[Federal Register Volume 86, Number 206 (Thursday, October 28, 2021)]
[Rules and Regulations]
[Pages 59619-59627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23423]


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DEPARTMENT OF EDUCATION

34 CFR Parts 604, 690 and 691

RIN 1840--AD46


Federal-State Relationship Agreements, Federal Pell Grant 
Program, Academic Competitiveness Grant, and National Science and 
Mathematics Access To Retain Talent Grant

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends the regulations implementing the Federal 
Pell Grant Program to conform with changes made by the Department of 
Education Appropriations Act, 2012 and the Department of Education 
Appropriations Act, 2017. The Secretary also removes obsolete 
regulations for Federal-State Relationship Agreements and the Academic 
Competitiveness Grant (ACG) and National Science and Mathematics Access 
to Retain Talent Grant (National SMART Grant) programs. These 
regulations also make technical corrections and delete references to 
programs that are no longer authorized or funded.

DATES: These final regulations are effective October 28, 2021.

FOR FURTHER INFORMATION CONTACT: Aaron Washington, 400 Maryland Avenue 
SW, Room 2C182, Washington, DC 20202.
    Telephone: (202) 453-7241.
     Email: [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: This regulatory action amends or 
removes various Department regulations to conform with statutory 
changes.
    The Secretary removes and reserves 34 CFR part 604, Federal-State 
Relationship Agreements, to reflect that section 1203 of the Higher 
Education Act of 1965, as amended (HEA), was eliminated by the Higher 
Education Amendments of 1998, Public Law 105-244.
    Section 401A(g) of the HEA authorized the ACG and National SMART 
Grant programs only through the end of the 2010-2011 award year. 
Therefore, the Secretary also removes and reserves the implementing 
regulations for those programs in 34 CFR part 691.
    The Secretary also amends part 690 to make conforming changes that 
are consistent with the statutory provisions referenced above and to 
make technical revisions to delete references to the ACG and National 
SMART Grant programs, which are no longer authorized.
    Summary of the Major Provisions of this Regulatory Action: In the 
final regulations we amend 34 CFR part 690 to reflect the following 
statutory changes to the Pell Grant Program.

Duration of Student Eligibility (Sec.  690.6)

    In December 2011, section 309 of the Department of Education 
Appropriations Act, 2012 (title III of division F of the Consolidated 
Appropriations Act, 2012, Pub. L. 112-74) amended section 401(c)(5) of 
the HEA to reduce the duration of a student's eligibility to receive a 
Federal Pell Grant from 18 semesters (or its equivalent) to 12 
semesters (or its equivalent).

Calculation of a Federal Pell Grant (Sec.  690.62)

    In December 2011, Public Law 112-74 amended section 401(b)(4) of 
the HEA to change the minimum Federal Pell Grant award calculation. The 
law set the minimum Federal Pell Grant award for a student at 10 
percent of the maximum award amount for the award year. In addition, it 
eliminated the provision that permitted a student who would be eligible 
to receive a Federal Pell Grant of between five and 10 percent of the 
award year's maximum award to receive an award of 10 percent of the 
maximum award.

One and One-Half Federal Pell Grants in One Award Year (Sec. Sec.  
690.63(g), 690.64(b), 690.65(c), (d)(2), and (f), and 690.67)

    In May 2017, section 310 of the Department of Education 
Appropriations Act, 2017 (title III of division H of Pub. L. 115-31, 
the Consolidated Appropriations Act, 2017), added section 401(b)(8) to 
the HEA to allow a student to receive Federal Pell Grant funds for up 
to 150 percent of the student's Pell Grant Scheduled Award for an award 
year, if the student is enrolled at least half time in a certificate, 
associate degree, or baccalaureate degree program, effective as of the 
2017-2018 award year.
    Prior to the publication of these final regulations, we provided 
guidance in Dear Colleague Letter GEN-17-06 (available at: https://ifap.ed.gov/dpcletters/GEN1706.html) to institutions on how to 
implement the provisions of section 401(b)(8) to allow certain students 
to receive one and one-half Pell Grants in one award year beginning 
with the 2017-2018 award year.
    Costs and Benefits: As further detailed in the Regulatory Impact 
Analysis, the statutory changes reflected in these regulations provide 
a substantial net benefit to students and result in transfers between 
the Federal Government and students.

Significant Regulations

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

Part 604--Federal-State Relationship Agreements

    Statute: Section 1203 of the HEA, as amended by the Education 
Amendments of 1980, established the procedure for State participation 
in the Continuing Education Outreach Program, the State Student 
Incentive Grant Program (currently the Leveraging Educational 
Assistance Partnership Program (LEAP) Program), and the Undergraduate 
Academic Facilities Program. States wishing to participate in these 
programs were required to enter into a Federal-State Relationship 
Agreement with the Secretary. The agreement had to contain assurances, 
and the means by which they would be met, relating to administration, 
financial management, treatment of applicants, supplement, not supplant 
requirements, and planning. The provisions of the agreement could not 
supersede any reporting requirements established by the applicable 
programs.

[[Page 59620]]

    Current Regulations: Current 34 CFR part 604 provides that a State 
must enter into an agreement with the Secretary if it wishes to 
participate in the Continuing Education Outreach program, title I-B, 
with the exception of sections 116 and 117 of the HEA; the State 
Student Incentive Grant program (currently the LEAP Program), subpart 3 
of title IV-A of the HEA; and the Undergraduate Academic Facilities 
Grant program, title VII-A of the HEA. The agreement must contain 
assurances relating to administration, financial management, treatment 
of applicants for subgrants and contracts, supplement, not supplant 
requirements, and planning.
    New Regulations: We are removing and reserving 34 CFR part 604.
    Reasons: Section 1203 of the HEA was repealed on October 7, 2008, 
by the Higher Education Amendments of 1998, Public Law 105-244. 
Therefore, the Secretary removes and reserves the implementing 
regulations for the Federal-State Relationship Agreements in 34 CFR 
part 604.

