[Federal Register Volume 84, Number 238 (Wednesday, December 11, 2019)]
[Proposed Rules]
[Pages 67778-67826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25808]



[[Page 67777]]

Vol. 84

Wednesday,

No. 238

December 11, 2019

Part II





Department of Education





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





34 CFR Parts 674, 675, 676, et al.





Federal Perkins Loan Program, Federal Work-Study Programs, Federal 
Supplemental Educational Opportunity Grant Program, Federal Family 
Education Loan Program, William D. Ford Federal Direct Loan Program, 
Teacher Education Assistance for College and Higher Education Grant 
Program, Federal Pell Grant Program, Leveraging Educational Assistance 
Partnership Program, and Gaining Early Awareness and Readiness for 
Undergraduate Programs; Proposed Rule

  Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / 
Proposed Rules  

[[Page 67778]]


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

DEPARTMENT OF EDUCATION

34 CFR Parts 674, 675, 676, 682, 685, 686, 690, 692, and 694

[Docket ID ED-2019-OPE-0081]
RIN 1840-AD40, 1840-AD44


Federal Perkins Loan Program, Federal Work-Study Programs, 
Federal Supplemental Educational Opportunity Grant Program, Federal 
Family Education Loan Program, William D. Ford Federal Direct Loan 
Program, Teacher Education Assistance for College and Higher Education 
Grant Program, Federal Pell Grant Program, Leveraging Educational 
Assistance Partnership Program, and Gaining Early Awareness and 
Readiness for Undergraduate Programs

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: In response to the United States Supreme Court decision in 
Trinity Lutheran Church of Columbia, Inc. v. Comer, and the United 
States Attorney General's October 7, 2017 Memorandum on Federal Law 
Protections for Religious Liberty pursuant to Executive Order No. 
13798, the Department of Education (Department) proposes revising the 
current regulations regarding the eligibility of faith-based entities 
to participate in the Federal Student Aid programs authorized under 
title IV of the Higher Education Act of 1965, as amended (HEA), and the 
eligibility of students to obtain certain benefits under those 
programs. The Secretary is also proposing to simplify the Teacher 
Education Assistance for College and Higher Education (TEACH) Grant 
Program requirements to minimize the number of TEACH Grants that are 
converted to Federal Direct Unsubsidized Loans, and to update, 
strengthen, and clarify other areas of the TEACH Grant Program 
regulations.

DATES: We must receive your comments on or before January 10, 2020.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
    If you are submitting comments electronically, we strongly 
encourage you to submit any comments or attachments in Microsoft Word 
format. If you must submit a comment in Adobe Portable Document Format 
(PDF), we strongly encourage you to convert the PDF to print-to-PDF 
format or to use some other commonly used searchable text format. 
Please do not submit the PDF in a scanned format. Using a print-to-PDF 
format allows the Department to electronically search and copy certain 
portions of your submissions.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``Help.''
     Postal Mail, Commercial Delivery, or Hand Delivery: The 
Department strongly encourages commenters to submit their comments 
electronically. However, if you mail or deliver your comments about the 
proposed regulations, address them to Mr. Jean-Didier Gaina, U.S. 
Department of Education, 400 Maryland Ave. SW, Mail Stop 294-20, 
Washington, DC 20202.
    Privacy Note: The Department's policy is to make all comments 
received from members of the public available for public viewing in 
their entirety on the Federal eRulemaking Portal at 
www.regulations.gov. Therefore, commenters should be careful to include 
in their comments only information that they wish to make publicly 
available.

FOR FURTHER INFORMATION CONTACT: 
    For information related to faith-based issues, contact Lynn 
Mahaffie at (202) 453-7862 or by email at [email protected].
    For information related to the TEACH Grant Program, contact Sophia 
McArdle at (202) 453-6318 or by email at [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: 

Executive Summary

Purpose of This Regulatory Action

    In response to the Supreme Court's decision in Trinity Lutheran 
Church of Columbia, Inc. v. Comer (137 S. Ct. 2012 (2017)), Executive 
Order Number 13798 (Exec. Order No. 13798 section 4, 82 FR 21675 (May 
4, 2017)), and the Attorney General's October 6, 2017 Memorandum (U.S. 
Att'y Gen. Memorandum on Federal Law Protections for Religious Liberty 
(October 6, 2017, https://www.justice.gov/opa/pressrelease/file/1001891/download)), the Department engaged in a full review of its 
regulations related to title IV, HEA programs in order to identify 
provisions that may discriminate against otherwise eligible students 
and faith-based entities by disqualifying them from title IV, HEA 
programs due to their religious beliefs in violation of the Free 
Exercise Clause of the First Amendment to the United States 
Constitution. To ensure that students and faith-based entities are not 
discriminated against due to their religious beliefs, the Department 
proposes to:
     Ensure that members of religious orders are not denied 
access to title IV funding or benefits under the title IV programs, 
including the Federal Pell Grant Program, the Federal Perkins Loan 
Program, the Federal Work-Study Program (FWSP), the Federal 
Supplemental Educational Opportunity Grant (FSEOG) Program, the Federal 
Family Education Loan (FFEL) Program, and the William D. Ford Federal 
Direct Loan (Direct Loan) Program.
     Under certain circumstances, allow borrowers working as 
full-time volunteers to defer repayment of Federal Perkins Loans, 
National Defense Student Loans (NDSLs), and FFELs if those borrowers 
also engage in giving religious instruction, conducting worship 
services, engaging in religious proselytizing, or engaging in 
fundraising to support religious activities as part of their assigned 
volunteer duties.
     Provide an interpretation of the Public Service Loan 
Forgiveness (PSLF) regulations that permit borrowers who work for 
employers that engage in religious instruction, worship services, or 
proselytizing to qualify for PSLF so long as they meet the applicable 
standard for full-time employment when those religious activities are 
excluded from their work hours.
     Eliminate arbitrary limitations on the ability of private 
secondary and postsecondary faith-based educational institutions to 
participate in the Gaining Early Awareness and Readiness for 
Undergraduate Programs (GEAR UP).
    In addition, during its review, the Department discovered language 
that is inconsistent with the statute in both the Leveraging 
Educational Assistance Partnership Program (LEAP) and FWSP regulations. 
The provisions in both programs relate to allowable employment-related 
activities for program participants. In these cases, the Department 
proposes to include the statutory language in the regulations.
    These proposed regulations would also make changes to the TEACH 
Grant Program requirements. In exchange for receiving a TEACH Grant, a 
grant

[[Page 67779]]

recipient must agree to complete a teaching service obligation and must 
regularly provide documentation of his or her progress toward 
satisfying the service obligation. If a grant recipient fails to 
complete the service obligation or does not meet requirements for 
documenting the service obligation, the TEACH Grants that the 
individual received are converted to a Direct Unsubsidized Loan that 
must be repaid, with interest charged from the date of each TEACH Grant 
disbursement. The proposed regulations would simplify program 
requirements to make it easier for TEACH Grant recipients to document 
their progress toward satisfying the service obligation, thereby 
reducing the number of TEACH Grants that are converted to Direct 
Unsubsidized Loans. The proposed regulations would also establish a 
process for a TEACH Grant recipient to request reconsideration of the 
conversion of the grant to a loan if the recipient believes that his or 
her TEACH Grant was converted to a loan in error, expand and strengthen 
counseling requirements for TEACH Grant recipients, expand the 
conditions under which a TEACH Grant recipient may receive a temporary 
suspension of the period for completing the teaching service 
obligation, and strengthen, update, and clarify other areas of the 
TEACH Grant Program regulations.

Summary of the Major Provisions of This Regulatory Action

    To restore religious liberty to faith-based institutions and 
religious students, we propose new regulations that would--
     Restore the ability of members of religious orders, who 
also are pursuing courses of study at institutions of higher education, 
to participate in the title IV, HEA programs by eliminating regulatory 
provisions that treat members of religious orders as having no 
financial need in certain circumstances.
     Allow certain borrowers, who serve as full-time volunteers 
in tax-exempt organizations and give religious instruction, conduct 
worship service, proselytize, or fundraise to support religious 
activities as part of their official duties, to defer repayment of 
Federal Perkins Loans, NDSLs, and FFELs.
     Provide an interpretation of the PSLF regulations, which 
permit borrowers who work for employers that engage in religious 
instruction, worship services, or proselytizing to qualify for PSLF so 
long as they meet the applicable standard for full-time employment when 
those religious activities are excluded from their work hours.
     Clarify requirements for private secondary and 
postsecondary faith-based institutions' participation in the GEAR UP 
program.
     Conform language in the LEAP and FWSP regulations 
regarding allowable program activities to statutory language.
    For the TEACH Grant Program, we propose new regulations that 
would--
     Clarify that grant recipients may satisfy the TEACH Grant 
service obligation by teaching for an educational service agency that 
serves low-income students.
     Clarify the beginning date of the eight-year period for 
completing the TEACH Grant service obligation.
     Revise the definition of ``highly qualified.''
     Update and expand the conditions under which a TEACH Grant 
recipient may satisfy the TEACH Grant service obligation by teaching in 
a high-need field listed in the Department's annual Teacher Shortage 
Area Nationwide Listing (Nationwide List).
     Clarify the service obligation requirements for TEACH 
Grant recipients who withdraw from the institution where they received 
a TEACH Grant before completing the program for which they received the 
grant, then later re-enroll in the same program or in a different TEACH 
Grant eligible program at the same academic level.
     Expand the information that is provided to TEACH Grant 
recipients during initial, subsequent, and exit counseling, and add a 
new conversion counseling requirement for grant recipients whose TEACH 
Grants are converted to Direct Unsubsidized Loans.
     Add new conditions under which a TEACH Grant recipient may 
receive a temporary suspension of the eight-year period for completing 
the service obligation.
     Remove the current regulatory requirement for TEACH Grant 
recipients to certify, within 120 days of completing the program for 
which they received TEACH Grants, that they have begun qualifying 
teaching service, or that they have not yet begun teaching, but they 
intend to satisfy the service obligation.
     Simplify the regulations specifying the conditions under 
which TEACH Grants are converted to Direct Unsubsidized Loans so that 
for all grant recipients, loan conversion will occur only if the 
recipient asks the Secretary to convert his or her TEACH Grants to 
loans, or if the recipient fails to begin or maintain qualifying 
teaching service within a timeframe that would allow the recipient to 
satisfy the service obligation within the eight-year service obligation 
period.
     Specify that the Secretary will send grant recipients, at 
least annually, a notice containing detailed information about the 
TEACH Grant service obligation requirements, a summary of the grant 
recipient's progress toward satisfying the service obligation, and an 
explanation of the process by which a grant recipient whose TEACH 
Grants are converted to Direct Unsubsidized Loans may request 
reconsideration of the conversion if he or she believes that the grants 
were converted in error.
     Describe the actions that the Secretary will take if a 
grant recipient's request for reconsideration of the conversion of the 
grant to a loan is approved or denied.
     Specify that the Secretary will notify a grant recipient 
in advance of the date by which he or she will be subject to loan 
conversion for failure to begin or maintain qualifying teaching service 
within a timeframe that would allow the recipient to complete the 
service obligation within the eight-year service obligation period, and 
inform the recipient of the final date by which he or she must provide 
documentation of teaching service to avoid having his or her grants 
converted to loans.
     Incorporate statutory changes and update, simplify, and 
clarify various areas of the TEACH Grant Program regulations.
    Please refer to the Summary of Proposed Changes section of this 
notice of proposed rulemaking (NPRM) for more details on the major 
provisions contained in this NPRM.

Costs and Benefits

    As discussed in the Regulatory Impact Analysis section of this 
document, the Department does not estimate that these proposed 
regulations would result in any significant costs. Changes regarding 
faith-based institutions and religious students would have minimal 
impacts on financial aid costs to the Federal government, because these 
provisions will affect few students and borrowers. Changes regarding 
the PSLF program would similarly have minimal impact, as the consensus 
language largely aligns with historical Department practice. Changes 
regarding the GEAR UP program would have no estimated costs as 
participation in the Department's competitive grant programs is 
voluntary and the program currently serves small numbers of religiously 
affiliated schools. While changes to the TEACH Grant Program would 
likely improve the reporting and documentation process for recipients 
and increase the number of teaching positions in which TEACH

[[Page 67780]]

grant recipients could satisfy their service obligations, we do not 
estimate that the changes would result in a sizable increase in the 
number of grant recipients.
    Invitation to Comment: We invite you to submit comments regarding 
these proposed regulations.
    To ensure that your comments have 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 provide relevant information and data whenever possible, 
even when there is no specific solicitation of data and other 
supporting materials in the request for comment. We also urge you to 
arrange your comments in the same order as the proposed regulations. 
Please do not submit comments that are outside the scope of the 
specific proposals in this NPRM, as we are not required to respond to 
such comments.
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866 and 13563 and their overall 
requirement of reducing regulatory burden that might result from these 
proposed regulations. Please let us know of any further ways we could 
reduce potential costs or increase potential benefits while preserving 
the effective and efficient administration of the Department's programs 
and activities.
    During and after the comment period, you may inspect all public 
comments about the proposed regulations by accessing Regulations.gov. 
You may also inspect the comments in person at 400 Maryland Ave. SW, 
Washington, DC, between 8:30 a.m. and 4 p.m., Eastern Time, Monday 
through Friday of each week except Federal holidays. To schedule a time 
to inspect comments, please contact one of the persons listed under FOR 
FURTHER INFORMATION CONTACT.
    Assistance to Individuals with Disabilities in Reviewing the 
Rulemaking Record: On request, we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public rulemaking record for the proposed regulations. To schedule an 
appointment for this type of accommodation or auxiliary aid, please 
contact one of the persons listed under FOR FURTHER INFORMATION 
CONTACT.

Background

    The Secretary proposes to amend parts 674, 675, 676, 682, 685, 686, 
690, 692, and 694 of title 34 of the Code of Federal Regulations (CFR). 
The regulations in 34 CFR part 674 pertain to the Federal Perkins Loan 
Program. The regulations in 34 CFR part 675 pertain to FWSP. The 
regulations in 34 CFR part 676 pertain to the FSEOG. The regulations in 
34 CFR part 682 pertain to FFEL. The regulations in 34 CFR part 685 
pertain to Direct Loans. The regulations in 34 CFR part 686 pertain to 
the TEACH Grant Program. The regulations in 34 CFR part 690 pertain to 
the Federal Pell Grant Program. The regulations in 34 CFR part 692 
pertain to LEAP. The regulations in 34 CFR part 694 pertain to GEAR UP.
    We are proposing these amendments to: (1) Ensure that students and 
faith-based organizations are not prevented from participating in title 
IV programs because of their religious views; (2) codify the statutory 
language about allowable forms of employment for both the FWSP and the 
LEAP program; (3) ensure that GEAR UP providers that serve students 
attending private schools are employed independently of the private 
school; (4) eliminate a redundant provision that prohibits the 
commingling of Federal and non-Federal funds used to provide services 
to GEAR UP students attending private institutions; and (5) eliminate 
the prohibition against pervasively sectarian institutions of higher 
education from serving as fiscal agents for GEAR UP grantees.
    Throughout this NPRM, when the Department refers to a ``generally 
available benefit program,'' the Department is referring to programs 
that meet the Supreme Court's characterization of ``neutral and 
generally available benefit programs'' in Trinity Lutheran.\1\
---------------------------------------------------------------------------

    \1\ 137 S. Ct. 2012 (2017).
---------------------------------------------------------------------------

    In 2007, Congress established the TEACH Grant Program to help 
increase the number of teachers in high-need fields in low-income 
schools. The TEACH Grant Program provides up to $4,000 per year to 
undergraduate and graduate students enrolling in coursework to become a 
teacher. In exchange for receiving a TEACH Grant, a recipient must 
agree to teach in a high-need field such as reading, mathematics, or 
science, at a low-income school, for at least four years in an eight-
year period and annually certify that he or she intends to meet this 
requirement. If a recipient does not meet the grant requirements or the 
annual certification requirements, the grant converts to a Federal 
Direct Unsubsidized Loan with interest charged from the date of each 
TEACH Grant disbursement.
    A 2015 Government Accountability Office (GAO) report found that 
around 36,000 out of more than 112,000 TEACH Grant recipients had not 
fulfilled TEACH Grant requirements and had their grants converted to 
loans (GAO, 2015).\2\ GAO's analysis also found that 2,252 TEACH Grants 
were improperly converted to loans as of September 2014. GAO concluded 
that due to the number of incorrectly converted grants, the Department 
should better understand the reasons teachers do not meet program 
requirements, and program management should be improved, especially 
with respect to the grant-to-loan conversion dispute process. These 
proposed regulations help to address GAO's concerns.
---------------------------------------------------------------------------

    \2\ Government Accountability Office. 2015. Higher Education: 
Better Management of Federal Grant and Loan Forgiveness Programs for 
Teachers Needed to Improve Participant Outcomes (GAO 15-314). 
Washington, DC: United States Government Accountability Office.
---------------------------------------------------------------------------

    A 2018 study conducted for the Department by the American 
Institutes for Research (U.S. Department of Education, 2018) \3\ found 
that as of June 2016, 63 percent of TEACH Grant recipients who started 
their eight-year service obligation period before July 2014 had their 
grants converted to unsubsidized loans because they did not meet the 
service obligation requirements or the annual certification 
requirements. More specifically, this study found that the factors 
associated with recipients not meeting the grant requirements included 
those related to the recipient's employment (including teaching in a 
position that did not qualify for TEACH Grant service (39 percent) and 
not working as a certified teacher (33 percent)), the recipient not 
understanding the service obligation requirements, and factors related 
to the recipient providing the annual certification (not providing the 
certification because the recipient did not know about the annual 
certification process (19 percent) and not providing the certification 
because the recipient experienced challenges related to the 
certification process (13 percent)).
---------------------------------------------------------------------------

    \3\ U.S. Department of Education. (2018). Study of the Teacher 
Education Assistance for College and Higher Education (TEACH) 
Program.
---------------------------------------------------------------------------

    To address the concerns raised by these studies, we are proposing 
amendments that we believe will reduce the number of TEACH Grants that 
are converted to Direct Unsubsidized Loans by simplifying the 
requirements for TEACH Grant recipients to show that they are meeting 
the service obligation requirements; ensure that TEACH Grant recipients 
are better informed of program requirements by expanding and 
strengthening counseling and notifications; make it easier for TEACH

[[Page 67781]]

Grant recipients to satisfy the service obligation by establishing 
additional conditions under which the period for completing the 
required teaching service may be temporarily suspended, and by 
expanding the options for satisfying the service obligation by teaching 
in a high-need field listed in the Department's Nationwide List; 
provide a process for TEACH Grant recipients to request reconsideration 
of the conversion of their TEACH Grant to a loan if they believe that 
the grant was converted to a loan in error; and update, simplify, and 
clarify various areas of the TEACH Grant regulations.

Public Participation

    On July 31, 2018, we published a notice in the Federal Register (83 
FR 36814) announcing our intent to establish a negotiated rulemaking 
committee under section 492 of the HEA to develop proposed regulations 
related to a number of higher education practices and issues, including 
(1) accreditation; (2) distance learning and educational innovation; 
(3) TEACH Grants; and (4) participation by faith-based educational 
entities. We also announced three public hearings at which interested 
parties could comment on the topics suggested by the Department and 
suggest additional topics for consideration for action by the 
negotiated rulemaking committee. Those hearings took place on September 
6, 2018, in Washington, DC, on September 11, 2018, in New Orleans, 
Louisiana, and on September 13, 2018, in Sturtevant, Wisconsin. We 
invited parties to comment and submit topics for consideration in 
writing as well. Transcripts from the public hearings are available at: 
www2.ed.gov/policy/highered/reg/hearulemaking/2018/index.html.
    Written comments submitted in response to the July 31, 2018 Federal 
Register notice may be viewed through the Federal eRulemaking Portal at 
www.regulations.gov, within docket ID ED-2018-OPE-0076. Instructions 
for finding comments are also available on the site under ``How to Use 
Regulations.gov'' in the ``Help'' section.

Negotiated Rulemaking

    Section 492 of the HEA, 20 U.S.C. 1098a, requires the Secretary to 
obtain public involvement in the development of proposed regulations 
affecting programs authorized by title IV of the HEA. After obtaining 
extensive input and recommendations from the public, including 
individuals and representatives of groups involved in the title IV, HEA 
programs, the Secretary in most cases must subject the proposed 
regulations to a negotiated rulemaking process. If negotiators reach 
consensus on the proposed regulations, the Department agrees to publish 
without alteration a defined group of regulations on which the 
negotiators reached consensus unless the Secretary reopens the process 
or provides a written explanation to the participants stating why the 
Secretary has decided to depart from the agreement reached during 
negotiations. Further information on the negotiated rulemaking process 
can be found at: www2.ed.gov/policy/highered/reg/hearulemaking/hea08/neg-reg-faq.html.
    On October 15, 2018, the Department published a notice in the 
Federal Register (83 FR 51906) announcing its intention to establish a 
negotiated rulemaking committee--the Accreditation and Innovation 
Committee--to prepare proposed regulations for the Federal Student Aid 
programs authorized under title IV of the HEA. The notice set forth a 
schedule for the committee meetings and requested nominations for 
individual negotiators to serve on the negotiating committee. We also 
announced the creation of three subcommittees--the Distance Learning 
and Educational Innovation Subcommittee, Faith-Based Entities 
Subcommittee, and the TEACH Grants Subcommittee--and requested 
nominations for individuals with pertinent expertise to participate on 
the subcommittees.
    The Department sought negotiators to represent the following groups 
for the Accreditation and Innovation Committee: Students; legal 
assistance organizations that represent students; financial aid 
administrators at postsecondary institutions; national accreditation 
agencies; regional accreditation agencies; programmatic accreditation 
agencies; institutions of higher education primarily offering distance 
education; institutions of higher education eligible to receive Federal 
assistance under title III, parts A, B and F, and title V of the HEA, 
which include Historically Black Colleges and Universities (HBCUs), 
Hispanic-Serving Institutions (HSIs), American Indian Tribally 
Controlled Colleges and Universities, Alaska Native and Native 
Hawaiian-Serving Institutions, and other institutions with a 
substantial enrollment of needy students as defined in title III of the 
HEA; two-year public institutions of higher education; four-year public 
institutions of higher education; faith-based institutions of higher 
education; private, nonprofit institutions of higher education; 
private, proprietary institutions of higher education; employers; and 
veterans.
    The Department sought individuals to represent the following groups 
for the Faith-Based Entities Subcommittee: Students; faith-based 
entities eligible for title IV, HEA programs; officers of institution-
based GEAR UP grantees; institutions of higher education with knowledge 
of faith-based entities' participation in the title IV, HEA programs; 
institutions of higher education with knowledge of faith-based 
entities' participation in the title IV, HEA programs that also are 
eligible to receive Federal financial assistance under title III, parts 
A, B, and F, and title V of the HEA, which include HBCUs, HSIs, 
American Indian Tribally Controlled Colleges and Universities, Alaska 
Native and Native Hawaiian-Serving Institutions, Predominantly Black 
Institutions, and other institutions with a substantial enrollment of 
needy students as defined in title III of the HEA; accrediting 
agencies; associations or organizations that focus on issues related to 
faith-based entities or the participation of faith-based entities in 
Federal programs; and financial aid administrators at postsecondary 
institutions.
    The Department sought individuals with expertise in teacher 
education programs, student financial aid, and high-need teacher 
education programs to serve as members of the TEACH Grant Subcommittee: 
Students who are or have been TEACH Grant recipients; legal assistance 
organizations that represent students; financial aid administrators at 
postsecondary institutions; State primary and secondary education 
executive officers; institutions of higher education that award or have 
awarded TEACH grants and that are eligible to receive Federal 
assistance under title III, parts A, B, and F, and title V of the HEA, 
which include HBCUs, HSIs, American Indian Tribally Controlled Colleges 
and Universities, Alaska Native and Native Hawaiian-Serving 
Institutions, Predominantly Black Institutions, and other institutions 
with a substantial enrollment of needy students as defined in title III 
of the HEA; two-year institutions of higher education that award or 
have awarded TEACH grants; four-year institutions of higher education 
that award or have awarded TEACH grants; organizations or associations 
that represent the interests of students who participate in title IV 
programs; and organizations or associations that represent financial 
aid administrators.
    The Accreditation and Innovation negotiating committee included the 
following members:


[[Page 67782]]


    Susan Hurst, Ouachita Baptist University, and Karen McCarthy 
(alternate), National Association of Student Financial Aid 
Administrators, representing financial aid administrators at 
postsecondary institutions.
    Robyn Smith, Legal Aid Foundation of Los Angeles, and Lea 
Wroblewski (alternate), Legal Aid of Nebraska, representing legal 
assistance organizations that represent students.
    Ernest McNealey, Allen University, and Erin Hill Hart 
(alternate), North Carolina A & T State University, representing 
institutions of higher education that award or have awarded TEACH 
grants and that are eligible to receive Federal assistance under 
title III, parts A, B, and F, and title V of the HEA, which include 
HBCUs, HSIs, American Indian Tribally Controlled Colleges and 
Universities, Alaska Native and Native Hawaiian-Serving 
Institutions, Predominantly Black Institutions, and other 
institutions with a substantial enrollment of needy students as 
defined in title III of the HEA.
    David Dannenberg, University of Alaska, Anchorage, and Tina 
Falkner (alternate), University of Minnesota, representing four-year 
public institutions of higher education.
    Terry Hartle, American Council on Education, and Ashley Ann 
Reich (alternate), Liberty University, representing private, 
nonprofit institutions of higher education.
    Jillian Klein, Strategic Education, Inc., and Fabian Fernandez 
(alternate), Schiller International University, representing 
private, proprietary institutions of higher education.
    William Pena, Southern New Hampshire University, and M. Kimberly 
Rupert (alternate), Spring Arbor University, representing 
institutions of higher education primarily offering distance 
education.
    Christina Amato, Sinclair College, and Daniel Phelan 
(alternate), Jackson College, representing two-year public 
institutions of higher education.
    Barbara Gellman-Danley, Higher Learning Commission, and 
Elizabeth Sibolski (alternate), Middle States Commission on Higher 
Education, representing regional accreditation agencies.
    Laura King, Council on Education for Public Health, and Janice 
Knebl (alternate), American Osteopathic Association Commission on 
Osteopathic College Accreditation, representing programmatic 
accreditation agencies.
    Michale S. McComis, Accrediting Commission of Career Schools and 
Colleges, and India Y. Tips (alternate), Accrediting Bureau of 
Health Education Schools, representing national accreditation 
agencies.
    Steven M. Sandberg, Brigham Young University, and David 
Altshuler (alternate), San Francisco Theological Seminary, 
representing faith-based institutions of higher education.
    Joseph Verardo, National Association of Graduate-Professional 
Students, and John Castellaw (alternate), University of Arizona, 
representing students.
    Edgar McCulloch, IBM Corporation, and Shaun T. Kelleher 
(alternate), BAM Technologies, representing employers.
    Daniel Elkins, Enlisted Association of the National Guard of the 
U.S., and Elizabeth Bejar (alternate), Florida International 
University, representing veterans.
    Annmarie Weisman, U.S. Department of Education, representing the 
Department.
    The Faith-Based Entities Subcommittee included the following 
members:
    Gregory Bruner, Olivet Nazarene University, representing 
financial aid administrators at postsecondary institutions.
    Andrew Bramson, College Crusade of Rhode Island, representing 
officers of institution-based GEAR UP grantees.
    Emmanual Guillory, United Negro College Fund, Inc., representing 
institutions of higher education eligible to receive Federal 
assistance under title III, parts A, B, F, and title V of the HEA, 
which include HBCUs, HSIs, American Indian Tribally Controlled 
Colleges and Universities, Alaska Native and Native Hawaiian-Serving 
Institutions, and other institutions with a substantial enrollment 
of needy students as defined in title III of the HEA.
    Stephen Eck, Oklahoma Christian University, representing faith-
based entities eligible for title IV, HEA programs.
    Thomas Dunne, Fordham University, representing institutions of 
higher education with knowledge of faith-based entities' 
participation in the title IV, HEA programs.
    William Hathaway, Regent University, representing accrediting 
agencies.
    Richard Katskee, Americans United for Separation of Church and 
State, and Kimberlee Wood Colby, Center for Law and Religious 
Freedom, representing associations or organizations that focus on 
issues related to faith-based entities or the participation of 
faith-based entities in Federal programs.
    Haven Herrin, Soulforce, representing students.
    Lynn Mahaffie, U.S. Department of Education.
    The TEACH Grants Subcommittee included the following members:
    Debbi Braswell, Belhaven University, and Stephen Payne, National 
Association of Student Financial Aid Administrators, representing 
financial aid administrators at postsecondary institutions.
    Kyra Taylor, Legal Services Center at Harvard Law School, 
representing legal assistance organizations that represent students.
    Willis W. Walter, Virginia State University, representing 
institutions of higher education that award or have awarded TEACH 
Grants and that are eligible to receive Federal assistance under 
title III, parts A, B, and F, and title V of the HEA, which includes 
HBCUs, HSIs, American Indian Tribally Controlled Colleges and 
Universities, Alaska Native and Native Hawaiian-Serving 
Institutions, and other institutions with a substantial enrollment 
of needy students as defined in title III of the HEA.
    Alyssa Dobson, Slippery Rock University, and David T. Cantaffa, 
State University of New York, representing four-year institutions of 
higher education that award or have awarded TEACH Grants.
    Deborah Koolbeck, American Association of Colleges for Teacher 
Education, representing organizations or associations that represent 
the interests of students who participate in the title IV programs.
    Sophia McArdle, U.S. Department of Education.

    The negotiated rulemaking committee met to develop proposed 
regulations on January 14-16, 2019; February 19-22, 2019; March 25-28, 
2019; and April 1-3, 2019.
    At the first meeting of the Committee, the Department received a 
petition for membership from David Tandberg, Vice President of Policy 
Research and Strategic Initiatives at the State Higher Education 
Executive Officers Association, to represent State higher education 
executive officers. The negotiated rulemaking committee voted to 
include Dr. Tandberg on the full committee.
    During its first meeting, the negotiating committee also reached 
agreement on its protocols and proposed agenda. The protocols provided, 
among other things, that the committee would operate by consensus. 
Consensus means that there must be no dissent by any member for the 
committee to have reached agreement. Under the protocols, the 
Department would use the consensus-based language in its proposed 
regulations for each bucket, as described in more detail below, on 
which final consensus was achieved. Furthermore, the Department would 
not substantively alter the consensus-based language of its proposed 
regulations unless the Department reopened the negotiated rulemaking 
process or provided a written explanation to the committee members 
regarding why it decided to depart from that language.
    During the first meeting, the negotiating committee agreed to 
negotiate an agenda of issues related to accreditation and student 
financial aid. Under the protocols, the issues were placed into three 
``buckets'' upon which a final consensus would have to include 
consensus on all issues within that bucket. The first bucket included 
issues related to accreditation in 34 CFR parts 600, 602, 603, and 668, 
as well as the Robert C. Byrd Scholarship Program in 34 CFR part 654. 
The second bucket included issues related to the TEACH Grant Program in 
34 CFR part 686 and the treatment of faith-based entities in student 
aid and grant programs in 34 CFR parts 674, 675, 676, 682, 685, 690, 
692, and 694. The third bucket included issues related to distance 
learning and educational innovation in 34 CFR parts 600 and 668. The 
committee reached consensus on each of the three buckets.
    The Department plans to issue separate NPRMs and final regulations 
for each bucket of issues. This NPRM addresses issues related to the 
treatment of faith-based entities and TEACH

[[Page 67783]]

Grants. During the committee meetings, the Department explained that it 
would consider early implementation of the provisions of the final 
TEACH grant regulations in order to reduce the number of conversions of 
grants to loans by simplifying program requirements.
    During committee meetings, the committee reviewed and discussed the 
Department's drafts of regulatory language and the committee members' 
alternative language and suggestions. At the final meeting on April 3, 
2019, the committee reached consensus on regulatory language. For this 
reason, and according to the committee's protocols, committee members 
and the organizations that they represent have agreed to refrain from 
commenting negatively on the consensus-based regulatory language. For 
more information on the negotiated rulemaking sessions, please visit: 
https://www2.ed.gov/policy/highered/reg/hearulemaking/2018/index.html.

