's file the modification that was made to the GEAR UP student's 
gift aid award package and the reason for the modification. Finally, 
the institution would be required to provide written notification to 
the GEAR UP student of the reason for and the specific modification 
made to the gift aid package.
    Under the proposed regulations, an institution would be required to 
disclose its policy for the treatment of a GEAR UP scholarship in 
relation to other student financial assistance if it doesn't follow the 
procedures already discussed. The proposed regulations would require 
the institution, if it chooses a policy other than that outlined in 
Sec. 694.11(a), to establish a policy for the treatment of GEAR UP 
scholarships and inform all prospective students of that policy. Under 
the proposed regulations, there would be a cross-reference to the 
definition of ``prospective student'' in Sec. 668.41, which provides 
that prospective students are individuals who have contacted an 
eligible institution requesting information concerning admission to 
that institution. This could include students who have written a 
letter, called, or notified by email an institution that they'd like 
information about admission to the institution.
    In addition, the institution would be required to notify the 
Department by September 1, 2000 that its treatment of GEAR UP 
scholarships with respect to institutional gift aid is different from 
the procedures that would not require disclosure. The institution also 
must notify the Department in a timely manner if, after September 1, 
2000, it elects to treat GEAR UP scholarships differently from the 
procedures that would not require disclosure.
    Finally, the proposed regulations would make clear that regardless 
of the disclosure requirements, all institutions must follow the 
procedures outlined in Sec. 694.11 (a) with respect to title IV aid, 
regardless of whether the institution was required to disclose its 
policy.
    Reasons: The Department's initial proposal would have required 
institutions to treat GEAR UP scholarships, with respect to other 
student financial assistance, in the same way as the procedures that do 
not require disclosure in the proposed regulations as they appear in 
this NPRM and also to apply this requirement to other private 
scholarship funds. However, one negotiator objected that those 
procedures meant that the Federal government would be putting 
conditions on how institutions and private charities package or award 
their own scholarship aid. The negotiator was concerned that this could 
set a negative precedent for future programs and regulations and 
ultimately penalize schools that do the most for needy students, such 
as those that practice need-blind admissions. The negotiator also 
argued that the ``supplement not supplant'' language in the GEAR UP 
legislation applies to programmatic funds, not to individual student 
aid packages funded through private dollars at colleges not part of a 
GEAR UP partnership. The negotiator also argued that the Department's 
interpretation gave special treatment to GEAR UP students over other 
needy students, including many in existing early intervention programs. 
Finally, it was pointed out that some private scholarship money is 
``last-dollar.'' To attempt to make the GEAR UP program last-dollar 
might have the perverse effect of decreasing a GEAR UP student's 
overall aid package by removing a student's eligibility for these 
funds.
    Other negotiators, including the Department, agreed that private 
charitable scholarships, other than institutional aid, should be 
excluded from the regulation. With regard to institutional aid, 
however, these negotiators pointed out that it was not unprecedented 
for the Federal government to place conditions on such aid to protect 
the Federal fiscal interest. Several negotiators noted that the Federal 
Government had a long history of placing maintenance-of-effort, 
supplement-not-supplant, and similar restrictions on institutional aid 
as a condition of receiving Federal funds. These negotiators also felt 
that the Federal Government should ensure that not only its funds, but 
also the matching funds provided in good faith by other GEAR UP donors, 
such as school districts, service clubs, businesses, and SEAs and State 
higher education agencies, are used properly by institutions for the 
intended purpose of aiding GEAR UP students, not to supplant 
institutional scholarship aid.
    These negotiators also rejected the suggestion that putting 
conditions on institutional scholarship aid penalizes any institutions. 
All institutions would be treated the same, wherever Federal GEAR UP 
funds were used. They argued that it cannot be considered an 
institutional penalty when students come to an institution with GEAR UP 
scholarships to help pay for college, in addition to the other 
scholarships for which they would otherwise qualify. The fact that some 
institutions would consider the conditions a denial of an opportunity 
to exchange GEAR UP aid for other aid, which could be used for other 
purposes, is not an institutional penalty but a prudent measure to 
prevent misuse of Federal program funds.
    These negotiators rejected the suggestion that supplement-not-
supplant should not apply to individual student aid packages. They 
agreed with the point that applying this provision to individual 
student aid packages gives special treatment to GEAR UP students (and 
TRIO and NEISP students who receive a GEAR UP scholarship) above 
others, but noted that this is the whole point of the GEAR UP program. 
They pointed out that GEAR UP scholarships are not a general need-based 
aid program, or an institutional aid program, but a scholarship program 
to motivate individual GEAR UP students and help them pay for college. 
The committee agreed, in response to a negotiator's concern, that 
excess GEAR UP scholarships would go to other GEAR UP students and not 
to the Federal Treasury.
    In an effort to reach consensus, all the negotiators agreed to 
fulfill the intent of GEAR UP scholarships through public disclosure 
and public information. By doing so, the institution would be able to 
treat GEAR UP scholarships as they relate to certain other non-Title IV 
student financial assistance as it sees fit. An institution would, 
however, have to disclose, to both prospective students and the 
Department, that it has chosen not to follow the procedures in the 
proposed regulations and would have to disclose to prospective students 
its policy for GEAR UP scholarships. GEAR UP scholarship students would 
then know how institutions plan to treat GEAR UP scholarships so that 
they can make informed decisions about which institution they want to 
apply to and attend based on the amount and type of financial 
assistance they are likely to receive.
    In addition to the reasons already mentioned, the negotiators felt 
that