Part 690--Federal Pell Grant Program

Duration of Student Eligibility (Sec.  690.6)
    Statute: Section 401(c)(5) of the HEA provides that the duration of 
a student's eligibility to receive a Federal Pell Grant is 12 semesters 
(or its equivalent).
    Current Regulations: Current Sec.  690.6(e) provides that if a 
student receives a Federal Pell Grant for the first time on or after 
July 1, 2008, the student may receive no more than nine Scheduled 
Awards. A student may receive a maximum of one Scheduled Award per 
academic year.
    New Regulations: Revised Sec.  690.6(e) provides that a student may 
receive no more than six Scheduled Awards as determined by the 
Secretary.
    Reasons: These final regulations amend Sec.  690.6(e) to conform to 
amended section 401(c)(5) of the HEA, by reducing the number of 
Scheduled Awards a student may receive to six (or the equivalent of 12 
semesters).
Institutional Participation (Sec.  690.7(a), (d), and (e))
    Statute: Section 401A(c)(1) of the HEA provides that a student must 
be eligible for a Federal Pell Grant to qualify for an ACG or National 
SMART Grant. Section 401(j) of the HEA provides that no institution of 
higher education is eligible to participate in the Federal Pell Grant 
Program if that institution is ineligible to participate in the Federal 
Family Education Loan (FFEL) or William D. Ford Federal Direct Loan 
(Direct Loan) programs as a result of a final default rate 
determination made by the Secretary.
    Current Regulations: Section 690.7(a) provides that an institution 
may not participate in the Federal Pell Grant Program if it has at 
least one eligible program under Sec.  691.2(d) and does not 
participate in the ACG or National SMART Grant programs, as applicable. 
Section 690.7(d) provides that if an institution loses its eligibility 
to participate in the FFEL or Direct Loan program under the provisions 
of subpart M of 34 CFR part 668, it also loses its eligibility to 
participate in the Federal Pell Grant Program for the same period of 
time. Section 690.7(e) provides that an institution must provide to the 
Secretary, within 45 days after the effective date of loss of 
eligibility, student-level disbursement information and an accounting 
of the Federal Pell Grant expenditures for that award year to the date 
of termination.
    New Regulations: We are removing paragraph (a) of Sec.  690.7 and 
making technical changes to the remaining paragraphs.
    Reasons: Section 401A(g) of the HEA authorized the ACG and National 
SMART Grant programs only through the end of the 2010-2011 award year. 
Therefore, we are removing Sec.  690.7(a), which references these two 
programs. With the removal of paragraph (a), current paragraphs (d) and 
(e) are redesignated as paragraphs (c) and (d). In redesignated 
paragraph (c)(1), we are removing the reference to the FFEL program and 
adding a reference to subpart N, which includes regulations for 
calculating the three-year cohort default rate and parallels the 
provisions in subpart M, part 668, which includes regulations for 
calculating a two-year cohort default rate. In redesignated paragraph 
(c)(2), we are revising the citations to include Sec. Sec.  668.187(d) 
and 668.206(d) of subpart M and N, part 668, respectively, to describe 
the consequences of cohort default rates on an institution's ability to 
participate in the Federal Pell Grant Program. In redesignated 
paragraph (d), we are adding ``or for whom the institution obtained a 
valid ISIR'' to include the electronic equivalent of the Student Aid 
Report.
Calculation of a Federal Pell Grant (Sec.  690.62(b))
    Statute: Section 401(b)(4) of the HEA provides that a Federal Pell 
Grant may not be awarded to a student if the amount of that grant for 
that student for any academic year is less than 10 percent of the 
maximum amount of a Federal Pell Grant award determined for such 
academic year.
    Current Regulations: Current Sec.  690.62(b) states that no payment 
may be made to a student if the student's annual award is less than 
$200. However, a student who is eligible for an annual award that is 
equal to or greater than $200, but less than or equal to $400, will be 
awarded a Federal Pell Grant of $400.
    New Regulations: We are removing Sec.  690.62(b).
    Reasons: We are removing Sec.  690.62(b), which has been superseded 
by section 401(b)(4) of the HEA. Since the 2012-2013 award year, this 
change in the law has been explained in the annual Dear Colleague 
Letter that accompanies the Pell Grant Payment and Disbursement 
Schedules (available at: https://ifap.ed.gov/dpcletters/P1201.html).
One and One-Half Federal Pell Grants in an Award Year (Sec. Sec.  
690.63(g), 690.64(b), 690.65(c), (d)(2), and (f), and 690.67)
    Statute: Section 401(b)(8) of the HEA provides that a student may 
receive up to one and one-half consecutive Federal Pell Grant Scheduled 
Awards during a single award year, if the student is enrolled at least 
half-time in the payment period(s) for which the student receives 
additional Pell Grant funds in excess of 100 percent of the student's 
Pell Grant Scheduled Award. The student must also be enrolled in a 
certificate, associate degree, or baccalaureate degree program. Section 
484(s)(3) of the HEA provides the authority to waive this provision for 
students with intellectual disabilities who enroll in a comprehensive 
transition and postsecondary program.
Calculation of a Federal Pell Grant for a Payment Period (Sec.  
690.63(g))
    Current Regulations: Current Sec.  690.63(g)(1) provides that the 
amount of a student's award for the award year may not exceed his or 
her Scheduled Federal Pell Grant award for the award year.
    New Regulations: We are revising Sec.  690.63(g)(1) to provide that 
a student is eligible to receive one and one-half of the student's 
Scheduled Federal Pell Grant award in the same award year.
    Under new Sec.  690.63(g)(2), if a student is eligible for the 
remaining portion of a first Scheduled Award in an award year and for a 
payment from the additional one-half Scheduled Award, the student's 
payment is calculated using the annual award for his or her enrollment 
status for the payment period. The student's payment is the remaining 
amount of the first Scheduled Award being completed plus an amount from 
the additional one-half Scheduled Award in the award year up to the 
total

