[Federal Register Volume 71, Number 242 (Monday, December 18, 2006)]
[Rules and Regulations]
[Pages 75672-75679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-21525]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 21

RIN 2900-AM12


Transfer of Montgomery GI Bill-Active Duty Entitlement to 
Dependents

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: This rule amends Department of Veterans Affairs (VA) 
regulations to implement VA's authority under the National Defense 
Authorization Act for Fiscal Year 2002 and the Bob Stump National 
Defense Authorization Act for Fiscal Year 2003 to provide educational 
assistance to dependents eligible for transferred Montgomery GI Bill-
Active Duty (MGIB) entitlement. The legislation authorized the 
Department of Defense (DoD) to offer individuals in the Armed Forces, 
who have critical military skills, the option to transfer up to 18 
months of their MGIB entitlement to their dependents as a reenlistment 
incentive. In addition, the rule implements a provision in the Strom 
Thurmond National Defense Authorization Act for Fiscal Year 1999, which 
increased the maximum amount of benefits payable under DoD's college 
fund program.

DATES: Effective Date: This final rule is effective December 18, 2006.
    Applicability Dates. VA will apply the amendments in this final 
rule in accordance with the effective dates specified by Congress for 
the statutory changes. Therefore, the transfer of entitlement 
provisions of this rule will apply to individuals, who are eligible, on 
or after December 28, 2001, the date of enactment of the National 
Defense Authorization Act for Fiscal Year 2002. The provisions of this 
rule addressing the maximum monthly amount payable under DoD's college 
fund program will apply to individuals, who are eligible, on or after 
October 1, 1998, the date of enactment of the Strom Thurmond National 
Defense Authorization Act for Fiscal Year 1999. VA will apply the 
increased maximum college fund amount to individuals first entering the 
Armed Forces after September 30, 1998.

FOR FURTHER INFORMATION CONTACT: Lynn M. Nelson (225C), Education 
Advisor, Veterans Benefits Administration, Department of Veterans 
Affairs, 810 Vermont Avenue, NW., Washington, DC 20420, 202-273-7294.

SUPPLEMENTARY INFORMATION: This document amends VA's regulations set 
forth in 38 CFR part 21 concerning the MGIB program to implement 
provisions permitting the transfer of MGIB entitlement to dependents 
and to reflect the maximum amount of additional educational assistance 
payable under DoD's college fund program.

I. Transfer of MGIB Entitlement

    Section 654 of the National Defense Authorization Act for Fiscal 
Year 2002 (Pub. L. 107-107), added section 3020 to title 38, United 
States Code, authorizing DoD to permit certain individuals to transfer 
some of their MGIB entitlement to their dependents. The Bob Stump 
National Defense Authorization Act for Fiscal Year 2003 (Pub. L. 107-
314) amended 38 U.S.C. 3020 to clarify the rate of payment of 
educational assistance allowance to dependents in receipt of 
transferred entitlement. VA is amending its regulations to implement 
the provisions in 38 U.S.C. 3020 as described in this final-rule 
notice. Section 3020 authorizes the Secretary of each service 
department, or the Secretary of Defense with respect to the Coast Guard 
or the Secretary of Homeland Security when the Coast Guard is not 
operating as a service in the Navy, at such Secretary's sole 
discretion, to permit a servicemember, who is entitled to MGIB, to 
transfer up to 18 months of his or her MGIB entitlement to his or her 
eligible dependents. The statute further provides the--
     Eligibility criteria for both the individual transferring 
the entitlement and the dependent;
     Limits on months of entitlement that may be transferred;
     Administrative provisions (including designations, 
revocations, and modifications of transferred entitlement); and
     Special provisions in the event of an overpayment of 
educational assistance allowance.
    These statutory changes are being incorporated in VA's existing 
regulations governing the MGIB program by adding new 38 CFR 21.7080.
    Since 38 U.S.C. 3020(h) provides that a dependent transferee has 
the same MGIB entitlement as the transferor, new 38 CFR 21.7080(a) 
lists the regulations in 38 CFR part 21 that apply to individuals in 
receipt of transferred entitlement.
    As it is at the discretion of the Secretary concerned to approve 
transfer entitlement, and not every servicemember will be permitted to 
do so, VA must have some evidence of the approval prior to payment of 
benefits. Thus, Sec.  21.7080(b) provides that VA will accept a copy of 
the reenlistment contract attachment (DD Form 2366-2) that DoD issues 
to individuals granted the transferability option or any other 
comparable document issued and signed by an appropriate service 
department official.
    Section 3020 of title 38, United States Code, permits the transfer 
of entitlement to an approved servicemember's child or children. A 
stepchild meets the definition of child for VA purposes if the 
stepchild is a member of the veteran's household (38 U.S.C. 101(4); 38 
CFR 3.57). Section 21.7080(c)(4) provides that a stepchild, who is a 
member of the servicemember's household or who has maintained normal 
family ties while temporarily absent from the household, is an eligible 
transferee.
    Section 3032(a)(1) of title 38, United States Code, places 
limitations on educational assistance for individuals who are on active 
duty. However, section 3020(h)(3)(A) specifically provides that these 
limitations do not apply to eligible dependents. Nonetheless, VA is not 
allowing an individual, who is eligible for the Selected Reserve 
``kicker,'' to transfer the ``kicker'' to his or her dependent because 
there are no provisions in title 10, United States Code, that authorize 
such a transfer. The Selected Reserve kicker is an amount of money that 
DoD authorizes for certain Selected Reserve members under the authority 
of 10 U.S.C. 16131(i)(2) and is a benefit provided in addition to the 
amount otherwise payable under 38 U.S.C. 3015. Based on the lack of 
statutory authority in title 10, we will not include the transferor's 
``Selected Reserve kicker'' when determining the amount payable to a 
dependent under 38 CFR 21.7080(k). However, if the dependent is 
eligible for a Selected Reserve kicker based on his or her own Selected 
Reserve service, we will increase the MGIB educational assistance 
transferred to the dependent by the amount of the