[[Page 71559]]

disclosure requirements were the best option for several other 
purposes. A list of the institutions that report their policies to the 
Department will be made available to all GEAR UP Partnership and State 
grant programs so that they can advise students that a GEAR UP 
scholarship may not result in any additional benefits if used at any of 
the institutions on the list. Also, the Department may use the list to 
distinguish among institutions in future GEAR UP program evaluations, 
because GEAR UP scholarships should not be expected to make a program 
performance difference at institutions where they are packaged not to 
make such a difference. Finally, any institution that wants to comply 
with the non-supplantation procedures, but can't due to exceptional 
circumstances, related to a particular student, could document the 
circumstances, rather than inform the Department that it isn't adopting 
the policy in the proposed regulations. For example, if a GEAR UP 
student were eligible for a non-GEAR UP scholarship and any portion of 
the scholarship that wasn't needed for undergraduate education could be 
saved for graduate education, the institution could benefit the student 
by reducing this other scholarship before reducing the GEAR UP 
scholarship.

Section 694.12  Financial Assistance for Partnerships That Don't 
Participate in the Scholarship Component Under Section 404E of the HEA

    Current regulations: The current regulations provide that a GEAR UP 
Partnership that does not participate in the GEAR UP scholarship 
component may provide financial assistance for postsecondary education 
to students who participate in the early intervention component only if 
the financial aid is directly related to, and in support of, other 
activities of the Partnership under the early intervention component of 
GEAR UP.
    Proposed Regulations: The proposed regulations would keep the 
language from the current regulations, with minor additions. One 
addition is that the proposed regulations would add language to clarify 
that the requirements in this section apply to Partnerships only if 
they use either GEAR UP funds, or non-Federal funds used to comply with 
the matching requirement, to provide the financial assistance for 
postsecondary education. In addition, the proposed regulations would 
add the requirement that the Partnership comply with the provisions in 
Secs. 694.10(c) and 694.11, governing the treatment of student 
financial assistance under GEAR UP.
    Reasons: Several negotiators asked for this clarifying language. 
Negotiators felt the regulation could be read to imply that any 
financial assistance provided by the Partnership would have to be 
directly related to, and in support of, other activities of the 
Partnership under the early intervention component. Negotiators wanted 
it to be clearer that Partnerships could also provide financial 
assistance using non-Federal funds that the Partnership was not using 
to comply with the matching requirement to students that participated 
in GEAR UP, and that this financial assistance would not be subject to 
the requirements of this section. We therefore agreed to add language 
that would make the clarification.
    In addition, negotiators, including the Department, realized that 
financial assistance provided under this section should be subject to 
similar requirements as the financial assistance provided by the 
scholarship component in section 404E of the HEA.
    Several negotiators wanted clarification that in addition to these 
requirements, there are other, more general principles that apply to 
Partnerships that want to offer financial assistance. For example, 
there are principles of obligation law that dictate when and how 
financial assistance can be awarded if it is going to be counted toward 
the match in a particular fiscal year. The committee agreed that it is 
not necessary or desirable to have this kind of information in 
regulations, but that there would need to be non-regulatory guidance 
from the Department on other restrictions that might apply.

Section 694.13  Determination of the State Applicant

    Current regulations: The current regulations provide that the 
Governor of a State must designate which State agency applies for, and 
administers, a State grant under GEAR UP.
    Proposed regulations: The proposed language would keep the language 
in the current regulations.
    Reasons: Several negotiators mentioned that they would prefer a 
more collaborative approach to the designation of which State agency 
will apply for and administer a GEAR UP State grant. The negotiating 
committee therefore discussed whether others, such as the State 
Educational Agency (SEA), or the Chief State School Officer, should be 
involved in the decision. Although the negotiating committee agreed 
that collaboration was important, many on the committee felt that there 
was no need to add language to the regulations, because, in most if not 
all cases, the Governor of a State will collaborate with the SEA, the 
Chief State School Officer, and other relevant agencies and people. In 
addition, several negotiators felt that although many should be 
involved in the decision and implementation of the grant, the final 
decision needs to rest with the State's chief executive officer, the 
Governor. The Governor is in the best position to ensure that agencies 
collaborate in the design and implementation of the GEAR UP project. 
Finally, some negotiators felt that the Governor was necessary to 
bridge the gap between the elementary and secondary education community 
and the higher education community, both of which are involved in GEAR 
UP.
    The proposed regulations remain unchanged, therefore, with the 
Governor responsible for designating the State agency that applies for 
and administers the GEAR UP State grant. However, we expect that 
Governors of States applying for GEAR UP grants will collaborate with 
appropriate agencies and officials to determine which agency should 
apply on behalf of the State and how agencies should collaborate in 
implementing the grant.