[[Page 59621]]

amount of the payment for the payment period.
    Reasons: We are revising Sec.  690.63(g)(1) to establish procedures 
for awarding a student with one and one-half of the student's Scheduled 
Award in an award year as required by section 401(b)(8) of the HEA.
    The revisions to paragraph (g)(2) allow for the calculation of a 
student's Federal Pell Grant payment when the student is eligible to 
receive a payment from his or her first Scheduled Award and an 
additional one-half Scheduled Award in a payment period. In addition, 
we are making conforming changes to Sec.  690.63(f).
Determining the Award Year for a Federal Pell Grant Payment Period That 
Occurs in Two Award Years (Sec.  690.64(b))
    Current Regulations: Current Sec.  690.64(b) provides that an 
institution may not make a payment that will result in the student 
receiving more than his or her Scheduled Federal Pell Grant for an 
award year.
    New Regulations: We are revising current Sec.  690.64(b) to provide 
that a student is eligible to receive one and one-half of the student's 
Scheduled Federal Pell Grant award in the same award year.
    Reasons: We are revising Sec.  690.64(b) to conform to section 
401(b)(8) of the HEA.
Transfer Student: Attendance at More Than One Institution During an 
Award Year (Sec.  690.65(c), (d)(2), and (f))
    Current Regulations: Current Sec.  690.65(c) provides that a 
student who receives a Federal Pell Grant at one institution and 
subsequently enrolls at a second institution within the same award year 
may only be paid at the second institution for the period of time the 
student is enrolled at that institution. The institution must adjust 
the student's grant to ensure that funds received by the student for 
the award year do not exceed the student's Scheduled Federal Pell Grant 
for that award year.
    Current Sec.  690.65(d)(2) provides that the percentage of a 
student's Scheduled Federal Pell Grant used at the first institution is 
subtracted from 100 percent to determine the percentage of the 
Scheduled Federal Pell Grant the student is eligible to receive at the 
second institution.
    Current Sec.  690.65(f) provides that a transfer student must repay 
any amount received in an award year that exceeds his or her first 
Scheduled Federal Pell Grant.
    New Regulations: To conform to section 401(b)(8) of the HEA, we are 
revising current Sec.  690.65(c), (d)(2), and (f) to establish 
procedures for awarding a student an additional Pell Grant in an amount 
up to one-half of his or her Scheduled Award in an award year.
    Reasons: Section 401(b)(8) provides that an otherwise eligible 
student could receive more than one Federal Pell Grant in an award 
year. Therefore, we are establishing procedures for awarding a student 
an additional Pell Grant in an amount up to one-half of his or her 
Scheduled Award in an award year.
Eligibility To Receive Additional Federal Pell Grant Funds in an Amount 
Up to One-Half of a Scheduled Award During a Single Award Year (Sec.  
690.67)
    Current Regulations: None.
    New Regulations: New Sec.  690.67 provides that an institution 
participating in the Federal Pell Grant Program must award an 
additional Federal Pell Grant in an amount up to one-half of a 
Scheduled Award to a student in an award year if the student is 
enrolled (1) in an eligible bachelor's or associate's degree program, 
or program leading to another recognized educational credential, for 
one or more additional payment periods during the same award year that 
are not fully covered by the student's initial Federal Pell Grant 
Scheduled Award; and (2) at least as a half-time student in the payment 
period(s) for which the student receives any portion of the additional 
Federal Pell Grant funds. This provision does not apply to students 
with intellectual disabilities, to the extent provided in 34 CFR part 
668, subpart O, and section 484(s) of the HEA.
    Reasons: These regulations establish procedures for awarding a 
student an additional Pell Grant in an amount up to one-half of his or 
her Scheduled Award in an award year, in accordance with the statute.

Part 691--Academic Competitiveness Grant (ACG) and National Science and 
Mathematics Access To Retain Talent Grant (National SMART Grant) 
Programs

