FR Doc 06-5937
[Federal Register: July 3, 2006 (Volume 71, Number 127)]
[Rules and Regulations]               
[Page 37989-38012]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jy06-12]                         


[[Page 37989]]
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Part III





Department of Education





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34 CFR Parts 668, 674 et al.



Establishment of Regulations for the Academic Competitiveness Grant and 
National Science and Mathematics Access to Retain Talent Grant 
Programs, and Grant and Loan Program Amendments; Interim Rule


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DEPARTMENT OF EDUCATION

34 CFR Parts 668, 674, 675, 676, 682, 685, 690, and 691

RIN 1840-AC86

 
Student Assistance General Provisions; Federal Perkins Loan 
Program; Federal Work-Study Programs; Federal Supplemental Educational 
Opportunity Grant Program; Federal Family Education Loan Program; 
William D. Ford Federal Direct Loan Program; Federal Pell Grant 
Program; Academic Competitiveness Grant Program; and National Science 
and Mathematics Access to Retain Talent Grant Program

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Interim final regulations; request for comments.

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SUMMARY: The Secretary amends title 34 to establish regulations for the 
Academic Competitiveness Grant (ACG) and National Science and 
Mathematics Access to Retain Talent Grant (National SMART Grant) 
programs. The Secretary also amends the regulations related to the 
Student Assistance General Provisions, Federal Perkins Loan Program, 
Federal Work-Study Programs, Federal Supplemental Educational 
Opportunity Grant Program, Federal Family Education Loan Program, 
William D. Ford Federal Direct Loan Program, and Federal Pell Grant 
Program. These interim final regulations and amendments are needed to 
implement provisions of the Higher Education Act of 1965 (HEA), as 
amended by the Higher Education Reconciliation Act of 2005 (HERA).
    The interim final regulations for the ACG and National SMART Grant 
programs specify the eligibility requirements for a student to apply 
for and receive an award under these programs for the 2006-2007 award 
year. These interim final regulations also identify the roles of 
institutions of higher education (institutions), State educational 
agencies (SEAs), and local educational agencies (LEAs) in administering 
the programs. These interim final regulations will be effective for the 
2006-2007 award year. The Secretary is, however, soliciting comments on 
all aspects of these interim final regulations and may, for the 2007-
2008 award year, amend and finalize them as appropriate in response to 
comments received. For regulations that would take effect for the 2008-
2009 award year and subsequent award years, the Secretary intends to 
conduct negotiated rulemaking, as required under section 492 of the 
HEA.

DATES: These regulations are effective August 2, 2006. The Department 
must receive any comments on or before August 17, 2006. Affected 
parties do not have to comply with the information collection 
requirements in Sec. Sec.  691.12, 691.15, and 691.83 until the 
Department of Education publishes in the Federal Register the control 
numbers assigned by the Office of Management and Budget (OMB) to these 
information collection requirements. Publication of the control numbers 
notifies the public that OMB has approved these information collection 
requirements under the Paperwork Reduction Act of 1995.

ADDRESSES: Address all comments about these interim final regulations 
to: Fred Sellers, U.S. Department of Education, P.O. Box 33184, 
Washington, DC 20033-3184.
    If you prefer to deliver your comments by hand or by using a 
courier service or commercial carrier, address your comments to: Fred 
Sellers, 1990 K Street NW., room 8039, Washington, DC 20006-8542
    If you prefer to send your comments through the Internet, you may 
address them to us at the U.S. Government Web site: http://www.regulations.gov
.

    Or you may send your Internet comments to us at the following 
address: ACG.NSG@ed.gov.
    You must include the term ``Academic Competitiveness and National 
SMART Grants'' in the subject line of your electronic message.

FOR FURTHER INFORMATION CONTACT: Jacquelyn Butler, U.S. Department of 
Education, 1990 K Street, NW., room 8053, Washington, DC 20006-8544. 
Telephone: (202) 502-7890. Sophia McArdle, U.S. Department of 
Education, 1990 K Street, NW., room 8019, Washington, DC 20006-8544. 
Telephone: (202) 219-7078.
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Relay Service (FRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION:

Background

    These interim final regulations implement certain provisions of the 
Higher Education Reconciliation Act of 2005 (Pub. L. 109-171), enacted 
on February 8, 2006, 20 U.S.C. 1070a-1 (HERA), amending the Higher 
Education Act of 1965, as amended (HEA).
    Section 8003 of HERA amended the HEA by adding a new section 401A 
establishing the ACG and National SMART Grant programs to assist 
eligible students in paying their college education expenses and 
appropriating funds for these programs starting with the 2006-2007 
award year, beginning on July 1, 2006. The ACG Program awards grants to 
eligible financially needy students who complete a rigorous secondary 
school program of study. An ACG is available during a student's first 
and second academic years of undergraduate education in an eligible 
undergraduate program. The National SMART Grant Program awards grants 
to eligible financially needy students who are pursuing majors in the 
physical, life, or computer sciences, mathematics, technology, 
engineering, or foreign languages critical to the national security of 
the United States. A National SMART Grant is available to students 
during the third and fourth academic years of undergraduate education 
in an eligible undergraduate program.
    Under its principles for regulating, the Department of Education 
(Department) regulates only when absolutely necessary. The Department 
regulates in a way to improve the quality and equality of services to 
its customers and in the most flexible and least burdensome way 
possible. These interim final regulations are necessary to implement 
the ACG and National SMART Grant programs.

Significant Regulations

    We group major issues according to subject. We discuss other 
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.

Relationship Between the Federal Pell Grant Program and the ACG and 
National SMART Grant Programs

    The ACG and National SMART Grant program interim final regulations 
duplicate those of the Federal Pell Grant Program to the extent 
practicable given the similar nature of these programs. Like the 
Federal Pell Grant Program, the ACG and National SMART Grant programs 
provide for direct grants from the Federal Government to students to 
assist in paying their college expenses. In addition, a student must be 
receiving a Federal Pell Grant to be eligible for an ACG or National 
SMART Grant.
    The Secretary will be administering the ACG and National SMART 
Grant

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programs using the same delivery system that the Secretary uses for the 
Federal Pell Grant Program. The Secretary expects that this 
coordination of administrative requirements will assist participating 
institutions in administering these programs, reduce the amount of 
additional institutional administrative burden and paperwork, and 
simplify the process for students to apply for assistance under these 
programs.
    Accordingly, the following definitions are repeated in the ACG and 
National SMART Grant program interim final regulations without changes 
from the Federal Pell Grant Program regulations:
     Institutional Student Information Record (ISIR).
     Payment Data.
     Student Aid Report (SAR).
     Undergraduate Student.
     Valid Institutional Student Information Record (valid 
ISIR).
     Valid Student Aid Report (valid SAR).
    In addition, Sec. Sec.  691.61, 691.71, 691.78, 691.79, 691.81, 
691.82, and 691.83 of the ACG and National SMART Grant program interim 
final regulations do not reflect any substantive changes from the 
corresponding sections in the Federal Pell Grant Program regulations 
(34 CFR part 690). These sections are repeated in these interim final 
regulations to provide a complete description in part 691 of the 
program-specific requirements for the ACG and National SMART Grant 
programs. Other sections that implement specific ACG and National SMART 
Grant program requirements reflect Federal Pell Grant Program 
requirements to the extent practicable.

Part 668--Student Assistance General Provisions

    The following sections in 34 CFR part 668 are being amended to 
reflect specific requirements applicable to the ACG and National SMART 
Grant programs.
Section 668.33 Citizenship and Residency Requirements
    Statute: Section 401A(c)(1) of the HEA requires that a student be a 
citizen of the United States to be eligible for the ACG and National 
SMART Grant programs. The HEA continues to provide that permanent 
residents and certain other categories of noncitizens may be eligible 
for the other title IV, HEA programs, including the Federal Pell Grant 
Program.
    Regulations: This section provides that only students who are 
United States citizens are eligible to receive ACG and National SMART 
Grants.
    Reason: The regulations implement the statutory requirement that an 
eligible student for the ACG and National SMART Grant Programs must be 
a United States citizen.
Section 668.35 Student Debts Under the HEA and to the U.S.
    Regulations: This section provides that a student is not liable for 
an ACG or National SMART Grant overpayment in an award year if the 
institution can eliminate the overpayment by adjusting subsequent title 
IV, HEA program payments, excluding Federal Pell Grant, ACG, or 
National SMART Grant monies, in that same award year. If the 
overpayment cannot be eliminated by adjusting subsequent title IV, HEA 
program payments, a student is still not liable for an ACG or National 
SMART Grant overpayment if the overpayment can be eliminated by 
adjusting subsequent ACG or National SMART Grant payments, as 
appropriate, in that same award year.
    Reason: These regulations detail the requirements for institutions 
to follow when resolving overpayments to students under the ACG and 
National SMART Grant programs. These requirements are similar to the 
requirements in the Federal Pell Grant Program but also account for the 
requirement in section 401A(d) of the HEA that the amount of an ACG or 
National SMART Grant award to a student must be adjusted in relation to 
other aid received and the student's expected family contribution.