[[Page 75673]]

kicker in accordance with 10 U.S.C. 16131(i)(2).
    In 38 CFR 21.7080(l), we state that a dependent is not entitled to 
educational assistance for training pursued in an on-the-job training 
or apprenticeship program during periods the transferor is on active 
duty. This restriction implements 38 U.S.C. 3002(3), which provides 
that an authorized program of education for MGIB purposes includes on-
the-job training or apprenticeship programs only for those individuals 
who are not on active duty.
    Section 21.7080(n) addresses the maximum months of entitlement and 
concurrent receipt of educational assistance for a dependent, who is 
eligible for MGIB through his or her own military service and through 
transferred entitlement. Section 3033 of title 38, United States Code, 
does not bar an individual's receipt of MGIB benefits based on his or 
her own military service concurrently with educational assistance 
payable via transferred entitlement. We note that 38 U.S.C. 3695 limits 
the period of assistance (months of entitlement) when an individual is 
entitled to educational assistance under two or more programs. However, 
this limitation does not apply when the individual is entitled to MGIB 
educational assistance through transferred entitlement and MGIB 
educational assistance based on the individual's own military service 
because the benefits are provided under one program (38 U.S.C. chapter 
30).
    Section 3020(h)(4) of title 38, United States Code, provides that 
the death of the transferor will not affect the tranferee's 
entitlement. Section 21.7050(h)(2) and (i)(2) provide that the ending 
date of eligibility for dependents of a transferor, who dies on active 
duty without specifying an eligibility termination date, is 10 years 
from the date of the transferor's death. This is consistent with the 
generally applicable eligibility period of 10 years following the date 
of discharge or release from active duty. Regardless, a dependent 
child's eligibility will end at age 26 in accordance with 38 U.S.C. 
3020(h)(5), even if the 10-year period has not expired.

II. Increased Maximum Amount of DoD College Fund ``Kicker''

    Effective October 1, 1998, the Strom Thurmond National Defense 
Authorization Act for Fiscal Year 1999 (Pub. L. 105-261) amended 38 
U.S.C. 3015 to increase the maximum amount payable under DoD's college 
fund program for certain individuals, who first become members of the 
Armed Forces after September 30, 1998. The Secretary concerned 
determines the amount of the college fund payment to these individuals. 
VA is updating its regulations, 38 CFR 21.7136, to include this 
increase.
    In updating Sec.  21.7136, VA is also correcting an earlier 
technical oversight that failed to set forth the maximum amount payable 
under the DoD college fund program. This oversight has not harmed those 
eligible for the increased college fund because VA, regardless of the 
regulatory error, has been paying educational assistance that includes 
the maximum college fund when appropriate and as authorized by DoD. For 
clarity, VA is further amending 38 CFR 21.7137(b) to provide that if 
there is no cost for a course, educational assistance is not payable. 
Section 3032(a) of title 38, United States Code, provides that the 
amount of educational assistance payable to an active duty 
servicemember or an individual training at less than \1/2\-time is the 
lesser of the rate otherwise payable or the cost of the tuition and 
fees. Consequently, if there is no cost, nothing is payable.
    We are also amending 38 CFR 21.7137 to remove paragraph (d). Public 
Law 105-261 amended 38 U.S.C. 3015(d) to authorize the service 
departments to increase the basic MGIB educational assistance allowance 
to $950 per month for certain individuals, who first became members of 
the Armed Forces on or after October 1, 1998. Currently only those 
individuals, who meet the requirements of 38 U.S.C. 3011(a)(1)(B) or 
(C), or 3012(a)(1)(B) or (C), are eligible for the enhanced educational 
assistance rates set forth in current Sec.  21.7137. Such rates may be 
awarded at the discretion of the Secretary of the service department 
concerned. However, these individuals, who meet the requirements of 38 
U.S.C. 3011(a)(1)(B) or (C), or 3012(a)(1)(B) or (C), first became 
members of the Armed Forces before July 1, 1985, and thus do not 
qualify for the additional amount provided in 38 U.S.C. 3015(d), as 
amended by Public Law 105-261. Prior to the enactment of Public Law 
105-261, the law did not proscribe these additional payments to certain 
individuals, who had prior service or who entered the Armed Forces 
before October 1, 1998. Nonetheless, the service departments did not 
offer the additional payments to individuals who entered the Armed 
Forces before July 1, 1985. VA is removing paragraph (d) of Sec.  
21.7137 because the statutory amendment only applies to service on or 
after October 1, 1998, and because the service departments never 
provided the additional payment to any individual who entered service 
before that date.

III. Clerical Changes, Revisions for Clarity or Simplification of 
Application

    We are amending 38 CFR 21.7131(h) and 38 CFR 21.7135(p)(1) to 
remove cross references to former 38 CFR 21.7139(e), (f), and (g).
    We are amending 38 CFR 21.7135(a)(2) by adding the words ``his or 
her'' before ``program of education.''
    We are amending 38 CFR 21.7138(c)(1) to provide the correct cross-
reference to Sec.  21.7136.
    We are amending 38 CFR 21.7139(b) and (c) by combining them into 
new Sec.  21.7137(b) for purposes of simplification. In addition, we 
are amending several cross references in Sec.  21.7139 because of 
revisions in Sec. Sec.  21.7136 and 21.7137.