Section 694.14  21st Century Certificates

    Statute: Section 404F of the HEA requires that the Secretary ensure 
that 21st century scholarship certificates are provided to all students 
participating in GEAR UP. In addition, the certificate must be 
personalized for each student and indicate the amount of Federal 
financial aid for college a student may be eligible to receive.
    Current Regulations: The current regulations provide that a State 
or Partnership must provide, in accordance with such procedures as the 
Secretary may specify, a 21st Century Scholar Certificate from the 
Secretary of Education to each student participating in the early 
intervention component of its GEAR UP project. In addition, current 
regulations require each certificate to be personalized and to indicate 
the amount of Federal financial aid for college that a student may be 
eligible to receive.
    Proposed Regulations: The proposed regulations would keep the 
language that is in the current regulations.
    Reasons: The negotiating committee agreed that the statute requires 
the Secretary to ensure that the students participating in GEAR UP each 
receive an individualized certificate, indicating the amount of Federal 
financial aid for college that a student may be eligible to receive. 
The regulations make it clear that the State or Partnership must

[[Page 71560]]

provide the certificate to each student, but that the certificate will 
be from the Secretary. Since the certificates must be personalized, the 
best and most efficient way to award the certificates is to involve the 
Partnerships and States, since they are the more likely to have the 
students' personal information, such as the students' names and the 
date the certificate will be presented.

Section 694.15  NEISP States

    Statute: Section 404A(b)(2) of the HEA requires that the Secretary 
ensure that students served under the chapter 2 of subpart 2 of part A 
of title IV of the HEA, the National Early Intervention Scholarship and 
Partnership (NEISP) Program, on the day before the date of enactment of 
the Higher Education Amendments of 1998 (Amendments) continue to 
receive assistance through the completion of secondary school.
    Current regulations: The current regulations basically restate the 
requirements in statute for any State that receives a GEAR UP grant 
that served the students referred to in the statute.
    Proposed regulations: The proposed regulations would keep the 
language in the current regulations.
    Reasons: The negotiators agreed that the statute requires the 
Secretary to ensure that students served under the NEISP program 
continue to receive assistance through the completion of secondary 
school. The regulations clarify that the chapter mentioned in the 
statute is NEISP, and that the date of enactment of the Amendments was 
October 7, 1998.

Section 694.16  Mandatory Priority

    Statute: Section 404A(b)(2) of the HEA requires that the Secretary, 
in making awards to States, give priority to eligible entities that on 
the date of enactment of the Amendments, carried out successful 
opportunity programs under chapter 2 of subpart 2 of part A of title 
IV, and that have a prior, demonstrated commitment to early 
intervention leading to college access through collaboration and 
replication of successful strategies.
    Current regulations: The current regulations essentially restate 
the statute, with language that the date of enactment was October 7, 
1998, and that the chapter referred to is the NEISP program, which GEAR 
UP replaced.
    Proposed regulations: The proposed regulations basically restate 
the proposed regulations, with only small editorial changes.
    Reason: The statutory priority remains in the regulations because 
the language is clearer than in the statute, and because there are also 
permissible priorities in the regulations, and so it seemed clearer to 
people to have all the priorities appear in the same place, rather than 
having to reference both the regulations and the statute to know what 
priorities applied.

Section 694.17  Permissible Priorities

    Current regulations: The current regulations include two priorities 
that the Secretary would have the discretion to choose for the fiscal 
year 1999 competition. Under those regulations, the Secretary could 
give priority to projects by Partnerships or States that serve a 
substantial number or percentage of students who reside in an 
Empowerment Zone, including a Supplemental Empowerment Zone, or 
Enterprise Community designated by the U.S. Department of Housing and 
Urban Development or the U.S. Department of Agriculture. In addition, 
the Secretary could give priority to Partnerships that establish or 
maintain a financial assistance program that awards scholarships to 
students either in accordance with section 404E of the HEA, or in 
accordance with these regulations.
    Proposed regulations: The proposed regulations would keep the 
language in the current regulations, with some minor changes. In the 
priority for projects in Empowerment Zones or Enterprise Communities, 
the proposed regulations would allow a priority for projects that serve 
a substantial number or percentage or students who either reside in, or 
attend a school in, an Empowerment Zone or Enterprise Community. In 
addition, the priority for Partnerships that establish or maintain a 
financial assistance program that awards scholarships would include 
language that the scholarship program is to strengthen the early 
intervention component of its GEAR UP project.
    Reasons: For the priority about Empowerment Zones and Enterprise 
Communities, several negotiators felt that Partnerships or States that 
serve a substantial number of students who attend a school in an 
Empowerment Zone or Enterprise Community should be eligible for the 
priority, even if the students don't live in an Empowerment Zone or 
Enterprise Community. The committee discussed whether it could ever 
occur that students who weren't truly needy would ever attend schools 
in Empowerment Zones or Enterprise Communities. The Committee decided 
that it was not a concern because the other eligibility requirements 
would still apply.
    For the priority for Partnerships that include a scholarship 
program in their GEAR UP project, several negotiators were concerned 
that this priority would penalize Partnerships that had very strong 
early intervention components, but no scholarships. These negotiators 
felt that the early intervention component was crucial to the success 
of GEAR UP, and that Partnerships shouldn't be penalized for 
concentrating their efforts and sometimes very limited resources on 
early intervention. The committee discussed the importance of 
scholarships, and the need to ensure that the benefits of the early 
intervention component resulted in more students going to college. The 
committee therefore decided to add language to the priority to ensure 
that the priority wouldn't be read to mean that the scholarship 
component was more important, or could replace, the early intervention 
component. The priority is not intended to imply that scholarships are 
more important than the early intervention component, only that 
scholarships are an excellent way to supplement an already strong early 
intervention component.