    Statute: Section 401A of the HEA established the ACG and National 
SMART Grant programs to assist eligible students in paying their 
college education expenses.
    Current Regulations: Current 34 CFR part 691 provides guidance for 
the administration of the ACG and National SMART Grant programs. The 
ACG Program awards grants to help eligible financially needy first- and 
second-year undergraduate students, who complete rigorous secondary 
school programs of study, meet the cost of their postsecondary 
education.
    The National SMART Grant Program awards grants to help eligible 
financially needy third-, fourth-, and, in the case of a program with 
at least five full years, fifth-year undergraduate students who are 
pursuing eligible majors in the physical, life, or computer sciences, 
mathematics, technology, or engineering or a critical foreign language 
meet the cost of their postsecondary education.
    New Regulations: We are removing and reserving 34 CFR part 691.
    Reasons: Section 401A(g) of the HEA authorized the ACG and National 
SMART Grant programs only through the end of the 2010-2011 award year. 
Therefore, the Secretary removes and reserves the implementing 
regulations for the ACG and National SMART Grant programs in 34 CFR 
part 691.
    Waiver of Rulemaking and Delayed Effective Date: Under the 
Administrative Procedure Act (APA) (5 U.S.C. 553), the Department 
generally offers interested parties the opportunity to comment on 
proposed regulations. However, the APA provides that an agency is not 
required to conduct notice and comment rulemaking when the agency for 
good cause finds that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest. 5 
U.S.C. 553(b)(B).
    There is good cause here for waiving rulemaking under the APA 
because this regulatory action merely rescinds regulations that have 
become obsolete due to statutory changes and revises others to conform 
to those changes. This regulatory action does not establish or affect 
substantive policy. Therefore, under 5 U.S.C. 553(b)(B), the Secretary 
has determined that obtaining public comment on this regulatory action 
is unnecessary.
    Notice and comment is ``unnecessary'' when ``the administrative 
rule is a routine determination, insignificant in nature and impact, 
and inconsequential to the industry and to the public.'' Mack Trucks, 
Inc. v. EPA, 682 F.3d 87, 94 (D.C. Cir. 2012); Util. Solid Waste 
Activities Grp. v. EPA, 236 F.3d 749, 755 (D.C. Cir. 2001). See also 
Riverbend Farms, Inc. v. Madigan, 958 F.2d 1479, 1484 (9th Cir. 1992) 
(``Notice and comment is `unnecessary' when `the regulation is 
technical or minor.' '') (quoting Levesque v. Block, 723 F.2d 175, 184 
(1st Cir. 1983)).
    The APA generally requires that regulations be published at least 
30 days before their effective date, unless the agency has good cause 
to implement its regulations sooner (5 U.S.C. 553(d)(3)). In addition, 
this final rule has been

[[Page 59622]]

determined to be a major rule for purposes of the Congressional Review 
Act (CRA) (5 U.S.C. 801, et seq.). Generally, under the CRA, a major 
rule takes effect 60 days after the date on which the rule is published 
in the Federal Register. Section 808(2) of the CRA, however, provides 
that any rule which an agency for good cause finds (and incorporates 
the finding and a brief statement of reasons therefore in the rule 
issued) that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest, shall take effect at 
such time as the Federal agency promulgating the rule determines.
    As previously stated, because the final regulations merely reflect 
statutory changes and remove and update obsolete regulatory provisions, 
there is good cause to waive the delayed effective dates in the APA and 
the CRA and make the final regulations effective upon publication.

Executive Orders 12866 and 13563

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.
    The final regulations will result in transfers between the Federal 
Government and students of more than $100 million. Therefore, this 
final action is ``economically significant'' and subject to review by 
OMB under section 3(f)(1) of Executive Order 12866. Pursuant to the 
Congressional Review Act (5 U.S.C. 801 et seq.), the Office of 
Information and Regulatory Affairs designated this rule as a ``major 
rule,'' as defined by 5 U.S.C. 804(2).
    We have also reviewed these 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 final regulations only on a reasoned 
determination that their benefits would 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 have also determined that this regulatory action would not 
unduly interfere with State, local, and Tribal governments in the 
exercise of their governmental functions.
    In accordance with the Executive orders, the Department has 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action. The final regulations are 
expected to have an economically significant impact on the Federal 
Government and students. As discussed further in the costs, benefits, 
and transfers section, there will be transfers between the Federal 
Government and students as a result of the statutory changes, which are 
reflected in these regulations. In this Regulatory Impact Analysis, we 
discuss the need for regulatory action; costs, benefits, and transfers; 
net budget impacts; and regulatory alternatives we considered.

Need for Regulatory Action

    Over the past nine years, there have been several self-implementing 
statutory changes that have not been reflected in the Federal Pell 
Grant Program regulations. In December 2011, Public Law 112-74 amended 
section 401(b)(4) of the HEA to change the minimum Federal Pell Grant 
award calculation. The law established the minimum Federal Pell Grant 
award for a student at 10 percent of the maximum award amount for the 
award year. In addition, it eliminated the provision that permitted a 
student who would be eligible to receive a Federal Pell Grant of 
between five and 10 percent of the award year's maximum award to 
receive an award of 10 percent of the maximum award. Therefore, 
beginning with the 2012-2013 award year, students could not receive a 
Federal Pell Grant unless they were eligible for at least 10 percent of 
the maximum award for the academic year. This change in the law has 
been described in the annual Dear Colleague Letter that accompanies the 
Pell Grant Payment and Disbursement Schedules since the 2012-2013 award 
year.
    Section 309 of the Department of Education Appropriations Act, 2012 
(title III of division F of the Consolidated Appropriations Act, 2012, 
Pub, L. 112-74) amended section 401(c)(5) of the HEA to reduce the 
duration of a student's eligibility to receive a Federal Pell Grant 
from 18 semesters (or its equivalent) to 12 semesters (or its 
equivalent), effective beginning with the 2012-2013 award year. The 
calculation of the duration of a student's eligibility includes all 
years of the student's receipt of Federal Pell Grant funding. This 
change in the duration of students' Federal Pell Grant eligibility is 
not limited to students who received their first Federal Pell Grant on 
or after the 2008-2009 award year, as the HEA previously provided when 
the duration of eligibility was 18 semesters. Although the Department 
issued guidance in Dear Colleague Letter GEN-13-14, the Department 
needs to update

[[Page 59623]]

its regulations to reflect this statutory change.
    In May 2017, section 310 of the Department of Education 
Appropriations Act, 2017 (title III of division H of Pub. L. 115-31, 
the Consolidated Appropriations Act, 2017), added section 401(b)(8) to 
the HEA to allow a student to receive Federal Pell Grant funds for up 
to 150 percent of the student's Pell Grant Scheduled Award for an award 
year, if the student is enrolled at least half-time in a certificate, 
associate degree, or baccalaureate degree program, effective as of the 
2017-2018 award year. The regulations preceding this statutory change 
restricted students to the maximum of one Pell award in an award year. 
Although the Department issued guidance via Dear Colleague Letter GEN-
17-06 for the 2017-2018 award year, we need to revise our current 
regulations to reflect these statutory changes.
    Furthermore, these regulatory changes will impact institutions' 
financial aid operations and the Department must revise current 
regulations to ensure that institutions have the correct guidance to 
properly disburse Pell awards.