Administrative Procedure Act

    Changes to 38 CFR part 21 are being published without regard to the 
notice-and-comment and delayed-effective-date provisions of 5 U.S.C. 
553 because they conform VA's existing rules to statutory amendments. 
Accordingly, these changes involve procedural and interpretive rules 
exempt from the notice-and-comment and delayed-effective-date 
requirements of 5 U.S.C. 553(b) and (d).

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity). The Executive 
Order classifies a ``significant regulatory action,'' requiring review 
by the Office of Management and Budget, as any regulatory action that 
is likely to result in a rule that may: (1) Have an annual effect on 
the economy of $100 million or more or adversely affect in a material 
way the economy, a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities; (2) Create a serious inconsistency 
or otherwise interfere with an action taken or planned by another 
agency; (3) Materially alter the budgetary impact of entitlements, 
grants, user fees, or loan programs or the rights and obligations of 
recipients thereof; or (4) Raise novel legal or policy issues arising 
out of legal mandates, the President's priorities, or the principles 
set forth in the Executive Order.
    The economic, interagency, budgetary, legal, and policy

[[Page 75674]]

implications of this final rule have been examined and it has been 
determined that it is a significant regulatory action under the 
Executive Order because it may raise novel legal or policy issues 
arising out of legal mandates, the President's priorities, or the 
principles set forth in the Executive Order.

Paperwork Reduction Act

    The filing requirements in new 38 CFR 21.7080(b), (e), (g), and (h) 
are not considered collections of information under the Paperwork 
Reduction Act (44 U.S.C. 3501-321) because they apply to less than 10 
persons within any 12-month period.
    The filings information referenced in Sec.  21.7080(b) is a one-
time submission to establish that the transferor was approved by a 
service department to participate in the transferability program. The 
collection in Sec.  21.7080(e) is generally a one-time collection.
    The filings information referenced in paragraphs (g) and (h) of 
Sec.  21.7080 apply to modifications and revocations of the 
transferor's designation of transfer. Although early in the program, VA 
has not received any modification or revocation requests.
    Due to the small universe of servicemembers approved to transfer 
entitlement and the low volume of dependents who have requested 
educational assistance via transferred entitlement since the program 
began, and the varying ages of the transferor's children, VA does not 
anticipate collecting information from 10 or more persons in any year 
under any of the above mentioned paragraphs of Sec.  21.7080.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before developing any rule that may result in an expenditure 
by State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This rule would have no such effect on 
State, local, and tribal governments, or on the private sector.

Regulatory Flexibility Act

    The initial and final regulatory flexibility analyses requirements 
of sections 603 and 604 of the Regulatory Flexibility Act, 5 U.S.C. 
601-612, are not applicable to this rule, because a notice of proposed 
rulemaking is not required for this rule. Even so, the Secretary of 
Veterans Affairs hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act. This final rule 
directly affects only individuals and does not directly affect small 
entities. Therefore, this final rule is also exempt pursuant to 5 
U.S.C. 605(b) from the initial and final regulatory flexibility 
analyses requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance Program Numbers

    The Catalog of Federal Domestic Assistance number and title for 
the program affected by this final rule is 64.124, All-Volunteer 
Force Educational Assistance.

List of Subjects in 38 CFR Part 21

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

    Approved: September 8, 2006.
Gordon H. Mansfield,
Deputy Secretary of Veterans Affairs.

0
For the reasons stated in the preamble, the Department of Veterans 
Affairs amends 38 CFR part 21, subpart K, as follows:

PART 21--VOCATIONAL REHABILITATION AND EDUCATION

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

0
1. The authority citation for part 21, subpart K continues to read as 
follows:

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


0
2. Amend Sec.  21.7020 to revise paragraph (b)(9)(i) and to add 
paragraphs (b)(58) and (b)(59) immediately following the authority 
citation at the end of paragraph (b)(57), to read as follows:


Sec.  21.7020  Definitions.

* * * * *
    (b) * * *
    (9) * * *
    (i) A spouse as defined in Sec.  3.50(a) of this chapter,
* * * * *
    (58) Transferor. The term transferor means an individual, who is--
    (i) Entitled to educational assistance under the Montgomery GI 
Bill--Active Duty program based on his or her own active duty service; 
and
    (ii) Approved by the service department to transfer a portion of 
his or her entitlement to his or her dependent or dependents.

(Authority: 38 U.S.C. 3020)


    (59) Transferee. The term transferee means an individual to whom 
entitlement has been transferred.

(Authority: 38 U.S.C. 3020)


0
3. Amend Sec.  21.7050 to add paragraphs (h) and (i) immediately after 
the authority citation at the end of paragraph (g), to read as follows:


Sec.  21.7050  Ending dates of eligibility.

* * * * *
    (h) Time limitation for a spouse eligible for transferred 
entitlement. (1) Unless the transferor dies while on active duty, the 
ending date of the eligibility period for a spouse, who is eligible for 
transferred entitlement under Sec.  21.7080, is the earliest of the 
following dates:
    (i) The transferor's ending date of eligibility as determined under 
this section;
    (ii) The ending date the transferor specified, if the transferor 
specified the period for which the transfer was effective; or
    (iii) The effective date of the transferor's revocation of transfer 
of entitlement as determined under Sec.  21.7080(g)(2).
    (2) If the transferor dies while on active duty, the ending date of 
the eligibility period for a spouse, who is eligible for transferred 
entitlement under Sec.  21.7080, is the earliest of the following 
dates:
    (i) The date 10 years from the transferor's date of death;
    (ii) The ending date the transferor specified, if the transferor 
specified the period for which the transfer was effective; or
    (iii) The effective date of the transferor's revocation of transfer 
of entitlement as determined under Sec.  21.7080(g)(2).