Summary of Proposed Changes

    With respect to issues discussed by the Faith-Based Subcommittee, 
the proposed regulations would--
     Amend Sec. Sec.  674.9, 675.9, 676.9, 682.301, 685.200, 
and 690.75 by removing language that presumes that a member of a 
religious order has no financial need when determining eligibility for 
the Pell Grant Program, the Federal Perkins Loan Program, the FWSP, the 
FSEOG Program, the FFEL Program, and the Direct Loan Program, 
respectively.
     Delete language in Sec. Sec.  674.35, 674.36, and 682.210 
that would prohibit borrowers with Federal Perkins Loans made before 
July 1, 1993, NDSLs made on or after October 1, 1980, but before July 
1, 1993, or FFELs made before July 1, 1993, from obtaining deferment of 
their loans during periods of otherwise eligible full-time volunteer 
work that includes providing religious instruction, conducting 
religious services, proselytizing, or engaging in fundraising to 
support religious activities.
     Amend Sec. Sec.  675.20 and 692.30 to conform regulatory 
provisions in the FWSP and LEAP Program to statutory provisions that 
prohibit work study employment from involving the construction, 
operation, or maintenance of so much of any facility as is used or is 
to be used for sectarian instruction or as a place for religious 
worship.
     Amend Sec.  685.219 by deleting provisions that would 
exclude borrowers who are otherwise eligible for PSLF from receiving 
forgiveness, because they are working for organizations engaged in 
activities relating to religious instruction, worship services, or 
proselytizing.
     Modify Sec.  694.6(b) by replacing language related to the 
provision of GEAR UP services and providers at private religious 
schools with language requiring that providers of GEAR UP services be 
employed or contracted independently of a private school and its 
affiliated organizations. The Department proposes to delete the word 
``religious'' before the word ``organization'' to clarify that 
employment must be independent of organizations affiliated with the 
school, regardless of whether those organizations are religious in 
nature.
     Delete Sec.  694.6(c), which prohibits the commingling of 
Federal and non-Federal funds used to provide GEAR UP services to 
students attending private schools.
     Amend Sec.  694.10 to delete language indicating that the 
fiscal agent of a GEAR UP grant may not be pervasively sectarian.
    For the TEACH Grant Program, the proposed regulations would--
     Where needed throughout the regulations, add references to 
educational service agencies, replace ``agreement to serve'' with 
``agreement to serve or repay,'' and revise the references to Direct 
Unsubsidized Loans for consistency with the terminology used in the 
Direct Loan Program regulations.
     Amend Sec.  686.1 by expanding the information included in 
the description of the scope and purpose of the TEACH Grant Program.
     Revise Sec.  686.2 by adding a cross-reference to the 
definition of ``Free Application for Federal Student Aid (FAFSA)'' in 
34 CFR part 668, adding definitions of ``educational service agency'' 
and ``Teacher Shortage Area Nationwide Listing (Nationwide List),'' and 
revising the definitions of ``Agreement to serve,'' ``highly 
qualified,'' ``school serving low-income students (low-income 
school),'' and ``TEACH Grant-eligible program.''
     Modify Sec. Sec.  686.10 and 686.11 by replacing 
references to submitting a TEACH Grant application with references to 
submitting the FAFSA and making additional conforming changes.
     Amend Sec.  686.12 by (1) changing ``agreement to serve'' 
to ``agreement to serve or repay''; (2) expanding the description of 
the contents of the agreement to serve or repay; (3) clarifying the 
requirements for completion of more than one service obligation, and 
adding language to explain the service obligation requirements for 
grant recipients who withdraw from an institution prior to completing 
the program for which TEACH Grants were received and later re-enroll; 
and (4) updating the conditions under which a TEACH Grant recipient may 
satisfy the service obligation by teaching in a high-need field listed 
in the Department's Nationwide List.
     Make minor changes to Sec.  686.21 to be more consistent 
with the corresponding statutory language.
     Amend Sec.  686.32 by expanding and revising the 
information that TEACH Grant recipients receive during initial, 
subsequent, and exit counseling, and by adding a new conversion 
counseling requirement for grant recipients whose TEACH Grants are 
converted to Direct Unsubsidized Loans.
     Modify Sec.  686.40 by (1) removing the requirement for 
grant recipients to confirm their status within 120 days of ceasing 
enrollment in a program for which they received a TEACH Grant; (2) 
eliminating the current rule stating that a grant recipient may not 
satisfy the service obligation by teaching in a geographic region of a 
State or in a specific grade level not associated with a high-need 
field that has been designated as a teacher shortage area in the 
Department's Nationwide List; and (3) adding a new circumstance under 
which teaching for less than a complete academic year may be counted as 
a full year of qualifying teaching service.
     Revise Sec.  686.41 by adding new conditions under which a 
grant recipient may receive a temporary suspension of the period for 
completing the service obligation.
     Amend Sec.  686.42 by updating the requirements and 
procedures for receiving a discharge of the TEACH Grant service 
obligation based on a total and permanent disability (TPD).
     Revise Sec.  686.43 by (1) simplifying the rules for 
conversion of TEACH Grants to Direct Unsubsidized Loans to provide that 
for all grant recipients, conversion will occur only if the grant 
recipient requests conversion, or if the recipient fails to begin or 
maintain qualifying teaching service within a timeframe that would 
allow the recipient to complete the service obligation within the 
eight-year service obligation period; (2) adding language describing a 
notice that the Secretary will send to grant recipients at least 
annually to remind them of the service obligation requirements; (3) 
specifying that the Secretary will notify grant recipients in advance 
of the final date by which they must submit documentation of qualifying 
teaching service to avoid loan conversion; and (4) describing the 
information that the Secretary will provide to a grant

[[Page 67784]]

recipient whose grants are converted to loans, including information 
about the process by which a grant recipient may request 
reconsideration of the conversion.

Significant Proposed Regulations

    We discuss substantive issues under the sections of the proposed 
regulations to which they pertain. Generally, we do not address 
proposed regulatory provisions that are technical or otherwise minor in 
effect.

Faith-Based Significant Proposed Regulations

Student Eligibility (Sec.  674.9)
    Statute: Parts E (Sec.  461, et seq.) and F (Sec.  471, et seq.) of 
the HEA govern the Federal Perkins Loan Program and need analysis, 
respectively.
    Current Regulations: Section 674.9(c) provides that a member of a 
religious order pursuing a course of study in an institution of higher 
education has no financial need for purposes of the Federal Perkins 
Loan Program if the order has as its primary objective the promotion of 
ideals and beliefs regarding a Supreme Being; requires its members to 
forego monetary or other support substantially beyond the support it 
provides; and directs the member to pursue the course of study or 
provides subsistence support to its members.
    Proposed Regulations: We propose to revise Sec.  674.9(c) to remove 
the language that provides that a member of a religious order is 
considered to have no financial need.
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral toward religion, but policies that single out the 
religious for disfavored treatment violate the Free Exercise Clause.\4\ 
The Department determined that the current regulations may violate the 
Free Exercise Clause by categorically denying individuals from 
participation in generally available benefit programs, based on a 
person's religious views. The Department believes that otherwise 
eligible students should not be denied participation in title IV 
programs based solely on their membership in a religious order or the 
particular attributes of that order. It is not necessary and is in 
violation of the Free Exercise Clause to single out and exclude from 
participation in title IV programs individuals who are members of 
religious orders. Accordingly, the Department proposes to delete this 
provision.
---------------------------------------------------------------------------

    \4\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

Deferment of Repayment--Federal Perkins Loans Made Before July 1, 1993 
(Sec.  674.35)
    Statute: Parts E (Sec.  461, et seq.) and F (Sec.  471, et seq.) of 
the HEA govern the Federal Perkins Loan Program and need analysis, 
respectively.
    Current Regulations: Section 674.35(c)(5)(iv) denies deferment of 
repayment for Federal Perkins loan borrowers working as volunteers if 
their volunteer duties include giving religious instruction, conducting 
worship services, proselytizing, or fundraising to support religious 
activities.
    Proposed Regulations: We propose to delete Sec.  674.35(c)(5)(iv).
    Reasons: We believe that the current provision may violate the Free 
Exercise Clause of the First Amendment. Many religious organizations 
offer services such as providing food to impoverished people as part of 
their religious worship and outreach. Those organizations may not be 
able to separate the provision of secular and non-secular services, as 
they are intertwined in their faith and belief systems. Volunteers 
should be able to enjoy membership in a religious organization and 
obtain loan deferments (a generally available benefit). Accordingly, 
the Department proposes to delete this provision.
Deferment of Repayment--NDSLs Made on or After October 1, 1980, but 
Before July 1, 1993 (Sec.  674.36)
    Statute: Section 464 of the HEA governs the terms of Perkins Loans.
    Current Regulations: Section 674.36(c)(4)(iv) denies deferment of 
repayment for NDSL borrowers working as volunteers if their duties 
include giving religious instruction, conducting worship service, 
proselytizing, or fundraising to support religious activities.
    Proposed Regulations: We propose to delete Sec.  674.36(c)(4)(iv).
    Reasons: We believe that the current regulation may violate the 
Free Exercise Clause of the First Amendment. Many religious 
organizations offer services such as providing food to impoverished 
people as part of their religious worship and outreach. Those 
organizations may not be able to separate the provision of secular and 
non-secular services, as they are intertwined in their faith and belief 
systems. Volunteers should be able to enjoy membership in a religious 
organization and obtain loan deferments (a generally available 
benefit). Accordingly, the Department proposes to delete this 
provision.
Student Eligibility (Sec.  675.9)
    Statute: HEA part C (Sec.  441, et seq.) governs the FWSP and HEA 
part F (Sec.  471, et seq.) governs need analysis.
    Current Regulations: Section 675.9(c) provides that a member of a 
religious order pursuing a course of study in an institution of higher 
education has no financial need for purposes of the FWSP if the order 
has as its primary objective the promotion of ideals and beliefs 
regarding a Supreme Being; requires its members to forego monetary or 
other support substantially beyond the support it provides; and directs 
the member to pursue the course of study or provides subsistence 
support to its members.
    Proposed Regulations: We propose to revise Sec.  675.9(c) to remove 
the language that provides that a member of a religious order is 
considered to have no financial need.
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral and generally applicable without regard to religion, 
but policies that single out the religious for disfavored treatment 
violate the Free Exercise Clause.\5\ The Department determined that the 
current regulations may violate the Free Exercise Clause by 
categorically denying individuals from participation in neutral and 
generally available benefit programs based on their membership in a 
religious order. Other non-discriminatory methods exist for determining 
a student's cost of attendance when a third party is providing housing, 
sustenance, or other support to the student. It is not necessary and is 
in violation of the Free Exercise Clause to single out and exclude from 
participation in title IV programs individuals who are members of 
religious orders. Accordingly, the Department proposes to delete this 
provision.
---------------------------------------------------------------------------

    \5\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

Eligible Employers and General Conditions and Limitation on Employment 
(Sec.  675.20)
    Statute: Section 443(b)(1)(C) of the HEA states that work performed 
under the FWSP may ``not involve the construction, operation, or 
maintenance of so much of any facility as is used or is to be used for 
sectarian instruction or as a place for religious worship.''
    Current Regulations: Section 675.20(c)(2)(iv) provides that FWSP 
employment may not ``involve the construction, operation, or 
maintenance of any part of a facility used or to be

[[Page 67785]]

used for religious worship or sectarian instruction.''
    Proposed Regulations: We propose to amend the regulation to be 
consistent with the statutory text.
    Reasons: On college campuses, chapels and other religious 
structures may be part of larger multi-use facilities. The current 
regulations are not clear as to when FWSP employment may include the 
construction, operation, or maintenance of a larger, multi-use facility 
that includes space that is used for religious worship or sectarian 
instruction. The current regulatory language also has departed from the 
statute in precluding certain employment activities from any part of a 
facility used or to be used for religious worship or sectarian 
instruction. To provide clarity and to ensure adherence to the statute, 
the Faith-Based Entities Subcommittee suggested that we conform the 
regulatory language to the statutory provision, and the committee 
reached consensus on amending the provision as proposed by the 
subcommittee.
Student Eligibility (Sec.  676.9)
    Statute: Section 413C and Part F (Sec.  471, et seq.) of the HEA 
govern the selection of recipients for the FSEOG Program and need 
analysis, respectively.
    Current Regulations: Section 676.9(c) states that a member of a 
religious order pursuing a course of study in an institution of higher 
education has no financial need for purposes of the FSEOG Program if 
the order has as its primary objective the promotion of ideals and 
beliefs regarding a Supreme Being; requires its members to forego 
monetary or other support substantially beyond the support it provides; 
and directs the member to pursue the course of study or provides 
subsistence support to its members.
    Proposed Regulations: We propose to revise Sec.  676.9(c) to remove 
the language that provides that a member of a religious order is 
considered to have no financial need.
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral to religion, but policies that single out the religious 
for disfavored treatment violate the Free Exercise Clause.\6\ The 
Department determined that the current regulations may violate the Free 
Exercise Clause by categorically denying individuals from participating 
in generally available benefit programs based on their membership in a 
religious order. The Department believes that otherwise eligible 
students who are members of religious orders should not be required to 
disavow their religious beliefs in order to participate in title IV 
programs. Other non-discriminatory methods exist for determining a 
student's cost of attendance when a third party is providing housing, 
sustenance, or other support to the student. It is not necessary and is 
in violation of the Free Exercise Clause to single out and exclude from 
participation in title IV programs individuals who are members of 
religious orders. Accordingly, the Department proposes to delete this 
provision.
---------------------------------------------------------------------------

    \6\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

Deferment (Sec.  682.210)
    Statute: Section 427(a)(2)(c) of the HEA as it was in effect on 
July 2, 1992 governs deferments that were available to borrowers with 
loans issued before July 1, 1993.
    Current Regulations: Section 682.210(m)(1)(iv) denies deferment of 
repayment for FFEL borrowers working as volunteers if their duties 
include giving religious instruction, conducting worship service, 
proselytizing, or fundraising to support religious activities.
    Proposed Regulations: During negotiations, we developed proposed 
changes to Sec.  682.210(m)(1)(iv) that would deny deferment of 
repayment for FFEL borrowers working as volunteers only for that 
portion of their duties spent participating in religious instruction, 
worship services, or any form of proselytizing. However, this proposed 
revision is inconsistent with the other provisions regarding deferment 
in which consensus was reached. Similar provisions in other regulations 
were simply deleted. Because this would be inconsistent with our other 
proposed regulatory changes, we seek comment from the public on whether 
we should instead remove Sec.  682.210(m)(1)(iv).
    Reasons: We believe that the current regulatory provision may 
violate the Free Exercise Clause of the First Amendment. Many religious 
organizations offer services such as providing food to impoverished 
people as part of their religious worship and outreach. Those 
organizations may not be able to separate the provision of secular and 
non-secular services, as they are intertwined as part of their faith 
and belief system. Volunteers should be able to enjoy membership in a 
religious organization and obtain loan deferments (a generally 
available benefit). Accordingly, the Department proposes to revise this 
provision.
Eligibility of Borrowers for Interest Benefits on Stafford and 
Consolidation Loans (Sec.  682.301)
    Statute: Section 428 of the HEA governs Federal payments to reduce 
student interest costs.
    Current Regulations: Section 682.301(a)(2) provides that a member 
of a religious order pursuing a course of study in an institution of 
higher education has no financial need for purposes of the FFEL Program 
if the order has as its primary objective the promotion of ideals and 
beliefs regarding a Supreme Being; requires its members to forego 
monetary or other support substantially beyond the support it provides; 
and directs the member to pursue the course of study or provides 
subsistence support to its members.
    Proposed Regulations: We propose to delete Sec.  682.301(a)(2).
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral to religion, but policies that single out the religious 
for disfavored treatment violate the Free Exercise Clause.\7\ The 
Department determined that the current regulations may violate the Free 
Exercise Clause by categorically denying individuals from participation 
in generally available benefit programs based on their membership in a 
religious order. The Department believes that otherwise eligible 
students who are members of religious orders should not be required to 
disavow their religious beliefs in order to participate in title IV 
programs. Other non-discriminatory methods exist for determining a 
student's cost of attendance when a third party is providing housing, 
sustenance, or other support to the student. It is not necessary to 
single out and exclude from participation in title IV programs 
individuals who are members of religious orders and singling out these 
individuals for exclusion may violate the Free Exercise Clause. 
Accordingly, the Department proposes to delete this provision.
---------------------------------------------------------------------------

    \7\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

Borrower Eligibility (Sec.  685.200)
    Statute: Section 451, et seq. of the HEA governs the Direct Loan 
program.
    Current Regulations: Section 685.200(a)(2)(ii) provides that a 
member of a religious order, group, community, society, agency or other 
organization pursuing a course of study in an institution of higher 
education has no financial need for purposes of the Direct

[[Page 67786]]

Loan Program if the order has as its primary objective the promotion of 
ideals and beliefs regarding a Supreme Being; requires its members to 
forego monetary or other support substantially beyond the support it 
provides; and directs the member to pursue the course of study or 
provides subsistence support to its members.
    Proposed Regulations: We propose to delete Sec.  685.200(a)(2)(ii).
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral to religion, but policies that single out the religious 
for disfavored treatment violate the Free Exercise Clause.\8\ The 
Department determined that the current regulations may violate the Free 
Exercise Clause by categorically denying individuals from participating 
in generally available benefit programs based on their membership in a 
religious order. The Department believes that otherwise eligible 
students who are members of religious orders should not be required to 
disavow their religious beliefs in order to participate in title IV 
programs. Other non-discriminatory methods exist for determining a 
student's cost of attendance when a third party is providing housing, 
sustenance, or other support to the student. It is not necessary to 
single out and exclude from participation in title IV programs 
individuals who are members of religious orders and singling out these 
individuals for exclusion may violate the Free Exercise Clause. 
Accordingly, the Department proposes to delete this provision.
---------------------------------------------------------------------------

    \8\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

PSLF Program (Sec.  685.219)
    Statute: HEA section 455 governs the PSLF Program.
    Current Regulations: The definition of ``public service 
organization'' in Sec.  685.219(b) excludes a non-profit organization 
engaged in religious activities unless the qualifying activities are 
unrelated to religious instruction, worship services, or any form of 
proselytizing. The Department has not historically interpreted this 
regulation to categorically prohibit borrowers who work for employers 
that engage in religious instruction, worship services, or 
proselytizing from qualifying for the PSLF Program and proposes to 
revise this regulation.
    Proposed Regulations: The Department initially proposed to delete 
the provision in Sec.  685.219(b) that defines a public service 
organization as a non-profit organization that is ``not engaged in 
religious activities, unless the qualifying activities are unrelated to 
religious instruction, worship services, or any form of 
proselytizing.'' The Department is concerned that denying certain 
borrowers the same generally available benefit as a result of the 
borrowers' choice to work for a non-profit engaged in religious 
activities may violate the Free Exercise Clause.\9\ During 
negotiations, the Committee reached consensus to revise the definition 
of ``public service organization'' to provide that borrowers who work 
for employers that engage in religious instruction, worship services, 
or proselytizing qualify for the PSLF Program so long as they can meet 
the applicable standard for full-time employment when those religious 
activities are excluded from their work hours.
---------------------------------------------------------------------------

    \9\ Trinity Lutheran, 137 S. Ct. at 2021-22.
---------------------------------------------------------------------------

    Reasons: Currently, borrowers or other members of the public who 
read the Department's regulations may not understand how they can 
qualify for the PSLF Program, if they are employed by an organization 
that engages in religious instruction, worship services, or any form of 
proselytizing. The proposed modification to the definition of ``public 
service organization'' constitutes a compromise that the Department 
reached with the Committee. This revision does not categorically deny 
borrowers the opportunity to qualify for the PSLF Program if they 
choose to work for a non-profit organization that is engaged in 
religious activities. The Department seeks comment on this revision, 
including whether and how borrowers may exclude religious activities 
from their work hours if their religious activities may be intertwined 
with their secular work. The Department also seeks comment on whether 
this revision may substantially burden a person's exercise of religion 
under the Religious Freedom Restoration Act, 42 U.S.C. 2000bb, et seq.
Determination of Eligibility for Payment (Sec.  690.75)
    Statute: Section 401 of the HEA governs Pell Grants.
    Current Regulations: Section 690.75(d) states that a member of a 
religious order, community, society, agency, or organization who is 
pursuing a course of study in an institution of higher education is 
considered to have an expected family contribution amount at least 
equal to the maximum authorized award amount for the award year if that 
religious order has as a primary objective the promotion of ideals and 
beliefs regarding a Supreme Being and provides subsistence support to 
its members, or has directed the member to pursue the course of study.
    Proposed Regulations: We propose to delete Sec.  690.75(d).
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral to religion, but policies that single out the religious 
for disfavored treatment violate the Free Exercise Clause.\10\ The 
Department determined that the current regulations may violate the Free 
Exercise Clause by categorically denying individuals from participating 
in generally available benefit programs based on their membership in a 
religious order, community, society, agency, or organization. The 
Department believes that otherwise eligible students who are members of 
religious orders should not be required to disavow their religious 
beliefs in order to participate in title IV programs. Other non-
discriminatory methods exist for determining a student's cost of 
attendance when a third party is providing housing, sustenance, or 
other support to the student. It is not necessary to single out and 
exclude from participation in title IV programs individuals who are 
members of religious orders and singling out such individuals for 
exclusion may violate the Free Exercise Clause. Accordingly, the 
Department proposes to delete this provision.
---------------------------------------------------------------------------

    \10\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

How does a State administer its community service-learning job program? 
(Sec.  692.30)
    Statute: Section 415C of the HEA provides that grants for community 
service-learning jobs must be made in accordance with the requirements 
of the FWSP. Under those FWSP requirements in Section 443(b)(1)(C) of 
the HEA, work performed may ``not involve the construction, operation, 
or maintenance of so much of any facility as is used or is to be used 
for sectarian instruction or as a place for religious worship.''
    Current Regulations: Section 692.30(c)(5) states that each 
community service-learning job must ``not involve the construction, 
operation, or maintenance of any part of a facility used or to be used 
for religious worship or sectarian instruction.''
    Proposed Regulations: We propose replacing the regulatory text with 
the statutory text.
    Reasons: On college campuses, chapels and other religious 
structures may be part of larger multi-use facilities.

[[Page 67787]]

The current regulations are not clear as to when a community service-
learning job may include the construction, operation, or maintenance of 
a larger multi-use facility that includes space that is used for 
religious worship or sectarian instruction. The current regulatory 
language also departs from the statutory language. To provide clarity 
and to adhere to the statute, the Faith-Based Entities Subcommittee 
agreed to conform the regulatory language to the statutory provision.
Who may provide GEAR UP services to students attending private schools? 
(Sec.  694.6)
    Statute: Section 404 et seq. of the HEA governs the GEAR UP 
program.
    Current Regulations: Section 694.6(b) states that, 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.
    Proposed Regulations: We propose to change this provision to state 
that, when providing GEAR UP services to students attending private 
schools, the employee, individual, association, agency, or organization 
must be employed or contracted independently of the private school that 
the students attend, and of any other organization affiliated with the 
school, and that employment or contract must be under the control and 
supervision of the public agency.
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral to religion, but policies that single out the religious 
for disfavored treatment violate the Free Exercise Clause.\11\ The 
current regulatory provision is written in a way that singles out and 
disfavors religious organizations and, thus, may violate the Free 
Exercise Clause. The Faith-Based Entities Subcommittee proposed, and 
the negotiating committee agreed to, language that provides needed 
safeguards without singling out religious organizations.
---------------------------------------------------------------------------

    \11\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

    Statute: Section 404, et seq. of the HEA governs the GEAR UP 
program.
    Current Regulations: Section 694.6(c) states that Federal funds 
used to provide GEAR UP services to students attending private schools 
may not be commingled with non-Federal funds.
    Proposed Regulations: We propose to delete this provision.
    Reasons: The current regulatory provision duplicates broader 
requirements in the Education Department General Administrative 
Regulations (EDGAR) and corresponding Office of Management and Budget 
Circulars that prohibit the comingling of any Federal and non-Federal 
funds, not just funds used to provide services to students attending 
private schools. Because the current regulatory provision duplicates 
other requirements, it is unnecessary. Furthermore, because the current 
provision is limited to funds used to serve students in private 
schools, it may mislead grantees to believe that Federal and non-
Federal funds used for other purposes may be comingled. Grantees could 
also misinterpret the provision to believe that the requirements for 
the management of Federal and non-Federal funds is different for the 
GEAR UP program than for other discretionary grant programs 
administered by the Department. We believe that all regulatory 
provisions relating to the management of Federal and non-Federal funds 
should be in the EDGAR regulations that apply to all grant programs 
administered by the Department rather than including a narrow provision 
out of context in the GEAR UP program regulations.
What are the requirements that a Partnership must meet in designating a 
fiscal agent for its project under this program? (Sec.  694.10)
    Statute: Section 404 et seq. of the HEA governs the GEAR UP 
program.
    Current Regulations: Section 694.10 states that a Partnership must 
designate a local educational agency (LEA) or an ``institution of 
higher education that is not pervasively sectarian'' to serve as its 
fiscal agent.
    Proposed Regulations: We propose to delete the phrase ``that is not 
pervasively sectarian'' so that any otherwise qualified institution of 
higher education can serve as the fiscal agent of a GEAR UP grant.
    Reasons: In Trinity Lutheran Church of Columbia, Inc. v. Comer, the 
Supreme Court held that laws and policies may provide benefits in a way 
that is neutral to religion, but policies that single out the religious 
for disfavored treatment violate the Free Exercise Clause.\12\ The 
Department determined that the current regulations may categorically 
deny entities from participating in a generally available benefit 
program based on their religious status. It is not necessary to single 
out institutions that are pervasively sectarian from serving as fiscal 
agents for GEAR UP grants and singling out such institutions for 
exclusion may violate the Free Exercise Clause. Accordingly, the 
Department proposes to delete this provision.
---------------------------------------------------------------------------

    \12\ 137 S. Ct. at 2021-25.
---------------------------------------------------------------------------

TEACH Grant Program

Scope and Purpose (Sec.  686.1)
    Statute: HEA sections 420L through 420P establish the terms and 
conditions of the TEACH Grant Program.
    Current Regulations: Section 686.1 states that the TEACH Grant 
Program awards grants to students who intend to teach, to help meet the 
cost of their postsecondary education. In exchange for receiving a 
grant, a student must agree to serve as a full-time teacher in a high-
need field in a low-income school for at least four academic years 
within eight years of completing the program of study for which the 
grant was received. The current regulations further provide that if the 
grant recipient does not satisfy the service obligation, the amounts of 
the TEACH Grants received are treated as a Direct Unsubsidized Loan 
that must be repaid with interest.
    Proposed Regulations: The Department proposes to revise and expand 
Sec.  686.1 by--
     Adding language stating that a student can receive a TEACH 
Grant by agreeing to serve as a full-time teacher in a high-need field 
for an educational service agency serving low-income students;
     Replacing the current language stating that a student must 
agree to teach for at least four academic years within eight years of 
completing the program of study for which he or she received the grant 
with language stating that the student must agree to complete the 
required years of teaching within eight years of ceasing enrollment at 
the institution where the student received the TEACH grant or, in the 
case of a student who receives a TEACH Grant at one institution and 
subsequently transfers to another institution and enrolls in another 
TEACH Grant-eligible program, within eight years of ceasing enrollment 
at the other institution;
     Adding language stating that the eight-year period for 
completing the required four years of teaching does not include periods 
of suspension in accordance with Sec.  686.41;
     Adding language to clarify that interest is charged from 
the date of each TEACH Grant disbursement if the TEACH Grant recipient 
does not satisfy the service obligation requirements and his or her 
TEACH Grants are converted into a Direct Unsubsidized Loan that must be 
repaid with interest; and

[[Page 67788]]

     Adding language stating the conditions under which a TEACH 
Grant that has been converted to a Direct Unsubsidized Loan can be 
reconverted to a grant.
    Reasons: We are proposing to add a reference to educational service 
agencies in Sec.  686.1 to reflect the change made by the Higher 
Education Opportunity Act of 2008 (Pub. L. 110-315) (HEOA) that amended 
section 465(a)(2)(A) of the HEA to include educational service agencies 
in the description of a low-income school for purposes of the title IV 
student financial assistance programs, including the TEACH Grant 
Program.
    For consistency with proposed changes discussed in more detail 
later in this preamble, we propose to amend Sec.  686.1 to state that 
the eight-year period for completing the service obligation begins when 
a student ceases enrollment at the institution where he or she received 
a TEACH Grant, rather than when the student completes the program of 
study for which the student received the grant. Further, because the 
current TEACH Grant regulations do not address the starting date of the 
eight-year service obligation period for students who receive a TEACH 
Grant at one institution and later transfer to a different institution, 
we propose to clarify in Sec.  686.1 that in such cases the eight-year 
period would begin when the student ceases enrollment at the transfer 
institution. This is consistent with other proposed changes, discussed 
later in this preamble, that provide that a grant recipient will have a 
single service obligation associated with all TEACH Grants received 
while the recipient is at the same academic level.
    The TEACH Grant subcommittee recommended that we expand Sec.  686.1 
to clarify that the eight-year period for completing the service 
obligation does not include periods of suspension granted under Sec.  
686.41, that interest is charged on a converted TEACH Grant from the 
date of each TEACH Grant disbursement, and that a TEACH Grant that has 
been converted to a Direct Unsubsidized Loan can be reconverted to a 
grant only if the Secretary determines that the grant was improperly 
converted to a loan. Subcommittee members believed that it was 
particularly important for TEACH Grant recipients to understand these 
specific provisions of the TEACH Grant Program and urged the Department 
to include them in Sec.  686.1 for the benefit of grant recipients who 
may only read the ``scope and purpose'' section of the regulations.
    We agreed with the recommendations to expand the content of Sec.  
686.1, but instead of adding language stating that a TEACH Grant that 
has been converted to a loan can be reconverted to a grant only if the 
Secretary determines that the grant was improperly converted to a loan, 
we propose to say that a loan can be reconverted to a grant only in 
accordance with Sec.  686.43. The reason for proposing this alternative 
language is that under certain circumstances as described in proposed 
Sec.  686.43, a TEACH Grant that was converted to a loan can be 
reconverted to a grant even though the conversion to a loan was not 
improper.

Definitions (Sec.  686.2)

Free Application for Federal Student Aid (FAFSA)
    Statute: HEA section 420N(b) requires that teacher candidates must 
file an application to receive a TEACH Grant.
    Current Regulations: There is no current definition of a TEACH 
Grant application.
    Proposed regulations: In Sec.  686.2(b), we propose to add a cross-
reference to the term ``Free application for Federal student aid 
(FAFSA)'' in 34 CFR part 668.
    Reasons: This is a conforming change to reflect proposed changes in 
Sec.  686.10 that replace references to an application for a TEACH 
Grant with references to the FAFSA. The FAFSA serves as the application 
for a TEACH Grant.
Agreement To Serve or Repay
    Statute: Section 420N(b) of the HEA requires that an application 
for a TEACH Grant contain or be accompanied by an agreement to serve.
    Current Regulations: Section 686.2(d) defines ``Agreement to serve 
(ATS)'' as an agreement under which a TEACH Grant recipient commits to 
meet the service obligation described in Sec.  686.12 and to comply 
with program requirements.
    Proposed Regulations: We propose to change the name of the 
agreement signed by a TEACH Grant recipient from ``Agreement to serve 
(ATS)'' to ``Agreement to serve or repay'' and to clarify that the 
agreement requires the TEACH Grant recipient to commit to meet the 
service obligation or repay the loan.
    Reasons: We are proposing the changes described above because the 
current term ``Agreement to serve (ATS)'' and the definition of that 
term do not clearly convey the consequences of failing to meet the 
service obligation requirements. This change would clarify that signing 
the agreement to serve or repay commits the TEACH Grant recipient to 
either meet the service obligation or repay the loan.
Educational Service Agency
    Statute: The HEOA amended section 465(a)(2)(A) of the HEA to 
include educational service agencies in the description of a low-income 
school and added a new section 481(f) stating that ``educational 
service agency'' has the meaning given the term in section 9101 of the 
ESEA.
    Current Regulations: Current regulations do not define 
``educational service agency.''
    Proposed Regulations: We propose to add the term ``educational 
service agency'' in Sec.  686.2(d) and to include in the regulations 
the definition of that term from section 9101 of the ESEA. An 
educational service agency is a regional public multiservice agency 
authorized by State statute to develop, manage, and provide services or 
programs to LEAs.
    Reasons: The Department proposes to add a definition of 
``educational service agency'' to reflect the statutory change made by 
the HEOA to section 465(a)(2)(A) of the HEA to include educational 
service agencies in the description of a low-income school, and added a 
new section 481(f) that provides that ``educational service agency'' 
has the meaning given the term in section 9101 of the ESEA.
High-Need Field
    Statute: Section 420N(b)(1)(C) of the HEA describes high-need 
fields as mathematics, science, foreign languages, bilingual education, 
special education, reading specialist, or another field documented as 
high-need by the Federal Government, State government, or LEA, and 
approved by the Secretary.
    Current Regulations: Section 686.2(d) defines ``high-need field'' 
as including the following--
    (1) Bilingual education and English language acquisition;
    (2) Foreign language;
    (3) Mathematics;
    (4) Reading specialist;
    (5) Science;
    (6) Special education; and
    (7) Another field documented as high-need by the Federal 
Government, a State government or an LEA, and approved by the Secretary 
and listed in the Department's annual Teacher Shortage Area Nationwide 
Listing (Nationwide List) in accordance with 34 CFR 682.210(q).
    Proposed Regulations: We propose to clarify that ``science'' 
includes computer science. In addition, we propose to remove the cross-
reference to 34 CFR 682.210(q) from paragraph (7) of the current 
definition and incorporate this reference into the proposed definition 
of the term ``Teacher Shortage Area Nationwide Listing (Nationwide 
List).''