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

Subpart A--Scope, Purpose and General Definitions

Section 691.2 Definitions
Eligible Major
    Statute: Section 401A(c)(3)(C)(i) of the HEA requires a student to 
pursue a major in the physical, life, or computer sciences, 
mathematics, technology, engineering, or a critical foreign language in 
order to be eligible for a National SMART Grant.
    Regulations: Section 691.2(d) provides a definition of eligible 
major for purposes of the National SMART Grant Program. An eligible 
major, as determined by the Secretary under Sec.  691.17, is a major in 
one of the physical, life, or computer sciences, mathematics, 
technology, engineering or a critical foreign language.
    Reason: This section implements the statutory requirement that, to 
qualify as an eligible student for a National SMART Grant, a student 
must major in one of the physical, life, or computer sciences, 
mathematics, technology, engineering, or a critical foreign language.
Eligible Program
    Statute: Section 401A(c)(3) of the HEA requires that an eligible 
student be enrolled or accepted for enrollment in an undergraduate 
program at a two- or four-year degree-granting institution of higher 
education to be eligible for an ACG or in a four-year degree-granting 
institution of higher education to be eligible for a National SMART 
Grant.
    Regulations: This section adds a definition of eligible program in 
Sec.  691.2(d). An eligible program is an eligible program as defined 
in 34 CFR 668.8 that, for the ACG Program, leads to an associate's or 
bachelor's degree, is a two-academic-year program acceptable for full 
credit toward a bachelor's degree, or is a graduate degree program that 
includes at least three academic years of undergraduate education or, 
for the National SMART Grant Program, leads to a bachelor's degree in 
an eligible major or is a graduate degree program in an eligible major 
that includes at least three academic years of undergraduate education.
    Reason: These provisions are necessary to implement the statute and 
to ensure eligibility for students enrolled in combined undergraduate/
graduate programs with at least three years of undergraduate study.
Section 691.6 Duration of Student Eligibility--Undergraduate Course of 
Study
    Statute: Under section 401A(d)(2)(B) of the HEA, an eligible 
student may only receive one ACG for each of the first two academic 
years of an undergraduate program and one National SMART Grant for each 
of the third and fourth academic years of a bachelor's degree program.
    Regulations: This section sets forth the duration of student 
eligibility for the ACG and National SMART Grant programs by academic 
year and restricts a student to one grant for each of his or her first, 
second, third, or fourth academic years of enrollment in an eligible 
program.
    Reason: Unlike the Federal Pell Grant Program, student eligibility 
under the ACG and National SMART Grant programs is based on the 
specific academic years of the student's eligible program rather than 
award years or completion of a bachelor's degree.

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Section 691.7 Institutional Participation
    Statute: Section 401A(c)(2) of the HEA provides that a student must 
be eligible for a Federal Pell Grant to qualify for an ACG or National 
SMART Grant.
    Regulations: In general, the interim final regulations mirror the 
Federal Pell Grant program participation requirements. In addition, the 
interim final regulations require an institution that participates in 
the Federal Pell Grant Program and offers an educational program that 
is an eligible program for the ACG or National SMART Grant programs, to 
participate in the ACG and National SMART Grant programs, as 
applicable. A coordinating technical amendment is also being made to 34 
CFR 690.7 of the Federal Pell Grant Program regulations to require 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.
    Reason: An otherwise eligible student must be eligible for a 
Federal Pell Grant to receive an ACG or National SMART Grant. The 
Secretary believes that mandating institutional participation in all 
three programs when eligible programs are offered at an institution is 
consistent with the statute's requirement that the Secretary award 
grants to Pell-eligible students.
Section 691.8 Enrollment Status for Students Taking Regular and 
Correspondence Courses
    Statute: Section 401A(c) of the HEA provides that a student must be 
a full-time student to be eligible for an ACG or National SMART Grant.
    Regulations: This section sets forth the circumstances under which 
correspondence courses may be applied toward a student's full-time 
enrollment status in a noncorrespondence study program. The interim 
final regulations in Sec.  691.8(a) and (b) duplicate the Federal Pell 
Grant Program regulations with respect to correspondence work that can 
be included in determining a student's enrollment status. Section 
691.8(c), however, provides that a student taking correspondence 
courses is considered a full-time student if the student is taking 
coursework that is commensurate with the institution's standard for 
full-time students and the student's noncorrespondence coursework 
constitutes at least one-half of the institution's required minimum 
coursework for full-time students.
    Reason: These provisions are necessary to clarify what is required 
for determining whether a student taking correspondence courses is 
considered full-time. The Secretary believes these provisions are 
consistent with 34 CFR 690.8 of the Federal Pell Grant Program 
regulations under which the enrollment status of a student taking only 
correspondence study is never greater than half-time. Section 691.8(c) 
of these interim final regulations is consistent with 34 CFR 
690.8(b)(3) of the Federal Pell Grant Program regulations in that it 
ensures that a student is enrolled in noncorrespondence coursework that 
is at least one-half of the minimum coursework to qualify as a full-
time student.
Section 691.11 Payments From More Than One Institution
    Regulations: This section addresses the situation in which a 
student attends more than one institution and requires a student to 
receive an ACG or National SMART Grant from the same institution that 
awards the student his or her Federal Pell Grant.
    Reason: Under the Federal Pell Grant Program, a student cannot 
receive payments from more than one institution or from the Secretary 
and an institution at the same time. To ensure coordination with the 
Federal Pell Grant Program, these regulations provide that a student 
can only receive an ACG or National SMART Grant from the same 
institution that awards the student's Federal Pell Grant.

Subpart B--Application Procedures

Section 691.12 Application
    Statute: Section 401A(c) of the HEA provides the student 
eligibility requirements for the ACG and National SMART Grants. Section 
401A(c)(3)(A) and (B) of the HEA requires that a student successfully 
complete a rigorous secondary school program of study to receive an 
ACG.
    Regulations: This section specifies the procedures that a student 
must follow when applying for an ACG or National SMART Grant, and in 
particular, requires that a student must submit a Free Application for 
Federal Student Aid (FAFSA). The interim final regulations provide that 
a student may be required to provide additional information in the 
application, including information about the rigorous secondary school 
program of study that the student completed to qualify for an ACG.
    Reason: Under section 483(a) of the HEA, the FAFSA is the standard 
form used by all students applying for title IV, HEA program aid, 
including Federal Pell Grants and these programs. Use of this form and 
procedures that are similar to the Federal Pell Grant Program will 
facilitate students' completion and institutions' use of the FAFSA for 
the ACG and National SMART Grant programs.
Section 691.15 Eligibility To Receive a Grant
General Requirements
    Statute: Section 401A(c) of the HEA provides student eligibility 
requirements for the ACG and National SMART Grant programs.
    Regulations: Section 691.15(a) of these interim final regulations 
sets forth the ACG and National SMART Grant student eligibility 
requirements common to both programs including United States 
citizenship, full-time enrollment, and receipt of a Federal Pell Grant 
in the payment period that a student receives an ACG or National SMART 
Grant.
    Reason: This section implements the statutory provision that, to be 
eligible to receive an ACG or National SMART Grant, a student must 
establish eligibility for assistance under the title IV, HEA programs 
and establish that he or she is a United States citizen, is enrolled 
full-time, and is eligible for a Federal Pell Grant. The Secretary 
believes that the institution's determination that a student will 
receive a Federal Pell Grant is the best way to demonstrate that a 
student is Pell-eligible for purposes of the ACG and National SMART 
Grant programs.
Academic Year in College
    Statute: Section 401A(c)(3)(A), (B), and (C) of the HEA ties a 
student's eligibility for a grant to the student's enrollment in the 
first, second, third, and fourth academic years of a program of 
undergraduate education.
    Regulations: The interim final regulations provide that a student 
may receive an ACG during the first and second academic years of an 
eligible program of undergraduate education and may receive a National 
SMART Grant during the third and fourth academic years of an eligible 
program of undergraduate education. Section 691.15(b)(1)(iii)(B) 
further provides that, for an eligible student to receive an ACG for 
the student's second academic year, the student must have successfully 
completed the first academic year. There is a parallel provision for 
eligibility for the fourth academic year of the National SMART Grant 
program in Sec.  691.15(c)(5). Thus, for a student to receive a second-
year ACG, for example, a student must be enrolled in the second 
academic year of the student's eligible