(Authority: 38 U.S.C. 3020)


    (i) Time limitation for a child eligible for transferred 
entitlement. (1) Unless the transferor dies while on active duty, the 
ending date of the eligibility period for a child, who is eligible for 
transferred entitlement under Sec.  21.7080 is the earliest of the 
following dates:
    (i) The transferor's ending date of eligibility as determined under 
this section;
    (ii) The ending date the transferor specified, if the transferor 
specified the

[[Page 75675]]

period for which the transfer was effective;
    (iii) The effective date of the transferor's revocation of transfer 
of entitlement as determined under Sec.  21.7080(g)(2); or
    (iv) The day the child attains age 26.
    (2) If the transferor dies while on active duty, the ending date of 
the eligibility period for a child, who is eligible for transferred 
entitlement under Sec.  21.7080, is the earliest of the following 
dates:
    (i) The date 10 years from the transferor's date of death;
    (ii) The ending date the transferor specified, if the transferor 
specified the period for which the transfer was effective;
    (iii) The effective date of the transferor's revocation of transfer 
of entitlement as determined under Sec.  21.7080(g)(2); or
    (iv) The day the child attains age 26.

(Authority: 38 U.S.C. 3020)


0
4. An undesignated center heading and Sec.  21.7080 are added to read 
as follows:

Transfer of Entitlement to Basic Educational Assistance to Dependents


Sec.  21.7080  Transfer of entitlement.

    An individual entitled to educational assistance under the 
Montgomery GI Bill--Active Duty (38 U.S.C. chapter 30) program based on 
his or her own active duty service, and who is approved by a service 
department to transfer a portion of his or her entitlement, may 
transfer up to a total of 18 months of his or her entitlement to a 
dependent (or among dependents). A transferor may not transfer an 
amount of entitlement that is greater than the entitlement he or she 
has available.
    (a) Application of sections in subpart K to individuals in receipt 
of transferred entitlement. In addition to the rules in this section, 
the following sections apply to a dependent in the same manner as they 
apply to the individual from whom entitlement was transferred.
    (1) Definitions. Section 21.7020--Definitions.

(Authority: 38 U.S.C. 3020)


    (2) Claims and Applications. Section 21.7030--Applications, claims, 
and time limits.

(Authority: 38 U.S.C. 3020)


    (3) Eligibility. (i) Section 21.7050--Ending dates of eligibility, 
only paragraphs (h) and (i); and
    (ii) Section 21.7051--Extended period of eligibility, except that 
extensions to dependents are subject to the transferor's right to 
revoke transfer at any time and that VA may only extend a child's 
ending date to the date the child attains age 26.

(Authority: 38 U.S.C. 3020)


    (4) Entitlement. (i) Section 21.7070--Entitlement;
    (ii) Section 21.7075--Entitlement to tuition assistance top-up; and
    (iii) Section 21.7076--Entitlement charges.

(Authority: 38 U.S.C. 3020)


    (5) Counseling. (i) Section 21.7100--Counseling; and
    (ii) Section 21.7103--Travel expenses.

(Authority: 38 U.S.C. 3020)


    (6) Programs of Education. (i) Section 21.7110--Selection of 
program of education;
    (ii) Section 21.7112--Programs of education combining two or more 
types of courses; and
    (iii) Section 21.7114--Change of program.

(Authority: 38 U.S.C. 3020)


    (7) Courses. (i) Section 21.7120--Courses included in programs of 
education;
    (ii) Section 21.7122--Courses precluded; and
    (iii) Section 21.7124--Overcharges.

(Authority: 38 U.S.C. 3020)


    (8) Payments--Educational Assistance. (i) Section 21.7130--
Educational Assistance;
    (ii) Section 21.7131--Commencing dates, except for paragraphs (d), 
(g), (l), (m), (n), (o), and (p) of Sec.  21.7131;
    (iii) Section 21.7133--Suspension or discontinuance of payments;
    (iv) Section 21.7135--Discontinuance dates, except for paragraphs 
(q), (s) and (u) of Sec.  21.7135;
    (v) Section 21.7139--Conditions which result in reduced rates or no 
payment, except for paragraph (c) of Sec.  21.7139. VA will apply the 
rules in paragraph (d) of Sec.  21.7139 to dependents, who are on 
active duty;
    (vi) Section 21.7140--Certifications and release of payments;
    (vii) Section 21.7141--Tutorial assistance;
    (viii) Section 21.7142--Accelerated payments;
    (ix) Section 21.7143--Nonduplication of educational assistance; and
    (x) Section 21.7144--Overpayments, except that the dependent and 
transferor are jointly and severally liable for any amount of 
overpayment of educational assistance to the dependent.

(Authority: 38 U.S.C. 3020)


    (9) Pursuit of courses. (i) Section 21.7150--Pursuit;
    (ii) Section 21.7151--Advance payment and accelerated payment 
certifications;
    (iii) Section 21.7152--Certification of enrollment;
    (iv) Section 21.7153--Progress and conduct;
    (v) Section 21.7154--Pursuit and absences;
    (vi) Section 21.7156--Other required reports;
    (vii) Section 21.7158--False, late, or missing reports; and
    (viii) Section 21.7159--Reporting fee.

(Authority: 38 U.S.C. 3020)


    (10) Course Assessment. (i) Section 21.7170--Course measurement; 
and
    (ii) Section 21.7172--Measurement of concurrent enrollments.