[[Page 67789]]

    Reasons: While the Department has traditionally considered 
``science'' to include ``computer science,'' non-Federal negotiators 
believed that institutions and students might not be aware of this, and 
therefore felt it was important to clarify this policy in the 
regulations. The Department agreed.
    The cross-reference to 34 CFR 682.210(q) in current paragraph (7) 
is no longer needed because it will be included in a proposed stand-
alone definition of ``Teacher Shortage Area Nationwide Listing 
(Nationwide List),'' as discussed below.
Highly Qualified
    Statute: Section 420N(b)(1)(E) of the HEA provides that, as a 
condition of receiving a TEACH Grant, an applicant must agree to comply 
with the requirements for being a highly qualified teacher as defined 
in section 9101 of the ESEA.
    Sections 428J(g)(3) and 460(g)(3) of the HEA describe how private 
school teachers who are exempt from State certification requirements 
may be considered highly qualified teachers for purposes of meeting the 
eligibility requirements for teacher loan forgiveness in the FFEL and 
Direct Loan programs.
    Current Regulations: Section 686.2(d) states that ``highly-
qualified'' has the meaning set forth in section 9101(23) of the ESEA 
or in section 602(10) of the Individuals with Disabilities Education 
Act.
    Proposed Regulations: In Sec.  686.2(d) we propose to replace the 
current definition of ``highly-qualified'' with the full text of the 
statutory definition of ``highly qualified'' from section 9101(23) of 
the ESEA. In addition, we propose to add to paragraph (4) of the 
definition provisions that describe how a public or other non-profit 
private, elementary or secondary school teacher who is exempt from 
State certification requirements can meet the ``highly qualified'' 
requirement.
    Reasons: The Every Student Succeeds Act (ESSA) removed the ``highly 
qualified'' definition from the law for ESEA purposes. However, section 
9214(a) of the ESSA provides that, for purposes of the title IV, HEA 
Federal student aid programs, including the TEACH Grant Program, the 
term ``highly qualified'' as it was defined in the ESEA as of the day 
before the enactment of the ESEA continues to apply. Therefore, TEACH 
Grant recipients must still meet the highly qualified teacher standards 
to satisfy their service obligation. To clarify that the highly 
qualified teacher requirements continue to apply for purposes of the 
TEACH Grant Program and to ensure that grant recipients understand 
those requirements, we believe it is appropriate to add the definition 
of ``highly qualified'' in its entirety to the TEACH Grant regulations.
    The definition of ``highly qualified'' in the ESEA does not address 
private school teachers. However, teaching in qualified non-profit 
private schools can be qualifying service for a TEACH Grant recipient. 
To clarify the requirements for private school teachers and to be 
consistent with the requirements that apply to teachers seeking loan 
forgiveness in the Direct Loan and FFEL Programs, we propose to expand 
the definition of ``highly qualified'' to include the language from 
sections 428J(g)(3) and 460(g)(3) of the HEA that describes how private 
school teachers who are exempt from State certification requirements 
can meet the highly qualified teacher standards for teacher loan 
forgiveness purposes.
School or Educational Service Agency Serving Low-Income Students (Low-
Income School)
    Statute: Section 420N(b)(1)(B) of the HEA provides that an 
applicant for a TEACH Grant must agree to teach in a ``low-income 
school'' as described in section 465(a)(2)(A) of the HEA. Under that 
section such a school is--
    (1) A public or other nonprofit private elementary school or 
secondary school, which has been determined by the Secretary (pursuant 
to regulations of the Secretary and after consultation with the State 
educational agency of the State in which the school is located) to be a 
school in which the number of children meeting a measure of poverty 
under section 1113(a)(5) of the ESEA, exceeds 30 percent of the total 
number of children enrolled in such school, and is in the school 
district of an LEA which is eligible in such year for assistance 
pursuant to part A of title I of the ESEA; or
    (2) A public, or nonprofit private, elementary school or secondary 
school or location operated by an educational service agency that has 
been determined by the Secretary (pursuant to regulations of the 
Secretary and after consultation with the State educational agency of 
the State in which the educational service agency operates) to be a 
school or location at which the number of children taught who meet a 
measure of poverty under section 1113(a)(5) of the ESEA, exceeds 30 
percent of the total number of children taught at such school or 
location.
    Current Regulations: Section 686.2(d) defines ``school serving low-
income students (low-income school)'' as an elementary or secondary 
school that--
    (1) Is in the school district of an LEA that is eligible for 
assistance pursuant to title I of the ESEA;
    (2) Has been determined by the Secretary to be a school in which 
more than 30 percent of the school's total enrollment is made up of 
children who qualify for services provided under title I of the ESEA; 
and
    (3) Is listed in the Department's Annual Directory of Designated 
Low-Income Schools for Teacher Cancellation Benefits.
    The current definition of ``low-income school'' further provides 
that the Secretary considers all elementary and secondary schools 
operated by the Bureau of Indian Education (BIE) in the Department of 
the Interior or operated on Indian reservations by Indian Tribal groups 
under contract or grant with the BIE to qualify as schools serving low-
income students.
    Proposed Regulations: We propose to revise the current definition 
of ``low-income school'' to include educational service agencies in 
addition to elementary and secondary schools. We also propose to remove 
paragraphs (1) and (2) of the current definition and to replace 
``Annual Directory of Designated Low-Income Schools for Teacher 
Cancellation Benefits'' with ``Teacher Cancellation Low-Income (TCLI) 
Directory.'' The revised definition would state that a low-income 
school is an elementary school, secondary school, or educational 
service agency that is listed in the Department's TCLI Directory. We 
propose to retain the current language related to schools operated by 
the BIE, with the addition of a reference to educational service 
agencies.
    Reasons: We are proposing to add references to educational service 
agencies to the definition of ``low-income school'' to reflect the 
statutory change made by the HEOA to section 465(a)(2)(A) of the HEA 
that allows a TEACH Grant recipient to satisfy his or her service 
obligation by teaching in an educational service agency that serves 
low-income students. To simplify the definition of ``low-income 
school,'' we propose to delete current paragraphs (1) and (2), which 
explain the requirements that a school or educational service agency 
must meet to be included in the TCLI Directory. Since grant recipients 
must teach at a low-income school that is listed in the TCLI Directory, 
we believe it is sufficient to simply state that requirement, without 
including the TCLI eligibility criteria. Finally, we propose to replace 
``Annual Directory of Designated Low-Income Schools for

[[Page 67790]]

Teacher Cancellation Benefits'' with ``Teacher Cancellation Low-Income 
(TCLI) Directory'' to reflect the current name of the Directory.
TEACH Grant-Eligible Program
    Statute: The HEA does not define ``TEACH Grant-eligible program.''
    Current Regulations: The current regulations define ``TEACH Grant-
eligible program'' as an eligible program for Federal student financial 
aid purposes, as defined in 34 CFR 668.8, that is a program of study 
designed to prepare an individual to teach as a highly qualified 
teacher in a high-need field and which leads to a baccalaureate or 
master's degree, or is a post-baccalaureate program of study. A two-
year program of study acceptable for full credit toward a baccalaureate 
degree is considered to be a program of study that leads to a 
baccalaureate degree.
    Proposed Regulations: We propose to add language to the current 
definition stating that a TEACH Grant-eligible program is a program of 
study ``at a TEACH Grant-eligible institution.''
    Reasons: For greater clarity, the TEACH Grant subcommittee 
recommended that we specify in the definition that a program is TEACH 
Grant-eligible only if it is offered at an institution that 
participates in the TEACH Grant Program. This would make it clear that 
if an undergraduate TEACH Grant recipient transfers to a different 
institution prior to completing the program for which he or she 
received a TEACH Grant and enrolls in a baccalaureate program at the 
new institution that could qualify as TEACH Grant-eligible, the 
recipient would be eligible to have the starting date of the eight-year 
service obligation period adjusted, as discussed later in this 
preamble, only if the new institution participates in the TEACH Grant 
Program.
Teacher Shortage Area Nationwide Listing (Nationwide List)
    Statute: The HEA does not define ``Teacher Shortage Area Nationwide 
Listing (Nationwide List).''
    Current Regulations: Current regulations do not define ``Teacher 
Shortage Area Nationwide Listing (Nationwide List).''
    Proposed Regulations: The Department proposes to add to Sec.  
686.2(d) the term ``Teacher Shortage Area Nationwide Listing 
(Nationwide List),'' which we would define as a list of teacher 
shortage areas in each State as defined under 34 CFR 
682.210(q)(8)(vii).
    Reasons: The term ``Teacher Shortage Area Nationwide Listing 
(Nationwide List)'' is used in various sections of the proposed 
regulations, but we have not previously defined it. Therefore, we are 
proposing to add a definition for this term.
Application (Sec.  686.10)
    Statute: Section 420N of the HEA provides that the Secretary must 
periodically set dates by which a teacher candidate who wishes to 
receive a TEACH Grant for any year must file an application that 
contains information showing that the candidate meets the eligibility 
requirements in section 420N(a)(2).
    Current regulations: Section 686.10(a)(1) provides that to receive 
a TEACH Grant, a student must complete and submit an application 
designated by the Secretary. Section 686.10(a)(2) states that a TEACH 
Grant applicant must complete and sign an agreement to serve and 
promise to repay, and Sec.  686.10(a)(3) requires a TEACH Grant 
applicant to provide any additional information and assurances 
requested by the Secretary.
    Section 686.10(b) requires the student to submit the application by 
sending the completed application to the Secretary, or by providing the 
application, signed by all appropriate family members, to the 
institution that the student attends or plans to attend, so that the 
institution can transmit the application information to the Secretary 
electronically.
    Section 686.10(c) requires the student to provide the address of 
his or her residence.
    Finally, Sec.  686.10(d) provides that for each award year, the 
Secretary, through publication in the Federal Register, establishes 
deadline dates for submitting the application and additional 
information, and for making corrections to the information provided.
    Proposed Regulations: We propose to redesignate Sec.  686.10(a)(1) 
as Sec.  686.10(a) and revise the redesignated paragraph to state that 
to receive a TEACH Grant, a student must complete and submit the FAFSA 
in accordance with the instructions in the FAFSA.
    We further propose to redesignate Sec.  686.10(a)(2) and (3) as 
Sec.  686.10(b) and (c), respectively, amend the redesignated 
paragraphs, and remove Sec.  686.10(b), (c), and (d).
    In redesignated Sec.  686.10(b), we propose to replace ``agreement 
to serve and promise to pay'' with ``agreement to serve or repay,'' and 
to specify that the TEACH Grant applicant must complete and sign the 
agreement to serve or repay in accordance with Sec.  686.12.
    In redesignated Sec.  686.10(c), we propose to remove the 
requirement for the applicant to provide any assurances requested by 
the Secretary, and to specify that in addition to being required to 
provide any additional information requested by the Secretary, the 
applicant must also provide any additional information requested by the 
institution.
    Reasons: We are proposing to replace references to submitting an 
application as designated by the Secretary with a reference to 
submitting the FAFSA, and to remove other current provisions related to 
submitting the application, because the FAFSA is the application for 
the TEACH Grant Program. There is no separate application for the TEACH 
Grant Program.
    We also propose to remove the requirement for the TEACH Grant 
applicant to provide assurances because any required assurances are 
included in the agreement to serve or repay. We further propose to add 
a provision stating that a TEACH Grant applicant must provide any 
additional information requested by the institution. TEACH Grant 
subcommittee members recommended adding this provision because there 
are institutions that require potential TEACH Grant recipients to 
submit information showing that they meet the program eligibility 
requirements of the TEACH Grant-eligible program that are specific to 
that institution.
Eligibility To Receive a Grant (Sec.  686.11)
    Statute: Section 420N(a) of the HEA provides student eligibility 
requirements for the TEACH Grant Program.
    Current Regulations: Section 686.11(a) sets forth the TEACH Grant 
student eligibility requirements common to all students who are 
enrolled in undergraduate, post-baccalaureate, and graduate programs. 
All students must meet the student eligibility requirements for Federal 
student financial aid in 34 CFR part 668, subpart C; have submitted a 
completed application along with a signed service agreement; and be 
enrolled in a TEACH Grant-eligible institution in a TEACH Grant-
eligible program. All students must also complete coursework and other 
requirements necessary to begin a career in teaching or plan to do so 
before graduating and meet specific academic requirements.
    Section 686.11(b) sets forth the TEACH Grant student eligibility 
requirements for current or former teachers and retirees. A current or 
former teacher or retiree must meet the student eligibility 
requirements for Federal student financial aid in 34 CFR part 668, 
subpart C, have submitted a completed application along with a signed 
service agreement, and have

[[Page 67791]]

applied for a TEACH Grant to obtain a master's degree. The applicant 
must be a teacher or retiree or be a current or former teacher pursuing 
certification through a high-quality alternative certification route. 
Applicants must be enrolled in a TEACH Grant eligible-program at a 
TEACH Grant-eligible institution during the time period required for 
completion of a master's degree. Section 686.11(c) provides the 
eligibility requirements to receive a grant for transfer students.
    Proposed Regulations: We are proposing to revise Sec.  
686.11(a)(1)(i) to specify that, instead of submitting a completed 
application, a student must meet the application requirements in 
proposed Sec.  686.10, and to delete Sec.  686.11(a)(1)(ii). We would 
also redesignate Sec.  686.11(a)(1)(iii) through (v) as Sec.  
686.11(a)(1)(ii) through (iv), respectively.
    We propose to revise the introductory text in Sec.  686.11(b) to 
refer to the application requirements in proposed Sec.  686.10, 
consistent with the proposed change to Sec.  686.11(a)(1)(i). We also 
propose to remove Sec.  686.11(b)(1) and redesignate Sec.  686.11(b)(2) 
and (3) as Sec.  686.11(b)(1) and (2), respectively.
    Reasons: We are proposing these changes to be consistent with the 
proposed cross-reference to Sec.  686.10, which specifies that a 
student must complete the FAFSA, sign an agreement to serve or repay, 
and provide any additional information requested by the Secretary. 
Because the requirements under proposed Sec.  686.10 incorporate the 
agreement to serve or repay, there is no need to repeat this language 
in proposed Sec.  686.11 (a) or (b). The consensus language contained 
an edit to Sec.  686.11(b)(1) that would change the term ``agreement to 
serve'' to ``agreement to serve or repay.'' We have determined that 
Sec.  686.11(b)(1) should instead be removed because, like Sec.  
686.11(a)(1)(ii), it is redundant as a result of the proposed change to 
refer to the application requirements in Sec.  686.10 in the 
introductory text of Sec.  686.11(b).
Agreement To Serve (Sec.  686.12)
    Statute: Section 420N(b)(1) of the HEA provides that each TEACH 
Grant application must contain or be accompanied by an agreement by the 
applicant that he or she will--
    (1) Serve as a full-time teacher for a total of not less than four 
academic years within eight years after completing the course of study 
for which the applicant received a TEACH Grant;
    (2) Teach in a school described in section 465(a)(2)(A) of the HEA;
    (3) Teach in any of the fields of mathematics, science, foreign 
language, bilingual education, special education, reading specialist, 
or another field documented as high-need by the Federal Government, 
State government, or LEA, and approved by the Secretary;
    (4) Submit evidence of qualifying employment in the form of a 
certification by the chief administrative officer of the school upon 
completion of each year of service; and
    (5) Comply with the requirements for being a highly qualified 
teacher as defined in section 9101 of the ESEA.
    Section 420N(b)(2) of the HEA provides that if the applicant is 
determined to have failed or refused to carry out the service 
obligation, the sum of the amounts of any TEACH Grants received by the 
applicant will be treated as a loan and collected from the applicant in 
accordance with section 420N(c) of the HEA.
    Section 420N(b)(3) of the HEA states that the agreement to serve 
must contain or be accompanied by a plain-language disclosure form 
developed by the Secretary that clearly describes the nature of the 
TEACH Grant award, the service obligation, and the loan repayment 
requirements that are the consequences of failure to complete the 
service obligation.
    Section 420N(d)(1) of the HEA provides that if a recipient of an 
initial TEACH Grant has acquired an academic degree or expertise in a 
field that was, at the time of the recipient's application for that 
grant, designated as high-need by the Federal Government, State 
government, or LEA, and approved by the Secretary, but it is no longer 
designated as high-need, the grant recipient may fulfill the TEACH 
Grant service obligation by teaching in that field.
    Current Regulations: Section 686.12(a) provides that a student who 
meets the eligibility requirements in Sec.  686.11 may receive a TEACH 
Grant only after he or she signs an agreement to serve and receives 
counseling in accordance with Sec.  686.32.
    Section 686.12(b) describes the contents of the agreement to serve. 
Section 686.12(b) introductory text provides that for each TEACH Grant-
eligible program for which a student received TEACH Grant funds, the 
grant recipient must fulfill a service obligation by performing 
creditable teaching service.
    Section 686.12(b)(1) states that a grant recipient must perform the 
creditable teaching service by serving as a full-time teacher for a 
total of not less than four elementary or secondary academic years 
within eight calendar years after completing the program or otherwise 
ceasing enrollment in the program for which the recipient received the 
TEACH Grant--
    (1) In a low-income school;
    (2) As a highly qualified teacher; and
    (3) In a high-need field in the majority of classes taught during 
each elementary and secondary year.
    Under Sec.  686.12(b)(2), the agreement to serve requires the grant 
recipient to submit, upon completion of each year of service, 
documentation of the service in the form of a certification by a chief 
administrative officer of the school.
    Under Sec.  686.12(b)(3), the agreement to serve requires the grant 
recipient to comply with the terms, conditions, and other requirements 
consistent with Sec. Sec.  686.40--686.43 that the Secretary determines 
to be necessary.
    Section 686.12(c) addresses the completion of more than one service 
obligation. Section 686.12(c)(1) states that a grant recipient must 
complete a service obligation for each program of study for which he or 
she received TEACH Grants; specifies that each service obligation 
begins following the completion or other cessation of enrollment by the 
student in the TEACH Grant-eligible program for which the student 
received TEACH Grant funds; and clarifies that creditable teaching 
service, a suspension approved under Sec.  686.41(a)(2), or a military 
discharge granted under Sec.  686.42(c)(2) may apply to more than one 
service obligation.
    Section 686.12(c)(2) provides that a grant recipient may request a 
suspension, in accordance with Sec.  686.41, of the eight-year time 
period described in Sec.  686.12(b)(1).
    Section 686.12(d) describes the requirements for majoring and 
serving in a high-need field. The current regulations state that a 
grant recipient who completes a TEACH Grant-eligible program in a field 
that is listed in the Nationwide List cannot satisfy his or her service 
obligation to teach in that high-need field unless the high-need field 
in which he or she has prepared to teach is listed in the Nationwide 
List for the State in which the grant recipient begins teaching at the 
time the recipient begins teaching in that field.
    Section 686.12(e) describes the requirement that the recipient 
repay the amount of TEACH Grants received plus interest if the 
recipient fails to complete the service obligation. Under Sec.  
686.12(e), if a grant recipient fails or refuses to carry out the 
required service obligation described in Sec.  686.12(b), the TEACH 
Grants received by the recipient must be repaid and will be treated as 
a Federal Direct Unsubsidized Loan, with interest accruing from the 
date of each

[[Page 67792]]

TEACH Grant disbursement, in accordance with applicable sections of 34 
CFR part 685, subpart B.
    Proposed Regulations: The proposed regulations would change the 
title of Sec.  686.12 to ``Agreement to serve or repay,'' and would 
make conforming changes where needed throughout the section.
    The proposed regulations would redesignate the introductory text of 
Sec.  686.12(b) as Sec.  686.12(b)(1), redesignate Sec.  686.12(b)(1) 
as (b)(1)(i), and redesignate Sec.  686.12(b)(1)(i), (ii), and (iii) as 
Sec.  686.12(b)(1)(ii), (iii), and (iv), respectively.
    We propose to amend redesignated Sec.  686.12(b)(1)(i) by changing 
``eight calendar years'' to ``eight years,'' and by further revising 
the current language to provide that a grant recipient must complete 
the four-year service obligation within eight years after the date the 
recipient ceased to be enrolled at the institution where he or she 
received a TEACH Grant or, in the case of a student who receives a 
TEACH Grant at one institution and later transfers to another 
institution and enrolls in another TEACH Grant-eligible program, within 
eight years of ceasing enrollment at the other institution. In 
redesignated Sec. Sec.  686.32(b)(1)(ii) and (iii), we propose to add 
cross-references to the definitions of ``low-income school'' and 
``highly qualified'' teacher in Sec.  686.2(d).
    We propose to add new paragraphs Sec.  686.12(b)(3) and (4), and 
redesignate current paragraph Sec.  686.12(b)(3) as paragraph Sec.  
686.12(b)(5).
    Under proposed new Sec.  686.12(b)(3), the agreement to serve or 
repay would explain that the eight-year period for completing the 
service obligation does not include periods of suspension in accordance 
with Sec.  686.41.
    Under proposed new Sec. Sec.  686.12(b)(4)(i) through (iii), the 
agreement to serve or repay would: (1) Explain the conditions under 
which a TEACH Grant may be converted to a Direct Unsubsidized Loan, as 
described in Sec.  686.43; (2) explain that if a TEACH Grant is 
converted to a loan, the grant recipient must repay the loan in full, 
with interest charged from the date of each TEACH Grant disbursement; 
and (3) explain that to avoid further accrual of interest, a grant 
recipient who for any reason no longer intends to satisfy the service 
obligation may request that the Secretary convert his or her TEACH 
Grant to a loan that the grant recipient can begin repaying 
immediately.
    We propose to change the heading for Sec.  686.12(c) from 
``Completion of more than one service obligation'' to ``Completion of 
the service obligation.'' In addition, we propose to revise paragraph 
(c)(1) and add new paragraphs (c)(2) and (3). Current paragraph (c)(2) 
would be redesignated as paragraph (c)(4).
    Proposed revised Sec.  686.12(c)(1) would provide that a TEACH 
Grant recipient must complete one service obligation for all TEACH 
Grants received for undergraduate study, and one service obligation for 
all TEACH Grants received for graduate study, and would further specify 
that the eight-year period for completing the service obligation begins 
when the grant recipient ceases to be enrolled at the institution where 
he or she received a TEACH Grant or, in the case of a student who 
receives a TEACH Grant at one institution and later transfers to 
another institution and enrolls in another TEACH Grant-eligible 
program, when the recipient ceases enrollment at the other institution. 
Proposed revised Sec.  686.12(c)(1) would continue to specify that 
creditable teaching service, an approved suspension, or a military 
discharge may apply to more than one service obligation.
    Proposed new Sec.  686.12(c)(2) would address the service 
obligation requirements for TEACH Grant recipients who withdraw from an 
institution before completing the program of study for which they 
received TEACH Grants, but later re-enroll at the same institution or 
at a different institution in the same or a different TEACH Grant-
eligible program at the same academic level. Specifically, proposed new 
Sec.  686.12(c)(2)(i) would provide that if a grant recipient withdraws 
from an institution before completing a baccalaureate or post-
baccalaureate program, but later re-enrolls at the same or a different 
institution in either the same program or in a different baccalaureate 
or post-baccalaureate program and receives additional TEACH Grants, or 
the Secretary otherwise confirms that the recipient has re-enrolled in 
a TEACH Grant-eligible program, the Secretary would adjust the starting 
date of the eight-year service obligation period to begin when the 
recipient ceases enrollment at the institution where he or she has re-
enrolled, except as provided in proposed new Sec.  686.12(c)(3). 
Proposed new Sec.  686.12(c)(2)(ii) would provide for the same 
treatment of a grant recipient who withdraws from and later re-enrolls 
in a TEACH Grant-eligible master's degree program. Proposed Sec.  
686.12(c)(2)(i) and (ii) would apply only if the grant recipient re-
enrolls before we convert the recipient's TEACH Grants to Direct 
Unsubsidized Loans in accordance with proposed Sec.  686.43(a)(1)(ii).
    Proposed new Sec.  686.12(c)(3) would address the treatment of 
grant recipients covered under proposed Sec.  686.12(c)(2)(i) or (ii) 
who complete one or more years of creditable teaching service during 
the period between their withdrawal and subsequent re-enrollment. 
Specifically, the proposed regulations would provide that if a grant 
recipient completed one or more complete academic years of creditable 
teaching service during the period between withdrawal and re-
enrollment, those years of teaching would count toward satisfaction of 
the grant recipient's service obligation, and the Secretary would not 
adjust the starting date of the eight-year period for completing the 
service obligation, unless the recipient requests an adjustment. 
Proposed new Sec.  686.12(c)(3) would further provide that if a grant 
recipient continues to perform creditable teaching service after re-
enrolling in a TEACH Grant-eligible program, qualifying teaching 
service performed while the recipient is concurrently enrolled in the 
TEACH Grant-eligible program may be applied toward satisfaction of the 
grant recipient's service obligation only if the grant recipient does 
not request and receive a temporary suspension of the service 
obligation period under Sec.  686.41(a)(1)(i).
    We propose to change the heading of Sec.  686.12(d) from ``Majoring 
and serving in a high-need field'' to ``Teaching in a high-need field 
listed in the Nationwide List''. We propose to revise retitled Sec.  
686.12(d) to provide that for teaching service prior to July 1, 2010, 
teaching in a high-need field listed in the Nationwide List counts 
toward satisfaction of the service obligation as long as the high-need 
field in which the recipient prepared to teach is listed in the 
Nationwide List for the State in which the recipient teaches at the 
time the recipient begins teaching in that field, even if that field 
subsequently loses its high-need designation. For teaching service 
performed on or after July 1, 2010, the field must be listed in the 
Nationwide List at the time the grant recipient begins teaching in that 
field, even if the field later loses its high-need designation, or must 
have been listed at the time the grant recipient signed the agreement 
to serve or repay or received the TEACH Grant, even if that field is no 
longer designated as high-need when the recipient begins teaching in 
that field.
    Reasons: We propose to change the title of Sec.  686.12 from 
``agreement to serve'' to ``agreement to serve or repay'' to better 
emphasize that, as a condition

[[Page 67793]]

for receiving a TEACH Grant, a student must agree to either complete 
the service obligation or repay the grant as a loan. For greater 
clarity, we also propose to restructure current Sec.  686.12(b)(1) and 
add cross references to definitions in Sec.  686.2(d).
    To reflect our current practice, we propose to specify in Sec.  
686.12(b)(1)(i) that the eight-year period for completing the service 
obligation begins on the date the grant recipient ceases enrollment at 
the institution or at the transfer institution where he or she received 
a TEACH Grant, rather than on the date the recipient completes or 
otherwise ceases to be enrolled in the program of study for which the 
recipient received a TEACH Grant. Existing practice is to start the 
eight-year service obligation on the date we receive enrollment 
information indicating that a grant recipient has ceased enrollment at 
the institution, because we generally do not collect the dates on which 
students cease enrollment in specific educational programs.
    Proposed revised Sec.  686.12(b)(1)(i) would also specify that the 
grant recipient must complete the service obligation within ``eight 
years'' rather than within ``eight calendar years'' as in current Sec.  
686.12(b)(1). During the TEACH Grant subcommittee meetings, a 
subcommittee member asked the Department if a grant recipient would be 
considered to have completed the service obligation within the eight-
year service obligation period if the recipient's fourth academic year 
of qualifying teaching began less than eight calendar years from the 
starting date of the eight-year period, but did not end until more than 
eight calendar years had elapsed. The Department confirmed that, in 
this situation, the recipient would be considered to have satisfied the 
service obligation within the eight-year period. To make this clear in 
the regulations, the subcommittee member recommended that the 
Department replace ``eight calendar years'' with ``eight years.'' We 
agreed to propose this change.
    We are proposing to add new paragraphs Sec.  686.12(b)(3) and (4) 
to specify that the agreement to serve or repay will include certain 
information, as described earlier under ``Proposed Regulations,'' that 
subcommittee members believed was particularly important to ensure that 
students are better informed of the terms and conditions of the service 
obligation before they submit the agreement.
    We propose to revise Sec.  686.12(c) to cover certain circumstances 
that the current regulations do not address. Current Sec.  686.12(c)(1) 
states that a grant recipient must complete a service obligation for 
each program of study for which he or she received TEACH Grants, but it 
does not address the service obligation requirements for grant 
recipients who start out in one TEACH Grant-eligible program, but then 
change to a different TEACH Grant-eligible program at the same academic 
level and at the same institution, or for grant recipients who receive 
a TEACH Grant at one institution and later transfer to another 
institution. We believe that the simplest approach, and the approach 
that is most beneficial to grant recipients, is to require a grant 
recipient to complete one service obligation for all TEACH Grants 
received for undergraduate study at the same institution or at more 
than one institution, and to complete one service obligation for all 
TEACH Grants received for graduate study at the same institution or at 
more than one institution. This means, for example, that a grant 
recipient who receives TEACH Grants for undergraduate TEACH Grant-
eligible Program A, but before completing that program changes to 
undergraduate TEACH Grant-eligible Program B at either the same 
institution or at a different institution, would have just one four-
year service obligation associated with all TEACH Grants received for 
undergraduate study. This approach is consistent with section 
420N(b)(1)(A) of the HEA, which requires a TEACH Grant recipient to 
complete a four-year service obligation after completing the course of 
study for which the individual received TEACH Grants.
    Because current Sec.  686.12(c)(1) also does not address the 
service obligation requirements for grant recipients who withdraw from 
an institution before completing the program for which they received 
TEACH Grants, but later re-enroll in the same or a different TEACH 
Grant-eligible program, we are proposing to add new paragraphs (c)(2) 
and (3) to describe the requirements that would apply in this 
circumstance. The regulations in proposed new (c)(2) and (3) are 
consistent with the concept of having one service obligation for all 
TEACH Grants received for undergraduate study, and one service 
obligation for all TEACH Grants received for graduate study, as 
described in proposed Sec.  686.12(c)(1).
    The following example illustrates how proposed Sec.  
686.12(c)(2)(i) would apply:
    A TEACH Grant recipient withdraws from an institution in December 
2019 before completing TEACH Grant-eligible baccalaureate Program A. 
The eight-year period for completing the TEACH Grant service obligation 
begins on the student's withdrawal date. In September 2020, the grant 
recipient re-enrolls in Program A and receives another TEACH Grant. The 
grant recipient completes Program A and graduates in June 2021. We 
adjust the starting date of the eight-year period for completing the 
service obligation to begin in June 2021.
    Proposed Sec.  686.12(c)(2)(ii) would provide for the same 
treatment as described in the above example in the case of a grant 
recipient who withdraws prior to completing a TEACH Grant-eligible 
master's degree program and later re-enrolls in the same program or in 
a different TEACH Grant-eligible master's degree program.
    Proposed Sec.  686.12(c)(3)(i) and (ii) would specify that if a 
grant recipient completes one or more academic years of qualifying 
teaching service during the period between withdrawal and re-
enrollment, the completed teaching counts toward satisfaction of the 
recipient's service obligation and the starting date of the period for 
completing the service obligation is not adjusted, unless the recipient 
requests an adjustment. The reason for not adjusting the service 
obligation period starting date in this circumstance is that if the 
starting date were adjusted to begin when the recipient ceases 
enrollment at the institution where he or she has re-enrolled, the 
period of completed teaching service for which the grant recipient is 
receiving credit would have been performed prior to the start of the 
service obligation period. Therefore, in this situation the starting 
date of the service obligation period will be the date the recipient 
withdrew prior to completing the program for which he or she received 
TEACH Grants. However, upon re-enrollment the grant recipient could 
request a temporary suspension of the period for completing the service 
obligation in accordance with proposed Sec.  686.41(a)(1)(i). The non-
Federal negotiators supported the provisions described in proposed new 
Sec.  686.12(c)(2) and (3), but felt that a grant recipient who 
completed one or more years of qualifying teaching service during the 
period between withdrawal and re-enrollment should have the option of 
forfeiting credit for the completed teaching and instead have the 
starting date of the period for completing the service obligation 
adjusted to begin when the recipient ceases enrollment at the 
institution where he or she re-enrolled. This would provide the 
recipient with eight years to complete another four years of teaching. 
Some subcommittee members believed that for certain grant recipients it 
might be more beneficial to have a full eight

[[Page 67794]]

years to complete four years of teaching than to receive credit for the 
teaching that was completed during the period between withdrawal and 
re-enrollment and then have fewer than eight years to complete the 
remaining portion of the service obligation. The Department agreed to 
include this option in the proposed regulations.
    Under proposed Sec.  686.12(c)(3)(iii), if a grant recipient 
continues to perform qualifying teaching service after re-enrolling in 
a TEACH Grant-eligible program, the recipient may receive credit for 
that teaching service toward satisfaction of the service obligation 
only if the recipient does not request and receive a temporary 
suspension of the period for completing the service obligation under 
proposed Sec.  686.41(a)(1)(i) based on re-enrollment in a TEACH Grant-
eligible program. The reason for this limitation is that teaching 
service may be applied toward satisfaction of a grant recipient's 
service obligation only if the teaching is performed during the service 
obligation period. Since we exclude periods of suspension from the 
service obligation period, any teaching performed during a period when 
we suspend the service obligation period cannot be counted toward 
satisfaction of the service obligation.
    The following example illustrates how proposed Sec.  686.12(c)(3) 
would apply:
    A TEACH Grant recipient withdraws from an institution before 
completing TEACH Grant-eligible master's degree Program A in June 2020. 
The recipient's eight-year period for completing the service obligation 
begins in June 2020. In September 2020, the recipient begins teaching 
in a high-need field in a low-income school and completes a full year 
of qualifying teaching during the 2020-2021 school year. In September 
2021, the grant recipient stops teaching, re-enrolls in Program A, and 
completes the program, graduating in June 2022. The recipient requests 
and receives a temporary suspension of the eight-year service 
obligation period while completing Program A. Unless the recipient 
requests otherwise, the starting date of the eight-year period for 
completing the service obligation continues to be June 2020. The 
recipient would receive credit for the one year of teaching completed 
during the 2020-2021 school year, and now has seven years left to 
complete the remaining three years of the four-year service obligation. 
However, the recipient would have the option of asking the Secretary to 
adjust the starting date of the eight-year service obligation period to 
begin in June 2022, when the recipient graduates after completing 
Program A. In that case, the recipient would receive no credit for the 
year of teaching completed during the 2020-2021 school year and would 
have eight years to complete four years of teaching, starting in June 
2022.
    Under proposed Sec.  686.12(c)(3)(iii), if the grant recipient in 
the above example continued to perform qualifying teaching service 
after re-enrolling in Program A in September 2021 and completed an 
additional year of teaching during the 2021-2022 school year, the 
recipient could receive credit for the second year of teaching only if 
he or she did not request and receive a temporary suspension of the 
eight-year service obligation period after re-enrolling in Program A. 
In that case, after graduating in June 2022 the recipient would have 
six years left to complete the remaining two years of the four-year 
service obligation.
    Finally, a non-Federal negotiator noted that the proposed changes 
in Sec.  686.12(c) are not exclusively related to the completion of 
more than one service obligation. Accordingly, the Department agreed to 
change the heading of Sec.  686.12(c) from ``Completion of more than 
one service obligation'' to ``Completion of the service obligation.''
    We propose to revise Sec.  686.12(d) to reflect changes to section 
420N(d)(1) of the HEA made by the HEOA. The changes made by the HEOA, 
as described earlier under ``Proposed regulations,'' are effective for 
teaching performed on or after July 1, 2010. We are also proposing to 
change the heading of Sec.  686.12(d) from ``Majoring and serving in a 
high-need field'' to ``Teaching in a high-need field listed in the 
Nationwide List'' to describe the content of this section more 
accurately.
Calculation of a Grant (Sec.  686.21)
    Statute: Section 420M(d)(1)(B) of the HEA provides that the total 
TEACH Grant amount that a teacher candidate may receive for 
undergraduate or postgraduate study may not exceed $16,000. Section 
420M(d)(2) of the HEA provides that the total TEACH Grant amount that a 
teacher candidate may receive for graduate study may not exceed $8,000.
    Current Regulations: Section 686.21(a)(2)(i) states that the 
aggregate amount a student may receive in TEACH Grants for 
undergraduate study may not exceed $16,000, and Sec.  686.21(a)(2)(ii) 
states that the aggregate amount a student may receive in TEACH Grants 
for a master's degree may not exceed $8,000.
    Proposed Regulations: We propose to change the word ``aggregate'' 
to ``total'' in Sec.  686.21(a)(2)(i) and (ii), and to replace ``a 
master's degree'' with ``graduate study'' in Sec.  686.21(a)(2)(ii).
    Reasons: We are proposing the changes described above to make the 
regulatory language more consistent with the statutory language.
Counseling Requirements (Sec.  686.32)
    Statute: The HEA does not include any counseling requirements for 
TEACH Grant recipients.
    Current Regulations: Section 686.32 requires initial, subsequent, 
and exit counseling for TEACH Grant recipients.
Initial Counseling
    Section 686.32(a)(1) requires an institution to conduct initial 
counseling with each TEACH Grant recipient before making the first 
disbursement of the grant. Section 686.32(a)(2) states that the initial 
counseling must be in person, by audiovisual presentation, or by 
interactive electronic means, and that in each case the institution 
must ensure that an individual with expertise in the title IV, HEA 
programs is reasonably available shortly after the counseling to answer 
the student's questions. As an alternative method of counseling for 
students enrolled in a correspondence program or a study-abroad 
program, the current regulations allow for the student to be provided 
with written counseling materials before the grant is disbursed.
    Under Sec.  686.32(a)(3)(i) through (xi), initial counseling must--
     Explain the terms and conditions of the agreement to serve 
as described in Sec.  686.12 (Sec.  686.32(a)(3)(i));
     Provide the grant recipient with information about how to 
identify low-income schools and high-need fields (Sec.  
686.32(a)(3)(ii));
     Inform the grant recipient that, in order for teaching to 
count toward the service obligation, the high-need field in which he or 
she has prepared to teach must be one of the six high-need fields 
listed in Sec.  686.2, or a high-need field listed in the Nationwide 
List at the time and for the State in which the grant recipient begins 
teaching in that field (Sec.  686.32(a)(3)(iii));
     Inform the grant recipient of the opportunity to request a 
suspension of the eight-year period for completing the agreement to 
serve and the conditions under which a suspension may be granted in 
accordance with Sec.  686.41 (Sec.  686.32(a)(3)(iv));
     Explain to the grant recipient that conditions, such as 
conviction for a felony, could preclude the recipient from completing 
the service obligation (Sec.  686.32(a)(3)(v));
     Emphasize that if the grant recipient fails or refuses to 
complete the