Executive Order 12866

1. Potential Costs and Benefits

    Under Executive Order 12866, we have assessed the potential costs 
and benefits of this regulatory action.
    The potential costs associated with the proposed regulations are 
those resulting from statutory requirements and those we have 
determined as necessary for administering this program effectively and 
efficiently.
    In assessing the potential costs and benefits of this regulatory 
action--both quantitative and qualitative--we have determined that the 
benefits would justify the costs.
    We have also determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    We note that, as these proposed regulations were subject to 
negotiated rulemaking, the costs and benefits of the various 
requirements were discussed thoroughly by negotiators. The consensus 
reached on a particular requirement generally reflected agreement on 
the best possible approach to that requirement in terms of cost and 
benefit.
    To assist the Department in complying with the specific 
requirements of Executive Order 12866, the Secretary invites comments 
on whether there may be further opportunities to reduce any potential 
costs or to increase any potential benefits resulting from these 
proposed

[[Page 71561]]

regulations without impeding the effective and efficient administration 
of the program.

Summary of Potential Costs and Benefits

    Sections 694.1, 694.3-694.6, 694.8, and 694.12-694.17 of the 
proposed regulations would provide guidance for complying with 
statutory requirements and ensure the proper and effective expenditure 
of program funds. These regulations would set and clarify: the maximum 
amount that may be awarded to a Partnership or State; the requirements 
for serving a cohort of students; the requirements for serving private 
school students; the requirements for Partnerships in designating a 
fiscal agent; the conditions under which Partnerships may provide 
financial assistance to students; the procedure for designating a State 
agency; the requirements for providing 21st Century Scholarship 
Certificates; the requirements for States that served National Early 
Intervention Scholarship and Partnership students; and the priorities 
that must and may be established by the Secretary. There would be no 
costs associated with these regulations.
    Section 694.2 of the proposed regulations would clarify those 
services that a Partnership or State that chooses to use the cohort 
approach must provide. It would require appropriate, supplemental 
services to be targeted to students with the greatest needs. The 
Department has determined that the cost to provide these services would 
be minimal, and that the benefit would exceed the cost. This regulation 
would ensure that the neediest students in programs with large cohorts 
would receive a level of services sufficient to succeed in the program.
    Section 694.7 of the proposed regulations would modify the matching 
requirements for Partnerships. It would allow Partnerships to set their 
own matching levels in any year, as long as they comply with the 
matching percentage stated in their application and provide at least 50 
percent of the total project cost over the total project period. It 
would also allow Partnerships that meet certain, specified criteria to 
provide as low as 30 percent of the total project cost over the total 
project period. This regulation would provide greater flexibility to 
Partnerships in meeting matching requirements, giving Partnerships the 
ability to reduce costs in any given year and the ability to reduce 
costs over the total project period if they meet the specified 
criteria.
    Section 694.9 of the proposed regulations would set a maximum 
indirect cost rate of 8 percent for State and local government 
agencies. The potential cost associated with this regulation would be 
the amount of indirect costs that a State or local government agency 
could not charge to program funds. This amount would be the difference 
between a State or local government agency's negotiated indirect cost 
agreement, if it would exceed 8 percent, and the 8 percent maximum rate 
allowed. The Department has determined that the benefit from this 
regulation would exceed the potential cost. Setting a maximum indirect 
cost rate would increase the efficiency of program funds by ensuring 
that the vast majority of funds are used to provide direct services to 
students. Furthermore, the proposed regulation would support the 
competitive nature of the program by setting a maximum indirect cost 
rate that reflects the current indirect cost rates of the States that 
have been awarded grants.
    Section 694.10 of the proposed regulations would provide guidance 
for complying with statutory requirements for scholarships awarded 
under this program. It would require States and Partnerships that 
participate in the scholarship component to award continuation 
scholarships to those students who receive an initial scholarship, as 
long as those students remain eligible. The potential cost of this 
regulation would be the cost of scholarships for those students who 
continue to remain eligible beyond the time period for which a State or 
Partnership has budgeted. Given the substantial matching resources of 
States, which are required to participate in the scholarship component, 
the Department has determined the potential cost of this requirement to 
be minimal. More importantly, this regulation would ensure that 
students receive the continuing financial support that is necessary to 
complete their postsecondary education.
    Section 694.11 of the proposed regulations would clarify the 
statutory requirements for scholarships as they relate to title IV aid. 
It would require institutions of higher education to disclose their 
policy for the treatment of a scholarship under this program, if they 
choose not to follow the specified procedures for determining financial 
assistance eligibility and making adjustments in the case of an over-
award. The minimal cost of this regulation would be the cost for 
institutions to disclose their policy or to follow the procedures in 
the regulation. The Department has determined that the benefit of the 
proposed regulation would exceed the cost because students would be 
better informed about the treatment of their scholarship and the 
calculation of their financial assistance at competing institutions.