Discussion of Costs, Benefits, and Transfers

    The final regulations decrease the maximum number of Federal Pell 
Grant Scheduled Awards from nine to six and increase the annual award 
value from one Scheduled Award to one and one-half of a Scheduled 
Award. In the following sections, the Department summarizes the effects 
these final regulations are likely to have on students, institutions of 
higher education, and the Federal Government.

Students

    The statutory changes reflected in these regulations provide a 
substantial net benefit to students and changes in the transfers 
between the Federal Government and Pell recipients. The change to allow 
one and a half Pell grants in an award year increases transfers to 
students in any given award year. Students who qualify for the 
additional half Pell grant may be able to reduce their borrowing needs 
and exit college with less debt than they would have under the previous 
statute and rules. Students may also consider taking additional classes 
during the summer semester as a result of increased funding, which 
could allow them to graduate earlier and enter the job market earlier. 
A recent study published in Education Finance and Policy journal found 
that $1,000 per student in additional year-round Pell funding increased 
summer enrollment, completion rates, and post-college earnings.\1\
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    \1\ Vivian Yuen Ting Liu, Is School Out for the Summer? The 
Impact of Year-Round Pell Grants on Academic and Employment Outcomes 
of Community College Students, Education Finance and Policy 2020 
15:2, 241-269. Available at www.mitpressjournals.org/doi/full/10.1162/edfp_a_00277. ``The study finds that for each $1,000 of 
additional YRP grant funding, summer enrollment increases by 28 
percentage points, diploma completion rates increase by 1.6 
percentage points, and third-year earnings from college entry 
increase by $200. For YRP-eligible students who started in a short-
term program, the gains are a 2 percentage point higher certificate 
attainment rate, 3.6 percentage point increase in associate degree 
completion, and no effect on four-year transfer rates.''
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    At the time of its enactment, the Department estimated that this 
change would benefit approximately 905,000 Pell recipients at a cost of 
$1.5 billion for the 2018-19 award year. Over the 10-year budget 
window, it was expected to benefit an average of 980,000 Pell 
recipients annually with an average additional award of approximately 
$1,650.
    The expiration of the Academic Competitiveness Grants (ACG) and 
National Science and Mathematics Access to Retain Talent (SMART) grant 
programs reduced transfers to students. The programs awarded ACG grants 
to first- and second-year undergraduates who completed a rigorous high 
school curriculum, and SMART Grants to third- and fourth-year 
undergraduates majoring in physical, life, or computer sciences, 
mathematics, technology, engineering, or a critical foreign language.
    Academic Competitiveness Grants were awarded to students who were 
eligible for a Federal Pell Grant. First-year applicants, who may 
receive up to $750, also must have been first-time undergraduates who 
had completed a rigorous secondary school program and were enrolled or 
accepted for enrollment in a 2- or 4-year degree-granting institution. 
Second-year ACG applicants qualified for an award of up to $1,300 if 
they had completed a rigorous program and maintained a cumulative grade 
point average of at least 3.0 during their first year as an 
undergraduate.
    SMART Grant applicants had to maintain a cumulative GPA of at least 
3.0 in the coursework required by their major to qualify for up to 
$4,000 for their third and fourth years of undergraduate study. SMART 
Grants, in combination with the Federal Pell Grant and other student 
financial assistance, were not allowed to exceed the student's cost of 
attendance.
    In the 2010-11 award year, the final year of these programs, the 
Department estimated that there were 786,000 recipients of ACG grants 
with an average grant of $697 and 150,000 SMART grant recipients with 
an average grant of $2,560. With the sunset of the program, future 
students who may have qualified had to find other sources for these 
funds, including programs that would be affected by the higher unmet 
need resulting from the elimination of these grants.
    Another policy that affected a segment of Pell grant recipients was 
the statutory change to set the minimum Pell award to 10 percent of the 
maximum award. This reduced the maximum expected family contribution 
(EFC) with which a student can be eligible, decreasing the potential 
pool of recipients. This change was expected to affect those at the 
higher end of the income range eligible for Pell Grants. As described 
in the Net Budget Impacts, at the time of its enactment, this was 
estimated to reduce transfers to recipients by $23 million in the 2012-
13 award year and $389 million in the applicable 10-year budget window.
    The statutory change to reduce a Pell recipient's lifetime limit to 
12 semesters was meant to emphasize timely completion of programs. At 
the time of its enactment, the Department estimated that 66,000 
recipients would be affected in the 2012-13 award year and that total 
savings over the 10-year budget window would be approximately $2.9 
billion. For students, this policy may limit their ability to transfer 
institutions, switch educational programs, or restart their 
undergraduate education and complete a program. The Pell Grant duration 
for a student is calculated by adding together each of the annual 
percentages of a student's Scheduled Award that was actually disbursed 
to the student. For example, a student whose 2010-2011 Federal Pell 
Grant Scheduled Award was $5,550 (the maximum award that year), but who 
received $2,775 because she was only enrolled for one semester, will 
have used 50 percent of that award year's Scheduled Award. Similarly, a 
student who was enrolled three-quarter time for the 2011-2012 award 
year would have used 75 percent of his Scheduled Award. If these 
examples were for the same student and she did not receive Pell Grant 
funds for any other award year, her total Lifetime Eligibility Used 
(LEU) would be 125 percent. The combination of policies--the LEU and 
the possibility of receiving up to 150 percent of an award in one 
year--means students will have to track their Pell usage carefully as 
they plan their educational programs.