[[Page 67795]]

service obligation contained in the agreement to serve or any other 
condition of the agreement to serve, the TEACH Grant must be repaid as 
a Federal Direct Unsubsidized Loan, and the recipient will be obligated 
to repay the full amount of each TEACH Grant and accrued interest from 
each disbursement date (Sec.  686.32(a)(3)(vi));
     Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will convert to a Federal Direct Unsubsidized 
Loan (Sec.  686.32(a)(3)(vii));
     Emphasize that once a TEACH Grant converts to a Federal 
Direct Unsubsidized Loan, it cannot reconvert to a grant (Sec.  
686.32(a)(3)(viii));
     Review for the grant recipient information on the 
availability of the Department's Student Loan Ombudsman's office (Sec.  
686.32(a)(3)(ix));
     Describe the likely consequences of loan default, 
including adverse credit reports, garnishment of wages, Federal offset, 
and litigation (Sec.  686.32(a)(3)(x)); and
     Inform the grant recipient of sample monthly payment 
amounts based on a range of student loan indebtedness (Sec.  
686.32(a)(3)(xi)).
Subsequent Counseling
    In accordance with Sec.  686.32(b)(1), if a student receives more 
than one TEACH Grant, the institution must ensure that the student 
receives additional counseling before the disbursement of each 
subsequent TEACH Grant. Section 686.32(b)(2) provides that subsequent 
counseling may be conducted by the same means as allowed for initial 
counseling in Sec.  686.32(a)(2).
    Under Sec.  686.32(b)(3)(i) through (v), subsequent counseling 
must--
     Review the terms and conditions of the agreement to serve 
as described in Sec.  686.12 (Sec.  686.32(b)(3)(i));
     Emphasize that if the grant recipient fails or refuses to 
complete the service obligation contained in the agreement to serve or 
any other condition of the agreement to serve, the TEACH Grant must be 
repaid as a Federal Direct Unsubsidized Loan, and the recipient will be 
obligated to repay the full amount of each TEACH Grant and accrued 
interest from each disbursement date (Sec.  686.32(b)(3)(ii));
     Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will convert to a Federal Direct Unsubsidized 
Loan (Sec.  686.32(b)(3)(iii));
     Emphasize that once a TEACH Grant converts to a Federal 
Direct Unsubsidized Loan, it cannot reconvert to a grant (Sec.  
686.32(b)(3)(iv)); and
     Review for the grant recipient information on the 
availability of the Department's Student Loan Ombudsman's office (Sec.  
686.32(b)(3)(v)).
Exit Counseling
    Section 686.32(c)(1) requires an institution to ensure that each 
grant recipient receives exit counseling before he or she ceases to 
attend the institution at a time determined by the institution. Section 
686.32(c)(2) provides that subsequent counseling may be conducted by 
the same means as allowed for initial counseling in Sec.  686.32(a)(2), 
except that in the case of a grant recipient enrolled in a 
correspondence program or in a study-abroad program, Sec.  686.32(c)(2) 
states that the grant recipient may be provided with written counseling 
materials within 30 days after he or she completes the TEACH Grant-
eligible program.
    Section 686.32(c)(3) provides that within 30 days of learning that 
a grant recipient has withdrawn from the institution without the 
institution's knowledge, or from a TEACH Grant-eligible program, or 
failed to complete exit counseling as required, exit counseling must be 
provided either in-person, through interactive electronic means, or by 
mailing written counseling materials to the grant recipient's last 
known address.
    Under Sec.  686.32(c)(4)(i) through (xv), exit counseling must--
     Inform the grant recipient of the four-year service 
obligation that must be completed within the first eight calendar years 
after completing a TEACH Grant-eligible program in accordance with 
Sec.  686.12 (Sec.  686.32(c)(4)(i));
     Inform the grant recipient of the opportunity to request a 
suspension of the eight-year period for completing the service 
obligation and the conditions under which a suspension may be granted 
in accordance with Sec.  686.41 (Sec.  686.32(c)(4)(ii));
     Provide the grant recipient with information about how to 
identify low-income schools and high-need fields (Sec.  
686.32(c)(4)(iii));
     Inform the grant recipient that, in order for teaching to 
count toward the service obligation, the high-need field in which he or 
she has prepared to teach must be one of the six high-need fields 
listed in Sec.  686.2, or a high-need field listed in the Nationwide 
List at the time and for the State in which the grant recipient begins 
teaching in that field (Sec.  686.32(c)(4)(iv));
     Explain that the grant recipient will be required to 
submit to the Secretary each year written documentation of his or her 
status as a highly qualified teacher in a high-need field at a low-
income school, or of his or her intent to complete the service 
obligation, until the date the service obligation has been met or the 
date that the grant is converted to a loan, whichever occurs first 
(Sec.  686.32(c)(4)(v));
     Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will convert to a Federal Direct Unsubsidized 
Loan (Sec.  686.32(c)(4)(vi));
     Emphasize that once a TEACH Grant converts to a loan it 
cannot be reconverted to a grant (Sec.  686.32(c)(4)(vii));
     Inform the grant recipient of the average anticipated 
monthly repayment amount based on a range of student loan indebtedness 
if the TEACH Grants convert to a Federal Direct Unsubsidized Loan 
(Sec.  686.32(c)(4)(viii));
     Review for the grant recipient available repayment options 
if the TEACH Grant converts to a Federal Direct Unsubsidized Loan, 
including the standard repayment, extended repayment, graduated 
repayment, income-contingent and income-based repayment plans, and loan 
consolidation (Sec.  686.32(c)(4)(ix));
     Suggest debt-management strategies to the grant recipient 
that would facilitate repayment if the TEACH Grant converts to a loan 
(Sec.  686.32(c)(4)(x));
     Explain to the grant recipient how to contact the 
Secretary (Sec.  686.32(c)(4)(xi));
     Describe the likely consequences of loan default, 
including adverse credit reports, garnishment of wages, Federal offset, 
and litigation (Sec.  686.32(c)(4)(xii));
     Review the conditions under which the grant recipient may 
defer or forbear repayment, obtain a full or partial discharge, or 
receive teacher loan forgiveness if the TEACH Grant converts to a loan 
(Sec.  686.32(c)(4)(xiii));
     Review for the grant recipient information on the 
availability of the Department's Student Loan Ombudsman's office (Sec.  
686.32(c)(4)(xiv)); and
     Inform the grant recipient of the availability of title IV 
loan information in the National Student Loan Data System (NSLDS) 
(Sec.  686.32(c)(4)(xv)).
    Section 686.32(d) requires the institution to maintain 
documentation substantiating the institution's compliance with the 
TEACH Grant initial, subsequent, and exit counseling requirements for 
each TEACH Grant recipient.
    Proposed Regulations: We propose to amend the initial, subsequent, 
and exit counseling requirements, and to add a new conversion 
counseling requirement in Sec.  686.32(e). The Secretary would

[[Page 67796]]

provide conversion counseling to a TEACH Grant recipient at the time we 
convert a TEACH Grant to a Direct Unsubsidized Loan.
Initial and Subsequent Counseling
    We propose to amend the current initial counseling requirement in 
Sec.  686.32(a)(3)(iii) to require that the counseling explain to the 
recipient that for teaching to count toward a grant recipient's service 
obligation, the high-need field in which the grant recipient has 
prepared to teach must be one of the six high-need fields listed in 
Sec.  686.2, or must be a high-need field listed in the Nationwide List 
for the State in which the grant recipient teaches--
    (1) At the time the grant recipient begins teaching in that field, 
even if that field subsequently loses its high-need designation for 
that State; or
    (2) For teaching service performed on or after July 1, 2010, at the 
time the recipient signed the agreement to serve or repay or received 
the TEACH Grant, even if that field subsequently loses its high-need 
designation for that State before the grant recipient begins teaching 
in that field.
    We propose to redesignate current Sec.  686.32(a)(3)(viii), in 
initial counseling, as (a)(3)(ix), and redesignate current Sec.  
686.32(b)(3)(iv), in subsequent counseling, as Sec.  686.32(b)(3)(v), 
and to amend the redesignated paragraphs to state that the counseling 
must explain to the recipient that once a TEACH Grant converts to a 
Direct Unsubsidized Loan, it may reconvert to a grant only if--
    (1) The Secretary determines that the grant converted to a loan in 
error; or
    (2) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with proposed new 
Sec.  686.43(a)(1)(ii), within one year of the conversion date the 
grant recipient provides documentation showing that he or she is 
satisfying the service obligation within the eight-year service 
obligation period.
    Finally, we propose to add new Sec.  686.32(a)(3)(viii)(A) and (B) 
in initial counseling, and new Sec.  686.32(b)(3)(iv)(A) and (B) in 
subsequent counseling. Proposed new Sec.  686.32(a)(3)(viii)(A) and 
(b)(3)(iv)(A) would provide that the counseling must explain to the 
recipient that to avoid further accrual of interest as described in 
proposed Sec.  686.12(b)(4)(ii), a grant recipient who decides not to 
teach in a qualified school or field, or who for any other reason no 
longer intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the recipient may begin repaying immediately, instead of waiting 
for the TEACH Grant to be converted to a loan under the conditions 
described in proposed Sec.  686.43(a)(1)(ii).
    Proposed new Sec.  686.32(a)(3)(viii)(B) and (b)(3)(iv)(B) would 
provide that the counseling must explain that if a grant recipient 
requests that a TEACH Grant be converted to a Direct Unsubsidized Loan 
in accordance with proposed Sec.  686.43(a)(1)(i), the conversion of 
the grant to a loan cannot be reversed.
Exit Counseling
    We propose to revise Sec.  686.32(c)(4)(i) to provide that exit 
counseling must review the terms and conditions of the TEACH Grant 
agreement to serve or repay as described in Sec.  686.12 and emphasize 
to the grant recipient that the four-year service obligation must be 
completed within the eight-year period described in Sec.  686.12.
    We propose to add to the exit counseling requirements new Sec.  
686.32(c)(4)(ii), which would state that exit counseling must explain 
the treatment of a grant recipient who withdraws from and then re-
enrolls in a TEACH Grant-eligible program at a TEACH Grant-eligible 
institution as described in proposed Sec.  686.12(c). We would 
redesignate current Sec.  686.32(c)(4)(ii), (iii), and (iv) as 
(c)(4)(iii), (iv), and (v), respectively.
    We propose to revise redesignated Sec.  686.32(c)(4)(v) by making 
the same changes we are proposing to make in Sec.  686.32(a)(3)(iii) 
for initial counseling, as described earlier.
    The proposed regulations would remove current Sec.  686.32(c)(4)(v) 
and add new Sec.  686.32(c)(4)(vi) and (vii).
    Proposed new Sec.  686.32(c)(4)(vi) would specify that exit 
counseling must emphasize to the grant recipient that if he or she 
fails or refuses to complete the service obligation contained in the 
agreement to serve or repay or fails to meet any other condition of the 
agreement to serve or repay, the TEACH Grant must be repaid as a Direct 
Unsubsidized Loan, and the grant recipient will be obligated to repay 
the full amount of each grant and the accrued interest from each 
disbursement date.
    Proposed new Sec.  686.32(c)(4)(vii) would require exit counseling 
to explain to the grant recipient that the Secretary will, at least 
annually during the service obligation period, send the recipient the 
notice described in Sec.  686.43(a)(2).
    We propose to redesignate current Sec.  686.32(c)(4)(vi) as 
(c)(4)(viii) and add new (c)(4)(ix). Proposed new (c)(4)(ix) would 
require exit counseling to provide grant recipients with the same 
information that we propose to include in new Sec.  686.32(a)(3)(viii) 
and (b)(3)(iv) for initial and subsequent counseling, respectively, as 
described earlier.
    The proposed regulations would redesignate current Sec.  
686.32(c)(4)(vii) as (c)(4)(x) and revise the redesignated paragraph by 
making the same changes as described earlier for proposed redesignated 
Sec.  686.32(a)(3)(ix) and (b)(3)(v) in the initial and subsequent 
counseling regulations, respectively.
    Finally, we propose to remove current Sec. Sec.  
686.32(c)(4)(viii), (ix), and (x), retain current Sec.  
686.32(c)(4)(xi), and remove current Sec. Sec.  686.32(c)(4)(xii), 
(xiii), (xiv), and (xv).
Conversion Counseling
    We propose to add a conversion counseling requirement in new Sec.  
686.32(e). Under proposed Sec.  686.32(e)(1), at the time a TEACH Grant 
recipient's TEACH Grant is converted to a Direct Unsubsidized Loan, the 
Secretary would conduct conversion counseling with the recipient by 
interactive electronic means and by mailing written counseling 
materials to the most recent address provided by the recipient.
    Proposed Sec.  686.32(e)(2)(i) through (xv) would specify that 
conversion counseling--
    (1) Informs the borrower of the average anticipated monthly 
repayment amount based on the borrower's indebtedness (Sec.  
686.32(e)(2)(i));
    (2) Reviews for the borrower available repayment plan options, 
including standard, graduated, extended, income-contingent, and income-
based repayment plans, with a description of the different features of 
each plan and the difference in interest paid and total payments under 
each plan (Sec.  686.32(e)(2)(ii));
    (3) Explains to the borrower the options to prepay the loan, to pay 
the loan on a shorter schedule, and to change repayment plans (Sec.  
686.32(e)(2)(iii));
    (4) Provides information on the effects of loan consolidation 
including, at a minimum, the effects of consolidation on total interest 
to be paid and length of repayment, the effects of consolidation on a 
borrower's underlying loan benefits, including grace periods, loan 
forgiveness, cancellation, and deferment opportunities, and the options 
of the borrower to prepay the loan and to change repayment plans (Sec.  
686.32(e)(2)(iv));
    (5) Includes debt-management strategies that are designed to 
facilitate repayment (Sec.  686.32(e)(2)(v));
    (6) Explains to the borrower the availability of Public Service 
Loan

[[Page 67797]]

Forgiveness (PSLF) and teacher loan forgiveness (Sec.  
686.32(e)(2)(vi));
    (7) Explains how the borrower may request reconsideration of the 
conversion of the TEACH Grant to a Direct Unsubsidized Loan if the 
borrower believes that the grant converted to a loan in error (Sec.  
686.32(e)(2)(vii));
    (8) Describes the likely consequences of default, including adverse 
credit reports, delinquent debt collection procedures under Federal 
law, and litigation (Sec.  686.32(e)(2)(viii));
    (9) Informs the borrower of the grace period as described in Sec.  
686.43(c) (Sec.  686.32(e)(2)(ix));
    (10) Provides a general description of the terms and conditions 
under which a borrower may obtain full or partial forgiveness or 
discharge of the loan (including under the PSLF Program), defer 
repayment of the loan, or be granted a forbearance on repayment of the 
loan, and provides a copy, either in print or by electronic means, of 
the information the Secretary makes available pursuant to section 
485(d) of the HEA (Sec.  686.32(e)(2)(x));
    (11) Requires the borrower to provide current information 
concerning their name, address, Social Security number, and driver's 
license number and State of issuance, as well as the borrower's 
permanent address (Sec.  686.32(e)(2)(xi));
    (12) Reviews for the borrower information on the availability of 
the Student Loan Ombudsman's office (Sec.  686.32(e)(2)(xii));
    (13) Informs the borrower of the availability of title IV loan 
information in the NSLDS and how NSLDS can be used to obtain title IV 
loan status information (Sec.  686.32(e)(2)(xiii));
    (14) Provides a general description of the types of tax benefits 
that may be available to borrowers (Sec.  686.32(e)(2)(xiv)); and
    (15) Informs the borrower of the amount of interest that has 
accrued on the converted TEACH Grants and explains that any unpaid 
interest will be capitalized at the end of the grace period (Sec.  
686.32(e)(2)(xv)).
    Reasons: To reflect the changes made by the HEOA to HEA section 
420N(d)(1), as described earlier in this preamble, we are proposing to 
amend the current initial and exit counseling provisions that describe 
the conditions under which teaching in a high-need field may count 
towards satisfaction of the service obligation (Sec.  686.32(a)(3)(iii) 
for initial counseling, and redesignated Sec.  686.32(c)(4)(v) for exit 
counseling). The proposed changes are consistent with the proposed 
changes in Sec.  686.12(d).
    We are proposing to add new Sec.  686.32(a)(3)(viii), (b)(3)(iv), 
and (c)(4)(ix) to the initial, subsequent, and exit counseling 
regulations, respectively, in response to a recommendation from the 
TEACH Grant subcommittee. As explained in the discussions of the 
proposed changes to Sec. Sec.  686.12 and 686.43, subcommittee members 
recommended that we include in the agreement to serve or repay and in 
the notice described in proposed Sec.  686.43(a)(2) an explanation that 
if a grant recipient decides not to teach in a qualifying school or 
field, or for any other reason does not intend to satisfy the service 
obligation, the recipient can avoid further accrual of interest by 
asking the Secretary to convert the TEACH Grant to a Direct 
Unsubsidized Loan that the recipient can being repaying immediately, 
instead of waiting for the grant to be converted later. If a grant 
recipient requests loan conversion as soon as the recipient decides 
that he or she no longer intends to satisfy the service obligation and 
begins repaying the loan, it would reduce the amount of interest the 
recipient must pay on the converted grant because interest would be 
charged from the date of each TEACH Grant disbursement. The 
subcommittee members believed it was important for a grant recipient to 
understand that if at any point he or she no longer intends to satisfy 
the service obligation, it may be in the recipient's best interest to 
immediately ask the Secretary to convert the TEACH Grant to a loan so 
that the recipient can begin repaying the loan. For the same reason, 
the subcommittee recommended that we provide this information to grant 
recipients during initial, subsequent, and exit counseling. The 
subcommittee further recommended that we add a requirement for initial, 
subsequent, and exit counseling to explain that if a grant recipient 
who no longer intends to satisfy the service obligation asks the 
Secretary to convert a TEACH Grant to a loan, the loan cannot be 
reconverted to a grant. The subcommittee believed it was important for 
grant recipients to understand that while it may be beneficial to 
request loan conversion as soon as they decide that they no longer 
intend to satisfy the service obligation, the conversion of a grant to 
a loan at a recipient's request is permanent and cannot be reversed. 
The main negotiating committee supported these recommendations.
    Section 686.32(a)(3)(viii) (in the initial counseling regulations), 
(b)(3)(iv) (subsequent counseling), and (c)(4)(vii) (exit counseling) 
provide that once a TEACH Grant is converted to a loan, the loan cannot 
be reconverted to a grant. For consistency with proposed changes in 
Sec.  686.43, we initially proposed to revise these counseling 
provisions to state that once a TEACH Grant converts to a loan, it may 
reconvert to a grant if the grant converted to a loan in error. For the 
reasons explained in the discussion of the proposed changes to Sec.  
686.43, during the negotiated rulemaking process the Department 
proposed to further amend Sec.  686.43 by adding new Sec.  
686.43(a)(5), which provides that if a grant recipient's TEACH Grant 
converts to a loan in accordance with Sec.  686.43(a)(1)(ii), the 
Secretary will reconvert the loan to a grant if, within one year of the 
conversion date, the grant recipient provides the Secretary with 
documentation showing that he or she is satisfying the service 
obligation. The subcommittee and main committee supported this change 
and recommended that the information in proposed new Sec.  686.43(a)(5) 
be provided to grant recipients during initial, subsequent, and exit 
counseling, so that grant recipients would understand the conditions 
under which a converted TEACH Grant can be reconverted to a loan before 
they receive a grant and before they begin the service obligation 
period. Accordingly, we are proposing to add the information contained 
in proposed Sec.  686.43(a)(5) to the initial, subsequent, and exit 
counseling regulations.
    In the exit counseling regulations, we propose to expand Sec.  
686.32(c)(4)(i) in response to a recommendation from the subcommittee 
that the main negotiating committee accepted. Specifically, the 
subcommittee believed that grant recipients would benefit from 
receiving a review of all the terms and conditions of the agreement to 
serve or repay during exit counseling, in addition to a reminder of the 
timeframe during which the four-year service obligation must be 
completed.
    We are proposing to add new Sec.  686.32(c)(4)(ii) to the exit 
counseling requirements because it is important for grant recipients 
who receive exit counseling prior to withdrawing from an institution to 
understand the terms and conditions that will apply if they later 
decide to return to school and re-enroll in the same or a different 
TEACH Grant-eligible program.
    We are proposing to remove current Sec.  686.32(c)(4)(v) from the 
exit counseling regulations for consistency with proposed changes in 
Sec.  686.43 that eliminate the requirement for grant recipients to 
annually provide the Secretary with documentation of their

[[Page 67798]]

progress toward satisfying the service obligation or notice of their 
intent to satisfy the service obligation.
    We propose to add new Sec.  686.32(c)(4)(vi) based on the 
subcommittee's recommendation that it would be important for exit 
counseling to explain to grant recipients in greater detail the 
consequences of failing or refusing to complete the service obligation 
as described in the agreement to serve or repay, so that they will 
understand those consequences before they begin the service obligation 
period.
    We propose to add new Sec.  686.32(c)(4)(vii) in response to a 
recommendation from the subcommittee, which was supported by the main 
committee, that exit counseling tell grant recipients about the notice 
from the Secretary that they will receive at least annually during the 
service obligation period, as described in proposed Sec.  686.43(a)(2), 
so that the recipients will know what types of communications they can 
expect to receive from the Secretary during their service obligation 
period.
    We propose to remove current Sec.  686.32(c)(4)(viii) through (x) 
and (xii) through (xv) from the exit counseling requirements. These 
paragraphs require exit counseling to cover information that is 
relevant to a grant recipient only if a TEACH Grant is converted to a 
Direct Unsubsidized Loan, including, but not limited to, anticipated 
monthly loan payment amounts, available repayment options, debt 
management strategies, the consequences of defaulting on a loan, and 
loan deferment, forbearance, and forgiveness options. We propose to 
retain current Sec.  686.32(c)(4)(xi), which states that exit 
counseling must explain to the grant recipient how to contact the 
Secretary.
    The TEACH Grant subcommittee believed that it was not necessary to 
provide grant recipients with detailed information about loan terms and 
conditions unless and until their TEACH Grants convert to loans. If a 
grant recipient's TEACH Grant later converts to a Direct Unsubsidized 
Loan, the conversion may not occur until several years after the exit 
counseling has been provided. Therefore, the subcommittee recommended 
that we remove from exit counseling the requirements to provide 
information that would apply only if a grant converts to a loan, and 
instead include this information, along with additional loan-specific 
information, as part of a new conversion counseling requirement. The 
subcommittee recommended that the Secretary provide conversion 
counseling to a grant recipient at the time of loan conversion, so that 
the recipient would be informed of important information about loan 
terms and conditions shortly before he or she must begin repayment on 
the loan.
    For the reasons explained above, we are proposing to add a new 
conversion counseling requirement in Sec.  686.32(e). Because the 
Secretary makes the determination to convert a TEACH Grant to a Direct 
Unsubsidized Loan, the Secretary would provide the conversion 
counseling when the recipient's grant converts to a loan. Based on the 
recommendations of the subcommittee, we are proposing that the 
Secretary would provide conversion counseling through interactive 
electronic means and by mailing written counseling materials to the 
most recent address provided by the grant recipient. The subcommittee 
believed it was important to mail written counseling materials to grant 
recipients, to ensure that recipients who fail to complete the 
interactive electronic counseling would still receive the conversion 
counseling information.
    The subcommittee also believed that it would be appropriate to base 
the proposed new conversion counseling regulations on the current 
Direct Loan Program exit counseling regulations in 34 CFR 685.304(b), 
since Direct Loan exit counseling is intended to provide information 
that is important for borrowers to know as they prepare to begin 
repayment of their loans. Accordingly, the subcommittee recommended 
language that would require conversion counseling to provide grant 
recipients with much of the same information that is provided to Direct 
Loan borrowers during exit counseling, sometimes with minor 
modifications, and with additional information that is specific to 
grant recipients whose TEACH Grants have been converted to Direct 
Unsubsidized Loans. The proposed conversion counseling regulations 
would not include certain elements of the Direct Loan exit counseling 
regulations that are not relevant to TEACH Grant recipients whose 
grants have converted to loans. The proposed conversion counseling 
would include all the elements that we are proposing to remove from the 
current TEACH Grant exit counseling regulations, as explained earlier.
    Proposed Sec.  686.32(e)(2)(i) through (v), (viii), and (x) through 
(xiv), as described under ``Proposed Regulations,'' would mirror the 
corresponding Direct Loan exit counseling regulations in 34 CFR 
685.304(b)(4)(i), as shown in the table below.

------------------------------------------------------------------------
                                    Corresponding regulation in 34 CFR
   Proposed Sec.   686.32(e)                    685.304(b)
------------------------------------------------------------------------
Sec.   686.32(e)(2)(i).........  Sec.   685.304(b)(4)(i).
Sec.   686.32(e)(2)(ii)........  Sec.   685.304(b)(4)(ii).
Sec.   686.32(e)(2)(iii).......  Sec.   685.304(b)(4)(iii).
Sec.   686.32(e)(2)(iv)........  Sec.   685.304(b)(4)(iv).
Sec.   686.32(e)(2)(v).........  Sec.   685.304(b)(4)(v).
Sec.   686.32(e)(2)(viii)......  Sec.   685.304(b)(4)(viii).
Sec.   686.32(e)(2)(x).........  Sec.   685.304(b)(4)(ix).
Sec.   686.32(e)(2)(xi)........  Sec.   685.304(b)(4)(xiv).
Sec.   686.32(e)(2)(xii).......  Sec.   685.304(b)(4)(x).
Sec.   686.32(e)(2)(xiii)......  Sec.   685.304(b)(4)(xi).
Sec.   686.32(e)(2)(xiv).......  Sec.   685.304(b)(4)(xiii).
------------------------------------------------------------------------

    Generally, the language in the proposed TEACH Grant conversion 
counseling provisions listed in the table above is identical to the 
language in the corresponding Direct Loan exit counseling regulations. 
However, while the Direct Loan exit counseling provision in 34 CFR 
685.301(b)(4)(i) specifies that exit counseling must inform the 
borrower of the average anticipated monthly payment amount based on 
either the borrower's indebtedness or on average student borrower 
indebtedness, the corresponding regulation in proposed Sec.  
686.32(e)(2)(i) would specify that conversion counseling informs the 
borrower of the average anticipated monthly payment amount based only 
on the borrower's indebtedness, as the subcommittee believed it would 
be most

[[Page 67799]]

helpful for borrowers to know what they can expect to pay each month 
based on their actual loan debt. In proposed Sec.  686.32(e)(2)(x), we 
would specify that loan forgiveness options discussed in the counseling 
would include the PSLF Program. The corresponding Direct Loan exit 
counseling regulation includes only a general statement about the 
conditions under which a borrower may obtain forgiveness or discharge 
of a loan, without specifically mentioning PSLF. The subcommittee felt 
it was important to highlight the availability of the PSLF Program, 
since grant recipients whose TEACH Grants converted to loans could 
potentially have some of their Direct Loan debt forgiven in the future 
through the PSLF Program.
    Based on the subcommittee's recommendations, we also propose to 
specify in Sec.  686.32(e)(2)(vi), (vii), (ix), and (xv) that 
conversion counseling must explain the availability of PSLF and teacher 
loan forgiveness, explain how the borrower may request reconsideration 
of the conversion of the TEACH Grant to a loan if the borrower believes 
that the grant was converted to a loan in error, inform the borrower of 
the grace period as described in Sec.  686.43(c), and inform the 
borrower of the amount of interest that has accrued on the converted 
TEACH Grant, with an explanation that any unpaid interest will be 
capitalized at the end of the grace period. The subcommittee believed 
that it was important to provide this additional information to grant 
recipients whose TEACH Grants have been converted to loans, so that 
they would know about the options for loan forgiveness, the opportunity 
to request reconsideration if they believe their grant was converted to 
a loan in error, and when they must begin repaying the converted TEACH 
Grant and how they can avoid capitalization of accrued interest.
Documenting the Service Obligation (Sec.  686.40)
    Statute: HEA section 420N(b)(1)(D) requires a TEACH Grant applicant 
to agree to submit evidence of qualifying employment, in the form of a 
certification by the chief administrative officer of the school, upon 
completion of each year of service.
    HEA section 420N(b)(1)(C) requires an applicant for a TEACH Grant 
to agree to teach in one of the fields of mathematics, science, foreign 
language, bilingual education, special education, reading specialist, 
or another field documented as high-need by the Federal Government, 
State government, or LEA, and approved by the Secretary.
    HEA section 420N(b)(1)(B) requires a TEACH Grant applicant to agree 
to teach in a school described in HEA section 465(a)(2)(A). Section 
465(c)(2) of the HEA provides that if a teacher performs service in a 
school that meets the requirements of section 465(a)(2)(A) of the HEA 
in any year, and in a subsequent year that school fails to meet the 
requirements of section 465(a)(2)(A), the teacher may continue to teach 
in the school and will be eligible for loan cancellation pursuant to 
section 465(a)(1) of the HEA.
    The HEA does not address the treatment of TEACH Grant recipients 
who are unable to complete a full academic year of teaching service.
    Current Regulations: Section 686.40(a) provides that unless a TEACH 
Grant recipient has qualified for a temporary suspension of the period 
for completing the service obligation under Sec.  686.41 or a discharge 
of the agreement to serve under Sec.  686.42, the recipient must, 
within 120 days of completing or otherwise ceasing enrollment in a 
program of study for which a TEACH Grant was received, confirm to the 
Secretary in writing that--
    (1) He or she is employed as a full-time teacher in accordance with 
the terms and conditions of the agreement to serve described in Sec.  
686.12; or
    (2) He or she is not yet employed as a full-time teacher but 
intends to meet the terms and conditions of the agreement to serve 
described in Sec.  686.12.
    Section 686.40(b) provides that if a grant recipient is performing 
full-time teaching service in accordance with the agreement to serve, 
the grant recipient must, upon completion of each of the four required 
years of teaching, provide to the Secretary documentation of that 
teaching service on a form approved by the Secretary and certified by 
the chief administrative officer of the school where the grant 
recipient is teaching. The documentation must show that the grant 
recipient is teaching in a low-income school.
    Section 686.40(b) further provides that if the school where the 
grant recipient is employed meets the requirements of a low-income 
school in the first year of the recipient's four years of teaching, but 
fails to meet those requirements in subsequent years, those subsequent 
years of teaching qualify for purposes of satisfying the service 
obligation.
    Section 686.40(c)(1) states that the documentation required under 
Sec.  686.40(b) must also show that the grant recipient--
    (1) Taught a majority of classes during the period being certified 
in any of the high-need fields of mathematics, science, a foreign 
language, bilingual education, English language acquisition, special 
education, or as a reading specialist; or
    (2) Taught a majority of classes during the period being certified 
in a State in another high-need field designated by that State and 
listed in the Nationwide List, except that teaching service does not 
satisfy the requirements of the agreement to serve if that teaching 
service is in a geographic region of a State or in a specific grade 
level not associated with a high-need field of a State designated in 
the Nationwide List as having a shortage of elementary or secondary 
school teachers.
    Section 686.40(c)(2) provides that if a grant recipient begins 
qualified full-time teaching service in a State in a high-need field 
designated by that State and listed in the Nationwide List, and in 
subsequent years that high-need field is no longer designated by the 
State in the Nationwide List, the grant recipient will be considered to 
continue to perform qualified full-time teaching service in a high-need 
field of that State and to continue to fulfill the service obligation.
    Section 686.40(d) specifies that the documentation of teaching 
service provided by a grant recipient must also include evidence that 
the recipient is a highly qualified teacher.
    Section 686.40(e) provides that for purposes of completing the 
service obligation, an elementary or secondary academic year may be 
counted as one of the grant recipient's four complete academic years if 
the grant recipient completes at least one-half of the academic year 
and the grant recipient's school employer considers the grant recipient 
to have fulfilled his or her contract requirements for the academic 
year for the purposes of salary increases, tenure, and retirement if 
the grant recipient is unable to complete an academic year due to--
    (1) A condition that is a qualifying reason for leave under the 
Family and Medical Leave Act of 1993 (FMLA) (29 U.S.C. 2612(a)(1) and 
(3)); or
    (2) A call or order to active duty status for more than 30 days as 
a member of a reserve component of the Armed Forces named in 10 U.S.C. 
10101, or service as a member of the National Guard on full-time 
National Guard duty, as defined in 10 U.S.C. 101(d)(5), under a call to 
active service in connection with a war, military operation, or a 
national emergency.
    Finally, Sec.  686.40(f) provides that a grant recipient who taught 
in more than one qualifying school during an academic year and 
demonstrates that the combined teaching service was the