2. Clarity of the Regulations

    Executive Order 12866 and the President's Memorandum of June 1, 
1998 on ``Plain Language in Government Writing'' require each agency to 
write regulations that are easy to understand.
    The Secretary invites comments on how to make these proposed 
regulations easier to understand, including answers to questions such 
as the following:
     Are the requirements in the proposed regulations clearly 
stated?
     Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
     Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
     Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec. ''and a numbered heading; for example, 
Sec. 694.1 What is the maximum amount that the Secretary may award each 
fiscal year to a Partnership or a State under this program?)
     Could the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in 
making the proposed regulations easier to understand? If so, how?
     What else could we do to make the proposed regulations 
easier to understand?
    Send any comments that concern how the Department could make these 
proposed regulations easier to understand to the person listed in the 
ADDRESSES section of the preamble.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities.
    Entities that would be affected by these regulations are States and 
State agencies, local education agencies (LEAs), local community 
organizations, and institutions of higher education. States and State 
agencies are not ``small entities'' under the Regulatory Flexibility 
Act.
    Institutions of higher education are defined as ``small entities,'' 
according to the U.S. Small Business Administration Size Standards, if 
they are for-profit or nonprofit institutions with total annual revenue 
below $5,000,000 or if they are

[[Page 71562]]

institutions controlled by governmental entities with populations below 
50,000. Small LEAs and local community organizations are small entities 
for the purposes of the Regulatory Flexibility Act.
    The proposed regulations would not have a significant economic 
impact on small entities because the regulations would not impose 
excessive regulatory burden or require unnecessary Federal supervision. 
The regulations would give small entities greater flexibility in 
meeting matching requirements, provide guidance for complying with 
statutory provisions, and impose minimal requirements to ensure the 
proper expenditure of program funds.

Paperwork Reduction Act

    Section 694.7 contains an information collection requirement. In 
addition, there is an application package associated with the 
regulations that contains information collection. Under the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department of Education 
has submitted a copy of this section as well as a copy of the 
application package to the Office of Management and Budget (OMB) for 
its review.
Collection of Information--Discretionary Grant Programs--Application 
Package for the Gear UP Discretionary Grant Program
    The information collection would apply to two types of grants--
Partnership grants and State grants--awarded to help more low-income 
students stay in school, study hard, and take the right courses to go 
to college. By June 2000, approximately 74 new Partnership grants 
averaging $460,000 a year for five years, and 6 new State grants 
averaging $2.1 million per year for five years will be awarded.
    The likely respondents would be State agencies; two- and four-year 
degree granting institutions of higher education; LEAs; businesses and 
other for-profit entities; nonprofit institutions; small businesses or 
organizations; and public and private schools.
    This collection of information is necessary for applicants to apply 
for new grants under the GEAR UP program. Grants will be awarded on the 
basis of competitively reviewed applications submitted to the U.S. 
Department of Education, Office of Postsecondary Education (OPE), 
Policy, Planning & Innovation (PPI), GEAR UP grant competition. 
Continued support for these grants is based on the availability of 
funds and substantial progress in achieving project objectives. This 
application process occurs once each year to enable applicants to 
compete for Federal funds annually appropriated by Congress. The 
Department of Education is requesting approval of the information 
collection used to apply for new grants under this program.
    The total annual public reporting and record keeping burden for 
this information is 20 hours per application. We anticipate that there 
will be 800 applications (770 Partnership Grant applications and 30 
State Grant applications), for a total burden of 16,000 hours.
    If you want to comment on the information collection requirements, 
please send your comments to the Office of Information and Regulatory 
Affairs, OMB, room 10235, New Executive Office Building, Washington, DC 
20503; Attention: Desk Officer for U.S. Department of Education. You 
may also send a copy of these comments to the Department representative 
named in the ADDRESSES section of this preamble.
    We consider your comments on this proposed collection of 
information in--
     Deciding whether the proposed collection is necessary for 
the proper performance of our functions, including whether the 
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collection, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology; e.g., permitting electronic submission of 
responses.
    OMB is required to make a decision concerning the collection of 
information associated with these proposed regulations between 30 and 
60 days after publication of this document in the Federal Register. 
Therefore, to ensure that OMB gives your comments full consideration, 
it is important that OMB receives the comments within 30 days of 
publication. This does not affect the deadline for your comments to us 
on the proposed regulations.

Assessment of Educational Impact

    The Secretary particularly requests comments on whether these 
proposed regulations would 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, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at either of the 
following sites:

http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html

    To use PDF you must have the Adobe Acrobat Reader Program with 
Search, which is available free at either 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, DC, 
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 Number 84.334 Gaining Early 
Awareness and Readiness for Undergraduate Programs)

List of Subjects in 34 CFR Part 694

    Colleges and universities, Elementary and secondary education, 
Grant programs-education, Student aid.

    Dated: December 15, 1999.
A. Lee Fritschler,
Assistant Secretary for Postsecondary Education.

    For the reasons discussed in the preamble, the Secretary proposes 
to amend title 34 of the Code of Federal Regulations by revising part 
694 to read as follows:

PART 694-GAINING EARLY AWARENESS AND READINESS FOR UNDERGRADUATE 
PROGRAMS (GEAR UP)

Sec.
694.1  What is the maximum amount that the Secretary may award each 
fiscal year to a Partnership or a State under this program?
694.2  Which students must a Partnership, or a State that chooses to 
use the cohort approach in its project, serve under the program's 
early intervention component?
694.3  What are the requirements for a cohort?
694.4  Which students must a State or Partnership serve when there 
are changes in the cohort?
694.5  What requirements must be met by a Partnership or State that 
chooses to provide services to private school students under the 
program's early intervention component?
694.6  Who may provide GEAR UP services to students attending 
private schools?
694.7  What are the matching requirements for a GEAR UP Partnership?