(Authority: 38 U.S.C. 3020)


    (11) State approving agencies. Section 21.7200--State approving 
agencies.

(Authority: 38 U.S.C. 3020)


    (12) Approval of courses. (i) Section 21.7220--Course approval; and
    (ii) Section 21.7222--Courses and enrollments which may not be 
approved.

(Authority: 38 U.S.C. 3020)


    (13) Administrative. (i) Section 21.7301--Delegations of authority;
    (ii) Section 21.7302--Finality of decisions;
    (iii) Section 21.7303--Revision of decisions;
    (iv) Section 21.7305--Conflicting interests;
    (v) Section 21.7307--Examination of records;
    (vi) Section 21.7310--Civil rights; and
    (vii) Section 21.7320--Procedural protection; reduction following 
loss of dependent.

(Authority: 38 U.S.C. 3020)


    (b) Proof of transfer of entitlement option. An individual 
transferring entitlement, or the dependent to whom entitlement is 
transferred, must submit to VA--
    (1) A copy of DD Form 2366-2, entitled ``Montgomery GI Bill Act of 
1984 (MGIB) Transferability Program''; or
    (2) Any other document issued and signed by the transferor's 
service department that shows the transferor is authorized to transfer 
entitlement.

(Authority: 38 U.S.C. 3020)


    (c) Eligible dependents. (1) An individual transferring entitlement 
under this section may transfer entitlement to--
    (i) The individual's spouse;
    (ii) One or more of the individual's children; or

[[Page 75676]]

    (iii) A combination of the individuals referred to in paragraphs 
(c)(1)(i) and (ii) of this section.
    (2) A spouse must meet the definition of spouse in Sec.  3.50(a) of 
this chapter.
    (3) A child must meet the definition of child in Sec.  3.57 of this 
chapter. The transferor must make the required designation shown in 
Sec.  21.7080(e)(1) before the child attains age 23.
    (4) A stepchild, who meets VA's definition of child in Sec.  3.57 
of this chapter and is temporarily not living with the transferor, 
remains a member of the transferor's household if the actions and 
intentions of the stepchild and transferor establish that normal family 
ties have been maintained during the temporary absence.

(Authority: 38 U.S.C. 3020)


    y(d) Timeframe during which an individual may transfer entitlement. 
An individual approved by his or her service department to transfer 
entitlement may do so at any time after such approval up until the 
transferor's ending date of eligibility as determined under Sec.  
21.7050.

(Authority: 38 U.S.C. 3020)


    (e) Designating dependents, designating the amount to transfer, and 
period of transfer. (1) An individual transferring entitlement under 
this section must--
    (i) Designate the dependent or dependents to whom such entitlement 
is being transferred;
    (ii) Designate the number of months of entitlement to be 
transferred to each dependent; and
    (iii) Specify the beginning date and ending date of the period for 
which the transfer is effective for each dependent.
    (2) VA will accept the transferor's designations as shown on a copy 
of DD Form 2366-2, Montgomery GI Bill Act of 1984 Transferability 
Program, or on any document signed by the transferor that shows the 
information required in paragraphs (e)(1)(i) through (e)(1)(iii) of 
this section.

(Authority: 38 U.S.C. 3020)


    (f) Maximum months of entitlement transferable. (1) The maximum 
amount of entitlement a transferor may transfer is the lesser of--
    (i) Eighteen months of his or her entitlement; or
    (ii) The amount of entitlement he or she has available.
    (2) Subject to the limitations in paragraph (f)(1) of this section, 
the transferor may transfer up to the maximum amount of transferable 
entitlement--
    (i) To one dependent; or
    (ii) Divided among his or her designated dependents in any manner 
he or she chooses.

(Authority: 38 U.S.C. 3020)


    (g) Revocation of transferred entitlement. (1) A transferor may 
revoke any unused portion of transferred entitlement any time by 
submitting a written notice to both the Secretary of Veterans Affairs 
and the Secretary of the service department that initially approved the 
transferor to transfer entitlement. VA will accept a copy of the 
written notice addressed to the service department as sufficient 
written notification to VA.
    (2) The revocation will be effective the later of--
    (i) The date VA receives the notice of revocation; or
    (ii) The date the service department concerned receives the notice 
of revocation.

(Authority: 38 U.S.C. 3020)


    (h) Modifying a transfer of entitlement. (1) A transferor may 
modify the designations he or she made under paragraph (e) of this 
section at any time. Any modification made will apply only to any 
unused transferred entitlement. The transferor must submit a written 
notice to both the Secretary of Veterans Affairs and the Secretary of 
the service department that initially approved the transferor to 
transfer entitlement. VA will accept a copy of the written notice 
addressed to the service department as sufficient written notification 
to VA.
    (2) The modification will be effective the later of--
    (i) The date VA receives the notice of modification; or
    (ii) The date the service department concerned receives the notice 
of modification.

(Authority: 38 U.S.C. 3020)


    (i) Entitlement charge to transferor. VA will reduce the 
transferor's entitlement at the rate of 1 month of entitlement for each 
month of transferred entitlement used by the dependents.

(Authority: 38 U.S.C. 3020)


    (j) Secondary school diploma (or equivalency certificate). 
Children, who have attained age 18, and spouses may use transferred 
entitlement to pursue and complete the requirements of a secondary 
school diploma (or equivalency certificate).