[[Page 67800]]

equivalent of full-time, as supported by the certification of one or 
more of the chief administrative officers of the schools involved, is 
considered to have completed one academic year of qualifying teaching.
    Proposed Regulations: We propose to remove current Sec.  686.40(a), 
which requires grant recipients to provide certain information to the 
Secretary within 120 days of ceasing enrollment in a program of study 
for which a TEACH Grant was received, and redesignate current Sec.  
686.40(b) as Sec.  686.40(a). We further propose to--
    (1) Revise and restructure redesignated Sec.  686.40(a) to include, 
with certain changes, the service obligation documentation requirements 
that are in current Sec. Sec.  686.40(c) and (d);
    (2) Remove current Sec.  686.40(c) and (d); and
    (3) Redesignate current Sec.  686.40(e) and (f) as Sec.  686.40(b) 
and (c), respectively.
    We propose to remove the language in current Sec.  686.40(c)(1)(ii) 
stating that teaching in a high-need field listed in the Nationwide 
List does not satisfy the service obligation requirements if that 
teaching service is in a geographic region of a State or in a specific 
grade level not associated with a high-need field of a State designated 
in the Nationwide List as having a shortage of elementary or secondary 
school teachers. We also propose to replace the information in current 
Sec.  686.40(c)(2) with a cross-reference to Sec.  686.12(d) in 
proposed new Sec.  686.40(a)(2)(ii).
    In the introductory text to redesignated Sec.  686.40(b), we 
propose to retain the current provision stating that if a grant 
recipient completes at least one-half of an academic year of teaching 
and the grant recipient's school employer considers the grant recipient 
to have fulfilled his or her contract requirements for the academic 
year for the purposes of salary increases, tenure, and retirement, the 
partial year of teaching may be counted as one of the required four 
complete academic years of teaching if the grant recipient was unable 
to teach for the remainder of the year due to certain conditions 
described in proposed redesignated Sec.  686.40(b)(1) through (3).
    In redesignated Sec.  686.40(b)(2), we propose that a call or order 
to Federal or State active duty, or active service as a member of a 
Reserve Component of the Armed Forces named in 10 U.S.C 10101, or 
service as a member of the National Guard on full-time National Guard 
duty, as defined in 10 U.S.C. 101(d)(5), would be a condition that 
allows for less than a full school year of teaching to count as one 
year toward satisfaction of the TEACH Grant service obligation, if the 
other requirements described in the introductory text to redesignated 
Sec.  686.40(b) are met. We propose to eliminate the current 
requirement that National Guard service qualifies only under a call to 
active service in connection with a war, military operation, or a 
national emergency.
    Finally, we propose to add, in Sec.  686.40(b)(3), a new 
circumstance under which less than a full year of teaching may count as 
a full year toward satisfaction of the TEACH Grant service obligation. 
Specifically, proposed Sec.  686.40(b)(3) would provide that a grant 
recipient who completes at least half of an academic year of qualifying 
teaching and who meets the other requirements described in the 
redesignated Sec.  686.40(b) introductory text could have that partial 
year of teaching counted as one full year of the four required years of 
teaching if the recipient is unable to teach for the remainder of the 
academic year because he or she resides in or is employed in a 
federally declared major disaster area as defined in the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42. U.S.C. 
5122(2)).
    Reasons: We are proposing to eliminate current Sec.  686.40(a) for 
consistency with changes proposed in Sec.  686.43, and because we 
believe that requiring grant recipients to inform the Secretary of 
their status within 120 days of ceasing enrollment in a program for 
which a TEACH Grant was received adds unnecessary complexity to the 
requirements for documenting the service obligation.
    To present service obligation documentation requirements more 
clearly and concisely, we are proposing to include in redesignated 
Sec.  686.40(a) the provisions that are in current Sec. Sec.  
686.40(b), (c), and (d), and to cover the requirements related to 
teaching in a high-need field through a cross-reference to Sec.  
686.12(d) instead of repeating those requirements in Sec.  686.40(a).
    Further, we are proposing to eliminate the provision in current 
Sec.  686.40(c)(1)(ii) that prohibits a TEACH Grant recipient from 
satisfying the service obligation by teaching in a geographic region of 
a State or in a specific grade level not associated with a high-need 
field for a State that is designated in the Nationwide List as having a 
shortage of elementary or secondary school teachers. Subcommittee 
members believed that this provision of the current regulations is 
inconsistent with the goal of the TEACH Grant Program to encourage 
teachers to accept positions in low-income schools where there is an 
urgent need for teachers. The subcommittee members noted that in many 
parts of the country there is a general shortage of teachers in 
specific geographic regions, such as in rural areas, or in certain 
grade levels, without regard to subject areas taught. For example, a 
State might have an urgent need for elementary school teachers, or a 
need for teachers in all subject areas in a particular county. However, 
under the current TEACH Grant regulations a grant recipient may not 
satisfy the service obligation simply by teaching at a low-income 
elementary school in a State where there is a shortage of elementary 
school teachers as documented in the Nationwide List, or by teaching in 
a low-income school located in a particular geographic area of a State 
where there is a shortage of teachers as documented in the Nationwide 
List, unless the grant recipient is also teaching in a subject area 
that is a high-need field. The subcommittee members urged the full 
committee to eliminate the current regulatory limitation, to enable 
more grant recipients to teach where there is the greatest need for 
teachers. With the full committee having agreed to the subcommittee's 
recommendation, the Department proposes this change.
    A non-Federal negotiator on the negotiated rulemaking committee 
representing the interests of military service members recommended that 
we make the changes in redesignated Sec.  686.40(b)(2) to more 
accurately reflect current active duty provisions. We agreed to make 
the suggested changes.
    We are proposing to add residing in or being employed in a 
federally declared major disaster area as another condition that would 
allow less than a full year of teaching to count as one full year 
toward satisfaction of the service obligation because we believe that 
grant recipients who teach for part of an academic year but who are 
unable to teach for the remainder of the year as a result of their home 
or place of employment being adversely affected by a natural disaster 
should receive credit for the partial year of qualifying teaching that 
was completed, assuming that the other conditions described in the 
introductory text of redesignated Sec.  686.40(b) are met.
Periods of Suspension (Sec.  686.41)
    Statute: The HEA does not address suspensions of the period for 
completing the TEACH Grant service obligation.
    Current Regulations: Section 686.41(a)(1) provides that a grant 
recipient who has completed or who has

[[Page 67801]]

otherwise ceased enrollment in a program for which he or she received 
TEACH Grant funds may request a suspension of the eight-year period for 
completion of the service obligation based on--
    (1) Enrollment in a program of study for which the recipient would 
be eligible for a TEACH Grant or in a program of study that has been 
determined by a State to satisfy the requirements for certification or 
licensure to teach in the State's elementary or secondary schools;
    (2) A condition that is a qualifying reason for leave under the 
FMLA; or
    (3) A call or order to active duty status for more than 30 days as 
a member of a reserve component of the Armed Forces named in 10 U.S.C. 
10101, or service as a member of the National Guard on full-time 
National Guard duty, as defined in 10 U.S.C. 101(d)(5), under a call to 
active service in connection with a war, military operation, or a 
national emergency.
    Section 686.41(a)(2) provides that a grant recipient may receive a 
suspension in one-year increments that--
    (1) Does not exceed a combined total of three years for suspensions 
based on enrollment in a qualifying period of study or a condition that 
is a qualifying reason for leave under the FMLA; or
    (2) Does not exceed a total of three years for suspensions based on 
qualifying military service.
    Section 686.41(b) specifies that a grant recipient, or his or her 
representative in the case of a grant recipient who requests a 
suspension based on qualifying military service, must apply for a 
suspension in writing on a form approved by the Secretary prior to 
being subject to any of the conditions under Sec.  686.43(a)(1) through 
(5) that would cause the recipient's TEACH Grant to be converted to a 
Federal Direct Unsubsidized Loan.
    Section 686.41(c) requires a grant recipient, or his or her 
representative in the case of a grant recipient who requests a 
suspension based on qualifying military service, to provide the 
Secretary with documentation supporting the suspension request as well 
as current contact information including home address and telephone 
number.
    Proposed Regulations: In Sec.  686.41(a)(1), we propose to add 
three new circumstances that would qualify a TEACH Grant recipient for 
a temporary suspension of the eight-year service obligation period, and 
to amend current Sec.  686.41(a)(1)(iii), which we propose to 
redesignate as Sec.  686.41(a)(1)(iv).
    We propose to redesignate current Sec. Sec.  686.41(a)(1)(ii) and 
(iii) as (a)(1)(iii) and (iv), respectively, and add new Sec.  
686.41(a)(1)(ii), which would provide that a grant recipient may 
request a suspension of the eight-year service obligation period while 
he or she is receiving State-required instruction or otherwise 
fulfilling requirements for licensure to teach in a State's elementary 
or secondary schools.
    We propose to revise redesignated Sec.  686.41(a)(1)(iv) (current 
Sec.  686.41(a)(1)(iii)) to provide that a grant recipient may request 
a suspension of the service obligation period based on a call to order 
to Federal or State active duty or active service as a member of the 
Reserve Component of the Armed Forces named in 10 U.S.C. 10101, or 
service as a member of the National Guard on full-time National Guard 
duty, as defined in 10 U.S.C. 101(d)(5). The proposed revisions to 
redesignated Sec.  686.41(a)(1)(iv) would remove the current 
requirements that the active duty status must be for more than 30 days, 
and that a suspension based on service as a member of the National 
Guard on full-time Guard duty must be under a call to active service in 
connection with a war, military operation, or a national emergency.
    Under proposed new Sec.  686.41(a)(1)(v), a grant recipient could 
request a suspension of the eight-year period for completing the 
service obligation based on military orders for the recipient's spouse 
for deployment with a military unit or as an individual in support of a 
call to Federal or State active duty or active service, or a change of 
permanent duty station from a location in the continental United States 
to a location outside of the continental United States or from a 
location in a State to any location outside of that State.
    Under proposed new Sec.  686.41(a)(1)(vi), a grant recipient could 
request a suspension of the eight-year period for completing the 
service obligation due to residing in or being employed in a federally 
declared major disaster area as defined in the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122(2)).
    We propose to revise Sec.  686.41(a)(2) to specify the maximum 
periods of time for which a grant recipient may receive a suspension of 
the eight-year service obligation under the current and proposed new 
suspension conditions.
    Revised Sec.  686.41(a)(2) introductory text would continue to 
provide that for all suspension conditions, a grant recipient may 
receive suspensions in one-year increments.
    Under proposed Sec.  686.41(a)(2)(i), a grant recipient could 
receive suspensions under Sec. Sec.  686.41(a)(1)(i), (ii), and (iii) 
that do not exceed a combined total of three years. Current Sec.  
686.41(a)(2)(ii) would continue to provide that a grant recipient may 
receive suspensions under redesignated Sec.  686.41(a)(2)(iv) (current 
Sec.  686.41(a)(1)(iii)) that do not exceed a total of three years.
    Proposed Sec.  686.41(a)(2)(iii) and (v) would establish maximum 
three-year suspension limits for suspensions granted under proposed new 
Sec.  686.41(a)(1)(v) and (vi), respectively.
    We propose to revise Sec.  686.41(b) and (c) to provide that, as is 
currently permitted for suspensions under current Sec.  
686.41(a)(1)(iii) (redesignated as Sec.  686.41(a)(1)(iv)), a TEACH 
Grant's representative may request a suspension under proposed new 
Sec.  686.41(a)(1)(vi) and provide the documentation supporting the 
suspension request on behalf of the recipient.
    We propose to add Sec.  686.41(d), which would provide that, on a 
case-by-case basis, the Secretary may grant a grant recipient a 
temporary suspension of the period for completing the service 
obligation if the Secretary determines that the recipient was unable to 
complete a full academic year of teaching or begin the next academic 
year of teaching due to exceptional circumstances significantly 
affecting the operation of the school or educational service agency 
where the grant recipient was employed or the grant recipient's ability 
to teach.
    Finally, we propose to add Sec.  686.41(e), which would provide 
that the Secretary notifies the grant recipient of the outcome of the 
application for a suspension.
    Reasons: The Department proposes a new suspension condition that 
would allow a grant recipient to request a suspension of the service 
obligation period based on residing in or being employed in a federally 
declared major disaster area, because we believe it is appropriate to 
allow for suspensions in circumstances when a grant recipient is 
temporarily unable to perform qualifying teaching service due to being 
adversely affected by a federally declared disaster. The proposed new 
disaster suspension is consistent with actions previously taken by the 
Department under the authority granted by the U.S. Congress through the 
Bipartisan Budget Act of 2018 (Public Law 115-123) to waive or modify 
certain requirements of the HEA for the purpose of assisting 
individuals and institutions affected by hurricanes Harvey, Irma, and 
Maria. The Department used this authority to suspend the service 
obligation period

[[Page 67802]]

for TEACH Grant recipients in Puerto Rico and the U.S. Virgin Islands 
who were temporarily unable to teach due to extended hurricane-related 
closures of elementary and secondary schools. The proposed new 
suspension would provide the same benefit to TEACH Grant recipients 
affected by disasters in other parts of the United States. The 
Department further proposes that suspensions for this circumstance 
would be granted in one-year increments that do not exceed a total of 
three years. The TEACH Grant subcommittee supported the Department's 
proposed new suspension condition, and also recommended additional 
suspension options to cover certain other common circumstances that 
could impact a grant recipient's ability to complete the service 
obligation within the eight-year period.
    The subcommittee noted that in some cases a grant recipient who is 
certified to teach in one State may move to a different State and be 
unable to teach in that State until he or she has received State-
required instruction provided by the State or otherwise fulfilled 
State- requirements for licensure to teach in that State's elementary 
or secondary schools. To ensure that the grant recipient would be able 
to complete the required four years of teaching within the eight-year 
service obligation period, the subcommittee members recommended that, 
in this circumstance, the grant recipient be allowed to receive a 
temporary suspension of the eight-year period while he or she is 
fulfilling the new State's teacher licensure requirements. Given that 
these requirements may vary from State to State, we invite comments on 
how to best formulate this proposed suspension condition.
    We are proposing the changes in redesignated Sec.  686.41(a)(1)(iv) 
in response to a recommendation by members of the main negotiating 
committee that we update the current regulatory language to better 
conform with the terminology used by the military.
    The subcommittee recommended that we also provide a new suspension 
option for grant recipients who are military spouses to cover 
circumstances where the recipient's spouse receives military orders for 
deployment with a military unit or as an individual in support of a 
call to Federal or State active duty or active service, or receives 
orders for a change of permanent duty station from a location in the 
continental United States to a location outside of the continental 
United States or from a location in a State to any location outside 
that State. Subcommittee members noted that if a grant recipient 
accompanies his or her spouse on a military reassignment, it may not be 
possible for the recipient to find a teaching position in a high-need 
field at a low-income school in the new location, and they felt that it 
would be unfair to the grant recipient to not allow for a temporary 
suspension of the service obligation period in this circumstance.
    The current regulations at Sec.  686.41(a)(2)(i) specify that 
periods of suspension based on enrollment in a qualifying program 
(Sec.  686.41(a)(1)(i)) or a condition that is a qualifying reason for 
leave under the FMLA (current Sec.  686.41(a)(1)(ii), to be 
redesignated as Sec.  686.41(a)(1)(iii)) may not exceed a combined 
total of three years. Subcommittee members recommended that this 
combined three-year limit should also include the proposed new 
suspension condition based on fulfilling requirements for licensure to 
teach in a State's elementary or secondary schools. The subcommittee 
did not believe it was necessary to establish a separate maximum time 
period for the proposed new suspension, because a recipient who needs 
to fulfill State requirements to teach would likely satisfy those 
requirements either by completing a program of study at an institution 
or through State-provided instruction, but not both. Thus, the 
subcommittee felt that it was reasonable to expand the existing 
combined three-year limit in Sec.  686.41(a)(2)(i) to include the 
proposed new suspension.
    Consistent with the current three-year maximum period for 
suspensions based on qualifying military service and with the 
Department's proposal to set a three-year maximum for the proposed new 
suspension for grant recipients who reside in or are employed in a 
federally declared major disaster area, the subcommittee recommended 
that the regulations set a three-year limit for the proposed new 
suspension for military spouses under Sec.  686.41(a)(1)(v), and 
provide for the new military spouse suspension to be granted in one-
year increments, the same as the regulations provide for all other 
suspensions.
    Consistent with the existing regulatory provision that allows for a 
grant recipient's representative to submit a request for a suspension 
based on qualifying military service on behalf of the recipient and 
provide any required documentation, the subcommittee recommended that 
the same be allowed in the case of a grant recipient who qualifies for 
a suspension based on residing in or being employed in a federally 
declared major disaster area. As in the case of a grant recipient who 
is performing military service, a grant recipient who is adversely 
affected by a disaster may find it difficult to submit a suspension 
request and any required supporting documentation. Allowing for a 
representative to submit the suspension request and documentation on 
the grant recipient's behalf would ease the burden on the recipient. 
The proposed changes in Sec.  686.41(b) and (c) reflect this 
recommendation.
    The subcommittee believed there could be other unforeseen 
circumstances that might temporarily prevent a grant recipient from 
fulfilling the service obligation requirements, and recommended adding 
a provision allowing the Secretary to grant temporary suspensions on a 
case-by-case basis if the Secretary determines that there are 
exceptional circumstances affecting the operation of the school or 
educational agency where a recipient teaches or the recipient's ability 
to teach.
    Finally, to ensure that grant recipients are informed of the status 
of an application for suspension, the subcommittee recommended 
specifying in the regulations that the Secretary notifies the grant 
recipient regarding the outcome of an application for suspension.
Discharge of Agreement To Serve (Sec.  686.42)
    Statute: Section 420N(d)(2) of the HEA provides for the Secretary 
to establish by regulation categories of extenuating circumstances 
under which a TEACH Grant recipient who is unable to fulfill all or 
part of the recipient's service obligation may be excused from 
fulfilling that portion of the service obligation.
    Current Regulations: Current regulations provide for discharge of 
the TEACH Grant service obligation based on the grant recipient's 
death, TPD, or extended active duty military service.
Death Discharge
    Current Sec.  686.42(a)(1) contains the criteria under which the 
Secretary discharges an agreement to serve based on the death of a 
TEACH Grant recipient.
TPD Discharge
    Current Sec.  686.42(b)(1) provides that a grant recipient's 
agreement to serve is discharged if the recipient becomes totally and 
permanently disabled, as defined in 34 CFR 682.200(b), and the grant 
recipient applies for and satisfies the eligibility requirements for a 
TPD discharge in accordance with 34 CFR 685.213.

[[Page 67803]]

    Current Sec.  686.42(b)(2) specifies that the eight-year time 
period in which the grant recipient must complete the service 
obligation remains in effect during the conditional TPD discharge 
period described in 34 CFR 685.213(c)(2) unless the grant recipient is 
eligible for a suspension based on a condition that is a qualifying 
reason for leave under the FMLA.
    Under current Sec.  686.42(b)(3), interest continues to accrue on 
each TEACH Grant disbursement unless and until the TEACH Grant 
recipient's agreement to serve is discharged based on the recipient's 
TPD.
    Current Sec.  686.42(b)(4) provides that if the grant recipient 
satisfies the criteria for a TPD discharge during and at the end of the 
three-year conditional discharge period, the Secretary discharges the 
grant recipient's service obligation.
    Finally, current Sec.  686.42(b)(5) provides that if, at any time 
during or at the end of the three-year conditional discharge period, 
the Secretary determines that the grant recipient does not meet the 
eligibility criteria for a TPD discharge, the Secretary ends the 
conditional discharge period and the grant recipient is once again 
subject to the terms of the agreement to serve.
Military Service Discharge
    Current Sec.  686.42(c) provides that a TEACH Grant recipient who 
has completed or who has otherwise ceased enrollment in a program for 
which he or she received TEACH Grants and has exceeded the maximum 
period of time allowed for a military service suspension under Sec.  
686.41(a)(2)(ii) may qualify for a proportional discharge of his or her 
service obligation due to an extended call or order to active duty 
status. To apply for a military discharge, a grant recipient or his or 
her representative must submit a written request to the Secretary.
    Current Sec.  686.42(c)(2) provides that a grant recipient as 
described in current Sec.  686.42(c)(1) may receive a--
    (1) One-year discharge of the service obligation if a call or order 
to active duty status is for more than three years;
    (2) Two-year discharge of the service obligation if a call or order 
to active duty status is for more than four years;
    (3) Three-year discharge of the service obligation if a call or 
order to active duty status is for more than five years; or
    (4) Full discharge of the service obligation if a call or order to 
active duty status is for more than six years.
    Current Sec.  686.42(c)(3) requires a grant recipient or his or her 
representative to provide the Secretary with--
    (1) A written statement from the grant recipient's commanding or 
personnel officer certifying that the grant recipient is on active duty 
in the Armed Forces of the United States and the dates on which the 
grant recipient's service began and is expected to end; or
    (2) A copy of the grant recipient's official military orders, and a 
copy of the grant recipient's military identification.
    Current Sec.  686.42(c)(3) specifies that for military discharge 
purposes, the Armed Forces means the Army, Navy, Air Force, Marine 
Corps, and the Coast Guard.
    Current Sec.  686.42(d)(5) provides that based on a request for a 
military discharge from a grant recipient or his or her representative, 
the Secretary will notify the grant recipient or the representative of 
the outcome of the discharge request, and specifies that for the 
portion on the service obligation that remains, the grant recipient 
remains responsible for fulfilling the service obligation in accordance 
with Sec.  686.12.
    Proposed Regulations: In current Sec.  686.42(b)(1), we propose to 
replace the cross-reference to the definition of ``totally and 
permanently disabled'' in 34 CFR 682.200(b) with a cross-reference to 
the definition of that term in Sec.  685.102(b). We further propose to 
remove current Sec. Sec.  686.42(b)(2) through (5) and add new 
Sec. Sec.  686.42(b)(2) through (4).
    New Sec.  686.42(b)(2) would provide that if at any time the 
Secretary determines that the grant recipient does not meet the 
requirements of the three-year period following the discharge as 
described in 34 CFR 685.213(b)(7), the Secretary will notify the grant 
recipient that the grant recipient's obligation to satisfy the terms of 
the agreement to serve or repay is reinstated.
    New Sec.  686.42(b)(3) would provide that the Secretary's 
notification under Sec.  686.42(b)(2) will: (1) Include the reason or 
reasons for the reinstatement; (2) provide information on how the grant 
recipient may contact the Secretary if the grant recipient has 
questions about the reinstatement or believes that the agreement to 
serve or repay was reinstated based on incorrect information; and (3) 
inform the grant recipient that he or she must satisfy the service 
obligation within the portion of the eight-year period that remained 
after the date of the discharge.
    New Sec.  686.42(b)(4) would provide that if the TEACH Grant made 
to a recipient whose TEACH Grant agreement to serve or repay is 
reinstated is later converted to a Direct Unsubsidized Loan, the 
recipient will not be required to pay interest that accrued on the 
TEACH Grant disbursements from the date the agreement to serve or repay 
was discharged until the date the agreement to serve or repay was 
reinstated.
    Finally, we propose to amend current Sec.  686.42(c)(4) to provide 
that for military discharge purposes, the Armed Forces also includes a 
reserve component of the Armed Forces named in 10 U.S.C. 10101, or the 
National Guard.
    Reasons: The current TPD provisions for TEACH Grants in Sec.  
686.42(b) were modeled on the Direct Loan Program TPD discharge 
regulations that were in effect when the original TEACH Grant 
regulations were issued. On November 1, 2012, we published final 
regulations (77 FR 66088) that made significant changes to the 
regulations governing the TPD discharge process in the Direct Loan, 
FFEL, and Perkins loan programs. As a result, the language in current 
Sec.  686.42(b) is obsolete. We are proposing to amend the provisions 
authorizing the discharge of a TEACH Grant recipient's agreement to 
serve or repay based on a TPD to conform to the current Direct Loan TPD 
regulations.
    We propose to amend current Sec.  686.42(c)(4) for consistency with 
current Sec.  686.41(a)(1)(iii). Under current Sec.  686.41(a)(1)(iii), 
a TEACH Grant recipient may qualify for a temporary suspension of the 
eight-year service obligation period based on qualifying service as a 
member of Armed Forces named in 10 U.S.C. 10101 or as a member of 
National Guard. We believe that extended periods of the same type of 
military service should also qualify a TEACH Grant recipient for 
discharge of some or all of their service obligation.
Obligation To Repay the Grant (Sec.  686.43)
    Statute: Section 420N(c) of the HEA provides that if a TEACH Grant 
recipient fails or refuses to comply with the service obligation in the 
agreement under section 420N(b) of the HEA, the sum of the amounts of 
any TEACH Grants received by the recipient will, upon a determination 
of the recipient's failure or refusal to comply with the service 
obligation, be treated as a Federal Direct Unsubsidized Loan under 
title IV, part D of the HEA, and will be subject to repayment, together 
with interest accrued from the date of the TEACH Grant award, in 
accordance with terms and conditions specified by the Secretary in 
regulations.
    The HEA does not address the reconversion of a loan to a TEACH 
Grant following the conversion of a TEACH Grant to a loan.

[[Page 67804]]

    Current Regulations: Current Sec.  686.43(a) provides that the 
TEACH Grant amounts disbursed to a grant recipient will be converted 
into a Direct Unsubsidized Loan, with interest accruing from the date 
of each grant disbursement, and will be collected by the Secretary in 
accordance with the relevant provisions of 34 CFR part 685, subpart A 
under the conditions described in current Sec. Sec.  686.43(a)(1) 
through (5).
    Current Sec.  686.43(a)(1) provides that a TEACH Grant will be 
converted to a Direct Unsubsidized Loan if the grant recipient, 
regardless of enrollment status, requests that the TEACH Grant be 
converted into a loan because he or she has decided not to teach in a 
qualified school or field or for any other reason.
    Current Sec.  686.43(a)(2) provides that a TEACH Grant will convert 
to a loan if, within 120 days of ceasing enrollment in the institution 
prior to completing the TEACH Grant-eligible program, the grant 
recipient has failed to notify the Secretary in accordance with Sec.  
686.40(a).
    Current Sec.  686.43(a)(3) provides that a TEACH Grant will be 
converted to a loan if, within one year of ceasing enrollment in the 
institution prior to completing the TEACH Grant-eligible program, the 
grant recipient has not been determined eligible for a suspension of 
the eight-year period for completion of the service obligation as 
provided in Sec.  686.41, re-enrolled in a TEACH Grant-eligible 
program, or begun creditable teaching service as described in Sec.  
686.12(b).
    Current Sec.  686.43(a)(4) provides that a TEACH Grant will be 
converted to a loan if the grant recipient completes the course of 
study for which a TEACH Grant was received and does not actively 
confirm to the Secretary, at least annually, his or her intention to 
satisfy the agreement to serve.
    Finally, current Sec.  686.43(a)(5) provides that a TEACH Grant 
will be converted to a loan if the grant recipient has completed the 
TEACH Grant-eligible program but has failed to begin or maintain 
qualified employment within the timeframe that would allow the 
recipient to complete the service obligation within the number of years 
required under Sec.  686.12.
    Current Sec.  686.43(b) states that if a TEACH Grant converts to a 
Federal Direct Unsubsidized Loan, we do not count that loan against the 
grant recipient's annual or aggregate Direct Loan limits.
    Current Sec.  686.43(c)(1) provides that a grant recipient whose 
TEACH Grant has been converted to a Federal Direct Unsubsidized Loan 
receives a six-month grace period prior to entering repayment, and 
current Sec.  686.43(c)(2) provides that a grant recipient whose grant 
has been converted to a loan is eligible for all of the benefits of the 
Direct Loan Program, including an in-school deferment.
    Current Sec.  686.43(d) states that a TEACH Grant that converts to 
a Federal Direct Unsubsidized Loan cannot reconvert to a grant.
    Proposed Regulations: We are proposing to revise Sec.  686.43(a) by 
removing current Sec.  686.43(a)(2) through (4). Current Sec.  
686.43(a)(1) and (5) would be slightly revised and redesignated as 
Sec.  686.43(a)(1)(i) and (ii), respectively. Under the proposed 
regulations, a TEACH Grant would be converted to a loan only if the 
grant recipient, regardless of enrollment status, requests that the 
TEACH Grant be converted into a loan because he or she has decided not 
to teach in a qualified school or educational service agency, or not to 
teach in a high-need field, or for any other reason (proposed Sec.  
686.43(a)(1)(i)), or if the grant recipient does not begin or maintain 
qualified employment within the timeframe that would allow the 
recipient to complete the service obligation within the number of years 
required under Sec.  686.12 (proposed Sec.  686.43(a)(1)(ii)).
    We also propose to expand current Sec.  686.43(a) by adding new 
Sec. Sec.  686.43(a)(2) through (9).
    Proposed new Sec.  686.43(a)(2) would specify that at least 
annually during the eight-year period for completing the service 
obligation, the Secretary will notify the grant recipient of--
     The terms and conditions the grant recipient must meet to 
satisfy the service obligation (proposed Sec.  686.43(a)(2)(i));
     The requirement for the grant recipient to provide to the 
Secretary, upon completion of each of the four required years of 
teaching service, documentation of the service on a form approved by 
the Secretary and certified by the chief administrative officer of the 
school or educational service agency where the recipient taught, 
including a reminder of the need for the grant recipient to keep a copy 
of the certification as well as copies of the recipient's own 
employment documentation (proposed Sec.  686.43(a)(2)(ii));
     The number of years of teaching service that the grant 
recipient has completed and the remaining timeframe within which the 
recipient must complete the service obligation (proposed Sec.  
686.43(a)(2)(iii));
     The conditions under which a grant recipient may request a 
temporary suspension of the period for completing the service 
obligation (proposed Sec.  686.43(a)(2)(iv));
     The conditions described in Sec.  686.43(a)(1) under which 
TEACH Grant amounts disbursed to the grant recipient will convert to a 
Direct Unsubsidized Loan (proposed Sec.  686.43(a)(2)(v));
     The potential total interest accrued (proposed Sec.  
686.43(a)(2)(vi));
     The process by which the grant recipient may contact the 
Secretary to request reconsideration of the conversion of a TEACH Grant 
to a loan, the deadline by which the recipient must submit the request, 
and a list of the specific documentation required by the Secretary to 
reconsider the conversion (proposed Sec.  686.43(a)(2)(vii)); and
     An explanation that to avoid further accrual of interest, 
a grant recipient who decides not to teach in a qualified school or 
field, or who for any other reason no longer intends to satisfy the 
service obligation, may request that the Secretary convert his or her 
TEACH Grant to a loan that the recipient may begin repaying 
immediately, instead of waiting for the grant to be converted to a loan 
in accordance with Sec.  686.43(a)(1)(ii) (proposed 
686.43(a)(2)(viii)).
    Proposed new Sec.  686.43(a)(3) would provide that on or about 90 
days before the date that a grant recipient's TEACH Grants would be 
converted to loans in accordance with Sec.  686.43(a)(1)(ii), the 
Secretary will notify the recipient of the date by which the recipient 
must submit documentation showing that the recipient is satisfying the 
service obligation.
    Proposed new Sec.  686.43(a)(4) would provide that if the TEACH 
Grant amounts disbursed to a recipient convert to a loan, the Secretary 
will notify the recipient of the conversion and offers conversion 
counseling in accordance with Sec.  686.32(e).
    Under proposed new Sec.  686.43(a)(5), if a grant recipient's TEACH 
Grant is converted to a loan in accordance with Sec.  686.43(a)(1)(ii), 
the Secretary will reconvert the loan to a grant if, within one year of 
the conversion date, the grant recipient provides the Secretary with 
documentation showing that he or she is satisfying the service 
obligation.
    Under proposed new Sec.  686.43(a)(6), if a grant recipient's TEACH 
Grant is involuntarily converted to a loan, the Secretary will 
reconvert the loan to a TEACH Grant based on documentation provided by 
the grant recipient or in the Department's records demonstrating