[[Page 71563]]

694.8  What are the requirements that a Partnership must meet in 
designating a fiscal agent for its project under this program?
694.9  What is the maximum indirect cost rate for an agency of a 
State or local government?
694.10  What are the requirements for awards under the program's 
scholarship component under section 404E of the Higher Education Act 
of 1965, as amended (HEA)?
694.11  What are the disclosure requirements regarding an 
institution's treatment of a GEAR UP scholarship in relation to 
other student financial assistance?
694.12  Under what conditions may a Partnership that does not 
participate in the GEAR UP scholarship component under section 404E 
of the HEA provide financial assistance for postsecondary education 
to students under the GEAR UP early intervention component?
694.13  How does a State determine which State agency will apply 
for, and administer, a State grant under this program?
694.14  What requirements must be met by a Partnership or State 
participating in GEAR UP with respect to 21st Century Scholarship 
Certificates?
694.15  What requirements apply to a State that served students 
under the National Early Intervention Scholarship and Partnership 
program (NEISP) and that receives a GEAR UP grant?
694.16  What priority must the Secretary establish?
694.17  What priorities may the Secretary establish?

    Authority: 20 U.S.C. 1070a-21 to 1070a-28


Sec. 694.1  What is the maximum amount that the Secretary may award 
each fiscal year to a Partnership or a State under this program?

    (a) Partnership grants. The maximum amount that the Secretary may 
award each fiscal year for a GEAR UP Partnership grant is calculated by 
multiplying--
    (1) $800; by
    (2) The number of students the Partnership proposes to serve that 
year, as stated in the Partnership's plan.
    (b) State grants. The Secretary establishes the maximum amount that 
may be awarded each fiscal year for a GEAR UP State grant in a notice 
published in the Federal Register.

(Authority: 20 U.S.C. 1070a-23)


Sec. 694.2  Which students must a Partnership, or a State that chooses 
to use the cohort approach in its project, serve under the program's 
early intervention component?

    A Partnership, or a State that chooses to use a cohort approach in 
its GEAR UP early intervention component, must, except as provided in 
Sec. 694.4--
    (a) Provide services to at least one entire grade level (cohort) of 
students (subject to Sec. 694.3(b)) beginning not later than the 7th 
grade;
    (b) Ensure that supplemental appropriate services are targeted to 
the students with the greatest needs; and
    (c) Ensure that services are provided through the 12th grade to 
those students.

(Authority: 20 U.S.C. 1070a-22)


Sec. 694.3  What are the requirements for a cohort?

    (a) In general. Each cohort to be served by a Partnership or State 
must be from a participating school--
    (1) That has a 7th grade; and
    (2) In which at least 50 percent of the students are eligible for 
free or reduced-price lunch under the National School Lunch Act; or
    (b) Public housing exception. If the Partnership or State 
determines it would promote program effectiveness, a cohort may consist 
of all of the students in a particular grade level at one or more 
participating schools who reside in public housing, as defined in 
section 3(b)(1) of the United States Housing Act of 1937.

(Authority: 20 U.S.C. 1070a-22)


Sec. 694.4  Which students must a State or Partnership serve when there 
are changes in the cohort?

    (a) At the school where the cohort began. A Partnership or State 
must serve, as part of the cohort, any additional students who--
    (1) Are at the grade level of the students in the cohort; and
    (2) Begin attending the participating school at which the cohort 
began to receive GEAR UP services.
    (b) At a subsequent participating school. If not all of the 
students in the cohort attend the same school after the cohort 
completes the last grade level offered by the school at which the 
cohort began to receive GEAR UP services, a Partnership or a State--
    (1) May continue to provide GEAR UP services to all students in the 
cohort; and
    (2) Must continue to provide GEAR UP services to at least those 
students in the cohort that attend participating schools that enroll a 
substantial majority of the students in the cohort.

(Authority: 20 U.S.C. 1070-a22)


Sec. 694.5  What requirements must be met by a Partnership or State 
that chooses to provide services to private school students under the 
program's early intervention component?

    (a) Secular, neutral, and nonideological services or benefits. 
Educational services or other benefits, including materials and 
equipment, provided under GEAR UP by a Partnership or State that 
chooses to provide those services or benefits to students attending 
private schools, must be secular, neutral, and nonideological.
    (b) Control of funds. In the case of a Partnership or State that 
chooses to provide services under GEAR UP to students attending private 
schools, the fiscal agent (in the case of a Partnership) or a State 
agency (in the case of a State) must--
    (1) Control the funds used to provide services under GEAR UP to 
those students;
    (2) Hold title to materials, equipment, and property purchased with 
GEAR UP funds for GEAR UP program uses and purposes related to those 
students; and
    (3) Administer those GEAR UP funds and property.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)


Sec. 694.6  Who may provide GEAR UP services to students attending 
private schools?

    (a) GEAR UP services to students attending private schools must be 
provided--
    (1) By employees of a public agency; or
    (2) Through contract by the public agency with an individual, 
association, agency, or organization.
    (b) In providing GEAR UP services to students attending private 
schools, the employee, individual, association, agency, or organization 
must be independent of the private school that the students attend, and 
of any religious organization affiliated with the school, and that 
employment or contract must be under the control and supervision of the 
public agency.
    (c) Federal funds used to provide GEAR UP services to students 
attending private schools may not be commingled with non-Federal funds.