[[Page 59624]]

Institutions

    The effect of the statutory change reflected in these final 
regulations on institutions will depend on the percentage of recipients 
who receive more than one Pell award in a given award year. 
Institutions might benefit if they choose to decrease the amount of 
institutional aid they give to students receiving both institutional 
grants and also Pell Grants for an additional semester, or reallocate 
that aid to other students. Some institutions may decide to increase 
tuition because of the increased availability of Pell Grants. Research 
from the Federal Reserve Bank of New York found a correlation between 
increased maximum Pell awards and tuition and fees and a reduction in 
institutional grants.\2\
---------------------------------------------------------------------------

    \2\ Lucca, D., Nadauld, T. & Shen, K., July 2015, Credit Supply 
and the Rise in College Tuition: Evidence from the expansion in 
Federal Student Aid Programs, Federal Reserve Bank of New York.
---------------------------------------------------------------------------

    If an institution spends additional revenue on academic or student 
support services, that would benefit all students. If the Pell Grants 
displace other non-institutional sources used to pay tuition (e.g., 
State aid or Federal loans), we would expect little financial impact on 
institutions.
    We expect little impact on costs to institutions from increases in 
enrollment intensity by the marginal student, as it would require very 
little in additional resources. Full-time students are typically more 
cost-effective for institutions, given that they pay more tuition but 
require or use the same amount of many campus resources as part-time 
students. Large-scale shifts in student behavior, though, may require 
increasing capacity like adding sections of courses. This may be 
particularly true for institutions that have not historically had 
robust summer terms, but see increased demand for such courses due to 
the expanded access to Pell grants.
    The actual impact of this statutory change on institutions will 
vary according to student behavior and institutional decision-making. 
In the 2018-19 award year, transfers to recipients increased by 
approximately $1.3 billion.
    The elimination of ACG and SMART grants eliminated these sources of 
funding but also costs of administering the programs for institutions. 
The change in the lifetime limit also reduces the maximum amount of 
Pell Grants an institution may receive with respect to individual 
recipients. If the reduced aid prompted any students to leave school, 
institutions would also lose out on the net tuition revenue from those 
students. The effect on costs is less clear. Students may accelerate 
their coursework and take more credits per semester, potentially 
increasing the expense associated with them in any given semester. On 
the other hand, students may focus on their program of study sooner and 
take fewer classes outside their major and reduce costs by finishing 
faster.

Federal Government

    The administrative changes associated with the statutory and 
regulatory changes described in this rule have already been implemented 
and are not expected to have significant costs. The effects on the Pell 
Grant program are described in the Net Budget Impacts section of this 
document.

Net Budget Impacts

    Because Pell Grants are an entitlement to eligible recipients, 
changes to eligibility or award value change costs of the Pell Grant 
Program. These regulations increase the maximum annual award from one 
Scheduled Award to one and one-half of a Scheduled Award. With this 
change, more money may be awarded per award year over fewer award 
years. The Department will see increased costs in the form of Pell 
awards as a result of the statutory change reflected in the year-round 
Pell regulations. At the time of enactment the Department estimated 
that year-round Pell would benefit approximately 905,000 Pell 
recipients at a cost of $1,502,000,000 in the 2018-19 award year and 
would have an estimated cost of $16.3 billion over the 10-year budget 
window. This estimate was derived using the take-up rate and other 
student data from the 2010-11 award year when year-round Pell grants 
were previously available. In the 2010-11 award year students were able 
to receive two full Scheduled Awards rather than the current one and a 
half. This change was controlled for in applying the 2010-11 data to 
the current award year conditions. The newest iteration of year-round 
Pell grants has now been in place for three full award years. Most 
recently, in the 2019-20 award year approximately 823,000 recipients 
benefitted at a cost of about $1,300,000,000. In future estimates the 
Department will take into account these additional data points.
    While the change to year-round Pell increased transfers to 
recipients, the implementation of the 10 percent minimum award and 12 
semester lifetime Pell eligibility limit reflected in these regulations 
reduced the cost of the Pell Grant program. The statutory change to set 
the minimum Pell award to 10 percent of the maximum award reduces the 
maximum EFC with which a student can be eligible, thus reducing the 
potential pool of recipients. At the time of enactment this change was 
estimated to save $23 million in the 2012-13 award year and $389 
million over the 10-year budget window. Limiting Pell recipients' 
lifetime limit to 12 semesters was estimated to save $247 million in 
the 2012-13 award year and $2,862 million over the 10-year budget 
window.
    The elimination of the ACG and SMART grant programs were not 
expected to have a significant budget impact because they were expected 
to sunset in 2010-11 and that was reflected in the Department's budget 
baselines at the time.

Alternatives Considered

    No alternatives were considered for the revisions to the 
regulations included in this document because these changes implement 
changes to the HEA enacted by Congress, and the Department did not 
exercise discretion in developing these amendments.