(Authority: 38 U.S.C. 3020)


    (k) Rate of payment of educational assistance. VA will apply the 
rules in Sec.  21.7136 or Sec.  21.7137 (and the rules in Sec.  21.7138 
when applicable) to determine the educational assistance rate that 
would apply to the transferor. VA will pay the dependent the monthly 
rate of educational assistance that would be payable to the transferor 
except that VA will--
    (1) Exclude the transferor's kicker for service in the Selected 
Reserve(Sec. Sec.  21.7136(g) and 21.7137(e)) if the transferor is 
eligible for such kicker;
    (2) Include the dependent's Selected Reserve kicker, if the 
dependent is eligible for a kicker from the Selected Reserve based on 
the dependent's own Selected Reserve service; and
    (3) Disregard the fact that either the transferor or the dependent 
is on (or both are on) active duty and pay the veteran rate rather than 
the rate applicable to individuals on active duty.

(Authority: 10 U.S.C. 16131; 38 U.S.C. 3020(h))


    (l) Restriction on payment of educational assistance to a dependent 
pursuing an on-the-job training or apprenticeship program while 
transferor is on active duty. A dependent is not entitled to 
educational assistance for training pursued in an on-the-job training 
or apprenticeship program during periods the transferor is on active 
duty.

(Authority: 38 U.S.C. 3002(3), 3020(h))


    (m) Transferor fails to complete required service contract that 
afforded participation in the transferability program. (1) The 
dependents are not eligible for transferred entitlement if the 
transferor fails to complete the amount of active duty service he or 
she agreed to serve in the Armed Forces in order to participate in the 
transferability program, unless the transferor did not complete the 
active duty service due to--
    (i) His or her death;
    (ii) A service-connected disability;
    (iii) A medical condition which preexisted such service on active 
duty and which the Secretary of VA determines is not service-connected;
    (iv) A hardship; or
    (v) A physical or mental condition that was not characterized as a 
disability and did not result from the individual's own willful 
misconduct, but that did interfere with the individual's performance of 
duty, as determined by the Secretary of each service department.
    (2) VA will treat all payments of educational assistance to 
dependents as overpayments if the transferor does not complete the 
required service unless the transferor does not complete the required 
service due to one of the reasons stated in paragraphs (m)(1)(i) 
through (v) of this section.

[[Page 75677]]


(Authority: 38 U.S.C. 3020, 38 U.S.C. 3011(a)(1)(A)(ii))


    (n) Dependent is eligible for educational assistance under this 
section and is eligible for educational assistance under 38 U.S.C. 
chapter 30 based on his or her own active duty service. Dependents 
eligible for payment of educational assistance through transferred 
entitlement and who are eligible for payment under 38 U.S.C. chapter 30 
based on their own active service--
    (1) May receive educational assistance payable under this section 
and educational assistance payable based on their own active duty 
service for the same course.
    (2) Are not subject to the 48 months limit on training provided for 
in Sec.  21.4020 when combining transferred entitlement with their own 
entitlement earned under 38 U.S.C. chapter 30 as long as the only 
educational assistance paid is under 38 U.S.C. chapter 30. If the 
dependent is awarded educational assistance under another program 
listed in Sec.  21.4020 (other than 38 U.S.C. chapter 30), the 48 
months limit on training will apply.

(Authority: 38 U.S.C. 3020, 3033, 3034(a), 3695)


0
5. Amend Sec.  21.7131 to revise paragraph (h) introductory text and to 
add new paragraphs (r) and (s) immediately after the authority citation 
at the end of paragraph (q), to read as follows:


Sec.  21.7131  Commencing dates.

* * * * *
    (h) Individuals in a penal institution. If a veteran or a 
servicemember is paid a reduced rate of educational assistance under 
Sec.  21.7139 (c) and (d) of this part, the rate will be increased or 
assistance will commence effective the earlier of the following dates:
* * * * *
    (r) Spouse eligible for transferred entitlement. If a spouse is 
eligible for transferred entitlement under Sec.  21.7080, the 
commencing date of the award of educational assistance will be no 
earlier than the latest of the following dates:
    (1) The date the Secretary of the service department concerned 
approves the transferor to transfer entitlement;
    (2) The date the transferor completes 6 years of service in the 
Armed Forces;
    (3) The date the transferor specified in his or her designation of 
transfer; or
    (4) The date the spouse first meets the definition of spouse in 
Sec.  3.50(a) of this chapter.

(Authority: 38 U.S.C. 3020)


    (s) Child eligible for transferred entitlement. If a child is 
eligible for transferred entitlement under Sec.  21.7080, the 
commencing date of the award of educational assistance will be no 
earlier than the latest of the following dates:
    (1) The date the Secretary of the service department concerned 
approves the transferor to transfer entitlement;
    (2) The date the transferor completes 10 years of service in the 
Armed Forces;
    (3) The date the transferor specified in his or her designation of 
transfer;
    (4) The date the child first meets the definition of child in Sec.  
3.50(a) of this chapter;
    (5) Either--
    (i) The date the child completes the requirements of a secondary 
school diploma (or equivalency certificate); or
    (ii) The date the child attains age 18.

(Authority: 38 U.S.C. 3020)


0
6. Amend Sec.  21.7135 to revise paragraphs (a)(2), (p)(1), and (r) and 
to add new paragraphs (dd) through (ii) immediately after the authority 
citation at the end of paragraph (cc), to read as follows:


Sec.  21.7135  Discontinuance dates.