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program, after successfully completing the credit or clock hours and 
weeks of instructional time of the first academic year, consistent with 
34 CFR 668.3.
    Reason: The interim final regulations implement the statutory 
requirement that a student's eligibility for an ACG or National SMART 
Grant is based, in part, on the student's academic year of enrollment. 
The term ``academic year'' as used in these interim final regulations 
is the title IV, HEA program academic year as defined by the 
institution for an eligible program under the Student Assistance 
General Provisions regulations (34 CFR 668.3) and in accordance with 
section 481(a) of the HEA as amended by the HERA. In addition to being 
consistent with the other title IV, HEA programs, using this definition 
will allow the Secretary to provide assistance to qualified Federal 
Pell Grant recipients as early as possible as they progress through 
their educational program.
    The Secretary is specifying in the interim final regulations that a 
student applying for an ACG in his or her second academic year or a 
student applying for a National SMART Grant in his or her fourth 
academic year must have successfully completed the first and third 
academic years, respectively. The Secretary believes that a student 
should not be considered to have completed the credit or clock hours of 
an academic year for an ACG or National SMART Grant unless the student 
successfully completes, i.e., passes and earns, the credits or hours in 
the title IV, HEA academic year.
Grade Point Average (GPA)
    Statute: Section 401A(c)(3)(B) and (C) of the HEA provides that a 
student's eligibility for a grant is based, in part, on the student 
obtaining a cumulative GPA of at least 3.0 (or the equivalent as 
determined by the Secretary) in his or her first academic year of an 
educational program for a second-year ACG and in the coursework 
required for the student's major for a National SMART Grant.
    Regulations: Under Sec.  691.15(b)(1)(iii)(C), to receive an ACG in 
the second academic year, a student must successfully complete the 
first academic year of his or her eligible program and obtain a 
cumulative GPA of at least a 3.0 on a 4.0 scale, or the equivalent, as 
determined by the institution for other academic and title IV, HEA 
program purposes. Similarly, to receive a National SMART Grant, under 
Sec.  691.15(c)(3), a student must maintain at least a 3.0 on a 4.0 
scale, or the equivalent, cumulative GPA through the most recently 
completed payment period in the coursework required for a student's 
eligible program. For both programs, calculation of a student's GPA for 
purposes of eligibility for an ACG or National SMART Grant must be done 
consistent with other institutional measures for academic and title IV, 
HEA program purposes.
    In the case of a transfer student, Sec.  690.15(e) of the interim 
final regulations provides that an institution must rely on the grades 
of the courses from the prior institution that the institution accepts 
toward the student's eligible program for the first payment period. Use 
of grades from any prior institution to determine a student's GPA will 
be optional for the second and subsequent payment periods.
    Reason: The Secretary believes that, in general, a student's GPA 
used to determine eligibility for an ACG or National SMART Grant should 
be determined by the institution under the same standards as are used 
to calculate a GPA for other academic and title IV, HEA program 
purposes at the institution. This requirement provides consistency and 
reduces the administrative burden on institutions. In the case of a 
National SMART Grant, the Secretary has determined that a student must 
meet the GPA requirement based on all the courses required for the 
student's eligible program, not just those courses required for the 
eligible major. The Secretary believes this is appropriate because this 
approach will minimize the burden on institutions when determining 
whether a student meets the GPA requirement.
    To ensure that a transfer student may qualify for a grant in his or 
her first payment period at an institution to which the student has 
transferred, the institution to which the student transfers must take 
into account the grades in coursework taken at any prior institution 
that the institution accepts on transfer towards the student's eligible 
program in calculating a GPA to determine the student's eligibility. 
The Secretary believes it is appropriate to make consideration of 
transfer credits optional in the second and subsequent payment periods 
at the institution to which the student has transferred because the 
student will then have established a GPA with coursework taken at the 
institution to which the student transferred after the first payment 
period. The institution may then follow its standards for academic and 
title IV, HEA program purposes without any further exceptional 
treatment for the transfer student.
Prior Enrollment in a Postsecondary Educational Program
    Statute: Section 401A(c)(3)(A)(ii) of the HEA provides that a 
student is not eligible for an ACG in the student's first academic year 
of enrollment in an eligible program if the student previously enrolled 
in a program of undergraduate education.
    Regulations: Under Sec.  691.15(b)(1)(ii)(B) of the interim final 
regulations, a student is not eligible for an ACG in the student's 
first academic year if the student previously enrolled as a regular 
student in a program of undergraduate education.
    Reason: The Secretary believes that it is appropriate to clarify 
that a student is considered to have been enrolled in an undergraduate 
program if the student was admitted into the program as a regular 
student, as defined in 34 CFR 660.2. The term ``regular student'' is 
defined as ``a person who is enrolled or accepted for enrollment at an 
institution for the purpose of obtaining a degree, certificate, or 
other recognized educational credential offered by that institution.'' 
A student is not disqualified from eligibility for a first-year ACG 
based on his or her enrollment in college courses while in high school 
if that student had not been enrolled by the college for the purpose of 
obtaining a degree, certificate, or other recognized educational 
credential offered by the college. A student who was enrolled in a 
postsecondary program leading to a degree, certificate, or other 
recognized educational credential while enrolled in high school is not 
eligible for a first-year ACG. Under Sec. Sec.  101 and 102 of the HEA, 
a postsecondary institution that enrolls high school students who are 
not beyond the age of compulsory school attendance as regular students 
is not eligible for title IV, HEA aid. Thus, an institution that admits 
students as regular students who are in high school and are not beyond 
the age of compulsory school attendance endangers both its 
institutional eligibility and the eligibility of all students at the 
institution for aid under all title IV, HEA programs.
    A student's enrollment in a payment period during his or her first 
academic year of enrollment in an eligible program does not render that 
student ineligible for an ACG during a subsequent payment period during 
the first academic year if the student is otherwise eligible for an 
ACG. For example, a student graduates from high school in May 2006. In 
September 2006, the student enrolls for the fall semester as a half-
time student but is otherwise

[[Page 37994]]