Accounting Statement

    As required by OMB Circular A-4 (available at www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in the 
following table we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
these final regulations. This table provides our best estimate of the 
changes in annual monetized transfers in constant 2017 dollars as a 
result of these final regulations. Expenditures are classified as 
transfers from the Federal Government to financial aid recipients.

[[Page 59625]]



      Accounting Statement Classification of Estimated Expenditures
                              [In millions]
------------------------------------------------------------------------
                                                     Transfers
                Category                 -------------------------------
                                                7%              3%
------------------------------------------------------------------------
Annualized Monetized Transfers related          $1,407.5        $1,436.4
 to year-round Pell.....................
Annualized Monetized Transfers related             -28.4           -30.1
 to minimum Pell award..................
Annualized Monetized Transfers related            -248.0          -254.6
 to 12 semester lifetime limit..........
                                         -------------------------------
From Whom to Whom?......................  From the Federal Government to
                                             financial aid recipients
------------------------------------------------------------------------

Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act does not apply to this rulemaking 
because there is good cause to waive notice and comment under 5 U.S.C. 
553.

Paperwork Reduction Act of 1995

    The final regulations do not create any new information collection 
requirements.
    We are removing OMB control numbers from certain regulations 
because they either are no longer necessary, or the applicable burden 
is now captured under a separate control number. OMB Control Number 
1840-0536, ``Pell Grant Program (Recordkeeping Requirements),'' which 
we are removing from Sec.  690.81 ``Fiscal control and fund accounting 
procedures,'' was disapproved on November 16, 1990. Section 690.81 
cross references requirements for maintaining general fiscal records 
and general funds received in accordance with other sections of the 
Department's regulations. Any burden associated with those requirements 
is accounted for under OMB control numbers associated with those other 
regulations.
    OMB Control Number 1840-0681, ``Federal Pell Grant Program, 
Information Collection Presidential Access Scholarship Program, 
Information Collection,'' expired on December 31, 1997. It was 
associated with Sec. Sec.  690.12, 690.13, and 690.82. The Presidential 
Access Scholarship Program is no longer active. Any burden associated 
with Sec. Sec.  690.12 and 690.13 is captured under OMB Control Number 
1845-0001, ``Free Application for Federal Student Aid (FAFSA).'' 
Section 690.82 cross-references record retention and examination 
provisions in Sec.  668.24. Any burden associated with Sec.  668.24 is 
accounted for under OMB Control Number 1845-0038.
    OMB Control Number 1845-NEW5 was associated with an information 
collection in Sec.  690.63(h), which was removed through a prior 
interim final rule (77 FR 25893, May 2, 2012) due to statutory changes. 
Therefore, we are deleting the OMB control number from Sec.  690.63, as 
the information collection request has been discontinued and is no 
longer applicable to that section.

Intergovernmental Review

    The Federal Pell Grant, ACG, and National SMART Grant programs are 
not subject to Executive Order 12372 and the regulations in 34 CFR part 
79.

Assessment of Educational Impact

    Based on our own review, we have determined that the final 
regulations do not require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Accessible Format: On request to the program contact person listed 
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities 
can obtain this document in an accessible format. The Department will 
provide the requestor with an accessible format that may include Rich 
Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, 
Braille, large print, audiotape, or compact disc, or other accessible 
format.
    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 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. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.
    You may also view this document in text or PDF at the following 
site: www.ifap.ed.gov/.

(Catalog of Federal Domestic Assistance Numbers: 84.063 Federal Pell 
Grants; 84.375 Academic Competitiveness Grants; and 84.376 National 
Science and Mathematics Access to Retain Talent Grants.)

List of Subjects

34 CFR Part 604

    Colleges and universities, Grant programs--education, 
Intergovernmental relations.

34 CFR Part 690

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

34 CFR Part 691

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

Miguel A. Cardona,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary amends 
parts 604, 690, and 691 of title 34 of the Code of Federal Regulations 
as follows:

PART 604 [Removed and Reserved]

0
1. Under the authority of 20 U.S.C. 1221e-3, part 604 is removed and 
reserved.

PART 690--FEDERAL PELL GRANT PROGRAM

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

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


Sec.  690.2   [Amended]

0
3. Section 690.2 is amended by:
0
a. In paragraph (b), removing the terms ``Academic Competitiveness 
Grant (ACG) Program'', ``Federal Family Education Loan (FFEL) 
Program'', ``Federal Perkins Loan Program'', and ``National Science and 
Mathematics Access to Retain Talent Grant (National SMART Grant) 
Program''.

[[Page 59626]]

0
b. Removing the parenthetical authority citation at the end of the 
section.

0
4. Section 690.6 is amended by:
0
a. Revising paragraph (e).
0
b. Removing the parenthetical authority citation at the end of the 
section.
    The revision reads as follows:


Sec.  690.6   Duration of student eligibility.

* * * * *
    (e) A student may receive no more than six Scheduled Awards, as 
determined by the Secretary.
* * * * *


Sec.  690.7   [Amended]

0
5. Section Sec.  690.7 is amended by:
0
a. Removing paragraph (a).
0
b. Redesignating paragraphs (b) through (e) as paragraphs (a) through 
(d), respectively.
0
c. In newly redesignated paragraph (c)(1), removing the words ``FFEL 
or'' and adding the words ``or N'' after the words ``subpart M''.
0
d. In newly redesignated paragraph (c)(2), removing the citation 
``668.187'' and adding in its place the citations ``668.187(d) or 
668.206(d)''.
0
e. In newly redesignated paragraph (d)(1), adding the words ``or for 
whom the institution obtained a valid ISIR'' after the word 
``institution''.
0
f. Removing the parenthetical authority citation at the end of the 
section.