(Authority: 1070a-21 to 1070a-28)


Sec. 694.7  What are the matching requirements for a GEAR UP 
Partnership?

    (a) In general. A Partnership must--
    (1) State in its application the percentage of the cost of the GEAR 
UP project the Partnership will provide for each year from non-Federal 
funds, subject to the requirements in paragraph (b) of this section; 
and
    (2) Comply with the matching percentage stated in its application 
for each year of the project period.
    (b) Matching requirements. (1) Except as provided in paragraph 
(b)(2) of this section, the non-Federal share of the cost of the GEAR 
UP project must be not

[[Page 71564]]

less than 50 percent of the total cost over the project period.
    (2) A Partnership that has three or fewer institutions of higher 
education as members may provide less than 50 percent, but not less 
than 30 percent of the total cost over the project period if it 
includes--
    (i) A fiscal agent that is eligible to receive funds under Title V, 
or Part B of Title III, or section 316 or 317 of the HEA, or a local 
educational agency;
    (ii) Only participating schools with a 7th grade in which at least 
75 percent of the students are eligible for free or reduced-price lunch 
under the National School Lunch Act; and
    (iii) Only local educational agencies in which at least 50 percent 
of the students enrolled are eligible for free or reduced-price lunch 
under the National School Lunch Act.
    (3) The non-Federal share of the cost of a GEAR UP project may be 
provided in cash or in-kind.

(Authority: 20 U.S.C. 1070a-23)


Sec. 694.8  What are the requirements that a Partnership must meet in 
designating a fiscal agent for its project under this program?

    Although any member of a Partnership may organize the project, a 
Partnership must designate as the fiscal agent for its project under 
GEAR UP--
    (a) A local educational agency; or
    (b) An institution of higher education that is not pervasively 
sectarian.

(Authority: 20 U.S.C. 1070a-22)


Sec. 694.9  What is the maximum indirect cost rate for an agency of a 
State or local government?

    Notwithstanding 34 CFR 75.560-75.562 and 34 CFR 80.22, the maximum 
indirect cost rate that an agency of a State or local government 
receiving funds under GEAR UP may use to charge indirect costs to these 
funds is the lesser of--
    (a) The rate established by the negotiated indirect cost agreement; 
or
    (b) Eight percent.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)


Sec. 694.10  What are the requirements for awards under the program's 
scholarship component under section 404E of the HEA?

    (a) Amount of scholarship. (1) Except as provided in paragraph 
(a)(2) of this section, the amount of a scholarship awarded under 
section 404E of the HEA must be at least the lesser of--
    (i) 75 percent of the average cost of attendance, as determined 
under section 472 of the HEA, for in-State students in 4-year programs 
of instruction at public institutions of higher education in the State; 
or
    (ii) The maximum Federal Pell Grant award funded for the award year 
in which the scholarship will be awarded.
    (2) If a student who is awarded a GEAR UP scholarship attends an 
institution on a less than full-time basis during any award year, the 
State or Partnership awarding the GEAR UP scholarship may reduce the 
scholarship amount, but in no case shall the percentage reduction in 
the scholarship be greater than the percentage reduction in tuition and 
fees charged to that student.
    (b) Pell Grant recipient priority. A State, or a Partnership that 
chooses to participate in the scholarship component under section 404E 
of the HEA in its GEAR UP project--
    (1) Must award GEAR UP scholarships first to students who will 
receive, or are eligible to receive, a Federal Pell Grant during the 
award year in which the GEAR UP scholarship is being awarded and who 
are eligible for a GEAR UP scholarship under the eligibility 
requirements in section 404E of the HEA; and
    (2) May, if GEAR UP scholarship funds remain after awarding 
scholarships to students under paragraph (b)(1) of this section, award 
GEAR UP scholarships to other eligible students (who will not receive a 
Federal Pell Grant) after considering the need of those students for 
GEAR UP scholarships.
    (c) Continuation scholarships. A State, or a Partnership that 
chooses to participate in the scholarship component in accordance with 
section 404E of the HEA in its GEAR UP project, must award continuation 
scholarships in successive award years to each student who received an 
initial scholarship and who continues to be eligible for a scholarship.

(Authority: 20 U.S.C. 1070a-25)


Sec. 694.11  What are the disclosure requirements regarding an 
institution's treatment of a GEAR UP scholarship in relation to other 
student financial assistance?