eligible for an ACG. In January 2007, the student begins the second 
semester as a full-time student. The student would not be considered to 
have been previously enrolled in another postsecondary program under 
this provision and would be eligible in the second semester for an ACG 
payment from the student's first-year ACG Scheduled Award.
Documenting Completion of a Rigorous Secondary School Program of Study
    Statute: Section 401A(c)(3)(A)(i) and (B)(i) of the HEA requires 
that, to receive an ACG, a student must have successfully completed a 
rigorous secondary school program of study, as recognized by the 
Secretary.
    Regulations: Under Sec.  691.15(b)(2) of the interim final 
regulations, an institution is required to document a student's 
completion of a rigorous secondary school program of study using 
documentation from the appropriate cognizant authority provided by that 
authority or the student. Section 691.15(b)(3) of the interim final 
regulations provides that for a home-schooled student, the student's 
parent or guardian is the cognizant authority for purposes of providing 
documentation of the student's completion of a rigorous program of 
study. Such documentation would include a transcript or its equivalent 
or, alternatively, a detailed course description listing the secondary 
school courses completed by the student. In the case of a transfer 
student, Sec.  691.15(b)(4) of the interim final regulations provides 
that an institution may rely on documentation of a prior institution's 
determination that a student completed a rigorous secondary school 
program of study. Such determination can be documentation of a 
student's receipt of an ACG from a prior institution.
    Reason: The Secretary believes that, in determining a student's 
eligibility under the rigorous secondary school program of study 
requirement, the institution must obtain documentation that the student 
has completed such a course of study from the cognizant authority. The 
student or the cognizant authority may provide the documentation. To 
maintain the integrity of the application process, the Secretary is 
requiring that, if an institution has reason to believe that 
documentation provided by a student is incomplete or inaccurate, an 
institution must use documentation provided to it directly from the 
cognizant authority.
    With respect to home-schooled students, the Secretary is aware that 
parents or a student's guardian are the cognizant authority for home-
schooled students and is providing for this circumstance in Sec.  
691.15(b)(3) of these interim final regulations.
    In the case of a transfer student, the Secretary believes that an 
institution's reliance on a prior institution's determination and 
documentation of the student's rigorous secondary school program of 
study provides sufficient assurance of the student's eligibility and 
reduces institutional burden. This documentation may be documentation 
of the student's receipt of an ACG at a prior eligible institution.
Declaring an Eligible Major
    Statute: Section 401A(c)(3)(C)(i) of the HEA requires that a 
student must major in one of the physical, life, or computer sciences, 
mathematics, technology, engineering, or in a critical foreign language 
to be eligible for a National SMART Grant.
    Regulations: To be eligible for a National SMART Grant, Sec.  
691.15(c)(2) of the interim final regulations requires that a student 
must formally declare his or her eligible major in accordance with the 
institution's academic requirements. However, if under an institution's 
procedures, a student would not be able to formally declare a major in 
time to qualify for a National SMART Grant, the student must 
demonstrate his or her intent to declare an eligible major as 
documented by the institution. As soon as the student is able to 
formally declare a major, the student must do so in order to remain 
eligible for a National SMART Grant. In all cases, the student must 
enroll in the courses necessary to complete the degree program and to 
fulfill the major requirements.
    Reason: The Secretary believes the best assurance that a student is 
pursuing an eligible major is obtained by a student formally declaring 
his or her eligible major in accordance with the institution's academic 
requirements. The Secretary is aware, however, that in some instances, 
under institutional academic policies, a student is not allowed to 
declare his or her major early enough to qualify for a National SMART 
Grant. The Secretary is, therefore, providing an alternative means for 
students to qualify as having an eligible major. Under this alternative 
approach, a student may demonstrate his or her intent to declare an 
eligible major in accordance with the institution's academic 
requirements. However, to ensure the integrity of the program, the 
Secretary believes that it is important that the student formally 
declare an eligible major as soon as the student is allowed. Whether 
the student has formally declared a major or is covered by the 
alternative approach, the student also must enroll in the courses 
needed both to complete the student's eligible program and to fulfill 
the intended eligible major's requirements. The Secretary believes this 
additional requirement fulfills the statutory requirement because it 
further documents the student's pursuit of an eligible major.
Section 691.16 Recognition of a Rigorous Secondary School Program of 
Study
    Statute: Section 401A(f) of the HEA requires the Secretary to 
recognize at least one rigorous secondary school program of study in 
each State to determine student eligibility for an ACG. Section 
401A(c)(3)(A) and (B) provides that a rigorous secondary school program 
of study is established by an SEA or LEA.
    Regulations: The interim final regulations provide that, for an 
award year, the Secretary recognizes at least one rigorous secondary 
school program of study in each State identified by an SEA or by an LEA 
that can document that it is legally authorized by the State to 
establish a separate secondary school program of study. In identifying 
secondary school programs of study that it considers rigorous, an SEA 
or LEA must consider programs that are offered at public, charter, 
private, tribal, and home schools, prepare students to succeed in 
postsecondary education, and are not General Education Development 
(GED) Certificate programs. The Secretary believes that GED programs do 
not ensure the necessary academic achievement to be considered rigorous 
secondary school programs of study.
    In these interim final regulations, the Secretary is recognizing 
certain secondary school programs of study as rigorous that are in 
addition to any that may subsequently be explicitly identified by SEAs 
and LEAs and recognized by the Secretary. These additional programs 
include existing advanced and honors programs established by States and 
a set of courses identified under the State Scholars Initiative 
sponsored by the Western Interstate Commission for Higher Education 
(WICHE). In addition, an individual student may be considered to have 
completed a rigorous secondary school program of study, regardless of 
the school or program attended, if the individual student successfully 
completes a set of courses similar to those required under the State 
Scholars Initiative. An individual student may also be considered to 
have completed a rigorous secondary school

[[Page 37995]]

program of study, regardless of the school or program attended, if the 
individual student completes courses in the International Baccalaureate 
Diploma Program or the College Board's Advanced Placement Program and 
attains at least a minimum score, consistent with Sec.  691.16(d)(4) 
and (5), respectively, on the examinations for those courses. The 
interim final regulations also provide for publication by the Secretary 
of a list of recognized rigorous secondary school programs of study for 
each award year.
    Reason: The interim final regulations in this section are necessary 
to implement the statutory requirement that the Secretary recognizes at 
least one rigorous secondary school program of study in each State. 
While SEAs and LEAs may submit secondary school programs of study for 
the Secretary to recognize as rigorous, there is no requirement that 
SEAs or LEAs take such action. The Secretary, however, is under a 
mandate to recognize at least one program in each State as rigorous. To 
fulfill this mandate, the Secretary has identified several programs 
that the Secretary recognizes as rigorous secondary school programs of 
study in addition to any that may subsequently be explicitly identified 
by SEAs and LEAs and recognized by the Secretary. Recognizing these 
programs as rigorous in these interim final regulations will ensure 
that deserving students will be able to establish their eligibility for 
an ACG. The Secretary has made an initial determination that these 
particular programs indicate that a student is adequately prepared to 
pursue postsecondary education successfully. With respect to existing 
advanced or honors programs established by States, the Secretary has 
determined that, based on their composition, these programs inherently 
qualify as rigorous secondary school programs of study. Both the set of 
courses identified under the State Scholars Initiative and the set of 
similar courses prescribed in Sec.  691.16(d)(2) of these interim final 
regulations are patterned after the recommendations for the essentials 
of a strong curriculum in the National Commission on Excellence in 
Education's report A Nation at Risk: The Imperative for Educational 
Reform, available on the Department's Web site at http://www.ed.gov/pubs/NatAtRisk/index.html.
 As a result, the Secretary has determined 

that completing the courses of these secondary programs of study 
establishes that a student has completed a rigorous secondary school 
program of study.
    With respect to completing courses in the International 
Baccalaureate Diploma Program or the College Board's Advanced Placement 
Program and attaining at least a minimum score, the Secretary has 
determined that completing these courses with the prescribed minimum 
score establishes that a student has attained a level of ability in 
completing his or her secondary school program that is commensurate 
with completing a rigorous secondary school program of study.
    To ensure a wide distribution of the list of recognized programs 
for each award year, the Secretary will make the list available through 
a number of means, including to students applying using FAFSA on the 
Web, the Department's websites, and through Dear Colleague letters and 
other appropriate media.
Section 691.17 Determination of Eligible Majors
Eligible Major
    Statute: Section 401A(c)(3)(C)(i) of the HEA provides that a 
student may receive a National SMART Grant if the student is pursuing a 
major, as determined by the Secretary, in the physical, life, or 
computer sciences, mathematics, technology, engineering, or a critical 
foreign language.
    Regulations: Section 691.17(a) of the interim final regulations 
provides that, for each award year, the Secretary identifies the 
eligible majors in the physical, life, or computer sciences, 
mathematics, technology, engineering, and, after consulting with the 
Director of National Intelligence, critical foreign languages.
    Reason: This section implements the statutory provision that the 
Secretary determine eligible majors in the physical, life, and computer 
sciences, mathematics, technology, engineering, and, after consulting 
with the Director of National Intelligence, critical foreign languages. 
The Secretary will publish a list of eligible majors by Classification 
of Instructional Program (CIP) codes to provide a standardized method 
of identifying eligible majors. The Secretary believes that no 
significant additional burden will be imposed on institutions because 
they already use CIP codes.
    To ensure wide distribution of the list of eligible majors for each 
award year, the Secretary will make the list available on the 
Department's Web Sites, through Dear Colleague letters, and through 
other appropriate media.
Duration of Eligible Major
    Statute: Section 401A(c)(3)(C)(i) of the HEA provides that a 
student may receive a National SMART Grant if the student is pursuing a 
major, as determined by the Secretary, in the physical, life, or 
computer sciences, mathematics, technology, engineering, or a critical 
foreign language.
    Regulations: Section 691.17(c) of the interim final regulations 
provides that an eligible major for an award year remains an eligible 
major in subsequent award years for a student who majored in that 
eligible major and received a National SMART Grant in the award year in 
which the major was an eligible major, even if that major is no longer 
listed as an eligible major in subsequent award years during which the 
student is otherwise eligible for a National SMART Grant.
    Reason: The Secretary believes that a student who started a third 
academic year, or a portion of a fourth academic year, in an eligible 
major that ceases to be listed as an eligible major during a later 
award year should not be penalized for this change. The regulations 
provide that a student in this situation remains eligible to receive a 
National SMART Grant, provided he or she continues to meet the other 
eligibility requirements.