* * * * *
    (a) * * *
    (2) In all other cases if the veteran or servicemember dies while 
pursuing his or her program of education, the discontinuance date of 
educational assistance shall be the last date of attendance.
* * * * *
    (p) * * * (1) The provisions of this paragraph apply to a veteran 
or servicemember whose educational assistance must be discontinued or 
who becomes restricted to payment of educational assistance at a 
reduced rate under Sec.  21.7139 (c) and (d).
* * * * *
    (r) Record-purpose charge against entitlement under 38 U.S.C. 
chapter 34 equals entitlement that remained on December 31, 1989. An 
individual, who is receiving basic educational assistance at the rates 
stated in Sec.  21.7137(a), will have his or her award reduced to the 
rates found in Sec.  21.7136(a) effective the date the total of the 
individual's record-purpose charges against his or her entitlement 
under 38 U.S.C. chapter 34 equals the entitlement to that benefit which 
the individual had on December 31, 1989.

(Authority: 38 U.S.C. 30159(c); Pub. L. 98-525)

* * * * *
    (dd) Dependent exhausts transferred entitlement. The discontinuance 
date of an award of educational assistance to a dependent, who exhausts 
the entitlement transferred to him or her is the date he or she 
exhausts the entitlement.

(Authority: 38 U.S.C. 3020)


    (ee) Transferor revokes transfer of entitlement. If the transferor 
revokes a transfer of entitlement, the dependent's date of 
discontinuance is the effective date of the revocation of transfer as 
determined under Sec.  21.7080(g)(2).

(Authority: 38 U.S.C. 3020)


    (ff) Transferor fails to complete additional active duty service 
requirement. VA will discontinue each award of educational assistance 
given to a dependent, effective the first date of each such award 
when--
    (1) The transferor fails to complete the additional active duty 
service requirement that afforded him or her the opportunity to 
transfer entitlement to educational assistance; and
    (2) The service department discharges the transferor for a reason 
other than one of the reasons stated in Sec.  21.7080(m)(1).

(Authority: 38 U.S.C. 3020)


    (gg) Spouse eligible for transferred entitlement and transferor 
divorce. If a spouse eligible for transferred entitlement and the 
transferor divorce, the spouse's discontinuance date is the date of the 
divorce.

(Authority: 38 U.S.C. 101(31), 103, 3020)


    (hh) Child eligible for transferred entitlement marries. If a child 
eligible for transferred entitlement marries, the date of 
discontinuance is the date the child marries.

(Authority: 38 U.S.C. 101(4), 3020)


    (ii) Stepchild eligible for transferred entitlement no longer 
member of transferor's household. If a stepchild eligible for 
transferred entitlement ceases to be a member of the transferor's 
household, the date of discontinuance is the date the stepchild was no 
longer a member of the transferor's household. See Sec.  21.7080(c)(4).

(Authority: 38 U.S.C. 101(4), 3020)



0
7. Section 21.7136 is amended by:
0
a. Revising paragraphs (d)(1) and (d)(2) introductory texts;
0
b. Redesignating paragraphs (d)(3), (d)(4), (d)(5), and (d)(6) as 
paragraphs (d)(4), (d)(5), (d)(7), and (d)(8), respectively.
0
c. Adding new paragraphs (d)(3) and (d)(6).
0
d. Revising newly designated paragraph (d)(5) introductory text.
0
e. Revising paragraphs (e)(1) and (e)(2), and removing paragraph 
(e)(3).
0
f. Revising paragraphs (g)(1) introductory text, (g)(1)(i) and 
(g)(2)(ii).

[[Page 75678]]

0
g. Revising paragraphs (h)(1) introductory text, (h)(2)(i) through 
(iii), and (h)(3).
    The revisions and additions read as follows:


Sec.  21.7136  Rates of payment of basic educational assistance.

* * * * *
    (d) * * *
    (1) For individuals, who first become members of the Armed Forces 
before November 29, 1989, (other than those pursuing cooperative 
training before October 9, 1996, or apprenticeship or other on-job 
training) it may not exceed:
* * * * *
    (2) For individuals, who become members of the Armed Forces during 
the period beginning November 29, 1989 and ending September 30, 1998 
(other than those pursuing cooperative training before October 9, 1996, 
or apprenticeship or other on-job training), it may not exceed:
* * * * *
    (3) For individuals, who first become members of the Armed Forces 
after September 30, 1998, (other than those pursuing apprenticeship or 
other on-job training), it may not exceed:
    (i) $950.00 per month for full-time training,
    (ii) $712.50 per month for three-quarter-time training,
    (iii) $475.00 per month for one-half-time training or for training 
which is less than one-half, but more than one-quarter-time, or
    (iv) $237.50 per month for one-quarter-time training or less.

(Authority: 38 U.S.C. 3015, 3032)

* * * * *
    (5) For individuals, who first become members of the Armed Forces 
during the period beginning November 29, 1989 and ending September 30, 
1998, and, who are pursuing an apprenticeship or other on-job training, 
it may not exceed:
* * * * *
    (6) For individuals, who first become members of the Armed Forces 
after September 30, 1998, and who are pursuing apprenticeship or other 
on-job training, it may not exceed:
    (v) $712.50 per month during the first 6 months of training,
    (vi) $522.50 per month during the second 6 months of training, or
    (vii) $332.50 per month during the remaining months of training.

(Authority: 38 U.S.C. 3015, 3032)

* * * * *
    (e) * * *
    (1) The monthly rate stated in either paragraph (b) or (c) of this 
section (as determined by the veteran's or servicemember's initial 
obligated period of active duty) plus any additional amounts that may 
be due under paragraph (d) or (f) of this section, or
    (2) The monthly rate of the cost of the course. If there is no cost 
for the course, educational assistance is not payable.

