[Federal Register: October 28, 1999 (Volume 64, Number 208)]
[Rules and Regulations]
[Page 58283-58295]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28oc99-14]

[[Page 58283]]

_______________________________________________________________________

Part VI

Department of Education

_______________________________________________________________________

34 CFR Part 668 et al.

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

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DEPARTMENT OF EDUCATION

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

RIN 1845-AA01


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

AGENCY: Department of Education.

ACTION: Final regulations.

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SUMMARY: These final regulations amend the regulations governing the
Student Assistance General Provisions, the Campus-Based programs
(Federal Perkins Loan, Federal Work-Study (FWS), and Federal
Supplemental Educational Opportunity Grant (FSEOG) programs), and the
Federal Pell Grant Program. These regulations incorporate changes made
to the Higher Education Act of 1965, as amended (HEA), by the Higher
Education Amendments of 1998 (1998 Amendments).

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

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

SUPPLEMENTARY INFORMATION: These regulations implement certain
provisions of the 1998 Amendments (Pub. L. 105-244), enacted October 7,
1998. On August 3, 1999, we published a notice of proposed rulemaking
(NPRM) in the Federal Register (64 FR 42206). In the NPRM, we proposed
to amend the Student Assistance General Provisions regulations (part
668) which apply to all of the Title IV, HEA programs, the General
Provisions regulations for the Campus-Based programs (part 673), and
the regulations for the Federal Perkins Loan (part 674), FWS (part
675), FSEOG (part 676), and the Federal Pell Grant (part 690) programs.
    The NPRM included a discussion of the proposed changes that will
not be repeated here. The following list summarizes those changes and
identifies the pages of the preamble to the NPRM on which the
discussion can be found:

Student Assistance General Provisions

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

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

Section 668.161  Scope and Purpose

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

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

Section 673.5  Overaward

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

Sections 674.10, 675.10, and 676.10  Selection of Students

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

Federal Work-Study Programs

Section 675.2  Definitions

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

Section 675.8  Program Participation Agreement

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

Section 675.16  Payments Directly to the Student's Account

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

Section 675.18  Use of Funds

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

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

Section 675.20  Eligible Employers and General Conditions and
Limitation on Employment

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

Section 675.23  Employment Provided by a Private For-Profit
Organization

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

Section 675.26  FWS Federal Share Limitations

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

Work-Colleges Program (Subpart C)

Section 675.45  Allowable Costs, Federal Share, and Institutional Share

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

Federal Supplemental Educational Opportunity Grant Program

Section 676.18  Use of funds.

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

Federal Pell Grant Program

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

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

Section 690.7  Institutional Participation

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

Substantive Changes to the NPRM

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

Implementation Date of These Regulations

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

Analysis of Comments and Changes

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

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

General

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

Student Assistance General Provisions and the Federal Pell Grant
Program

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

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

Federal Work-Study Programs

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

[[Page 58288]]

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

[[Page 58289]]

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

[[Page 58290]]

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

Goals 2000: Educate America Act

    The Goals 2000: Educate America Act (Goals 2000) focuses the
Nation's education reform efforts on the eight National Education Goals
and provides a framework for meeting them. Goals 2000 promotes new
partnerships to strengthen schools and expands the Department's
capacities for helping communities to exchange ideas and obtain
information needed to achieve the goals.
    These regulations address the National Education Goals that (1) all
children will start school ready to learn and that student achievement
will be enhanced; (2) call for increasing the rate at which students
graduate from high school and pursue high quality postsecondary
education and for supporting life-long learning; (3) every adult
American will be literate and will possess the knowledge and skills
necessary to compete in a global economy and exercise the rights and
responsibilities of citizenship; and (4) the Nation's teaching force
will have access to programs for the continued improvement of their
professional skills and the opportunity to acquire the knowledge and
skills needed to instruct and prepare all American students for the
next century. The regulations in Sec. 675.18(g) further the objectives
of these Goals by requiring FWS student participation in reading
tutoring and in family literacy projects where the family is recognized
as an institution for education and learning and the parent is
recognized as their children's first teachers. The objectives of the
Goals are also addressed by extending eligibility for Federal Pell
Grants to those students who are pursuing a teacher certification or
licensing credential through a State

[[Page 58291]]

approved non-degree postbaccalaureate program.

Executive Order 12866

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

Paperwork Reduction Act of 1995

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

Intergovernmental Review

    The Federal Supplemental Educational Opportunity Grant program is
subject to Executive Order 12372 and the regulations in 34 CFR part 79.
The objective of the Executive order is to foster an intergovernmental
partnership and a strengthened federalism by relying on processes
developed by State and local governments for coordination and review of
proposed Federal financial assistance.
    In accordance with the order, we intend this document to provide
early notification of the Department's specific plans and actions for
this program.
    The Federal Perkins Loan, Federal Work-Study, and Federal Pell
Grant programs are not subject to the requirements of Executive Order
12372 and the regulations in 34 CFR part 79.

Assessment of Educational Impact

    In the NPRM we requested comments on whether the proposed
regulations would require transmission of information that any other
agency or authority of the United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have
determined that these final regulations do not require transmission of
information that any other agency or authority of the United States
gathers or makes available.

Electronic Access to This Document

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

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

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

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

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

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

List of Subjects

34 CFR Part 668

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

34 CFR Part 673, 674, 675, and 676

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

34 CFR Part 690

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

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

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

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

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

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

Sec. 668.8  Eligible program.

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

Sec. 668.32  Student eligibility--general.

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

Sec. 668.161  Scope and purpose.

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

[[Page 58292]]

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

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

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

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

Sec. 673.5  Overaward.

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

PART 674--FEDERAL PERKINS LOAN PROGRAM

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

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

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

Sec. 674.10  Selection of students for loans.

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

PART 675--FEDERAL WORK-STUDY PROGRAMS

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

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

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

Sec. 675.2  Definitions.

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

Sec. 675.8  [Amended]

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

Sec. 675.10  Selection of students for FWS employment.

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

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

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

Sec. 675.16  Payments to students.

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

[[Page 58293]]

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

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

Sec. 675.18  Use of funds.

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

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

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

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

* * * * *

[[Page 58294]]

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

Sec. 675.26  FWS Federal share limitations.

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

Subpart C--Work-Colleges Program

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

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

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

PART 676--SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT PROGRAM

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

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

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

Sec. 676.10  Selection of students for FSEOG awards.

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

Sec. 676.18  Use of funds.

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

PART 690--FEDERAL PELL GRANT PROGRAM

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

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

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

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

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

[[Page 58295]]

Sec. 690.7  Institutional participation.

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