Subpart F--Determination of Awards

Section 691.62 Calculation of a Grant
Maximum Award
    Statute: Section 401A(d)(1)(A) of the HEA establishes the grant 
amount that an eligible student can receive for each academic year of 
eligibility for an ACG or National SMART Grant. Section 
401A(d)(1)(B)(ii) of the HEA authorizes the Secretary to ratably reduce 
the maximum grant amounts for both programs when the funds available 
for a given fiscal year are less than the amount needed to fund full 
awards for all eligible students.
    Regulations: The interim final regulations provide that the 
Secretary establishes and announces the ACG and National SMART Grant 
Scheduled Awards each award year and sets forth the maximum grant 
amounts for each program for each academic year of eligibility for a 
student as set forth in the statute. The interim final regulations also 
provide that the Secretary may revise the maximum award during an award 
year based on the availability of funds.
    Reason: The Secretary establishes the ACG and National SMART Grant 
Scheduled Awards based on the availability of funds appropriated and 
the anticipated number of eligible students. If funds are insufficient 
to support these amounts, the ACG and National SMART Grant Scheduled 
Awards are ratably reduced from the

[[Page 37996]]

statutory maximums for both programs for all academic years of 
enrollment. To ensure that all eligible students receive an award, we 
also are providing that the Secretary may further revise the ACG and 
National SMART Grant Scheduled Awards during an award year.
Treatment in Relation to Other Aid Received
    Statute: Section 401A(d)(1)(B)(i) of the HEA provides that the 
grant amount may not exceed the student's cost of attendance when 
combined with the student's Federal Pell Grant and other student 
financial assistance.
    Regulations: Section 691.62(c) of the interim final regulations 
provides that a student's ACG or National SMART Grant, when combined 
with a student's expected family contribution determined under title 
IV, part F of the HEA and estimated financial assistance as defined in 
34 CFR 673.5(c), 682.200(b), and 685.102(b), may not exceed a student's 
cost of attendance under section 472 of the HEA.
    Reason: ACG and National SMART Grants are need-based grants. Need-
based grant assistance cannot replace a family's expected contribution 
toward a student's postsecondary expenses.
Section 691.63 Calculation of a Grant for a Payment Period
General
    Statute: Section 401A(d)(1)(A) of the HEA specifies the amount of a 
grant a student may receive for an academic year.
    Regulations: The interim final regulations detail how an 
institution calculates an ACG or National SMART Grant payment for a 
payment period for an eligible student depending on the academic 
calendar of the eligible program and the amount of the student's ACG or 
National SMART Grant Scheduled Award.
    Reason: As is the case with the Federal Pell Grant Program, a 
student's award for an ACG or National SMART Grant is considered to be 
awarded across a title IV, HEA academic year. The interim final 
regulations for this section follow the corresponding Federal Pell 
Grant Program regulations in 34 CFR 690.63 for calculating payments for 
payment periods to distribute a student's award across a title, IV HEA 
academic year. Because students enrolled in a program of study offered 
by correspondence are not eligible for ACG or National SMART Grants 
because these students are not full-time, the Secretary is not 
including in part 691 the Federal Pell Grant Program provisions in 34 
CFR 690.66, regarding calculation of a payment for a payment period for 
programs of study offered by correspondence.
Calculation of a Grant for a Payment Period That Applies to Two 
Academic Years
    Regulations: Under the interim final regulations, if a student is 
completing the remaining portion of an academic year in a payment 
period, the student's payment is calculated using the ACG or National 
SMART Grant Scheduled Award of the academic year being completed.
    Reason: In certain circumstances, a student may be completing in a 
payment period the coursework for an academic year while also beginning 
to take coursework applicable to the next academic year for which the 
student may qualify for another ACG or National SMART Grant Scheduled 
Award. These interim final regulations provide that the student's 
payment for a payment period is calculated based on the ACG or National 
SMART Grant Scheduled Award for the academic year that the student is 
completing. The Secretary believes this provision is necessary to 
provide guidance to institutions in calculating a student's payment for 
the payment period in this circumstance and to ensure that eligible 
students receive their awards.
Section 691.64 Calculation of a Grant for a Payment Period Which Occurs 
in Two Award Years
    Regulations: This section addresses how an institution calculates 
an ACG or National SMART Grant payment for an eligible student's 
payment period when the student is enrolled in a payment period that 
overlaps two award years. These interim final regulations are the same 
as in 34 CFR 690.64 of the Federal Pell Grant Program regulations, 
except for Sec.  691.64(a)(6), which provides that a student's ACG or 
National Smart Grant must be assigned to the same award year as the 
student's Federal Pell Grant and Sec.  691.64(b), which prohibits a 
student from receiving more than his or her ACG or National SMART Grant 
Scheduled Award for an academic year.
    Reason: The requirement in Sec.  691.64(a)(6) is necessary to 
coordinate these provisions with the student eligibility requirement in 
Sec.  691.15(a)(2) that a student be receiving a Federal Pell Grant in 
a payment period in order to be eligible for an ACG or National SMART 
Grant payment. The institution must assign a payment period for an ACG 
or National SMART Grant that occurs in two award years to the same 
award year that it assigns to the student's Federal Pell Grant. In 
addition, Sec.  691.64(b) clarifies that, unlike the Federal Pell Grant 
Program, a student's ACG or National SMART Grant Scheduled Award is 
based only on completing an academic year of the student's eligible 
program, rather than completing an academic year within an award year, 
as in the Federal Pell Grant Program.
Section 691.65 Transfer Student: Attendance at More Than One 
Institution During an Academic Year
    Regulations: This section specifies how an institution calculates 
an ACG or National SMART Grant payment for an eligible student who 
transfers from another postsecondary institution within the same award 
year. The interim final regulations are similar to the corresponding 
provisions in 34 CFR 690.65 under the Federal Pell Grant Program 
regulations with one exception. The Secretary is adding paragraph 
(a)(2) to provide that a transfer student must receive a Federal Pell 
Grant in the same payment period to be an eligible ACG or National 
SMART Grant recipient at the second institution.
    Reason: This provision coordinates these interim final regulations 
with the student eligibility requirement in Sec.  691.15(a)(2) that a 
student be receiving a Federal Pell Grant in a payment period in order 
to be eligible for an ACG or National SMART Grant payment.

Subpart G--Administration of Grant Payments

Section 691.75 Determination of Eligibility for Payment GPA and 
Declaration of a Major
    Statute: Section 401A(c) of the HEA provides the student 
eligibility requirements for the ACG and National SMART Grants.
    Regulations: This section specifies the requirements that govern an 
institution's determination of a student's eligibility for a 
disbursement of an ACG or National SMART Grant. These interim final 
regulations are similar to those in 34 CFR 690.75 of the Federal Pell 
Grant Program to the extent practicable. Similar to the Federal Pell 
Grant Program requirements for determinations of a student's 
satisfactory academic progress, these interim final regulations add 
provisions for the treatment of institutional determinations for a 
payment period regarding changes in a student's GPA and, for National 
SMART Grants, a student's major.
    Reason: A student's GPA may change during the course of a payment 
period, depending on when grades are earned or posted. Similarly, a 
student may declare

[[Page 37997]]

an eligible major during a payment period. These provisions provide 
institutions the flexibility to reconsider a student's eligibility for 
an ACG or National SMART Grant payment during a payment period.
Payments for Nonterm Self-Paced Programs
    Regulations: Section 691.75(a)(3) provides that a student enrolled 
in a nonterm self-paced program may not receive a disbursement for a 
payment period until the student completes at least 50 percent of the 
credit or clock hours, or the academic coursework, in the payment 
period at the rate of academic progress of a full-time student. Section 
691.75(e) describes a self-paced program for purposes of this section 
as one that allows a student to complete coursework without a defined 
academic schedule or to enroll in courses within a program at either 
defined dates or optional start dates without a defined schedule for 
completing the program.
    Reason: Unlike term-based programs and nonterm programs with 
defined academic schedules, a student's enrollment status in a self-
paced program may vary from that of other students in that program 
depending on the rate of academic progress the individual student is 
making in completing the credit or clock hours in the program.
    This varying rate of academic progress is already addressed in the 
Federal Pell Grant Program regulations governing calculation of 
payments for payment periods, 34 CFR 690.63(e), and Sec.  691.63(e) of 
these interim final regulations. For the numerator of the fraction in 
34 CFR 690.63(e)(2)(i) and Sec.  691.63(e)(3)(i) of these interim final 
regulations, an institution must determine the weeks of instructional 
time for full-time students in a program, using credit hours without 
terms or clock hours, to complete the lesser of the credit or clock 
hours in the program or the title IV, HEA academic year. For nonterm 
self-paced programs, institutions must distinguish between part-time 
students and full-time students to arrive at a proper value for the 
numerator in this fraction and determine the number of weeks of 
instructional time necessary for most full-time students enrolled in 
the program to complete the lesser of the credit or clock hours in the 
program or the academic year. Although an institution, to calculate a 
payment for the payment period, must determine this value based on the 
behavior of full-time students enrolled in the program, this value is 
used for the payment period calculations for all students in an 
eligible program regardless of each student's enrollment status. Thus, 
the calculations of payments for payment periods for clock-hour and 
nonterm credit-hour programs do not provide any assurance regarding an 
individual student's enrollment status.
    Under the definition of a payment period in 34 CFR 668.4(b) and 
(c), a student may not progress to the next payment period unless the 
student completes the clock hours in the payment period or, for a 
credit-hour program, the credit hours and the weeks of instructional 
time in the payment period. There is no requirement that the student be 
progressing at the rate of a particular enrollment status to move to 
the next payment period. Thus, progressing to the next payment period 
does not ensure that a student would be considered full-time.
    Because the existing Federal Pell Grant Program regulations 
governing payment periods and calculations of payments for payment 
periods do not ensure that a student is progressing at a full-time 
enrollment status, the Secretary believes it is necessary for an 
institution to determine that a student enrolled in a nonterm self-
paced program is progressing as a full-time student on or after the 
midpoint of the payment period in hours or coursework before making a 
disbursement to the student for that payment period. The Secretary 
believes this requirement ensures that ACG and National SMART Grant 
funds will be awarded only to full-time students.
    To clarify the programs that the Secretary believes should fall 
under these requirements, the Secretary is adding paragraph (e) to this 
section to describe nonterm programs that the Secretary considers to be 
offered in a self-paced academic calendar.
Payment Prior to Receipt of GPA
    Regulations: Under Sec.  691.75(d), an institution may make one 
disbursement for a payment period to a student whose GPA is not yet 
available as required under Sec.  691.15(b)(1)(iii)(C) and (c)(3). By 
making the disbursement, the institution assumes liability for the 
disbursement if it subsequently determines that the student's GPA was 
not eligible.
    Reason: The Secretary recognizes that a student's grades for a 
prior payment period are not always promptly available to determine the 
student's eligibility for an ACG or National SMART Grant disbursement 
for the next payment period. This provision provides the institution 
the authority to make a disbursement to a student whom it anticipates 
would be eligible, but when the student's grades for the prior payment 
period are available, if ineligible, the grant must be rescinded.
Section 691.76 Frequency of Payment
    Regulations: This section specifies how often an institution may 
pay a student. These interim final regulations are the same as the 
Federal Pell Grant Program regulations in 34 CFR 690.76 to the extent 
practicable but add that a student must have completed a prior payment 
period as a full-time student in order to receive payment in one lump 
sum for prior payment periods.
    Reason: The purpose of this section is to detail when institutions 
may disburse a payment within a payment period. These interim final 
regulations also ensure that a student has met the full-time status 
requirement, and is therefore eligible for disbursement of an ACG or 
National SMART Grant payment for a prior payment period.