[[Page 67805]]

that the recipient was satisfying the service obligation as described 
in Sec.  686.12, or demonstrating that the grant was improperly 
converted to a loan.
    Proposed new Sec.  686.43(a)(7) would specify that if a grant 
recipient who requests reconsideration of the conversion of a TEACH 
Grant to a loan demonstrates that the grant converted to a loan in 
error, the Secretary--
     Reconverts the loan to a TEACH Grant (proposed Sec.  
686.43(a)(7)(i);
     If the grant recipient completed one or more academic 
years of qualifying teaching service during the period when the grant 
was in loan status, applies that teaching service toward the 
recipient's four-year service obligation and excludes the period when 
the grant was in loan status from the eight-year period during which 
the recipient must complete the service obligation (proposed new Sec.  
686.43(a)(7)(i)(A));
     If the grant recipient did not complete any academic years 
of qualifying teaching service during the period when the grant was in 
loan status, excludes the period when the grant was in loan status from 
the eight-year period during which the recipient must complete the 
service obligation (proposed new Sec.  686.43(a)(7)(i)(B));
     Ensures that the grant recipient receives credit for any 
payments made on the Direct Unsubsidized Loan that reconverted to a 
TEACH Grant (proposed new Sec.  686.43(a)(7)(ii));
     Notifies the recipient of the reconversion of the loan to 
a grant and explains that the recipient is once again responsible for 
meeting all requirements of the service obligation (proposed new Sec.  
686.43(a)(7)(iii)); and
     Requests deletion of any derogatory information reported 
to consumer reporting agencies related to the grant while it was in 
loan status and, upon a request from the grant recipient, furnishes a 
statement of error that the recipient may provide to creditors until 
the recipient's credit history has been corrected (proposed new Sec.  
686.43(a)(7)(iv)).
    Proposed new Sec.  686.43(a)(8) would specify that if a grant 
recipient who requests reconsideration of the conversion of a grant to 
a loan does not demonstrate to the satisfaction of the Secretary that 
the grant converted to a loan in error, the Secretary--
     Notifies the recipient that the loan cannot reconvert to a 
TEACH Grant (proposed new Sec.  686.43(a)(8)(i));
     Explains the reason or reasons why the loan cannot 
reconvert to a TEACH Grant (proposed new Sec.  686.43(a)(8)(ii)); and
     Explains how the grant recipient may contact the Federal 
Student Aid Ombudsman if he or she continues to believe that the grant 
converted to a loan in error (proposed new Sec.  686.43(a)(8)(iii)).
    Proposed new Sec.  686.43(a)(9) would provide that a TEACH Grant 
recipient remains obligated to meet all requirements of the service 
obligation, even if the recipient does not receive the notice described 
in proposed Sec.  686.43(a)(2).
    In Sec.  686.43(c), we are proposing to revise paragraph (c)(2) by 
removing the words ``including an in-school deferment.''
    Finally, we are proposing to revise Sec.  686.43(d) to provide that 
a TEACH Grant that converted to a Direct Unsubsidized Loan cannot 
reconvert to a grant unless the Secretary determines that the grant was 
converted to a loan in error.
    Reasons: Under the current regulations, there are different 
circumstances that result in the conversion of a TEACH Grant to a loan 
depending on whether the grant recipient did or did not complete the 
program of study for which he or she received TEACH Grants. In 
addition, under the current regulations, a grant recipient may be 
subject to loan conversion if the recipient fails to meet certification 
requirements within specified timeframes, even if the recipient is 
otherwise meeting the service obligation requirements. Our experience 
in administering the TEACH Grant Program has shown that the existing 
regulatory conditions for converting TEACH Grants to loans are 
difficult for grant recipients to understand and in some cases have led 
to the conversions of grants made to recipients who were performing 
qualifying teaching service, but who failed to meet certification 
deadlines. Therefore, to simplify program requirements, reduce burden 
on grant recipients, and minimize grant-to-loan conversions resulting 
from late submission of documentation, we are proposing to eliminate 
the loan conversion conditions in current Sec. Sec.  686.43(a)(2) 
through (4) and retain, with minor modifications, only the current 
regulations that provide for loan conversion if the recipient requests 
conversion, or if the recipient fails to begin or maintain qualifying 
teaching service within a timeframe that would allow the recipient to 
complete the required four years of teaching within the eight-year 
service obligation period. These provisions would apply to all grant 
recipients, regardless of whether they completed the program of study 
for which they received TEACH Grants.
    To ensure that grant recipients are regularly reminded of the 
service obligation requirements, the Department initially proposed 
during negotiated rulemaking to specify in new Sec.  686.43(a)(2) that, 
at least annually during the service obligation period, the Secretary 
would notify the grant recipient of the terms and conditions that must 
be met to satisfy the service obligation, the requirement for the grant 
recipient to provide documentation of each completed year of teaching 
service, the remaining timeframe within which the recipient must 
complete the service obligation, the conditions under which the 
recipient may request a temporary suspension of the service obligation 
period, and the conditions under which a TEACH Grant will be converted 
to a Direct Unsubsidized Loan. In response to recommendations from the 
subcommittee, the Department agreed to expand the contents of the 
proposed notice to include the number of years of teaching service 
already completed by the recipient, the potential total accrued 
interest, information about the process by which a grant recipient may 
request reconsideration of the conversion of a TEACH Grant to a loan, 
and an explanation of the grant recipient's option to request 
conversion of the recipient's TEACH Grants to a loan if the recipient 
no longer intends to satisfy the service obligation. The subcommittee 
members felt that it was important to provide grant recipients with 
this additional information on a regular basis throughout the service 
obligation period.
    We are proposing to add new Sec.  686.43(a)(3) in response to a 
recommendation made by TEACH Grant subcommittee members. In addition to 
supporting the Department's proposed changes to the conditions that 
will result in the conversion of TEACH Grants to loans, several 
subcommittee members believed that it is important for grant recipients 
to be notified as they approach the date when they would be subject to 
loan conversion so that a grant recipient who has been teaching but who 
has not yet submitted documentation of qualifying teaching service 
would have an opportunity to do so in time to avoid loan conversion.
    We are proposing new Sec.  686.43(a)(4) to reflect in the 
regulations our current practice of notifying a grant recipient at the 
time his or her TEACH Grants are converted to a Direct Unsubsidized 
Loan, and to further specify in the regulations that conversion 
counseling will be provided in accordance with proposed Sec.  
686.32(e).
    We are proposing new Sec.  686.43(a)(5) to address circumstances in 
which a

[[Page 67806]]

grant recipient who has been working toward satisfaction of the service 
obligation neglects to provide any documentation of qualifying teaching 
service before having his or her grants converted to loans under 
proposed Sec.  686.43(a)(1)(ii). We believe that the proposed changes 
in Sec.  686.43 will significantly reduce the number of grant-to-loan 
conversions due to grant recipients' failure to submit documentation of 
qualifying teaching service in a timely manner. However, we recognize 
that these situations may still occasionally arise, and believe it 
would be appropriate in such cases to provide a means by which the 
recipient could have the conversion reversed within a reasonable period 
of time after the date of conversion. Accordingly, proposed Sec.  
686.43(a)(5) would provide that if a grant recipient's TEACH Grants are 
converted to a Direct Unsubsidized Loan because the grant recipient did 
not begin or maintain qualifying teaching service within a timeframe 
that would allow the recipient to complete the required four years of 
teaching within the eight-year service obligation period, the Secretary 
would change the loan back to a TEACH Grant if, within one year of the 
conversion date, the recipient provides the Secretary with 
documentation showing that he or she is satisfying the service 
obligation.
    We are proposing to add new Sec.  686.43(a)(6) in response to a 
request from non-federal negotiators to include in the regulations a 
process comparable to what is described in proposed Sec.  686.43(a)(5) 
for grant recipients whose grants were converted to loans for reasons 
other than the condition describe in proposed Sec.  686.43(a)(1)(ii), 
such as recipients whose grants were converted due to their failure to 
meet certification requirements or recipients whose grants were 
improperly converted to loans. Under proposed Sec.  686.43(a)(6), in 
contrast to proposed Sec.  686.43(a)(5), there would be no maximum 
timeframe following conversion within which a grant recipient must 
provide documentation showing that he or she was satisfying the service 
obligation requirements. The non-federal negotiators supported proposed 
Sec.  686.43(a)(5), but many were concerned that this provision is too 
limited in scope and that the one-year period for submitting 
documentation would not help grant recipients who were meeting the 
service obligation requirements, but had their grants converted to 
loans prior to the effective date of the new regulations. These non-
federal negotiators felt strongly that the regulations should provide a 
reconversion process for grant recipients who were meeting the service 
obligation requirements, but who had their grants converted to loans 
and who would not be covered by proposed Sec.  686.43(a)(5). Proposed 
Sec.  686.43(a)(6) describes how these grant recipients may request 
reconsideration of the conversion of their TEACH Grants to loans.
    We are proposing new Sec. Sec.  686.43(a)(7) and (8) to provide 
greater transparency related to the process by which a TEACH Grant 
recipient may request reconsideration of the conversion of a TEACH 
Grant to a loan if the recipient believes that the grant was converted 
in error, and the Secretary's actions after making a determination on a 
grant recipient's reconsideration request. Although a process currently 
exists for grant recipients to request reconversion of a TEACH Grant to 
a loan, that process is not reflected in the current regulations.
    The Department originally proposed that if a TEACH Grant recipient 
who requests reconsideration of the conversion of a TEACH Grant to a 
loan demonstrates to the satisfaction of the Secretary that the grant 
was converted in error, the Secretary would reconvert the loan to a 
TEACH Grant, notify the recipient of the reconversion to a grant, and 
explain that the grant recipient is once again responsible for meeting 
all requirements of the service obligation. During the negotiated 
rulemaking sessions, some non-federal negotiators expressed concerns 
that the Department's proposal was too limited in scope and would not 
provide adequate relief to grant recipients whose grants were converted 
to loans in error. In particular, these non-federal negotiators 
believed it was important to specify in the regulations that any 
academic years of qualifying teaching service performed by the grant 
recipient while their grant was improperly in loan status due to an 
erroneous conversion would be applied toward satisfaction of the 
service obligation requirement, and that the period during which the 
grant was improperly in loan status would not count against the eight-
year service obligation period.
    The non-federal negotiators believed that the additional financial 
burden resulting from the conversion of a grant recipient's TEACH 
Grants to loans could lead a grant recipient to leave his or her 
teaching position at a low-income school and obtain a higher paying job 
while awaiting a decision from the Secretary on the request for 
reconsideration of the conversion. The non-federal negotiators felt 
strongly that if the Secretary determines that a grant recipient's 
TEACH Grant was converted to a loan in error, upon the reconversion of 
the loan to a grant the recipient should receive credit toward 
satisfaction of the service obligation for any full academic years of 
qualifying teaching service that he or she completed during the period 
between the request for reconsideration and the determination that the 
grant was converted to a loan in error, and any other portion of that 
period when the grant was improperly in loan status should not be 
counted against the remaining portion of the grant recipient's eight-
year service obligation period once the loan has been changed back to a 
grant. To address these concerns, the Department agreed to add proposed 
Sec. Sec.  686.43(a)(7)(i)(A) and (B).
    As an example to illustrate how the provisions in proposed 
Sec. Sec.  686.43(a)(7)(i)(A) and (B) would be applied, consider the 
case of a grant recipient who completed one academic year of qualifying 
teaching service during the first year of the eight-year service 
obligation, then had his or her TEACH Grants converted to a loan and 
submitted a request for reconsideration based on the belief that the 
grants were converted in error. After submitting the reconsideration 
request, the grant recipient continued to perform qualifying teaching 
service for an additional academic year while the Secretary evaluated 
the recipient's request. The Secretary determines that the grants 
converted to a loan in error and reconverts the loans to TEACH Grants. 
We would apply the year of qualifying teaching that the recipient 
completed while the grants were in loan status toward the recipient's 
four-year service obligation requirement, and the recipient would have 
six years remaining to complete the remaining two years of the service 
obligation. In contrast, if the recipient did not complete any 
additional academic years of qualifying teaching following the 
conversion, and one year elapsed from the time the recipient submitted 
a reconsideration request until the Secretary made a determination that 
the grants had been converted in error, the recipient would then have 
seven years remaining to complete the required three additional years 
of teaching to fully satisfy the service obligation. We would exclude 
the one-year period when the grants were incorrectly in loan status 
from the eight-year service obligation period.
    The non-federal negotiators also urged the Department to specify in 
the regulations that if the Secretary determines that a recipient's 
TEACH Grants were converted to a loan in error, the grant recipient 
would receive credit

[[Page 67807]]

for any payments that he or she made on the loan that was later 
reconverted to a TEACH Grant. Proposed Sec.  686.43(a)(7)(ii) provides 
for this. If the Secretary determines that a recipient's grants were 
converted to a loan in error, and the recipient made payments on the 
loan, the payments that the recipient made would be reapplied to reduce 
the outstanding balance on the recipient's other Direct Loans, if any, 
unless the recipient requested a refund of the payments. We would 
automatically refund payments to the recipient if the recipient has no 
other Direct Loans.
    Non-federal negotiators were also concerned that grant recipients 
who have their TEACH Grants erroneously converted to a loan may not be 
able to handle the increased student loan debt, and this could lead to 
delinquency or default. Accordingly, the non-federal negotiators asked 
the Department to specify in the regulations that we would delete any 
derogatory information reported to consumer reporting agencies in 
connection with the loan, and that upon a request from the recipient, 
the Secretary would provide a statement explaining the conversion error 
that the recipient could provide to creditors. The Department agreed 
with the non-federal negotiators and has included this provision in 
proposed Sec.  686.43(a)(7)(iv).
    We are proposing new Sec.  686.43(a)(9) to clarify in the 
regulations that a grant recipient is obligated to meet all 
requirements of the service obligation even if the recipient does not 
receive the notices from the Secretary described in proposed Sec.  
686.43(a)(2). If a recipient does not receive the notices because he or 
she failed to provide updated contact information to the Secretary or 
for any other reason, this would not provide a basis for the recipient 
to assert that he or she is no longer responsible for satisfying the 
terms and conditions of the agreement to serve or repay that the 
recipient signed.
    In Sec.  686.43(c)(2), which currently provides that a grant 
recipient whose TEACH Grant is converted to a Direct Unsubsidized Loan 
is eligible for all of the benefits of the Direct Loan Program, 
including an in-school deferment, we are proposing to remove the words 
``including an in-school deferment'' because it is sufficient to simply 
state that the recipient would be eligible for all Direct Loan Program 
benefits. There is no reason to specifically refer to the in-school 
deferment benefit.
    Finally, for consistency with proposed changes in other sections of 
the proposed regulations, we are proposing to amend Sec.  686.43(d) to 
provide that a TEACH Grant that has been converted to a loan cannot be 
changed back to a grant unless the Secretary determines that the grant 
was converted to a loan in error. The main negotiating committee agreed 
with these proposals.
Directed Questions
    (1) If a grant recipient completed one or more academic years of 
qualifying teaching service during the period the grant was wrongly in 
loan status, under proposed Sec.  686.43(a)(7)(i)(A) the Secretary will 
credit the recipient for those years of service and not include the 
period the grant was wrongly in loan status in the eight-year service 
period during which the grant recipient must complete their service 
obligation. In addition to not including this period, if the grant 
recipient does not have sufficient time to complete such service within 
the eight-year period once the error is corrected, should the Secretary 
further extend the period in which the recipient has to complete the 
required service by an additional period equal to 8 years minus the 
number of years of qualified teaching service completed by the 
recipient?
    (2) If a grant recipient did not complete one or more academic 
years of qualifying teaching service during the period the grant was 
wrongly in loan status, under proposed Sec.  686.43(a)(7)(i)(B) the 
Secretary will not include the period the grant was wrongly in loan 
status in the eight-year service period during which the grant 
recipient must complete their service obligation. In addition to not 
including this period, if the grant recipient does not have sufficient 
time to complete such service within the eight-year period once the 
error is corrected, should the Secretary further extend the period in 
which the recipient has to complete the required service by an 
additional period equal to 8 years minus the number of years of 
qualified teaching service completed by the recipient?

Executive Orders 12866, 13563, and 13771 Regulatory Impact Analysis

    Under Executive Order 12866, the Office of Management and Budget 
(OMB) must determine whether this regulatory action is ``significant'' 
and, therefore, subject to the requirements of the Executive order and 
subject to review by OMB. Section 3(f) of Executive Order 12866 defines 
a ``significant regulatory action'' as an action likely to result in a 
rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
Tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement 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 stated in the 
Executive order.
    Under Executive Order 12866, section 3(f)(1), the changes proposed 
in this regulatory action would materially alter the rights and 
obligations of recipients of Federal financial assistance under title 
IV of the HEA. Therefore, the Secretary certifies that this is a 
significant regulatory action subject to review by OMB. Also, under 
Executive Order 12866 and the Presidential Memorandum ``Plain Language 
in Government Writing,'' the Secretary invites comment on how easy 
these regulations are to understand in the Clarity of the Regulations 
section.
    Under Executive Order 13771, for each new regulation that the 
Department proposes for notice and comment or otherwise promulgates 
that is a significant regulatory action under Executive Order 12866 and 
that imposes total costs greater than zero, it must identify two 
deregulatory actions. For FY 2019, any new incremental costs associated 
with a new regulation must be fully offset by the elimination of 
existing costs through deregulatory actions. The proposed regulations 
are a significant regulatory action under Executive Order 12866. 
However, Executive Order 13771 does not apply to ``transfer rules'' 
that cause only income transfers between taxpayers and program 
beneficiaries. Because the portion of the regulation relating to the 
TEACH Grant Program is a transfer rule and because the remaining 
proposed regulatory changes impose minimal estimated costs of 
approximately $1.27 million in annualized net PRA costs at a 7 percent 
discount rate, discounted to a 2016 equivalent, over a perpetual time 
horizon, the requirement to offset new regulations in Executive Order 
13771 does not apply. Accordingly, the Department is not required to 
identify two deregulatory actions under Executive Order 13771. Also, 
one of the benefits of this regulatory action is to help improve the 
process of certification by TEACH grantees and provide less restrictive 
qualification criteria by expanding the pool of schools under

[[Page 67808]]

certain circumstances that would be eligible for meeting the teaching 
service requirement.
    We have also reviewed these proposed regulations under Executive 
Order 13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these proposed regulations only on a reasoned 
determination that their benefits justify their costs. Based on the 
analysis that follows, the Department believes that these regulations 
are consistent with the principles in Executive Order 13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, or Tribal governments in the exercise of 
their governmental functions.
    In this regulatory impact analysis, we discuss the need for 
regulatory action, the potential costs and benefits, assumptions, 
limitations, and data sources, as well as regulatory alternatives we 
considered.

Need for Regulatory Action

    In 2007, Congress established the Teacher Education Assistance for 
College and Higher Education (TEACH) Grant Program to increase the 
number of teachers in high-need fields in low-income schools. In 
exchange for receiving a TEACH Grant, recipients agree to teach in a 
high-need field such as reading, mathematics, or science, at a low-
income school, for at least four years in an eight-year period and 
annually certify that they intend to meet this requirement. If a 
recipient does not meet the grant requirements or the annual 
certification requirements, the grant converts to a Federal Direct 
Unsubsidized Loan with interest charged from the date of each TEACH 
Grant disbursement.
    A 2015 Government Accountability Office (GAO) report found that 
around 36,000 out of more than 112,000 TEACH Grant recipients had not 
fulfilled TEACH Grant requirements and had their grants converted to 
loans (GAO, 2015).\13\ GAO concluded that The Department needs to 
explore ways to increase awareness among students of how the TEACH 
Grant program operates and improve program management, especially with 
respect to the grant-to-loan conversion dispute process. GAO further 
noted that the Department should take steps to understand why teachers 
often do not meet the TEACH program requirements. GAO reiterated that 
the goal of reducing grant-to-loan conversions and increasing program 
completion should help drive the Department's efforts. These proposed 
regulations help to address GAO's concerns.
---------------------------------------------------------------------------

    \13\ Government Accountability Office. (2015). Higher Education: 
Better Management of Federal Grant and Loan Forgiveness Programs for 
Teachers Needed to Improve Participant Outcomes (GAO 15-314). 
Washington, DC: United States Government Accountability Office.
---------------------------------------------------------------------------

    A 2018 study conducted for the Department by the American 
Institutes for Research (U.S. Department of Education, 2018) \14\ found 
that as of June 2016, 63 percent of TEACH Grant recipients who started 
their eight-year service obligation period before July 2014 had their 
grants converted to Unsubsidized Loans because they did not meet the 
service obligation requirements or the annual certification 
requirements. For instance, the study reported that 39 percent of 
recipients who were in loan status cited teaching in a position that 
did not qualify for TEACH Grant service and 33 percent cited not 
working as a certified teacher. Other factors related to teachers 
having grants converted to loans included not knowing about annual 
certification, challenges related to the certification process, and 
recipients who were never certain of their intention to teach or who 
changed to a nonteaching position prior to meeting their service 
obligation.
---------------------------------------------------------------------------

    \14\ U.S. Department of Education. (2018). Study of the Teacher 
Education Assistance for College and Higher Education (TEACH) 
Program.
---------------------------------------------------------------------------

    To address the concerns raised by these studies, we are proposing 
amendments that are intended to facilitate the process of documenting 
satisfaction of the service obligation requirements and ensure that 
recipients who fulfill their service obligation receive credit for it. 
This should also help to reduce the percentage of TEACH Grants that get 
converted to Direct Unsubsidized Loans and help promote the TEACH Grant 
Program's desired outcomes.
    The proposed regulations also speak to issues concerning 
eligibility and distribution of financial aid to various faith-based 
entities. In response to the Supreme Court's decision in Trinity 
Lutheran Church of Columbia, Inc. v. Comer (137 S. Ct. 2012 (2017)) and 
Executive Order 13798 (U.S. Attorney General Memorandum on Federal Law 
Protections for Religious Liberty (October 6, 2017)), the Department 
engaged in a full review of its regulations related to title IV, HEA 
programs in order to identify provisions that may discriminate against 
otherwise eligible students and faith-based entities by disqualifying 
them from title IV, HEA programs due to their religious beliefs in 
violation of the Free Exercise Clause of the First Amendment to the 
United States Constitution. The Department proposes to make changes to 
regulatory provisions that may discriminate against students or faith-
based entities based on their religious beliefs to ensure compliance 
with the Free Exercise Clause of the First Amendment.

Discussion of Costs and Benefits

    The Department has analyzed the costs and benefits of complying 
with these proposed regulations and our estimates are a function of the 
uncertainty and limitations of relevant data. As discussed below, we 
believe that these proposed regulations will result in modest costs to 
the Federal government and will benefit recipients of support under the 
affected programs.

Benefits of the Proposed Regulations

    With respect to the TEACH Grant Program, we anticipate that by 
simplifying and clarifying certification procedures and providing 
greater

[[Page 67809]]

flexibility to recipients to meet their service obligation, the 
proposed regulations would result in a decrease in the number of TEACH 
Grant recipients that have their grants converted to loans. We further 
anticipate that this outcome and the expansion of opportunities that 
students can use to fulfill the service obligation could result in more 
teachers teaching in high-need fields at low-income schools as well as 
in authorized teacher shortage areas.
    The regulations we propose related to other programs would also 
reduce the potential for discrimination against students and faith-
based institutions due to their religious beliefs in violation of the 
Free Exercise Clause of the First Amendment of the Constitution.

Costs of the Proposed Regulations

    Regarding changes to the TEACH Grant Program, the proposed changes 
would potentially improve the reporting and documentation process for 
grant recipients and could lead to a reduction in the number of grant-
to-loan conversions. According to Department data, the percentage of 
TEACH Grant recipients with one or more years of qualified teaching 
service after six or more years following their last TEACH award has 
been increasing steadily. The improvements to the process for 
recipients to document their teaching service included in these 
proposed regulations should help prevent unintended grant to loan 
conversions.
    For FY 2020, The Department estimates that approximately 32,000 
recipients will receive TEACH Grants with a value of $97.2 million in 
grants, and an average award of slightly over $3,000. To provide some 
background, over the past five years from fiscal year 2014 through 
fiscal year 2018, the Department has provided a total of $449.3 million 
in TEACH grant funding to 159,317 students. Based on program data, the 
Department estimates that 66 percent of students receiving TEACH Grants 
will fail to complete their required service commitment and will have 
their grants converted to Direct Unsubsidized Stafford Loans.
    Using a sensitivity analysis of grant-to-loan conversions, we 
estimate that for the 2020 cohort, a one percent reduction in the 
grant-to-loan conversion would result in a cost to the Federal 
Government of $767,663, since each grant that is not converted to a 
loan where the student is obligated to pay it back remains a grant. The 
Department recognizes the percentage change that the proposed 
regulations would have on the percentage of conversions is uncertain. 
The Department intends that these regulatory changes should reduce the 
loan conversion rate. However, students fail to meet the TEACH Grant 
service requirements for many reasons, including teaching in positions 
that do not qualify or changing to non-teaching employment. For 
instance, the PPSS/AIR study cited earlier reported that approximately 
39 percent of TEACH recipients whose grants had been converted to loans 
reported teaching in a position that did not qualify for the TEACH 
program, 33 percent reported not teaching or not completing the 
teaching certificate, 32 percent stated they did not understand the 
service requirements, and about 44 percent o reported factors related 
to the annual certification process as influencing them to not complete 
the program requirements. Since respondents could select more than one 
response category, the total percentage does not add to 100 percent. Of 
those that indicated the annual certification process was a problem, 
the distribution revealed that about 19 percent said they did not know 
about the annual certification process; 13 percent reported not 
certifying because of challenges to the certification process; 9 
percent reported not certifying because they forgot, and about 2 
percent listed other reasons.
    While predicting how recipients might change behavior due to the 
proposed regulations is speculative, the PPSS/AIR responses give us 
reason to assume that there could be improvement based on the 
recipients who cited the certification process as a factor in their 
conversion. Such improvement would logically lead to some reduction in 
the grant-to-loan conversion rate.
    Given an estimated grant-to-loan conversion rate, it is possible to 
identify a series of costs for a series of percentage reductions that 
give context to the potential impact that the proposed regulations 
would have.

      Five Percentage Point Interval Grant-to-Loan Conversion Costs
------------------------------------------------------------------------
                                                               Cost
               Percentage point reduction                   ($millions)
------------------------------------------------------------------------
5.......................................................             3.8
10......................................................             7.7
15......................................................            11.5
20......................................................            15.4
25......................................................            19.2
------------------------------------------------------------------------

    The above table suggests that if the grant-to-loan conversion rate 
were reduced from the estimated 66 percent to 61 percent--a five 
percentage point reduction--the Federal Government would incur 
additional costs of about $3.8 million. And, if the projected 66 
percent rate were reduced by 10 percentage points to 56 percent, there 
would be a cost of about $7.7 million based on the 2020 cohort. 
However, this cost to the Federal Government would also result in a 
benefit to student TEACH Grant recipients who would not have to repay 
their TEACH Grants that were converted to loans. Note that these are 
five percentage percentage-point intervals, and not percentage 
decreases of the current rate.
    The current regulations do not permit a TEACH Grant recipient to 
satisfy the service obligation by teaching in a geographic region of a 
State that has been designated in the Nationwide List as having a 
shortage of teachers, or by teaching at a particular grade level not 
associated with a high-need field that has been designated in the 
Nationwide List as having a shortage of teachers. Instead, the 
recipient must teach in a high-need field listed in the Nationwide 
List.
    The proposed regulations would remove this restriction. For 
example, under the proposed regulations, a grant recipient could 
satisfy the service obligation by serving as a full-time highly 
qualified general elementary school or secondary school teacher at a 
low-income school in a State that has reported a general shortage of 
elementary or secondary teachers in the Nationwide List. This is not 
allowed under the current regulations. Therefore, the proposed 
regulations would allow grant recipients who are unable to find 
qualifying teaching jobs in a high-need field to meet the service 
obligation by teaching at a low-income school located in a geographic 
teacher shortage area or at a grade level where there is a shortage of 
teachers. This could facilitate increased opportunities for TEACH 
recipients toward meeting the service obligation and perhaps impact the 
conversion rate to loans. But, it would be speculative to assume any 
specific amount of change in the conversion rate attributable to 
potential expanded teaching opportunities. Also, the proposed change 
might result in a number of grant recipients simply transferring from 
one low-income school to another low-income school to accept a teaching 
position that might previously have not been eligible.
    Based on available data from the Department's Teacher Shortage Area 
listing,\15\ there are about 10 states, including California, Idaho, 
Illinois, Maine, Michigan, North Dakota, South Dakota, Pennsylvania, 
Virginia, West Virginia and the District of Columbia, that appear to 
have teacher shortages

[[Page 67810]]

particularly in the elementary education area that could potentially 
expand the eligible teaching opportunities for TEACH Grant recipients 
compared to the opportunities available under the current regulations. 
According to National Center for Education Statistics data, these 
states represented approximately 27 percent of teachers in public 
elementary and secondary schools in the 2011-12 Schools and Staffing 
Survey data, both for overall teachers and for those in their first 10 
years of teaching.\16\ As indicated in the PPSS/AIR responses, 
approximately 15 percent of those whose grants converted to loans said 
they were unable to find a job in a high-need field and adjusting for 
nationwide percentage of public schools with 30 percent or more of 
students receiving a free and reduced lunch of approximately 70 
percent,\17\ we estimate that the changes removing the high needs field 
requirement in qualifying States will reduce the overall grant-to-loan 
conversion rate by approximately 3 percent., so relieving that 
requirement for those states would have some net budget impact. 
Nevertheless, while the proposed changes would expand options for grant 
recipients to meet the service obligation by allowing grant recipients 
who are not teaching in a high-need subject area to qualify by teaching 
at a low-income school in a geographic shortage area or in a grade-
level shortage area, we do not believe the proposed regulations would 
lead to a significant increase in the actual number of TEACH grant 
recipients. We would welcome comments from the public as to whether the 
expansion of teaching options would result in an increase in the number 
of TEACH grant recipients.
---------------------------------------------------------------------------

    \15\ https://tsa.ed.gov/#/reports.
    \16\ U.S. Department of Education, National Center for Education 
Statistics, Digest of Education Statistics 2017, Table 209.30. 
Highest degree earned, years of full-time teaching experience, and 
average class size for teachers in public elementary and secondary 
schools, by state: 2011-12. Data not reported for 5 states, 
including the District of Columbia, so percentage is adjusted to be 
total of those reporting.
    \17\ United States Department of Education, National Center for 
Education Statistics, Condition of Education--Characteristics of 
Traditional Public Schools and Charter Schools, Figure 3. Percentage 
of traditional public schools and public charter schools, by 
percentage of students eligible for free or reduced-price lunch: 
School year 2016-17. Available at https://nces.ed.gov/programs/coe/indicator_cla.asp.
---------------------------------------------------------------------------

    Overall, the proposed regulations have the potential to improve 
some aspects of the certification process and opportunities for 
recipients to meet their service requirements, which would benefit 
recipients, in keeping with the original goal of the program. As 
several provisions are expected to decrease the grant-to-loan 
conversion rate and result in additional cost to the Federal 
Government, we have estimated a net budget impact of that change.
    In addition to the 3 percent decrease attributed to the changes to 
the high needs field requirements, we assume that the additional 
changes to the TEACH Grant program described in this preamble will 
decrease grant-to-loan conversions. We expect this effect will be lower 
for existing cohorts as improved counseling is more applicable to 
future participants and participants who took out TEACH Grants several 
years ago may be established in jobs that may not qualify or may have 
moved on from the profession, possibly limiting the ways those with 
older TEACH grants may respond to the proposed regulations. As a 
result, we applied the decreases shown in Table [2] to the grant-to-
loan conversion rate to the President's Budget 2020 baseline. For past 
cohorts, the changes are applied only to future years of activity.

         Table 2--Grant-to-Loan Conversion Rate Decrease Factor
------------------------------------------------------------------------
                                                             Decrease
                         Cohorts                             (percent)
------------------------------------------------------------------------
2008-2012...............................................               4
2013-2019...............................................               9
2020-2029...............................................              15
------------------------------------------------------------------------

    The estimated net budget impact is a cost of $119.98 million, 
including a modification to existing cohorts of $15.8 million and a 
cost for cohorts 2020 to 2029 of $104.2 million. We welcome comments on 
the estimated effects of the proposed regulations and will consider any 
information received in evaluating the final regulations.
    A number of the proposed changes to the regulations relate to the 
eligibility of certain entities and recipients to participate in the 
title IV programs. The proposed regulations remove language prohibiting 
borrowers with Perkins loans made before July 1, 1993 and National 
Defense Student Loans (NDSL) made between October 1, 1980 and July 1, 
1993 from obtaining deferments during periods of otherwise eligible 
full-time volunteer work that includes providing religious instruction, 
conducting religious services, proselytizing, or engaging in 
fundraising to support religious activities. The small group of 
borrowers expected to benefit from these changes and the heavy 
discounting effect that would apply to any deferment costs on such old 
loans, we do not estimate any budget impact from these changes.
    The proposed regulations would remove current provisions that state 
that a member of a religious order pursuing a course of study in an 
institution of higher education has no financial need for purposes of 
the Pell Grant Program, Federal Perkins Loan Program, FWSP, FSEOG, FFEL 
Program, or the Direct Loan Program.
    Despite this proposed change, the additional eligibility for 
student aid for a very small group of participants in a given religious 
order would not, in our estimation, result in any additional 
significant financial aid costs to the government. We have little firm 
data on the number of members in religious orders subject to the 
proposed changes who would actually choose to accept the financial aid 
for which they are eligible. For instance, the Franciscans are perhaps 
the largest and most well-known mendicant religious order, which means 
the priests take a vow of poverty. According to a 2013 reference,\18\ 
there are around 14,000 first order Franciscan members, including 9,700 
priests. Even considering other orders within the Franciscans and 
additional smaller monastic sects such as the Benedictines and 
Dominicans, the membership estimates would not be large. Thus, the 
Department believes that the pool of members potentially impacted by 
this regulatory change is already small to begin with and the proposed 
regulations are not going to induce changes in member practices and 
would not result in measurable financial aid estimates. Note that there 
are already many religiously oriented postsecondary institutions that 
are title IV eligible and are not affected by these proposed 
regulations. Therefore, the proposed changes would allow our 
regulations to be consistent with the Supreme Court decision in Trinity 
Lutheran Church of Columbia, Inc. v. Comer without involving a 
significant economic impact.
---------------------------------------------------------------------------

    \18\ Annuario Pontificio 2013 (Libreria Editrice Vaticana 2013 
ISBN 978-88-209-9070-1), p. 1422.
---------------------------------------------------------------------------

    The proposed regulatory changes would also affect PSLF. Under the 
proposed regulations, certain institutions that are tax-exempt under 
section 501(c)(3) of the Internal Revenue Code that are religious 
organizations would be considered public service eligible employers for 
purposes of PSLF. However, the proposed regulations would provide that, 
while working for such an employer, no time spent by a borrower 
involving religious instruction, worship services, or proselytizing 
could be used toward meeting the full-time requirement stipulated for 
PSLF.