(Authority: 38 U.S.C. 3015, 3032)

* * * * *
    (g) Increase (``kicker'') in basic educational assistance rates 
payable for service in the Selected Reserve. (1) The Secretary of the 
service department concerned may increase the amount of basic 
educational assistance payable under paragraph (b), (c), (d), (e), or 
(f) of this section, as appropriate. The increase (``kicker'') is 
payable to an individual, who has a skill or specialty in which there 
is a critical shortage of personnel or for which it is difficult to 
recruit, or, in the case of critical units, retain personnel, if the 
individual:
    (i) Establishes eligibility for education under Sec. Sec.  
21.7042(a), 21.7045, or 21.7080; and
* * * * *
    (2) * * *
    (ii) May set the amount of the increase (``kicker'') payable, for 
an individual pursuing a program of education less than full time or 
pursuing a program of apprenticeship or other on-job training, at an 
amount less than the amount described in paragraph (g)(2)(i) of this 
section.
* * * * *
    (h) * * *
    (1) VA will increase the monthly rate provided in paragraphs (b)(1) 
through (b)(4) and (c)(1) through (c)(4) of this section by:
* * * * *
    (2) * * *
    (i) During the first 6 months of the veteran's pursuit of training, 
VA will increase the monthly rate provided in paragraphs (b)(5) through 
(b)(8) and (c)(5) through (c)(8) of this section by $3.75 for every $20 
the individual contributed;
    (ii) During the second 6 months of the veteran's pursuit of 
training, VA will increase the monthly rate provided in paragraphs 
(b)(5) through (b)(8) and (c)(5) through (c)(8) of this section by 
$2.75 for every $20 the individual contributed; and
    (iii) During the remaining months of the veteran's pursuit of 
training, VA will increase the monthly rate provided in paragraphs 
(b)(5) through (b)(8) and (c)(5) through (c)(8) of this section by 
$1.75 for every $20 the individual contributed.
    (3) VA will increase the monthly rate provided in paragraphs (b)(9) 
or (c)(9) of this section by $5 for every $20 the veteran has 
contributed.

(Authority: 38 U.S.C. 3015(g))


0
8. Section 21.7137 is amended by:
0
a. Revising paragraph (b) introductory text and paragraph (b)(2).
0
b. Removing paragraph (d).
0
c. Redesignating paragraph (e), (f), and (g) as (d), (e), and (f), 
respectively.
0
d. Revising newly designated paragraphs (d)(1) introductory text and 
(d)(1)(i).
    The revisions read as follows:


Sec.  21.7137  Rates of payment of basic educational assistance for 
individuals with remaining entitlement under 38 U.S.C. chapter 34.

* * * * *
    (b) * * * Except as provided in paragraph (d) of this section, the 
monthly rate of basic educational assistance for a veteran who is 
pursuing a course on a less than one-half-time basis is the lesser of:
* * * * *
    (2) The monthly rate of the cost of the course. If there is no cost 
for the course, educational assistance is not payable.
* * * * *
    (d) Increase (``kicker'') in basic educational assistance rates for 
service in the Selected Reserve. (1) The Secretary of the service 
department concerned may increase the amount of basic educational 
assistance payable under paragraphs (a), (b), or (c) of this section, 
as appropriate. The increase (``kicker'') is payable to an individual 
who has a skill or specialty in which there is a critical shortage of 
personnel or for which it is difficult to recruit, or, in the case of 
critical units, retain personnel, if the individual:
    (i) Establishes eligibility for educational assistance under Sec.  
21.7044(a) or Sec.  21.7080;
* * * * *

0
9. Amend Sec.  21.7138 to revise paragraph (c)(1) to read as follows:


Sec.  21.7138  Rates of supplemental educational assistance.

* * * * *
    (c) * * *
    (1) The monthly rate of the veteran's or servicemember's basic 
educational assistance determined as provided in Sec. Sec.  21.7136(e) 
and 21.7137(b), (c) and (d) of this part.
* * * * *

0
10. Section 21.7139 is amended by:
0
a. Removing paragraph (b).
0
b. Redesignating paragraphs (c), (d), (e), (f), and (g) as paragraphs 
(b), (c), (d), (e), and (f) respectively.
0
c. In newly designated paragraph (b), revising the paragraph heading 
and introductory text.

[[Page 75679]]

0
d. Revising newly designated paragraphs (c)(2)(iii), (d)(3)(iii), 
(f)(1)(i), and (f)(1)(ii).
    The revisions read as follows:


Sec.  21.7139  Conditions that result in reduced rates or no payment.

* * * * *
    (b) No educational assistance for some incarcerated veterans or 
servicemembers. VA will pay no educational assistance to a veteran or 
servicemember, who--
* * * * *
    (c) * * *
    (2) * * *
    (iii) The monthly rate found in Sec.  21.7136(e) or Sec.  
21.7137(c), as appropriate.
* * * * *
    (d) * * *
    (3) * * *
    (iii) The monthly rate determined by Sec.  21.7136(e) or Sec.  
21.7137(b), as appropriate, plus the monthly rate stated in Sec.  
21.7138(c) if the veteran is entitled to supplemental educational 
assistance.
* * * * *
    (f) * * *
    (1) * * *
    (i) The rates specified in Sec. Sec.  21.7136(b)(5) through (b)(8), 
(c)(5) through (c)(8), (d)(4) through (d)(6), (f)(4) and (h)(2) and 
21.7137(a)(5) through (a)(8); and
    (ii) Any increase (``kicker'') set by the Secretary of the service 
department concerned as described in Sec. Sec.  21.7136(g) and 
21.7137(d).
* * * * *
[FR Doc. E6-21525 Filed 12-15-06; 8:45 am]
BILLING CODE 8320-01-P