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
the regulatory action is ``significant'' and therefore subject to the 
requirements of the Executive Order and subject to review by the OMB. 
Under section 3(f) of Executive Order 12866, the order defines a 
``significant regulatory action'' as an action that is likely to result 
in a rule (1) having an annual effect on the economy of $100 million or 
more, or adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    Pursuant to the terms of the Executive Order, it has been 
determined that this regulatory action will have an annual effect on 
the economy of more than $100 million. Therefore, this action is 
``economically significant'' and subject to OMB review under section 
3(f)(4) of Executive Order 12866. The Secretary accordingly has 
assessed the potential costs and benefits of this regulatory action and 
has determined that the benefits justify the costs.

[[Page 37998]]

Need for Federal Regulatory Action

    As noted above, these interim final regulations are needed to 
implement two programs created in the HERA. The ACG program provides 
need-based grants to encourage students to complete a rigorous 
secondary school program of study. The National SMART Grant Program 
provides need-based grants to encourage students to major in certain 
scientific and technical fields or foreign languages deemed vital to 
national security. Section 401A(c)(3)(B)(ii) and (3)(C)(ii) of the HEA 
specifically requires the Secretary of Education to issue regulations 
implementing these programs.
    The Secretary had limited discretion in implementing these grant 
programs; the number of recipients and aid awarded is largely driven by 
statutory eligibility requirements such as that students be eligible to 
receive a Federal Pell Grant, be United States citizens, attend two-or 
four-year degree-granting institutions on a full-time basis, and, in 
some cases, maintain a 3.0 GPA. The Secretary has exercised discretion 
in the areas of program eligibility relating to the definition of a 
rigorous secondary school program of study in the case of the ACG 
Program and, for the National SMART Grant Program, the definition of 
qualifying fields of study. In both these cases, the Secretary has 
regulated to reflect clear congressional intent.

Benefits

    By facilitating the implementation of these new programs, these 
interim final regulations will support the provision of over $4 billion 
in need-based student aid over the next five years. The ACG Program 
will benefit society by providing an incentive for students to complete 
a rigorous secondary school program of study, which research indicates 
increases the likelihood of successfully completing postsecondary 
education. The National SMART Grant Program will encourage students to 
major in technical fields or critical foreign languages. In the case of 
technical fields, these majors will benefit both national and 
individual competitiveness, increasing the nation's economic security. 
For foreign languages, increases in the number of fluent speakers of 
Arabic, Farsi, Uzbek, and other critical languages would broaden 
understanding of important cultures and contribute significantly to 
ongoing efforts to combat international terrorism. In addition, awards 
under both programs serve to reduce a student's net cost of education. 
Research indicates that reduction in a student's cost of education 
correlates with increased student persistence and degree attainment. 
Data consistently show that postsecondary degree holders have 
substantially higher lifetime earnings than high school graduates.
Costs
    These programs are supported with $4.5 billion in mandatory 
appropriations: $790 million for fiscal year 2006, $850 million for 
fiscal year 2007, $920 million for fiscal year 2008, $960 million for 
2009, and $1,010 million for 2010. Funds not expended in one year may 
be carried forward to support awards in the subsequent year. If the 
estimated number of recipients exceeds the available funding for a 
given fiscal year, award levels would be ratably reduced.

                                    Table 1.--Estimated Program Participation
----------------------------------------------------------------------------------------------------------------
                                                                                                   Total amount
                                                                     Estimated    Estimated avg.  of aid awarded
                                                                     number of         award       (Expected  in
                                                                    recipients                       millions)
----------------------------------------------------------------------------------------------------------------
                                              Award Year 2006-2007
----------------------------------------------------------------------------------------------------------------
AC Grants--1st year.............................................         310,000            $657            $200
AC Grants--2nd year.............................................         110,000           1,245             140
National SMART Grants--3rd year.................................          40,000           3,718             150
National SMART Grants--4th year.................................          40,000           3,875             160
----------------------------------------------------------------------------------------------------------------
                                              Award Year 2007-2008
----------------------------------------------------------------------------------------------------------------
AC Grants--1st year.............................................         330,000             682             230
AC Grants--2nd year.............................................         130,000           1,255             160
National SMART Grants--3rd year.................................          40,000           3,718             150
National SMART Grants--4th year.................................          40,000           3,875             160
----------------------------------------------------------------------------------------------------------------

    The average awards displayed in Table 1 are less than the statutory 
maximum awards due to the cost of attendance limit on ACG and National 
SMART Grant awards. In addition, average awards also reflect students 
who are eligible for an ACG or National SMART Grant for less than the 
full award year. Figures in Table 1 may not add due to rounding.
    Because these programs are title IV, HEA programs and eligibility 
for these programs is linked to Federal Pell Grant eligibility, 
participating institutions must already meet Federal student aid 
institutional eligibility requirements. In addition, the delivery 
system and many program operational requirements for the new programs 
are patterned after those institutions are already using for Federal 
Pell Grants. Accordingly, institutions wishing to participate in the 
new programs have already absorbed most of the administrative costs 
related to implementing these interim final regulations. Marginal costs 
over this baseline are primarily related to initial, and ongoing 
eligibility determinations are minimal. Most data needed to make these 
determinations, such as student citizenship, full-time status, major, 
and GPA, are generally already available to institutions. The 
Department is particularly interested in comments on possible 
administrative burdens the new programs could impose on some 
institutions, especially related to the process of identifying 
cognizant authorities, documenting student eligibility, and verifying 
documentation considered incomplete or inaccurate.
Assumptions, Limitations, and Data Sources
    Because these interim final regulations largely restate statutory 
requirements that would be self-implementing in the absence of 
regulatory action, cost estimates provided above reflect a prestatutory 
baseline in which the ACG and National SMART Grant programs do not 
exist. Given the limited data available,