[[Page 67811]]

    This consensus language actually codifies existing program practice 
that makes religious organizations eligible to be PSLF employers, but 
prohibits time spent on specific religious duties from counting toward 
the full-time PSLF requirement. Therefore, due to operational practice 
since program inception and including baseline assumptions, the 
Department has already been implementing the policy proposed in the 
NPRM. As a result, the proposed changes would ``catch up'' the 
regulations with the program as it is currently being executed and 
simply codify the current operational process.
    In fact, the application form for PSLF (OMB No. 1845-0110) 
specifically states that a qualifying employer includes a ``not-for-
profit organization that is tax-exempt under Section 501(c)(3) of the 
Internal Revenue Code'' but makes no exclusion for religious purposes. 
The application also makes it clear that in performing job duties 
toward the full-time requirement, a borrower's qualifying employment at 
a 501(c)(3) organization or a not-for-profit organization does not 
include time spent participating in religious instruction, worship 
services, or any form of proselytizing. We do not estimate any 
significant increase in PSLF costs, given that the program has already 
been operating consistently with the proposed requirements.
    The proposed changes to the GEAR UP program regulations would 
clarify that providers of GEAR UP services to students enrolled in 
private schools must be contracted independently of the private schools 
and would allow pervasively sectarian institutions of higher education 
to serve as fiscal agents for GEAR UP grants. In general, the 
Department does not estimate costs associated with changes to 
regulations governing competitive grant programs as participation in 
such programs is voluntary. However, it is possible that certain 
changes in the regulatory framework governing a competitive grant 
program could produce transfers in program benefits among entities or 
recipients of services.
    Regarding the provision requiring providers of services to students 
enrolled in private schools to be independent of the school, the 
Department first assessed the extent to which GEAR UP services are 
currently provided to students enrolled in such schools. During the 
most recent reporting period, GEAR UP grantees reported serving 
students in 4,033 schools. Of those schools, the Department was only 
able to identify five private schools in which students received GEAR 
UP services. In total, private schools represented only 0.1 percent of 
schools served by the program and, even among the grantees serving such 
schools, private schools represented 0.9 percent of the total schools 
they served. As such, we do not believe that the proposed requirement 
relating to the employment relationship between individuals providing 
services in such schools and the schools themselves is likely to have a 
large impact on the administration of the program.
    Regarding who may serve as a fiscal agent for a GEAR UP Grant, as 
noted above, the proposed regulations would allow pervasively sectarian 
institutions of higher education to serve in such a capacity. However, 
nothing in the current GEAR UP regulations precludes a pervasively 
sectarian institution of higher education from being a member of a GEAR 
UP partnership. As such, pervasively sectarian institutions can 
currently participate in and provide services under a GEAR UP grant. 
The Department does not have readily available data to identify all 
members of GEAR UP partnerships and whether they are pervasively 
sectarian. With such information, the Department could more easily 
quantify the potential number of partnerships affected by the change. 
However, even without such information, given that pervasively 
sectarian institutions are already eligible members of partnerships, we 
do not believe the change to allow them to serve as fiscal agents would 
dramatically change the makeup of the GEAR UP applicant pool. Any 
pervasively sectarian institution that currently wishes to participate 
in the GEAR UP program is able to do so and this change would only 
result in a shift in who has primary fiscal liability for the grant.

Alternatives Considered

    With respect to the TEACH Grant program, we considered not 
including provisions related to the current reconsideration process in 
the proposed regulations, maintaining the current counseling 
requirements without adding a separate conversion counseling 
requirement, maintaining instead of expanding the current regulations 
related to qualifying teacher shortage areas for fulfilling the service 
obligation, and not expanding allowable suspensions beyond those that 
are currently available. For the faith-based provisions, we considered 
not making the proposed changes and leaving the current regulatory 
language in place as written.

Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum ``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 (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.  106.9 Dissemination of policy.)
     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?
    To send any comments that concern how the Department could make 
these proposed regulations easier to understand, see the instructions 
in the ADDRESSES section of the preamble.

Regulatory Flexibility Act Certification

    The Secretary certifies that the proposed rule, if promulgated, 
will not have a significant economic impact on a substantial number of 
small entities. In fact, the primary entities who are affected by the 
proposed regulations are individual students, not organizations, 
businesses, or governmental units. This holds true for the faith-based 
component of the NPRM that addresses individuals participating in 
religious orders, or student borrowers applying for PSLF. Similarly, 
the proposed changes to the TEACH Grant Program regulations primarily 
affect students who are interested in teaching and apply for a TEACH 
grant.
    Of the entities that would be affected by the proposed regulations, 
many institutions, especially religiously oriented schools, would be 
considered small. The Department recently proposed a size 
classification based on enrollment using IPEDS data that established 
the percentage of institutions in various higher education

[[Page 67812]]

sectors considered to be small entities, as shown in Table [6].\19\ 
This size classification was described in the NPRM published in the 
Federal Register on July 31, 2018 for the proposed borrower defense 
rule (83 FR 37242, 37302). Under the Department's proposed size 
standards, ``small entities'' have an enrollment of 1,000 students or 
less at 4-year schools or 500 students or less at 2-years schools. The 
Department has discussed the proposed standard with the Chief Counsel 
for Advocacy of the Small Business Administration, and while no change 
has been finalized, the Department continues to believe this approach 
better reflects a common basis for determining size categories that is 
linked to the provision of educational services.
---------------------------------------------------------------------------

    \19\ U.S. Department of Education, National Center for Education 
Statistics. Integrated Postsecondary Education Data System 2016 
Institutional Characteristics: Directory Information survey file 
downloaded March 3, 2018. Available at nces.ed.gov/ipeds/datacenter/DataFiles.aspx.

                            Table 6--Small Entities Under Enrollment Based Definition
----------------------------------------------------------------------------------------------------------------
                 Level                            Type                 Small           Total          Percent
----------------------------------------------------------------------------------------------------------------
2-year................................  Public..................             342           1,240              28
2-year................................  Private.................             219             259              85
2-year................................  Proprietary.............           2,147           2,463              87
4-year................................  Public..................              64             759               8
4-year................................  Private.................             799           1,672              48
4-year................................  Proprietary.............             425             558              76
                                                                 -----------------------------------------------
    Total.............................  ........................           3,996           6,951              57
----------------------------------------------------------------------------------------------------------------

    The proposed regulations would affect students who belong to 
religious orders and those students most likely attend institutions 
with a religious mission. In general, we believe religious institutions 
are more likely to be small institutions. However, the proposed 
regulations do not affect the title IV eligibility of such 
institutions. Indeed, even schools that are controlled by various 
religious organizations and do not adhere to certain title IX civil 
rights provisions can still participate in title IV financial aid 
programs if they receive a waiver from parts of title IX that conflict 
with the school's religious doctrine.
    According to the Department's Office of Civil Rights, since 1976 
there have been 277 religious institutions of higher education that 
have received a religious exemption from title IX civil rights laws due 
to certain title IX provisions that conflict with the school's 
religious beliefs. Most of those schools maintain eligibility for title 
IV funding while holding a partial exemption from title IX. In some 
cases, there are religious-based schools who on their own choose not to 
participate at all in title IX or title IV, but the proposed 
regulations would not impact that limited number of schools.
    We do not expect that the proposed regulations would have a 
significant economic impact on small entities. Nothing in the proposed 
regulations would compel institutions, small or not, to engage in 
substantive changes to their programs. Therefore, there is no estimated 
associated institutional burden.
    Even if the affected institutions were considered small entities, 
the proposed regulations are designed to permit them to participate in 
title IV programs without jeopardizing their religious mission. Nothing 
in the proposed regulations would require institutions to expand their 
enrollment, take on additional students, or to participate in title IV 
aid programs, but the proposed regulations would give them that 
opportunity.

Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public 
understands the Department's collection instructions, respondents can 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    Part 686 contains information collection requirements. Under the 
PRA the Department has submitted a copy of these sections to OMB for 
its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number.
    Notwithstanding any other provision of law, no person is required 
to comply with, or is subject to penalty for failure to comply with, a 
collection of information if the collection instrument does not display 
a currently valid OMB control number.
    In the final regulations we will display the control numbers 
assigned by OMB to any collection requirements proposed in this NPRM 
and adopted in the final regulations.

Section 686.12--Agreement To Serve or Repay

    Requirements: Under proposed Sec.  686.12 the TEACH Grant agreement 
to serve or repay would need to be expanded and updated with revised 
definitions, requirements, and explanations of the program and 
participant conditions, and options as discussed in the preamble.
    Burden Calculation: We believe that the proposed changes and 
updates would require changes to the TEACH Grant agreement to serve 
form currently approved under OMB Control Number 1845-0083, but that 
those changes would not impact the current burden associated with this 
form. We estimate that, on average, it would take a grant recipient 30 
minutes (.50 hours) to review and complete the updated agreement, which 
is done electronically. We anticipate 50,793 TEACH applicants would 
annually utilize the agreement accepting the program terms, including 
the required teaching service, or the conversion of the grant to a 
Direct Unsubsidized Loan if such service is not met or the applicant 
does not otherwise comply with the terms of the agreement. Based on one 
response per applicant, we estimate an annual reporting burden for 
individuals of 25,397 hours (50,793 x .50 hours).

[[Page 67813]]



                    Sec.   686.12--Agreement To Serve or Repay--OMB Control Number 1845-0083
----------------------------------------------------------------------------------------------------------------
                                                                               Time to respond
                 Entity                      Respondent         Responses          (hours)        Burden hours
----------------------------------------------------------------------------------------------------------------
Individual..............................            50,793            50,793               .50            25,397
                                         -----------------------------------------------------------------------
    Total...............................            50,793            50,793  ................            25,397
----------------------------------------------------------------------------------------------------------------

Section 686.32--Counseling Requirements

    Requirements: The proposed regulations in Sec.  686.32 would expand 
the information that is provided to TEACH Grant recipients during 
initial, subsequent, and exit counseling. The proposed regulations 
would add a new conversion counseling requirement for grant recipients 
whose TEACH Grants are converted to Direct Unsubsidized Loans.
    Burden Calculation: We believe that the proposed expansion and 
revision of the required program counseling would require changes to 
the counseling currently available. The changes to the initial, 
subsequent, exit, and new conversion counseling information collection 
would be completed and made available for comment through a full public 
clearance package after publication of the final rule and before being 
made available for use by the effective date of the regulations.

Section 686.40--Documenting the Service Obligation

    Requirements: The proposed regulations would clarify the 
requirements regarding the documentation of completion of the teaching 
service obligation in the TEACH Grant Program and how it is reported.
    Burden Calculation: We believe that the proposed changes to the 
required service obligation would require a new certification form. 
During the 2018 calendar year, Department records indicate we received 
documentation for 52,989 grantees regarding yearly service obligation 
completion. We estimate that to meet the requirements of Sec.  686.40 
each respondent would need 20 minutes (.33 hours) to complete the 
certification form.
    We estimate the total burden of 17,486 hours (52,989 x .33 hours) 
under OMB Control Number 1845-NEW1.

                 Sec.   686.40--Documenting the Service Obligation--OMB Control Number 1845-NEW1
----------------------------------------------------------------------------------------------------------------
                                                                               Time to respond
                 Entity                      Respondent         Responses          (hours)        Burden hours
----------------------------------------------------------------------------------------------------------------
Individual..............................            52,989            52,989               .33            17,486
                                         -----------------------------------------------------------------------
    Total...............................            52,989            52,989  ................            17,486
----------------------------------------------------------------------------------------------------------------

Section 686.41--Periods of Suspension

    Requirements: The proposed regulations would add new conditions 
under which a TEACH Grant recipient may receive a temporary suspension 
of the period for completing the service obligation.
    Burden Calculation: We believe that the proposed new conditions to 
receive a temporary suspension of the period for completing the service 
obligation would require a new temporary suspension form.
    During the 2018 calendar year, Department records indicate we 
received documentation supporting suspension of 589 grantees for 
enrollment to complete licensure requirements. We estimate that to meet 
the requirements in proposed Sec.  686.41(a)(1)(ii), each respondent 
would need 20 minutes (.33 hours) to complete the certification form. 
We estimate the total burden of 194 hours (589 x .33 hours).
    During the 2018 calendar year, Department records indicate we 
received documentation supporting suspension of 334 grantees for 
qualifying leave under the Family and Medical Leave Act of 1993. We 
estimate that to meet the requirements in proposed Sec.  
686.41(a)(1)(iii), each respondent would need 20 minutes (.33 hours) to 
complete the certification form. We estimate the total burden of 110 
hours (334 x .33 hours).
    During the 2018 calendar year, Department records indicate we 
received documentation supporting suspension of 24 grantees for call to 
military service. We estimate that to meet the requirements in proposed 
Sec.  686.41(a)(1)(iv), each respondent would need 20 minutes (.33 
hours) to complete the certification form. We estimate the total burden 
of 8 hours (24 x .33 hours).
    We anticipate that we would receive documentation supporting 
suspension of 25 grantees based on military orders for the grantee's 
spouse. We estimate that to meet the requirements in proposed Sec.  
686.41(a)(1)(v), each respondent would need 20 minutes (.33 hours) to 
complete the certification form. We estimate the total burden of 8 
hours (25 x .33 hours).
    We anticipate that we would receive documentation supporting 
suspension of 500 grantees based on residing or being employed in a 
federally declared major disaster area. We estimate that to meet the 
requirements in proposed Sec.  686.41(a)(1)(vi), each respondent would 
need 20 minutes (.33 hours) to complete the certification form. We 
estimate the total burden of 165 hours (500 x .33 hours).
    We estimate the total burden of 485 hours (1,472 x .33 hours) under 
OMB Control Number 1845-NEW1.

                       Sec.   686.41--Periods of Suspension--OMB Control Number 1845-NEW1
----------------------------------------------------------------------------------------------------------------
                                                                               Time to respond
                 Entity                      Respondent         Responses          (hours)        Burden hours
----------------------------------------------------------------------------------------------------------------
Individual (a)(1)(ii)...................               589               589               .33               194

[[Page 67814]]

 
Individual (a)(1)(iii)..................               334               334               .33               110
Individual (a)(1)(iv)...................                24                24               .33                 8
Individual (a)(1)(v)....................                25                25               .33                 8
Individual (a)(1)(vi)...................               500               500               .33               165
                                         -----------------------------------------------------------------------
    Total...............................             1,472             1,472  ................               485
----------------------------------------------------------------------------------------------------------------

Section 686.42--Discharge of Agreement To Serve or Repay

    Requirements: The proposed regulations would revise the language 
for conditions under which a TEACH Grant recipient may discharge an 
agreement to serve or repay based on military service.
    Burden Calculation: During the 2018 calendar year, Department 
records indicate we received documentation supporting suspension of 10 
grantees for discharge due to an extended call to military service. We 
estimate that to meet the requirements in proposed Sec.  686.42(c), 
each respondent would need 20 minutes (.33 hours) to complete the new 
certification form also used for military service suspension.
    We estimate the total burden of 3 hours (10 x .33 hours) under OMB 
Control Number 1845-NEW1.

              Sec.   686.42--Discharge of Agreement To Serve or Repay--OMB Control Number 1845-NEW1
----------------------------------------------------------------------------------------------------------------
                                                                               Time to respond
                 Entity                      Respondent         Responses          (hours)        Burden hours
----------------------------------------------------------------------------------------------------------------
Individual..............................                10                10               .33                 3
                                         -----------------------------------------------------------------------
    Total...............................                10                10  ................                 3
----------------------------------------------------------------------------------------------------------------

Section 686.43--Obligation To Repay the Grant

    Requirements: The proposed regulations would simplify the rules 
governing when a TEACH Grant will be converted to a Direct Unsubsidized 
Loan, as well as provide for annual notifications from the Secretary to 
the recipient regarding the status of a recipient's TEACH Grant service 
obligation. Under the proposed regulations, a TEACH Grant recipient 
could request conversion if the recipient decides not to fulfill the 
TEACH Grant obligations for any reason or if the recipient fails to 
begin or maintain qualifying teaching service within a timeframe to 
complete the service obligation in the requisite eight-year period. 
Additionally, the proposed regulations describe the notifications the 
Secretary would annually send to all TEACH Grant recipients regarding 
the service obligation requirements.
    Burden Calculation: We believe that the proposed regulations would 
require action on the part of TEACH grant recipients. Based on 
Department data during the 2018 calendar year there were 52,989 TEACH 
Grant recipients who submitted evidence of completed teaching service. 
We estimate that an additional 25 percent of that figure or about 
13,247 grant recipients would be working toward their teaching 
obligation for a total of 66,236 grant recipients who would receive the 
annual notice from the Secretary as required under proposed Sec.  
686.43(a)(2). We estimate that grant recipients would require 10 
minutes (.17 hours) to review the information provided in each annual 
notice. We estimate the total burden of 11,260 hours (66,236 x .17 
hours).
    There would be burden on those recipients who are notified that 
their TEACH Grant will be converted to a loan if the recipient does not 
submit required documentation to show that they are satisfying the 
service obligation. Based on the Department's data, during calendar 
year 2018 there were a total of 10,591 TEACH Grant recipients whose 
grants were converted to loans based on the recipients' voluntary 
request, or because the recipient was out of time to perform the 
service obligation or because the recipient did not provide evidence of 
meeting the service obligation as required under Sec.  686.43(a)(4). We 
estimate that grant recipients would require 10 minutes (.17 hours) to 
review the information in the notice. We estimate the total burden of 
1,800 burden hours (10,591 x .17 hours).
    Additionally, there would be burden on any TEACH Grant recipient 
whose grant was involuntarily converted to a Direct Unsubsidized Loan 
to request reconsideration from the Secretary. Based on the 
Department's data, during calendar year 2018 there were 282 correctable 
conversions of TEACH Grants into loans. We estimate that a recipient 
would require 15 minutes (.25 hours) to gather documentation to present 
to the Secretary and make such a request as required under Sec.  
686.43(a)(5). We estimate a total burden of 71 burden hours (282 x .25 
hours).
    We estimate a total burden of 13,131 burden hours under OMB Control 
Number 1845-NEW2.

                   Sec.   686.43--Obligation To Repay the Grant--OMB Control Number 1845-NEW2
----------------------------------------------------------------------------------------------------------------
                                                                               Time to respond
                 Entity                      Respondent         Responses          (hours)        Burden hours
----------------------------------------------------------------------------------------------------------------
Individual (a)(2).......................            66,236            66,236               .17            11,260
Individual (a)(4).......................               (*)            10,591               .17             1,800
Individual (a)(5).......................               (*)               282               .25                71
                                         -----------------------------------------------------------------------

[[Page 67815]]

 
    Total...............................            66,236            71,109  ................            13,131
----------------------------------------------------------------------------------------------------------------
* These respondents would be part of the universe of respondents who receive the annual notifications and are
  not summed to avoid duplication of respondents.

    The estimated cost to the recipients is $1,665,679, based on the 
$29.48 per hour averaged for 2018 elementary, middle school and high 
school teacher salaries from the 2019 Bureau of Labor Statistics 
Occupational Handbook.
BILLING CODE 4000-01-P

[[Page 67816]]

[GRAPHIC] [TIFF OMITTED] TP11DE19.000


[[Page 67817]]


[GRAPHIC] [TIFF OMITTED] TP11DE19.001

BILLING CODE 4000-01-C
Collections of Information
    The total burden hours and change in burden hours associated with 
each OMB control number affected by the proposed regulations follows:

------------------------------------------------------------------------
                                        Total
                                       proposed     Proposed change in
             Control No.                burden         burden hours
                                        hours
------------------------------------------------------------------------
1845-0083...........................     25,397  No change in hours.
1845-NEW1...........................     17,974  +17,974 hours.
1845-NEW2...........................     13,131  +13,131 hours.
                                     -----------------------------------
    Total...........................     56,502  +56,502 hours.
------------------------------------------------------------------------

Intergovernmental Review

    These programs are not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    In accordance with section 411 of GEPA, 20 U.S.C. 1221e-4, the 
Secretary particularly requests comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. At this site you can view this 
document, as well as all other documents of this Department published 
in the Federal Register, in text or Adobe Portable Document Format 
(PDF). To use PDF, you must have Adobe Acrobat Reader, which is 
available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov.

[[Page 67818]]

Specifically, through the advanced search feature at this site, you can 
limit your search to documents published by the Department. (Catalog of 
Federal Domestic Assistance Number does not apply.)

List of Subjects

34 CFR Part 674

    Loan programs--education, Reporting and recordkeeping, Student aid.

34 CFR Part 675

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

34 CFR Part 676

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

34 CFR Part 682

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

34 CFR Part 685

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

34 CFR Part 686

    Administrative practice and procedure, Colleges and universities, 
Education, Elementary and secondary education, Grant programs--
education, Reporting and recordkeeping requirements, Student aid.

34 CFR Part 690

    Colleges and universities, Education of disadvantaged, Grant 
programs--education, Reporting and recordkeeping requirements, Student 
aid.

34 CFR Part 692

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

34 CFR Part 694

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

    Dated: November 22, 2019.
Betsy DeVos,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary of 
Education proposes to amend parts 674, 675, 676, 682, 685, 686, 690, 
692, and 694 of title 34 of the Code of Federal Regulations as follows:

PART 674--FEDERAL PERKINS LOAN PROGRAM

0
1. The authority citation for part 674 continues to read as follows:

    Authority: 20 U.S.C. 1070g, 1087aa-1087hh; Pub. L. 111-256, 124 
Stat. 2643; unless otherwise noted.

0
2. Section 674.9 is amended by:
0
a. In the introductory text, removing the word ``A'' and adding the 
words ``Prior to October 1, 2017, a'' at the beginning of the sentence.
0
b. In the introductory text, removing the word ``is'', and adding, in 
its place, the word ``was''.
0
c. Revising paragraph (c).
    The revision reads as follows:


Sec.  674.9  Student eligibility.

* * * * *
    (c) Has financial need as determined in accordance with part F of 
title IV of the HEA.


Sec.  674.35  [Amended]

0
3. Section 674.35 is amended by removing paragraph (c)(5)(iv) and 
redesignating paragraph (c)(5)(v) as paragraph (c)(5)(iv).
0
4. Section 674.36 is amended by revising paragraph (c)(4) to read as 
follows:


Sec.  674.36  Deferment of repayment--NDSLs made on or after October 1, 
1980, but before July 1, 1993.

* * * * *
    (c) * * *
    (4) A full-time volunteer in service which the Secretary has 
determined is comparable to service in the Peace Corps or under the 
Domestic Volunteer Service Act of 1973 (ACTION programs). The Secretary 
considers that a borrower is providing comparable service if he or she 
satisfies the following four criteria:
    (i) The borrower serves in an organization that is exempt from 
taxation under the provisions of section 501(c)(3) of the Internal 
Revenue Code of 1954.
    (ii) The borrower provides service to low-income persons and their 
communities to assist them in eliminating poverty and poverty-related 
human, social, and environmental conditions.
    (iii) The borrower does not receive compensation that exceeds the 
rate prescribed under section 6 of the Fair Labor Standards Act of 1938 
(the Federal minimum wage), except that the tax-exempt organization may 
provide health, retirement, and other fringe benefits to the volunteer 
that are substantially equivalent to the benefits offered to other 
employees of the organization.
    (iv) The borrower has agreed to serve on a full-time basis for a 
term of at least one year.

PART 675--FEDERAL WORK-STUDY PROGRAMS

0
5. The authority citation for part 675 is revised to read as follows:

    Authority: 20 U.S.C. 1070g, 1087, 1094; 42 U.S.C. 2751-2756b; 
unless otherwise noted.

0
6. Section 675.9 is amended by revising paragraph (c) to read as 
follows:


Sec.  675.9  Student eligibility.

* * * * *
    (c) Has financial need as determined in accordance with part F of 
title IV of the HEA.
0
7. Section 675.20 is amended by revising paragraph (c)(2)(iv) to read 
as follows:


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

* * * * *
    (c) * * *
    (2) * * *
    (iv) Involve the construction, operation, or maintenance of so much 
of any facility as is used or is to be used for sectarian instruction 
or as a place for religious worship.
* * * * *

PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT 
PROGRAM

0
8. The authority citation for part 676 continues to read as follows:

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

0
9. Section 676.9 is amended by revising paragraph (c) to read as 
follows:


Sec.  676.9  Student eligibility.

* * * * *
    (c) Has financial need as determined in accordance with part F of 
title IV of the HEA.

PART 682--FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

0
10. The authority citation for part 682 continues to read as follows:

    Authority: 20 U.S.C. 1071-1087-4, unless otherwise noted.

0
11. Section 682.210 is amended by revising paragraph (m)(1)(iv) to read 
as follows:

[[Page 67819]]

Sec.  682.210  Deferment.

* * * * *
    (m) * * *
    (1) * * *
    (iv) Does not include time spent participating in religious 
instruction, worship services, or any form of proselytizing; and
* * * * *


Sec.  682.301  [Amended]

0
12. Section 682.301 is amended by removing paragraph (a)(2) and 
redesignating paragraph (a)(3) as paragraph (a)(2).

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

0
13. The authority citation for part 685 continues to read as follows:

    Authority: 20 U.S.C 1070g, 1087a, et seq., unless otherwise 
noted.


Sec.  685.200  [Amended]

0
14. Section 685.200 is amended by removing and reserving paragraph 
(a)(2)(ii).
0
15. Section 685.219 is amended by:
0
a. In paragraph (b), revising the definition of ``Public service 
organization'';
0
b. Revising paragraph (c)(1)(ii); and
0
c. Adding paragraph (c)(4).
    The revisions and addition read as follows:


Sec.  685.219  Public Service Loan Forgiveness Program.

* * * * *
    (b) * * *
    Public service organization means:
    (1) A Federal, State, local, or Tribal government organization, 
agency, or entity;
    (2) A public child or family service agency;
    (3) A non-profit organization under section 501(c)(3) of the 
Internal Revenue Code that is exempt from taxation under section 501(a) 
of the Internal Revenue Code;
    (4) A Tribal college or university; or
    (5)(i) A private organization that provides the following public 
services: Emergency management, military service, public safety, law 
enforcement, public interest law services, early childhood education 
(including licensed or regulated child care, Head Start, and State 
funded pre-kindergarten), public service for individuals with 
disabilities and the elderly, public health (including nurses, nurse 
practitioners, nurses in a clinical setting, and full-time 
professionals engaged in health care practitioner occupations and 
health care support occupations, as such terms are defined by the 
Bureau of Labor Statistics), public education, public library services, 
school library or other school-based services; and
    (ii) Is not a business organized for profit, a labor union, or a 
partisan political organization.
    (c) * * *
    (1) * * *
    (ii) Is employed full-time by a public service organization or 
serving in a full-time AmeriCorps or Peace Corps position--
    (A) When the borrower makes the 120 monthly payments described 
under paragraph (c)(1)(iii) of this section;
    (B) At the time of application for loan forgiveness; and
    (C) At the time the remaining principal and accrued interest are 
forgiven.
* * * * *
    (4) Time spent participating in religious instruction, worship 
services, or any form of proselytizing while employed by a non-profit 
organization under section 501(c)(3) of the Internal Revenue Code is 
not included toward meeting the full-time requirement under paragraph 
(c)(1)(ii) of this section.
* * * * *

PART 686--TEACHER EDUCATION ASSISTANCE FOR COLLEGE AND HIGHER 
EDUCATION (TEACH) GRANT PROGRAM

0
16. The authority citation for part 686 continues to read as follows:

    Authority: 20 U.S.C. 1070g, et seq., unless otherwise noted.

0
17. Section 686.1 is revised to read as follows:


Sec.  686.1  Scope and purpose.

    The TEACH Grant program awards grants to students who intend to 
teach, to help meet the cost of their postsecondary education. In 
exchange for the grant, the student must agree to serve as a full-time 
teacher in a high-need field in a school serving low-income students, 
or as a full-time teacher in a high-need field for an educational 
service agency serving low-income students, for at least four academic 
years within eight years of ceasing enrollment at the institution where 
the student received the grant or, in the case of a student who 
receives a TEACH Grant at one institution and subsequently transfers to 
another institution and enrolls in another TEACH Grant-eligible 
program, within eight years of ceasing enrollment at the other 
institution. The eight-year period for completing the required four 
years of teaching does not include periods of suspension in accordance 
with Sec.  686.41. If the student does not satisfy the service 
obligation, the amounts of the TEACH Grants received are treated as a 
Direct Unsubsidized Loan and must be repaid with interest charged from 
the date of each TEACH Grant disbursement. A TEACH Grant that has been 
converted to a Direct Unsubsidized Loan can be reconverted to a grant 
only in accordance with Sec.  686.43.
0
18. Section 686.2 is amended by:
0
a. In paragraph (b), adding in alphabetical order an entry for ``Free 
application for Federal student aid (FAFSA)'' following ``Expected 
family contribution (EFC)''.
0
b. In paragraph (d), removing the definition of ``Agreement to serve 
(ATS)'' and adding, in alphabetical order, a definition for ``Agreement 
to serve or repay''.
0
c. In paragraph (d), adding in alphabetical order the definition of 
``Educational service agency''.
0
d. In paragraph (d), in paragraph (5) of the definition of ``High-need 
field'', adding the phrase ``, including, but not limited to, computer 
science'' after the word ``Science''.
0
e. In paragraph (d), in paragraph (7) of the definition of ``High-need 
field'', removing the words ``in accordance with 34 CFR 682.210(q)''.
0
f. In paragraph (d), revising the definition of ``Highly-qualified''.
0
g. In paragraph (d), removing the definition of ``School serving low-
income students (low-income school)'' and adding, in alphabetical 
order, a definition for ``School or educational service agency serving 
low-income students (low-income school)''.
0
h. In paragraph (d), revising the definition of ``TEACH Grant-eligible 
program''.
0
i. In paragraph (d), adding in alphabetical order a definition for 
``Teacher Shortage Area Nationwide Listing (Nationwide List)''.
    The additions and revisions read as follows:


Sec.  686.2  Definitions.

* * * * *
    (d) * * *
    Agreement to serve or repay: An agreement under which the 
individual receiving a TEACH Grant commits to meet the service 
obligation or repay the loan as described in Sec.  686.12 and to comply 
with notification and other provisions of the agreement.
* * * * *
    Educational service agency: A regional public multiservice agency 
authorized by State statute to develop, manage, and provide services or

[[Page 67820]]

programs to local educational agencies (LEAs).
* * * * *
    Highly qualified: (i) When used with respect to any public 
elementary school or secondary school teacher in a State, means that--
    (A) The teacher has obtained full State certification as a teacher 
(including certification obtained through alternative routes to 
certification) or passed the State teacher licensing examination, and 
holds a license to teach in such State, except that when used with 
respect to any teacher teaching in a public charter school, the term 
means that the teacher meets the requirements set forth in the State's 
public charter school law; and
    (B) The teacher has not had certification or licensure requirements 
waived on an emergency, temporary, or provisional basis.
    (ii) When used with respect to--
    (A) An elementary school teacher who is new to the profession, 
means that the teacher--
    (1) Holds at least a bachelor's degree; and
    (2) Has demonstrated, by passing a rigorous State test, subject 
knowledge and teaching skills in reading, writing, mathematics, and 
other areas of the basic elementary school curriculum (which may 
consist of passing a State-required certification or licensing test or 
tests in reading, writing, mathematics, and other areas of the basic 
elementary school curriculum); or
    (B) A middle or secondary school teacher who is new to the 
profession, means that the teacher holds at least a bachelor's degree 
and has demonstrated a high level of competency in each of the academic 
subjects in which the teacher teaches by--
    (1) Passing a rigorous State academic subject test in each of the 
academic subjects in which the teacher teaches (which may consist of a 
passing level of performance on a State-required certification or 
licensing test or tests in each of the academic subjects in which the 
teacher teaches); or
    (2) Successful completion, in each of the academic subjects in 
which the teacher teaches, of an academic major, a graduate degree, 
coursework equivalent to an undergraduate academic major, or advanced 
certification or credentialing.
    (iii) When used with respect to an elementary, middle, or secondary 
school teacher who is not new to the profession, means that the teacher 
holds at least a bachelor's degree and--
    (A) Has met the applicable standard in paragraph (2) of this 
definition, which includes an option for a test; or
    (B) Demonstrates competence in all the academic subjects in which 
the teacher teaches based on a highly objective uniform State standard 
of evaluation that--
    (1) Is set by the State for both grade-appropriate academic subject 
matter knowledge and teaching skills;
    (2) Is aligned with challenging State academic content and student 
academic achievement standards and developed in consultation with core 
content specialists, teachers, principals, and school administrators;
    (3) Provides objective, coherent information about the teacher's 
attainment of core content knowledge in the academic subjects in which 
a teacher teaches;
    (4) Is applied uniformly to all teachers in the same academic 
subject and the same grade level throughout the State;
    (5) Takes into consideration, but is not based primarily on, the 
time the teacher has been teaching in the academic subject;
    (6) Is made available to the public upon request; and
    (7) May involve multiple, objective measures of teacher competency.
    (iv)(A) When used with respect to any public, or other non-profit 
private, elementary or secondary school teacher who is exempt from 
State certification requirements means that the teacher is permitted to 
and does satisfy rigorous subject knowledge and skills tests by taking 
competency tests in the applicable grade levels and subject areas.
    (B) For purposes of paragraph (iv)(A) of this definition, the 
competency tests taken by a private school teacher must be recognized 
by five or more States for the purpose of fulfilling the highly 
qualified teacher requirements as described in paragraphs (i) through 
(iii) of this definition, and the score achieved by the teacher on each 
test must equal or exceed the average passing score of those five 
States.
* * * * *
    School or educational service agency serving low-income students 
(low-income school): An elementary school, secondary school, or 
educational service agency that is listed in the Department's Teacher 
Cancellation Low-Income (TCLI) Directory. The Secretary considers all 
elementary and secondary schools and educational service agencies 
operated by the Bureau of Indian Education (BIE) in the Department of 
the Interior or operated on Indian reservations by Indian Tribal groups 
under contract or grant with the BIE to qualify as schools or 
educational service agencies serving low-income students.
* * * * *
    TEACH Grant-eligible program: An eligible program, as defined in 
Sec.  668.8 of this chapter, is a program of study at a TEACH Grant-
eligible institution that is designed to prepare an individual to teach 
as a highly qualified teacher in a high-need field and leads to a 
baccalaureate or master's degree, or is a post-baccalaureate program of 
study. A two-year program of study that is acceptable for full credit 
toward a baccalaureate degree is considered to be a program of study 
that leads to a baccalaureate degree.
* * * * *
    Teacher shortage area nationwide listing (Nationwide List): A list 
of teacher shortage areas, as defined in Sec.  682.210(q)(8)(vii) of 
this chapter, in each State.
0
19. Section 686.10 is revised to read as follows:


Sec.  686.10  Application.

    To receive a grant under this part, a student must--
    (a) Complete and submit the Free application for Federal student 
aid (FAFSA) in accordance with the instructions in the FAFSA;
    (b) Complete and sign an agreement to serve or repay in accordance 
with Sec.  686.12; and
    (c) Provide any additional information requested by the Secretary 
and the institution.