    (a) No disclosure. No disclosure of an institution's policy for the 
treatment of a GEAR UP scholarship in relation to other student 
financial assistance is necessary if the institution's policy is as 
follows:
    (1) Other grant assistance. A GEAR UP scholarship--
    (i) Is not considered in the determination of a student's 
eligibility for other grant assistance provided under title IV of the 
HEA; and
    (ii) Does not supplant other public or institutional gift aid that 
the student would otherwise have been eligible to receive (such as 
grants, scholarships, and tuition discounts) unless the conditions in 
Sec. 694.11(b)(2) apply.
    (2) Cost of attendance. A GEAR UP scholarship, in combination with 
other student financial assistance awarded under any title IV HEA 
program and any other grant or scholarship assistance, may not exceed 
the student's cost of attendance.
    (3) Overawards. (i) In general. If the combination of the GEAR UP 
scholarship and other student financial assistance under title IV of 
the HEA and any other grant or scholarship assistance exceeds the 
student's cost of attendance, the institution must, before reducing 
public or institutional gift aid, reduce the assistance to zero, by the 
amount in excess of cost of attendance, in the following order--
    (A) Loans;
    (B) Need-based student employment;
    (C) The GEAR UP scholarship;
    (ii) Exception. The institution may reduce need-based employment 
first and loans second at the election of the student.
    (4) Notwithstanding paragraph (a)(3) of this section, an 
institution may reduce its institutional aid before reducing a GEAR UP 
scholarship only if--
    (i) It determines and documents in writing that there are 
exceptional circumstances related to the GEAR UP student's 
institutional aid that are unique to that GEAR UP student;
    (ii) It documents and maintains in the GEAR UP student's file the 
modification that was made to the GEAR UP student's gift aid award 
package and the reason for the modification; and
    (iii) It provides written notification to the GEAR UP student of 
the reason for and the specific modification that was made to the gift 
aid package.
    (b) Disclosure. (1) Disclosure of an institution's policy for the 
treatment of a GEAR UP scholarship in relation to other student 
financial assistance is required if the institution does not follow the 
procedures set forth in paragraph (a) of this section.
    (2) If an institution does not follow the procedures in paragraph 
(a) of this section it must--
    (i) Establish a policy for the treatment of GEAR UP scholarships 
and inform all prospective students, as defined in Sec. 668.41 of this 
chapter;
    (ii) Notify the Department by September 1, 2000 that its treatment 
of GEAR UP scholarships with respect to institutional gift aid is 
different from the procedures in paragraph (a) of this section; and
    (iii) If, after September 1, 2000, it elects to treat GEAR UP 
scholarships

[[Page 71565]]

differently from the procedures in paragraph (a) of this section, 
notify the Department in a timely manner of that decision.
    (c) Notwithstanding the disclosure requirements with respect to 
GEAR UP and its relation to other student financial assistance, an 
institution must follow the procedures in paragraph (a) of this section 
as they relate to title IV aid.

(Authority: 20 U.S.C. 1070a-25; 20 U.S.C. 3474)


Sec. 694.12  Under what conditions may a Partnership that does not 
participate in the GEAR UP scholarship component under section 404E of 
the HEA provide financial assistance for postsecondary education to 
students under the GEAR UP early intervention component?

    A GEAR UP Partnership that does not participate in the GEAR UP 
scholarship component under section 404E of the HEA may provide 
financial assistance for postsecondary education, either with funds 
under this chapter, or with non-Federal funds used to comply with the 
matching requirement, to students who participate in the early 
intervention component of GEAR UP if--
    (a) The financial assistance is directly related to, and in support 
of, other activities of the Partnership under the early intervention 
component of GEAR UP; and
    (b) It complies with the requirements in Secs. 694.10(c) and 
694.11.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)


Sec. 694.13  How does a State determine which State agency will apply 
for, and administer, a State grant under this program?

    The Governor of a State must designate which State agency applies 
for, and administers, a State grant under GEAR UP.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)


Sec. 694.14  What requirements must be met by a Partnership or State 
participating in GEAR UP with respect to 21st Century Scholarship 
Certificates?

    (a) A State or Partnership must provide, in accordance with 
procedures the Secretary may specify, a 21st Century Scholar 
Certificate from the Secretary to each student participating in the 
early intervention component of its GEAR UP project.
    (b) 21st Century Scholarship Certificates must be personalized and 
indicate the amount of Federal financial aid for college that a student 
may be eligible to receive.

(Authority: 20 U.S.C. 1070a-26)


Sec. 694.15  What requirements apply to a State that served students 
under the National Early Intervention Scholarship and Partnership 
program (NEISP) and that receives a GEAR UP grant?

    Any State that receives a grant under this part and that served 
students under the NEISP program on October 6, 1998 must continue to 
provide services under this part to those students until they complete 
secondary school.

(Authority: 20 U.S.C. 1070a-21)


Sec. 694.16  What priority must the Secretary establish?

    For any fiscal year, the Secretary selects the following priority 
for any State grant applicant that--
    (a) On October 6, 1998, carried out successful educational 
opportunity programs under the National Early Intervention Scholarship 
and Partnership program (as that program was in effect on that date); 
and
    (b) Has a prior, demonstrated commitment to early intervention 
leading to college access through collaboration and replication of 
successful strategies.

(Authority: 20 U.S.C. 1070a-21)


Sec. 694.17  What priorities may the Secretary establish?

    For any fiscal year, the Secretary may select one or more of the 
following priorities:
    (a) Projects by Partnerships or States that serve a substantial 
number or percentage of students who reside, or attend a school, in an 
Empowerment Zone, including a Supplemental Empowerment Zone, or 
Enterprise Community designated by the U.S. Department of Housing and 
Urban Development or the U.S. Department of Agriculture.
    (b) Partnerships that establish or maintain a financial assistance 
program that awards scholarships to students, either in accordance with 
section 404E of the HEA, or in accordance with Sec. 694.12, to 
strengthen the early intervention component of its GEAR UP project.

(Authority: 20 U.S.C. 1070a-21 to 1070a-28)

[FR Doc. 99-32918 Filed 12-20-99; 8:45 am]
BILLING CODE 4000-01-U