[[Page 37999]]

estimates for 2007-2008 do not assume program benefits will induce 
increased student participation. In general, these estimates should be 
considered preliminary; they will be reevaluated as actual program data 
becomes available. Costs have been quantified for only two years 
because the Secretary plans to revise these interim final regulations 
through negotiated rule-making, after which more comprehensive cost 
analyses for subsequent years will be developed.
    In developing these estimates, data from the 2004 National 
Postsecondary Student Aid Survey was used to derive the percentage of 
students meeting initial eligibility requirements for ACG and National 
SMART Grant awards, including enrollment status, Federal Pell Grant 
eligibility, citizenship, academic major, and GPA. The 1994 National 
Education Longitudinal Study, 1996 Beginning Postsecondary Student 
Survey, and 2000 National Assessment of Educational Progress High 
School Transcript Study were used to derive the percentage of students 
otherwise eligible for an ACG who had successfully completed a rigorous 
secondary school program of study. All these studies were conducted by 
the National Center for Education Statistics.
Regulatory Alternatives Considered
    In defining eligibility requirements, particularly those related to 
rigorous secondary school programs of study, these interim final 
regulations strike a balance between complete State discretion, which 
could create confusion and regional inequalities and result in overly 
generous criteria that dramatically reduce award levels, and an overly 
prescriptive national determination that would significantly alter the 
traditional State role in determining secondary school curricula.
    More specifically, in considering the definition of a rigorous 
secondary school program of study, the Secretary looked at a variety of 
combinations of coursework and other possible measures. For example, at 
the time of the release of the President's fiscal year 2007 budget, 
preliminary estimates assumed a rigorous program of study would consist 
of four English, three social science, three science, three 
mathematics, and two foreign language courses. Under this scenario, an 
estimated 439,000 students would receive $400 million in ACG awards in 
2006-2007--compared with $340 million to 420,000 students under these 
interim final regulations. In subsequently considering the recognition 
of rigorous secondary school programs, the Secretary determined it 
would be more appropriate to include as one option secondary school 
programs of study with specific coursework requirements, such as, for 
mathematics, algebra I and a higher level course such as algebra II, 
geometry, or data analysis and statistics, and for science, at least 
two years with one year each of biology, chemistry or physics, as well 
as an advanced or honors program. In addition, the Secretary included 
students who complete a secondary school program and receive specified 
scores on the Advanced Placement or International Baccalaureate 
examinations. The latter provisions offer additional flexibility to 
individual students attending private or home schools.
    This approach is consistent with the programs' statutory purpose of 
creating incentives for certain student behaviors. To achieve this 
purpose, the grant level must be large enough to provide a meaningful 
incentive, yet at the same time, program flexibility must be sufficient 
to allow States and participating institutions to recognize broad 
differences in secondary school and higher education academic 
structures.
    Elsewhere in this SUPPLEMENTARY INFORMATION section we identify and 
explain burdens specifically associated with information collection 
requirements. See the heading Paperwork Reduction Act of 1995.
Accounting Statement
    As required by OMB Circular A-4 (available at 
http://www.Whitehouse.gov/omb/Circulars/a004/a-4.pdf), in Table 2 below, we 

have prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of these interim final 
regulations. This table provides our best estimate of the increase in 
Federal student aid payments as a result of these interim final 
regulations. All expenditures are classified as transfers to 
postsecondary students.

Table 2.--Accounting Statement: Classification of Estimated Expenditures
                              [In millions]
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $666.
From Whom To Whom?.....................  Federal Government To
                                          Postsecondary Students.
------------------------------------------------------------------------

Waiver of Proposed Rulemaking

    Under the Administrative Procedure Act (APA) (5 U.S.C. 553), the 
Department is generally required to publish a notice of proposed 
rulemaking and provide the public with an opportunity to comment on 
proposed regulations prior to establishing a final rule. In addition, 
all Department regulations for programs authorized under the title IV, 
HEA programs are subject to the negotiated rulemaking requirements of 
section 492 of the HEA.\1\ However, both the APA and the HEA provide 
for exemptions from these rulemaking requirements. 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. Similarly, section 492 of the HEA provides that the Secretary 
is not required to conduct negotiated rulemaking for a title IV, HEA 
program if the Secretary determines that applying that requirement is 
impracticable, unnecessary, or contrary to the public interest within 
the meaning of the APA.
---------------------------------------------------------------------------

    \1\ Section 492 provides specifically that any regulations 
issued for the title IV, HEA programs shall be subject to negotiated 
rulemaking to obtain the advice of and recommendations from 
individuals and groups involved in the student financial assistance 
programs.
---------------------------------------------------------------------------

    Although these regulations are subject to the APA's notice-and-
comment and the HEA's negotiated rulemaking requirements, the Secretary 
has determined that it would be impracticable to conduct either 
negotiated rulemaking or notice-and-comment rulemaking to implement the 
ACG and National SMART Grant programs for the 2006-2007 award year. 
Waiver of rulemaking under the impracticability exemption in the APA 
and HEA is warranted because it would not be possible for the 
Department to

[[Page 38000]]

comply with the APA's and HEA's rulemaking mandates and execute its 
statutory duties under the HERA.\2\ The Department cannot both 
implement the ACG and National SMART Grant programs, including making 
awards to eligible students, by the beginning of the 2006-2007 award 
year, and conduct negotiated or notice-and-comment rulemaking for the 
regulations for these programs.
---------------------------------------------------------------------------

    \2\ See Riverbend Farms, Inc. v. Madigan, 958 F.2d 1479, 1484, 
n.2 (9th Cir. 1992). The term ``impracticable'' has also been 
described as meaning ``a situation in which the due and required 
execution of the agency functions would be unavoidably prevented by 
its undertaking rulemaking proceedings. Zhang v. Slattery, 55 F.3d 
732, 746 (2d Cir. 1995) citing National Nutritional Foods Ass'n v. 
Kennedy, 572 F.2d 377, 385 (2d Cir. 1978) citing S. Rep. No. 752, 
79th Cong., 1st Sess. (1945).
---------------------------------------------------------------------------

    In the HERA, enacted on February 8, 2006, Congress appropriated 
$790 million for the Department to use in awarding ACG and National 
SMART Grants to students for the 2006-2007 award year, which begins on 
July 1, 2006. The Department therefore had a very short, less than 
five-month window to issue regulations, plan the administration of 
these programs, and begin the process of making awards for the 2006-
2007 award year.
    Even on an extremely expedited timeline, the Department could not 
feasibly conduct negotiated or notice-and-comment rulemaking and then 
promulgate final regulations in time to make awards for the 2006-2007 
award year. Negotiated rulemaking requires the Department to solicit 
nominations for negotiators to participate in the negotiated rulemaking 
sessions, select a committee of negotiators, conduct a series of 
negotiating sessions, publish a notice of proposed rulemaking, review 
public comments, and issue final regulations. Normally, this process 
would take at least 12 months and possibly longer.
    In addition to developing and issuing these regulations, there are 
a number of other steps necessary for the Department to implement the 
ACG and National SMART Grant programs for the 2006-2007 award year that 
make rulemaking impracticable. Implementation requires the Department 
to make a number of changes to the FAFSA and the Department's financial 
aid systems so that students can apply for and receive ACG and National 
SMART Grants. For the ACG Program, the Secretary also must recognize at 
least one rigorous secondary school program of study in each State, 
which will include considerations of State proposals for the 
recognition of their programs. To implement the National SMART Grant 
Program, the Secretary must consult with the Director of National 
Intelligence to establish a list of critical foreign languages. The 
process of completing all of these steps and developing program 
regulations through negotiated or notice-and-comment rulemaking 
requires far more time than that available to the Department in order 
to make awards to students for the upcoming 2006-2007 award year.
    Based upon this information, and in order to make timely grant 
awards for the 2006-2007 award year, the Secretary is issuing these 
interim final regulations without first conducting negotiated 
rulemaking or publishing proposed regulations for public comment.
    Although the Department is adopting these regulations on an interim 
final basis for the 2006-2007 award year, the Department requests 
public comment on these regulations for the 2007-2008 award year. After 
consideration of public comments, the Secretary will publish final 
regulations for the 2007-2008 award year.
    Section 482 of the HEA requires that any title IV regulations that 
have not been published in final form by November 1 prior to the start 
of an award year cannot become effective until the beginning of the 
second award year following the November 1 date. Therefore, the 
Secretary has determined that although it is feasible to conduct 
notice-and-comment rulemaking for the 2007-2008 award year, it would be 
impracticable to conduct negotiated rulemaking.
    As discussed above, the negotiated rulemaking process can take at 
least 12 months, if not longer, to complete final regulations. 
Therefore, it would not be feasible for the Department both to conduct 
a negotiated rulemaking process and have amended regulations for the 
2007-2008 award year in place by November 1, 2006, as would be required 
under section 482 of the HEA. The Secretary does intend to begin the 
negotiated rulemaking process later this year. The negotiated 
rulemaking process could further amend the regulations as appropriate 
for the 2008-2009 award year and subsequent years.