Sec.  686.11  [Amended]

0
20. Section 686.11 is amended by:
0
a. In paragraph (a)(1)(i), removing the words ``submitted a completed 
application'' and adding, in their place, the words ``met the 
application requirements in Sec.  686.10''.
0
b. Removing paragraph (a)(1)(ii).
0
c. Redesignating paragraphs (a)(1)(iii), (iv), and (v) as paragraphs 
(a)(1)(ii), (iii), and (iv), respectively.
0
d. In paragraph (b) introductory text, removing the words ``submitted a 
completed application'' and adding, in their place, the words ``met the 
application requirements in Sec.  686.10''.
0
e. Removing paragraph (b)(1).
0
f. Redesignating paragraphs (b)(2) and (3) as paragraphs (b)(1) and 
(2), respectively.
0
21. Section 686.12 is revised to read as follows:


Sec.  686.12  Agreement to serve or repay.

    (a) General. A student who meets the eligibility requirements in 
Sec.  686.11 may receive a TEACH Grant only after he or she signs an 
agreement to serve or repay provided by the Secretary and receives 
counseling in accordance with Sec.  686.32.

[[Page 67821]]

    (b) Contents of the agreement to serve or repay. The agreement to 
serve or repay--
    (1) Provides that, for each TEACH Grant-eligible program for which 
the student received TEACH Grant funds, the grant recipient must 
fulfill a service obligation by performing creditable teaching service 
by serving--
    (i) As a full-time teacher for a total of not less than four 
elementary or secondary academic years within eight years after the 
date the recipient ceased to be enrolled at the institution where the 
recipient received the TEACH Grant, or in the case of a student who 
receives a TEACH Grant at one institution and subsequently transfers to 
another institution and enrolls in another TEACH Grant-eligible 
program, within eight years of ceasing enrollment at the other 
institution;
    (ii) In a low-income school as defined in Sec.  686.2(d) and 
subject to the requirements under Sec.  686.40(a)(3);
    (iii) As a highly qualified teacher as defined in Sec.  686.2(d); 
and
    (iv) In a high-need field in the majority of classes taught during 
each elementary and secondary academic year;
    (2) Requires the grant recipient to submit, upon completion of each 
year of service, documentation of the service in the form of a 
certification by a chief administrative officer of the school;
    (3) Explains that the eight-year period for completing the service 
obligation does not include periods of suspension in accordance with 
Sec.  686.41;
    (4)(i) Explains the conditions under which a TEACH Grant may be 
converted to a Direct Unsubsidized Loan, as described in Sec.  686.43;
    (ii) Explains that, if a TEACH Grant is converted to a Direct 
Unsubsidized Loan, the grant recipient must repay the loan in full, 
with interest charged from the date of each TEACH Grant disbursement; 
and
    (iii) Explains that to avoid further accrual of interest as 
described in paragraph (b)(4)(ii) of this section, a grant recipient 
who decides not to teach in a qualified school or field, or who for any 
other reason no longer intends to satisfy the service obligation, may 
request that the Secretary convert his or her TEACH Grant to a Direct 
Unsubsidized Loan so that the grant recipient may begin repaying 
immediately, instead of waiting for the TEACH Grant to be converted to 
a loan under the condition described in Sec.  686.43(a)(1)(ii); and
    (5) Requires the grant recipient to comply with the terms, 
conditions, and other requirements consistent with Sec. Sec.  686.40 
through 686.43 that the Secretary determines to be necessary.
    (c) Completion of the service obligation. (1) A grant recipient 
must complete one service obligation for all TEACH Grants received for 
undergraduate study, and one service obligation for all TEACH Grants 
received for graduate study. Each service obligation begins when the 
grant recipient ceases enrollment at the institution where the TEACH 
Grants were received, or, in the case of a grant recipient who receives 
a TEACH Grant at one institution and subsequently transfers to another 
institution, within eight years from the date the grant recipient 
ceases enrollment at the other institution. However, creditable 
teaching service, a suspension approved under Sec.  686.41(a)(2), or a 
military discharge granted under Sec.  686.42(c)(2) may apply to more 
than one service obligation.
    (2) Unless paragraph (c)(3) of this section applies--
    (i) In the case of a TEACH Grant recipient who withdraws from an 
institution before completing a baccalaureate or post-baccalaureate 
program of study for which he or she received TEACH Grants, but later 
re-enrolls at the same institution or at a different institution in 
either the same baccalaureate or post-baccalaureate program or in a 
different TEACH Grant-eligible baccalaureate or post-baccalaureate 
program prior to the date that his or her TEACH Grants are converted to 
Direct Unsubsidized Loans under Sec.  686.43(a)(1)(ii) and receives 
additional TEACH Grants or the Secretary otherwise confirms that the 
grant recipient has re-enrolled in a TEACH Grant-eligible program, the 
Secretary adjusts the starting date of the period for completing the 
service obligation to begin when the grant recipient ceases to be 
enrolled at the institution where he or she has re-enrolled; and
    (ii) In the case of a TEACH Grant recipient who withdraws from an 
institution before completing a master's degree program of study for 
which he or she received TEACH Grants, but later re-enrolls at the same 
institution or at a different institution in either the same master's 
degree program or in a different TEACH Grant eligible master's degree 
program prior to the date that his or her TEACH Grants are converted to 
Direct Unsubsidized Loans under Sec.  686.43(a)(1)(ii) and receives 
additional TEACH Grants or the Secretary otherwise confirms that the 
grant recipient has re-enrolled in a TEACH Grant-eligible program, the 
Secretary adjusts the starting date of the period for completing the 
service obligation to begin when the grant recipient ceases to be 
enrolled at the institution where he or she has re-enrolled.
    (3) In the case of a TEACH Grant recipient covered under paragraph 
(c)(2)(i) or (ii) of this section who completed one or more complete 
academic years of creditable teaching service as described in Sec.  
686.12(b) during the period between the grant recipient's withdrawal 
and re-enrollment--
    (i) The Secretary does not adjust the starting date of the period 
for completing the service obligation unless requested by the 
recipient;
    (ii) The completed teaching service counts toward satisfaction of 
the grant recipient's service obligation under paragraph (c)(2)(i) of 
this section; and
    (iii) If the grant recipient continues to perform creditable 
teaching service after re-enrolling in a TEACH Grant-eligible program, 
the grant recipient may receive credit toward satisfaction of the 
service obligation for any complete academic years of creditable 
teaching performed while the recipient is concurrently enrolled in the 
TEACH Grant-eligible program only if the recipient does not request and 
receive a temporary suspension of the period for completing the service 
obligation under Sec.  686.41(a)(1)(i).
    (d) Teaching in a high-need field listed in the Nationwide List. 
For a grant recipient's teaching service in a high-need field listed in 
the Nationwide List to count toward satisfying the recipient's service 
obligation, the high-need field in which he or she prepared to teach 
must be listed in the Nationwide List for the State in which the grant 
recipient teaches--
    (1) For teaching service performed before July 1, 2010, at the time 
the grant recipient begins teaching in that field, even if that field 
subsequently loses its high-need designation for that State; or
    (2) For teaching service performed on or after July 1, 2010--
    (i) At the time the grant recipient begins teaching in that field, 
even if that field subsequently loses its high-need designation for 
that State; or
    (ii) At the time the grant recipient signed the agreement to serve 
or repay or received the TEACH Grant, even if that field subsequently 
loses its high-need designation for that State before the grant 
recipient begins teaching in that field.


Sec.  686.21  [Amended]

0
22. Section 686.21 is amended by:
0
a. In paragraph (a)(2)(i), removing the word ``aggregate'' and adding, 
in its place, the word ``total'';

[[Page 67822]]

0
b. In paragraph(a)(2)(ii), removing the word ``aggregate'' and adding, 
in its place, the word ``total'';
0
c. In paragraph (a)(2)(ii), removing the words ``a master's degree'' 
and adding, in their place, the words ``graduate study''.


Sec.  686.31  [Amended]

0
23. Section 686.31 is amended by:
0
a. In paragraph (a)(3), adding the words ``or repay'' after the word 
``serve''.
0
b. In paragraph (e)(2)(ii), removing the word ``Federal'' before the 
words ``Direct Unsubsidized Loan''.
0
24. Section 686.32 is amended by:
0
a. Revising paragraphs (a)(3), (b)(3), and (c)(4) and (5);
0
b. In paragraph (d), adding the phrase ``paragraphs (a) through (c) 
of'' after the words ``compliance with''; and
0
c. Adding paragraph (e).
    The revisions and addition read as follows:


Sec.  686.32  Counseling Requirements.

    (a) * * *
    (3) The initial counseling must--
    (i) Explain the terms and conditions of the TEACH Grant agreement 
to serve or repay as described in Sec.  686.12;
    (ii) Provide the grant recipient with information about how to 
identify low-income schools and documented high-need fields;
    (iii) Inform the grant recipient that, for the teaching to count 
towards the recipient's service obligation, the high-need field in 
which he or she has prepared to teach must be--
    (A) One of the six high-need fields listed in Sec.  686.2; or
    (B) A high-need field that is listed in the Nationwide List for the 
State in which the grant recipient teaches--
    (1) At the time the grant recipient begins teaching in that field, 
even if that field subsequently loses its high-need designation for 
that State; or
    (2) For teaching service performed on or after July 1, 2010, at the 
time the grant recipient signed the agreement to serve or repay or 
received the TEACH Grant, even if that field subsequently loses its 
high-need designation for that State before the grant recipient begins 
teaching in that field;
    (iv) Inform the grant recipient of the opportunity to request a 
suspension of the eight-year period for completion of the agreement to 
serve or repay and the conditions under which a suspension may be 
granted in accordance with Sec.  686.41;
    (v) Explain to the grant recipient that conditions, such as 
conviction of a felony, could preclude the grant recipient from 
completing the service obligation;
    (vi) Emphasize to the grant recipient that if the grant recipient 
fails or refuses to complete the service obligation contained in the 
agreement to serve or repay or any other condition of the agreement to 
serve or repay--
    (A) The TEACH Grant must be repaid as a Direct Unsubsidized Loan; 
and
    (B) The grant recipient will be obligated to repay the full amount 
of each grant and the accrued interest from each disbursement date;
    (vii) Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will be converted to a Direct Unsubsidized 
Loan;
    (viii) Explain that--
    (A) To avoid further accrual of interest as described in Sec.  
686.12(b)(4)(ii), a grant recipient who decides not to teach in a 
qualified school or field, or who for any other reason no longer 
intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii); and
    (B) If the grant recipient requests that a TEACH Grant be converted 
to a Direct Unsubsidized Loan in accordance with Sec.  686.43(a)(1)(i), 
the conversion of the TEACH Grant to a loan cannot be reversed;
    (ix) Emphasize that, once a TEACH Grant is converted to a Direct 
Unsubsidized Loan, it may be reconverted to a grant only if--
    (A) The Secretary determines that the grant has been converted to a 
loan in error; or
    (B) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with Sec.  
686.43(a)(1)(ii), within one year of the conversion date the grant 
recipient provides documentation showing that he or she is satisfying 
the service obligation within the eight-year service obligation period;
    (x) Review for the grant recipient information on the availability 
of the Department's Student Loan Ombudsman's office;
    (xi) Describe the likely consequences of loan default, including 
adverse credit reports, garnishment of wages, Federal offset, and 
litigation; and
    (xii) Inform the grant recipient of sample monthly repayment 
amounts based on a range of student loan indebtedness.
    (b) * * *
    (3) Subsequent counseling must--
    (i) Review the terms and conditions of the TEACH Grant agreement to 
serve or repay as described in Sec.  686.12;
    (ii) Emphasize to the grant recipient that if the grant recipient 
fails or refuses to complete the service obligation contained in the 
agreement to serve or repay or any other condition of the agreement to 
serve or repay--
    (A) The TEACH Grant must be repaid as a Direct Unsubsidized Loan; 
and
    (B) The grant recipient will be obligated to repay the full amount 
of the grant and the accrued interest from the disbursement date;
    (iii) Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will be converted to a Direct Unsubsidized 
Loan;
    (iv) Explain that--
    (A) To avoid further accrual of interest as described in Sec.  
686.12(b)(4)(ii), a grant recipient who decides not to teach in a 
qualified school or field, or who for any other reason no longer 
intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii); and
    (B) If the grant recipient requests that a TEACH Grant be converted 
to a Direct Unsubsidized Loan in accordance with Sec.  686.43(a)(1)(i), 
the conversion of the TEACH Grant to a loan cannot be reversed;
    (v) Emphasize that, once a TEACH Grant is converted to a Direct 
Unsubsidized Loan, it may be reconverted to a grant only if--
    (A) The Secretary determines that the grant has been converted to a 
loan in error; or
    (B) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with Sec.  
686.43(a)(1)(ii), within one year of the conversion date the grant 
recipient provides documentation showing that he or she is satisfying 
the service obligation within the eight-year service obligation period; 
and
    (vi) Review for the grant recipient information on the availability 
of the Department's Student Loan Ombudsman's office.
    (c) * * *
    (4) The exit counseling must--
    (i) Review the terms and conditions of the TEACH Grant agreement to 
serve or repay as described in Sec.  686.12 and emphasize to the grant 
recipient that the four-year service obligation must be

[[Page 67823]]

completed within the eight-year period described in Sec.  686.12;
    (ii) Explain the treatment of a grant recipient who withdraws from 
and then reenrolls in a TEACH Grant-eligible program at a TEACH Grant 
eligible institution as described in Sec.  686.12(c);
    (iii) Inform the grant recipient of the opportunity to request a 
suspension of the eight-year period for completion of the service 
obligation and the conditions under which a suspension may be granted 
in accordance with Sec.  686.41;
    (iv) Provide the grant recipient with information about how to 
identify low-income schools and documented high-need fields;
    (v) Inform the grant recipient that, for the teaching to count 
towards the recipient's service obligation, the high-need field in 
which he or she has prepared to teach must be--
    (A) One of the six high-need fields listed in Sec.  686.2; or
    (B) A high-need field that is listed in the Nationwide List for the 
State in which the grant recipient teaches--
    (1) At the time the grant recipient begins teaching in that field, 
even if that field subsequently loses its high-need designation for 
that State; or
    (2) For teaching service performed on or after July 1, 2010, at the 
time the grant recipient signed the agreement to serve or repay or 
received the TEACH Grant, even if that field subsequently loses its 
high-need designation for that State before the grant recipient begins 
teaching in that field;
    (vi) Emphasize to the grant recipient that if the grant recipient 
fails or refuses to complete the service obligation contained in the 
agreement to serve or repay or fails to meet any other condition of the 
agreement to serve or repay--
    (A) The TEACH Grant must be repaid as a Direct Unsubsidized Loan; 
and
    (B) The grant recipient will be obligated to repay the full amount 
of each grant and the accrued interest from each disbursement date;
    (vii) Explain to the grant recipient that the Secretary will, at 
least annually during the service obligation period, send the recipient 
the notice described in Sec.  686.43(a)(2);
    (viii) Explain the circumstances, as described in Sec.  686.43, 
under which a TEACH Grant will be converted to a Direct Unsubsidized 
Loan;
    (ix) Explain that--
    (A) To avoid further accrual of interest as described in Sec.  
686.12(b)(4)(ii), a grant recipient who decides not to teach in a 
qualified school or field, or who for any other reason no longer 
intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii); and
    (B) If the grant recipient requests that the TEACH Grant be 
converted to a Direct Unsubsidized Loan in accordance with Sec.  
686.43(a)(1)(i), the conversion of the TEACH Grant to a loan cannot be 
reversed;
    (x) Emphasize that once a TEACH Grant is converted to a Direct 
Unsubsidized Loan it may be reconverted to a grant only if--
    (A) The Secretary determines that the grant was converted to a loan 
in error; or
    (B) In the case of a grant recipient whose TEACH Grant was 
converted to a Direct Unsubsidized Loan in accordance with Sec.  
686.43(a)(1)(ii), within one year of the conversion date the grant 
recipient provides documentation showing that he or she is satisfying 
the service obligation within the eight-year service obligation period; 
and
    (xi) Explain to the grant recipient how to contact the Secretary.
    (5) If exit counseling is conducted through interactive electronic 
means, an institution must take reasonable steps to ensure that each 
grant recipient receives the counseling materials and participates in 
and completes the exit counseling.
* * * * *
    (e) Conversion counseling. (1) At the time a TEACH Grant 
recipient's TEACH Grant is converted to a Direct Unsubsidized Loan, the 
Secretary conducts conversion counseling with the recipient by 
interactive electronic means and by mailing written counseling 
materials to the most recent address provided by the recipient.
    (2) The conversion counseling--
    (i) Informs the borrower of the average anticipated monthly 
repayment amount based on the borrower's indebtedness;
    (ii) Reviews for the borrower available repayment plan options, 
including standard, graduated, extended, income-contingent, and income-
based repayment plans, including a description of the different 
features of each plan and the difference in interest paid and total 
payments under each plan;
    (iii) Explains to the borrower the options to prepay each loan, to 
pay each loan on a shorter schedule, and to change repayment plans;
    (iv) Provides information on the effects of loan consolidation 
including, at a minimum--
    (A) The effects of consolidation on total interest to be paid, and 
length of repayment;
    (B) The effects of consolidation on a borrower's underlying loan 
benefits, including grace periods, loan forgiveness, cancellation, and 
deferment opportunities; and
    (C) The options of the borrower to prepay the loan and to change 
repayment plans;
    (v) Includes debt-management strategies that are designed to 
facilitate repayment;
    (vi) Explains to the borrower the availability of Public Service 
Loan Forgiveness and teacher loan forgiveness;
    (vii) Explains how the borrower may request reconsideration of the 
conversion of the TEACH Grant to a Direct Unsubsidized Loan if the 
borrower believes that the grant was converted to a loan in error;
    (viii) Describes the likely consequences of default, including 
adverse credit reports, delinquent debt collection procedures under 
Federal law, and litigation;
    (ix) Informs the borrower of the grace period as described in Sec.  
686.43(c);
    (x) Provides--
    (A) A general description of the terms and conditions under which a 
borrower may obtain full or partial forgiveness or discharge of the 
loan (including under the Public Service Loan Forgiveness Program), 
defer repayment of the loan, or be granted a forbearance on repayment 
of the loan; and
    (B) A copy, either in print or by electronic means, of the 
information the Secretary makes available pursuant to section 485(d) of 
the HEA;
    (xi) Requires the borrower to provide current information 
concerning name, address, Social Security number, and driver's license 
number and State of issuance, as well as the borrower's permanent 
address;
    (xii) Reviews for the borrower information on the availability of 
the Student Loan Ombudsman's office;
    (xiii) Informs the borrower of the availability of title IV loan 
information in the National Student Loan Data System (NSLDS) and how 
NSLDS can be used to obtain title IV loan status information;
    (xiv) Provides a general description of the types of tax benefits 
that may be available to borrowers; and
    (xv) Informs the borrower of the amount of interest that has 
accrued on the converted TEACH Grants and explains that any unpaid 
interest will be

[[Page 67824]]

capitalized at the end of the grace period.
0
25. Section 686.40 is amended by:
0
a. Removing paragraph (a);
0
b. Redesignating paragraph (b) as paragraph (a) and revising it;
0
c. Removing paragraphs (c) and (d);
0
d. Redesignating paragraph (e) as paragraph (b);
0
e. Revising newly redesignated paragraph (b)(2) and adding new 
paragraph (b)(3); and
0
f. Redesignating paragraph (f) as paragraph (c) and revising it.
    The revisions and addition read as follows:


Sec.  686.40  Documenting the service obligation.

    (a) If a grant recipient is performing full-time teaching service 
in accordance with the agreement to serve or repay, or agreements to 
serve or repay if more than one agreement exists, the grant recipient 
must, upon completion of each of the four required elementary or 
secondary academic years of teaching service, provide to the Secretary 
documentation of that teaching service on a form approved by the 
Secretary and certified by the chief administrative officer of the 
school or educational service agency in which the grant recipient is 
teaching. The documentation must show that the grant recipient--
    (1) Taught full-time in a low-income school as a highly qualified 
teacher as defined in Sec.  686.2(d); and
    (2)(i) Taught a majority of classes during the period being 
certified in any of the high-need fields of mathematics, science, a 
foreign language, bilingual education, English language acquisition, 
special education, or as a reading specialist; or
    (ii) Taught a majority of classes during the period being certified 
in another high-need field designated by that State and listed in the 
Nationwide List, in accordance with Sec.  686.12(d).
    (b) * * *
    (2) A call or order to Federal or State active duty, or Active 
Service as a member of a Reserve Component of the Armed Forces named in 
10 U.S.C. 10101, or service as a member of the National Guard on full-
time National Guard duty, as defined in 10 U.S.C. 101(d)(5); or
    (3) Residing in or being employed in a federally declared major 
disaster area as defined in the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5122(2)).
    (c)(1) A grant recipient who taught in more than one qualifying 
school or qualifying educational service agency during an elementary or 
secondary academic year and demonstrates that the combined teaching 
service was the equivalent of full-time, as supported by the 
certification of one or more of the chief administrative officers of 
the schools or educational service agencies involved, is considered to 
have completed one elementary or secondary academic year of qualifying 
teaching.
    (2) If the school or educational service agency at which the grant 
recipient is employed meets the requirements of a low-income school in 
the first year of the grant recipient's four elementary or secondary 
academic years of teaching and the school or educational service agency 
fails to meet those requirements in subsequent years, those subsequent 
years of teaching qualify for purposes of satisfying the service 
obligation described in Sec.  686.12(b).
0
26. Section 686.41 is amended by:
0
a. Redesignating paragraphs (a)(1)(ii) and (iii) as paragraphs 
(a)(1)(iii) and (iv), respectively;
0
b. Adding new paragraph (a)(1)(ii);
0
c. Revising newly redesignated paragraphs (a)(1)(iii) and (iv);
0
d. Adding paragraphs (a)(1)(v) and (vi);
0
e. Revising paragraphs (a)(2), (b), and (c); and
0
f. Adding paragraphs (d) and (e).
    The additions and revisions read as follows:


Sec.  686.41  Periods of suspension.

    (a) * * *
    (1) * * *
    (ii) Receiving State-required instruction or otherwise fulfilling 
requirements for licensure to teach in a State's elementary or 
secondary schools;
    (iii) A condition that is a qualifying reason for leave under the 
FMLA;
    (iv) A call to order to Federal or State active duty or Active 
Service as a member of a Reserve Component of the Armed Forces named in 
10 U.S.C. 10101, or service as a member of the National Guard on full-
time National Guard duty, as defined in 10 U.S.C. 101(d)(5);
    (v) Military orders for the recipient's spouse for--
    (A) Deployment with a military unit or as an individual in support 
of a call to Federal or State Active Duty, or Active Service; or
    (B) A change of permanent duty station from a location in the 
continental United States to a location outside of the continental 
United States or from a location in a State to any location outside of 
that State; or
    (vi) Residing in or being employed in a federally declared major 
disaster area as defined in the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5122(2)).
    (2) A grant recipient may receive a suspension described in 
paragraphs (a)(1)(i) through (vi) of this section in one-year 
increments that--
    (i) Does not exceed a combined total of three years under 
paragraphs (a)(1)(i) through (iii) of this section;
    (ii) Does not exceed a total of three years under paragraph 
(a)(1)(iv) of this section;
    (iii) Does not exceed a total of three years under paragraph 
(a)(1)(v) of this section; or
    (iv) Does not exceed a total of three years under paragraph 
(a)(1)(vi) of this section.
    (b) A grant recipient, or his or her representative in the case of 
a grant recipient who qualifies under paragraph (a)(1)(iv) or (vi) of 
this section, must apply for a suspension on a form approved by the 
Secretary, prior to being subject to any of the conditions under Sec.  
686.43(a)(1) through (5) that would cause the TEACH Grant to convert to 
a Direct Unsubsidized Loan.
    (c) A grant recipient, or his or her representative in the case of 
a grant recipient who qualifies under paragraph (a)(1)(v) or (vi) of 
this section, must provide the Secretary with documentation supporting 
the suspension request as well as current contact information including 
home address and telephone number.
    (d) On a case-by-case basis, the Secretary may grant a temporary 
suspension of the period for completing the service obligation if the 
Secretary determines that a grant recipient was unable to complete a 
full academic year of teaching or begin the next academic year of 
teaching due to exceptional circumstances significantly affecting the 
operation of the school or educational service agency where the grant 
recipient was employed or the grant recipient's ability to teach.
    (e) The Secretary notifies the grant recipient regarding the 
outcome of the application for suspension.
0
27. Section 686.42 is amended by:
0
a. Revising the section heading;
0
b. In paragraph (a)(1), adding the words ``or repay'' after the word 
``serve'';
0
c. In paragraph (a)(2), adding the words ``or repay'' after the word 
``serve'';
0
d. Revising paragraph (b); and
0
e. In paragraph (c)(4), removing the words ``and the Coast Guard'' and 
adding, in their place, the words ``the Coast Guard, a reserve 
component of the Armed Forces named in 10 U.S.C. 10101, or the National 
Guard''.
    The revisions reads as follows:

[[Page 67825]]

Sec.  686.42  Discharge of agreement to serve or repay.

* * * * *
    (b) Total and permanent disability. (1) A grant recipient's 
agreement to serve or repay is discharged if the recipient becomes 
totally and permanently disabled, as defined in Sec.  685.102(b) of 
this chapter, and the grant recipient applies for and satisfies the 
eligibility requirements for a total and permanent disability discharge 
in accordance with Sec.  685.213 of this chapter.
    (2) If at any time the Secretary determines that the grant 
recipient does not meet the requirements of the three-year period 
following the discharge as described in Sec.  685.213(b)(7) of this 
chapter, the Secretary will notify the grant recipient that the grant 
recipient's obligation to satisfy the terms of the agreement to serve 
or repay is reinstated.
    (3) The Secretary's notification under paragraph (b)(2) of this 
section will--
    (i) Include the reason or reasons for reinstatement;
    (ii) Provide information on how the grant recipient may contact the 
Secretary if the grant recipient has questions about the reinstatement 
or believes that the agreement to serve or repay was reinstated based 
on incorrect information; and
    (iii) Inform the TEACH Grant recipient that he or she must satisfy 
the service obligation within the portion of the eight-year period that 
remained after the date of the discharge.
    (4) If the TEACH Grant made to a recipient whose TEACH Grant 
agreement to serve or repay is reinstated is later converted to a 
Direct Unsubsidized Loan, the recipient will not be required to pay 
interest that accrued on the TEACH Grant disbursements from the date 
the agreement to serve or repay was discharged until the date the 
agreement to serve or repay was reinstated.
* * * * *
0
28. Section 686.43 is amended by:
0
a. Revising paragraph(a);
0
b. In paragraph (b), removing the word ``Federal'' before the words 
``Direct Unsubsidized Loan'', and removing the word ``any'' before the 
word ``aggregate'';
0
c. In paragraph (c) introductory text, removing the word ``Federal'' 
before the words ``Direct Unsubsidized Loan''.
0
d. In paragraph (c)(2), removing the phrase ``, including an in-school 
deferment''; and
0
e. Revising paragraph (d).
    The revisions read as follows:


Sec.  686.43  Obligation to repay the grant.

    (a)(1) The TEACH Grant amounts disbursed to the recipient will be 
converted into a Direct Unsubsidized Loan, with interest accruing from 
the date that each grant disbursement was made and be collected by the 
Secretary in accordance with the relevant provisions of subpart A of 
part 685 of this chapter if--
    (i) The grant recipient, regardless of enrollment status, requests 
that the TEACH Grant be converted into a Direct Unsubsidized Loan 
because he or she has decided not to teach in a qualified school or 
educational service agency, or not to teach in a high-need field, or 
for any other reason; or
    (ii) The grant recipient does not begin or maintain qualified 
employment within the timeframe that would allow that individual to 
complete the service obligation within the number of years required 
under Sec.  686.12.
    (2) At least annually during the service obligation period under 
Sec.  686.12, the Secretary notifies the grant recipient of--
    (i) The terms and conditions that the grant recipient must meet to 
satisfy the service obligation;
    (ii) The requirement for the grant recipient to provide to the 
Secretary, upon completion of each of the four required elementary or 
secondary academic years of teaching service, documentation of that 
teaching service on a form approved by the Secretary and certified by 
the chief administrative officer of the school or educational service 
agency in which the grant recipient taught and emphasizes the necessity 
to keep copies of this information and copies of the recipient's own 
employment documentation;
    (iii) The service years completed and the remaining timeframe 
within which the grant recipient must complete the service obligation;
    (iv) The conditions under which the grant recipient may request a 
temporary suspension of the period for completing the service 
obligation;
    (v) The conditions as described under Sec.  686.43(a)(1) under 
which the TEACH Grant amounts disbursed to the recipient will be 
converted into a Direct Unsubsidized Loan;
    (vi) The potential total interest accrued;
    (vii) The process by which the recipient may contact the Secretary 
to request reconsideration of the conversion, the deadline by which the 
grant recipient must submit the request for reconsideration, and a list 
of the specific documentation required by the Secretary to reconsider 
the conversion; and
    (viii) An explanation that to avoid further accrual of interest as 
described in Sec.  686.12(b)(4)(ii), a grant recipient who decides not 
to teach in a qualified school or field, or who for any other reason no 
longer intends to satisfy the service obligation, may request that the 
Secretary convert his or her TEACH Grant to a Direct Unsubsidized Loan 
that the grant recipient may begin repaying immediately, instead of 
waiting for the TEACH Grant to be converted to a loan under the 
condition described in Sec.  686.43(a)(1)(ii).
    (3) On or about 90 days before the date that a grant recipient's 
TEACH Grants would be converted to Direct Unsubsidized Loans in 
accordance with paragraph (a)(1)(ii) of this section, the Secretary 
notifies the grant recipient of the date by which the recipient must 
submit documentation showing that the recipient is satisfying the 
obligation.
    (4) If the TEACH Grant amounts disbursed to a recipient are 
converted to a Direct Unsubsidized Loan, the Secretary notifies the 
recipient of the conversion and offers conversion counseling as 
described in Sec.  686.32(e).
    (5) If a grant recipient's TEACH Grant was converted to a Direct 
Unsubsidized Loan in accordance with paragraph (a)(1)(ii) of this 
section, the Secretary will reconvert the loan to a TEACH Grant if, 
within one year of the conversion date, the recipient provides the 
Secretary with documentation showing that he or she is satisfying the 
service obligation.
    (6) If a grant recipient's TEACH Grant was involuntarily converted 
to a Direct Unsubsidized Loan, the Secretary will reconvert the loan to 
a TEACH Grant based on documentation provided by the recipient or in 
the Department's records that demonstrate that the recipient was 
satisfying the service obligation as described in Sec.  686.12 or that 
the grant was improperly converted to a loan.
    (7) If a grant recipient who requests reconsideration demonstrates 
to the satisfaction of the Secretary that a TEACH Grant was converted 
to a loan in error, the Secretary--
    (i) Reconverts the loan to a TEACH Grant and--
    (A) If the grant recipient completed one or more academic years of 
qualifying teaching service during the period the grant was wrongly in 
loan status, the Secretary applies that teaching service toward the 
grant recipient's four-year service obligation requirement and suspends 
the period the grant was wrongly in loan status from the eight-year 
service period during which the grant recipient must complete their 
service obligation; or

[[Page 67826]]

    (B) If the grant recipient did not complete any academic years of 
qualifying teaching service during the period the grant was wrongly in 
loan status, the Secretary suspends the period the grant was wrongly in 
loan status from the eight-year service period during which the grant 
recipient must complete their service obligation;
    (ii) Ensures that the grant recipient receives credit for any 
payments that were made on the Direct Unsubsidized Loan that was 
reconverted to a TEACH Grant;
    (iii) Notifies the recipient of the reconversion to a grant and 
explains that the recipient is once again responsible for meeting all 
requirements of the service obligation under Sec.  686.12; and
    (iv) Requests deletion of any derogatory information reported to 
the consumer reporting agencies related to the grant while it was in 
loan status and, upon a request from the grant recipient, furnishes a 
statement of error that the recipient may provide to creditors until 
the recipient's credit history has been corrected.
    (8) If a grant recipient who requests reconsideration does not 
demonstrate to the satisfaction of the Secretary that a TEACH Grant was 
converted to a loan in error, the Secretary--
    (i) Notifies the recipient that the loan cannot be converted to a 
TEACH Grant;
    (ii) Explains the reason or reasons why the loan cannot be 
converted to a TEACH Grant; and
    (iii) Explains how the recipient may contact the Federal Student 
Aid Ombudsman if he or she continues to believe that the TEACH Grant 
was converted to a loan in error.
    (9) A TEACH Grant recipient remains obligated to meet all 
requirements of the service obligation under Sec.  686.12, even if the 
recipient does not receive the notices from the Secretary as described 
in paragraph (a)(2) of this section.
* * * * *
    (d) A TEACH Grant that is converted to a Direct Unsubsidized Loan 
cannot be reconverted to a grant except as provided in paragraph (a) of 
this section.

PART 690--FEDERAL PELL GRANT PROGRAM

0
29. The authority citation for part 690 continues to read as follows:

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


Sec.  690.75  [Amended]

0
30. Section 690.75 is amended by removing paragraph (d).

PART 692--LEVERAGING EDUCATIONAL ASSISTANCE PARTNERSHIP PROGRAM

0
31. The authority citation for part 692 continues to read as follows:

    Authority:  20 U.S.C. 1070c-1070c-4, unless otherwise noted.

0
32. Section 692.30 is amended by revising paragraph (c)(5) to read as 
follows:


Sec.  692.30  How does a State administer its community service-
learning job program?

* * * * *
    (c) * * *
    (5) Not involve the construction, operation, or maintenance of so 
much of any facility as is used or is to be used for sectarian 
instruction or as a place for religious worship; and
* * * * *

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

0
33. The authority citation for part 694 continues to read as follows:

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

0
34. Section 694.6 is amended by revising paragraph (b) and removing 
paragraph (c).
    The revision reads as follows:


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

* * * * *
    (b) When providing GEAR UP services to students attending private 
schools, the employee, individual, association, agency, or organization 
must be employed or contracted independently of the private school that 
the students attend, and of any other organization affiliated with the 
school, and that employment or contract must be under the control and 
supervision of the public agency.


Sec.  694.10  [Amended]

0
35. Section 694.10 is amended by removing the words ``that is not 
pervasively sectarian'' from paragraph (b).

[FR Doc. 2019-25808 Filed 12-10-19; 8:45 am]
 BILLING CODE 4000-01-P