Sec.  690.10   [Amended]

0
6. Section Sec.  690.10 is amended by:
0
a. In paragraph (b), removing the words and punctuation ``Federal 
Perkins Loan,''.
0
b. Removing the parenthetical authority citation at the end of the 
section.


Sec.  690.12   [Amended]

0
7. Section Sec.  690.12 is amended by removing the parenthetical OMB 
control number and authority citation at the end of the section.


Sec.  690.13   [Amended]

0
8. Section Sec.  690.13 is amended by removing the parenthetical OMB 
control number and authority citation at the end of the section.


Sec.  690.14   [Amended]

0
9. Section Sec.  690.14 is amended by:
0
a. In paragraph (c)(2), removing the citation ``34 CFR 668.57'' and 
adding in its place the citation ``subpart E of part 668 of this 
chapter''.
0
b. Removing the parenthetical authority citation at the end of the 
section.

0
10. Section 690.62 is revised to read as follows:


Sec.  690.62   Calculation of a Federal Pell Grant.

    The amount of a student's Pell Grant for an academic year is based 
upon the payment and disbursement schedules published by the Secretary 
for each award year.

0
11. Section 690.63 is amended by:
0
a. Revising paragraphs (f) and (g).
0
b. Removing the parenthetical OMB control number and authority citation 
at the end of the section.
    The revisions read as follows:


Sec.  690.63   Calculation of a Federal Pell Grant for a payment 
period.

* * * * *
    (f) Calculating payments that exceed 50 percent of a student's 
annual award. A single disbursement may not exceed 50 percent of any 
award determined under paragraphs (d) and (g)(2) of this section. If a 
payment for a payment period calculated under paragraphs (d) and (g)(2) 
of this section would require the disbursement of more than 50 percent 
of a student's annual award in that payment period, the institution 
must make at least two disbursements to the student in that payment 
period. The institution may not disburse an amount that exceeds 50 
percent of the student's annual award until the student has completed 
the period of time in the payment period that equals, in terms of weeks 
of instructional time, 50 percent of the weeks of instructional time in 
the program's academic year.
    (g) Additional Federal Pell Grant funds and defining an academic 
year. (1) Notwithstanding paragraphs (b), (c), (d), and (e) of this 
section and Sec.  690.66, the amount of a student's award for an award 
year may not exceed one and one-half of his or her Scheduled Federal 
Pell Grant award for that award year.
    (2) A student's payment for the payment period may include the 
remaining amount of the student's Scheduled Award plus an amount from 
the additional Federal Pell Grant funds not to exceed one-half of a 
student's Scheduled Award.
    (3) For purposes of this section and Sec.  690.66, an institution 
must define an academic year for each of its eligible programs in terms 
of the number of credit or clock hours and weeks of instructional time 
in accordance with the requirements of 34 CFR 668.3.
* * * * *


Sec.  690.64   [Amended]

0
12. Section 690.64 is amended by:
0
a. In paragraph (b), adding the words ``one and one-half of'' after the 
words ``more than''.
0
b. Removing the parenthetical authority citation at the end of the 
section.


Sec.  690.65   [Amended]

0
13. Section 690.65 is amended by:
0
a. In paragraph (c), adding the words ``one and one-half of'' after the 
words ``not exceed''.
0
b. In paragraph (d)(2), adding the words ``or 150 percent, if the 
student is eligible to receive additional Federal Pell Grant funds in 
an amount up to one-half of a Scheduled Award during a single award 
year'' after the words ``100 percent''.
0
c. In paragraph (f), adding the punctuation and words ``, or one and 
one-half of his or her Scheduled Federal Pell Grant, whichever is 
applicable'' after the word ``Grant''.
0
d. Removing the parenthetical authority citation at the end of the 
section.

0
14. Section 690.67 is added to read as follows:


Sec.  690.67   Eligibility to receive additional Federal Pell Grant 
funds in an amount up to one-half of a Scheduled Award during a single 
award year.

    An institution awards additional Federal Pell Grant funds up to 
one-half of a Scheduled Award to a student in an award year if the 
student is enrolled--
    (a) In an eligible program leading to a bachelor's or associate's 
degree or other recognized educational credential, except as provided 
in 34 CFR part 668, subpart O, for students with intellectual 
disabilities, for one or more additional payment periods during the 
same award year that are not fully covered by the student's initial 
Federal Pell Grant Scheduled Award; and
    (b) At least as a half-time student in the payment period(s) for 
which the student receives any portion of the additional Federal Pell 
Grant funds.


Sec.  690.81   [Amended]

0
15. Section 690.81 is amended by removing the parenthetical OMB control 
number and authority citation at the end of the section.


Sec.  690.82   [Amended]

0
16. Section 690.82 is amended by removing the parenthetical OMB control 
number and authority citation at the end of the section.


Sec.  690.83   [Amended]

0
17. Section 690.83 is amended by:
0
a. In paragraph (d)(2), removing the citation ``34 CFR 668.23(c)'' and 
adding

[[Page 59627]]

in its place the citation ``34 CFR 668.23(b)''.
0
b. In the parenthetical OMB control number at the end of the section, 
removing the words ``control number 1840-0688'' and adding in their 
place the words ``control number 1845-0039''.
0
c. Removing the parenthetical authority citation at the end of the 
section

PART 691 [Removed and Reserved]

0
18. Under the authority of 20 U.S.C. 1221e-3, part 691 is removed and 
reserved.

[FR Doc. 2021-23423 Filed 10-27-21; 8:45 am]
BILLING CODE 4000-01-P