Regulatory Flexibility Act Certification

    The Secretary certifies these regulations will not have a 
significant economic impact on a substantial number of small entities. 
Entities that would be affected by these regulations are States, SEAs, 
LEAs, and institutions of higher education. States, SEAs, and LEAs are 
not defined as ``small entities'' in the Regulatory Flexibility Act. 
The small entities affected by these regulations are institutions of 
higher education receiving Federal funds under these programs. Roughly 
1,000 institutions of higher education eligible to participate in ACG 
and National SMART Grant Programs meet the definition of a ``small 
entity'' in that they have annual revenues of $6.5 million or less. The 
regulations will not have a significant economic impact on these 
institutions of higher education; these institutions must already 
comply with the eligibility requirements related to participating in 
the Federal Pell Grant program in order to participate in the ACG and 
National SMART Grant Programs. Additional, program-specific 
requirements included in these regulations will impose only minimal 
additional requirements to ensure the proper expenditure of program 
funds.

Paperwork Reduction Act of 1995

    Sections 691.12, 691.15, 691.16, 691.82, and 691.83 contain 
information collection requirements. As required by the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department of Education 
has submitted a copy of these sections to the Office of Management and 
Budget (OMB) for its review.
    Collection of Information: Academic Competitiveness Grant (ACG) 
Program and National Science and Mathematics Access to Retain Talent 
Grant (National SMART Grant) Program.

Section 691.12--Student Application

    This new section will be included for approval under OMB control 
number 1845-0001. These interim final regulations allow a student to 
provide information that he or she completed a rigorous secondary 
school program of study to qualify for an ACG. The Secretary expects to 
collect this information when the student applies for assistance under 
the title IV, HEA programs using an addendum to the FAFSA. Potentially 
eligible students completing the FAFSA will be directed to a Web site 
that allows the student to select the applicable rigorous secondary 
school programs of study from a list of programs recognized by the 
Secretary. The student's information is then transmitted on the 
student's SAR and the ISIR to the institutions listed on the student's 
FAFSA. There is additional burden associated with a student going to 
the Web site and responding to a few additional FAFSA questions to 
select their rigorous secondary school programs of study from a list of 
programs recognized by the Secretary. The public is invited to comment 
on the burden associated with this collection.

[[Page 38001]]

Section 691.15--Documenting a Student's Completion of a Rigorous 
Secondary School Program of Study

    Burden on student applicants who apply for an ACG or National SMART 
Grant under this new section will be included for approval under OMB 
control number 1845-0001. Burden on institutions for collecting 
documentation and evaluating a student's eligibility for an ACG or 
National SMART Grant under this new section will be included for 
approval under OMB control number 1845-0039. Under these interim final 
regulations, an institution must document a student's completion of a 
rigorous secondary school program of study using documentation from the 
cognizant authority for qualifying secondary school program of study. 
The documentation from the cognizant authority may be provided to the 
institution by the student or directly to the institution by the 
cognizant authority. Most institutions likely to enroll ACG and 
National SMART Grant recipients already have the necessary 
documentation of a student's completion of a rigorous secondary school 
program of study as part of their admissions process. A small number of 
institutions will need to collect additional documentation. Similarly, 
existing academic evaluations performed by most institutions will 
suffice to determine a student's completion of a rigorous secondary 
school program of study. However, some institutions will need to 
perform more extensive evaluations. The public is invited to comment on 
the burden associated with this collection.

Section 691.16--Recognition of a Rigorous Secondary School Program of 
Study

    This new section will be included for approval under a new OMB 
information collection control number. These interim final regulations 
allow States to propose additional rigorous secondary school programs 
of study for recognition by the Secretary. The Secretary expects to 
collect this information and recognize additional rigorous secondary 
school programs of study annually prior to the commencement of the next 
award year for each State that submits a proposal.

Section 691.82--Maintenance and Retention of Records

    This new section will be included for approval under OMB control 
number 1845-0039. Under these interim final regulations, an institution 
must include in its maintenance and retention of records, documentation 
collected to determine the eligibility of a student for an ACG or 
National SMART Grant. Most institutions already maintain the required 
documentation (e.g., high school transcripts) that they use for other 
purposes. However, for a limited number of institutions that do not 
normally collect documentation sufficient for the purposes of these 
programs, additional collection and maintenance will be required.

Section 691.83--Submission of Reports

    This new section will be included for approval under OMB control 
number 1845-0039. The interim final regulations provide that 
institutions requesting funds from the Secretary under the ACG and 
National SMART Grant programs must submit Payment Data. We expect some 
additional burden to institutions. However, because institutions will 
be reporting Payment Data in the same process as is used for the 
Federal Pell Grant Program and for the same students, the increased 
burden is expected to be minimal.
    If you want to comment on the information collection requirements, 
please send your comments to the Office of Information and Regulatory 
Affairs, OMB, room 10235, New Executive Office Building, Washington, DC 
20503; Attention: Desk Officer for U.S. Department of Education. You 
may also send a copy of these comments to the Department representative 
named in the FOR FURTHER INFORMATION CONTACT section of this preamble.
    We consider your comments on these proposed collections of 
information in--
     Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collections, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology; e.g., permitting electronic submission of 
responses.
    OMB is required to make a decision concerning the collections of 
information contained in these regulations between 30 and 60 days after 
publication of this document in the Federal Register. Therefore, to 
ensure that OMB gives your comments full consideration, it is important 
that OMB receives the comments within 30 days of publication.

Intergovernmental Review

    This program is subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
order is to foster an intergovernmental partnership and a strengthened 
federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.
    This document provides early notification of our specific plans and 
actions for this program.

Assessment of Educational Impact

    Based on our own review, we have determined that these interim 
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, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at the following site: 
http://www.ed.gov/news/fedregister/index.html.

    To use PDF you must have Adobe Acrobat Reader, which is available 
free at this site. If you have questions about using PDF, call the U.S. 
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in 
the Washington, DC, area at (202) 512-1530.
    1. You may also view this document in text or PDF at the following 
site: http://ifap.ed.gov/ifap/byYear.jsp?type=fregisters&set=current.

 



    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: 84.375 Academic 
Competitiveness Grants; 84.376 SMART Grants)

List of Subjects in 34 CFR Parts 668, 674, 675, 676, 682, 685, 690, 
and 691

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

    Dated: June 27, 2006.
Margaret Spellings,
Secretary of Education.

0
For the reasons discussed in the preamble, the Secretary amends parts 
668, 674, 675, 676, 682, 685, and 690 of, and adds a new part 691 to, 
title 34 of

[[Page 38002]]

the Code of Federal Regulations as follows:

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

0
1. The authority citation for part 668 continues to read as follows:

    Authority: 20 U.S.C. 1001, 1002, 1003, 1085, 1088, 1091, 1092, 
1094, 1099c, and 1099c-1, unless otherwise noted.

0
2. Section 668.1 is amended by:
0
A. Revising paragraph (c)(2).
0
B. In paragraph (c)(9), removing the word ``and''.
0
C. In paragraph (c)(10), removing the punctuation ``.'' at the end of 
the paragraph and adding, in its place, the words ``; and''.
0
D. In paragraph (c), adding new paragraph (11) to read as follows:


Sec.  668.1  Scope.

* * * * *
    (c) * * *
    (2) The Academic Competitiveness Grant (ACG) Program (20 U.S.C. 
1070a-1; 34 CFR part 691);
    (11) The National Science and Mathematics Access to Retain Talent 
Grant (National SMART Grant) Program (20 U.S.C. 1070a-1; 34 CFR part 
691).

0
3. Section 668.2(b) is amended by adding, in alphabetical order, 
definitions of ``Academic Competitiveness Grant (ACG) Program'' and 
``National Science and Mathematics Access to Retain Talent Grant 
(National SMART Grant) Program'' and revising the definition of 
``Federal Pell Grant Program'' to read as follows:


Sec.  668.2  General definitions.

* * * * *
    (b) * * *
    Academic Competitiveness Grant (ACG) Program: A grant program 
authorized by Title IV-A-1 of the HEA under which grants are awarded 
during the first and second academic years of study to eligible 
financially needy undergraduate students who successfully complete 
rigorous secondary school programs of study.

(Authority: 20 U.S.C. 1070a-1)

* * * * *
    Federal Pell Grant Program: A grant program authorized by Title IV-
A-1 of the HEA under which grants are awarded to help financially needy 
students meet the cost of their postsecondary education.

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

* * * * *
    National Science and Mathematics Access to Retain Talent Grant 
(National SMART Grant) Program: A grant program authorized by Title IV-
A-1 of the HEA under which grants are awarded during the third and 
fourth academic years of study to eligible financially needy 
undergraduate students pursuing eligible majors in the physical, life, 
or computer sciences, mathematics, technology, or engineering, or 
foreign languages determined to be critical to the national security of 
the United States.

(Authority: 20 U.S.C. 1070a-1)
* * * * *


0
4. Section 668.8 is amended by:
0
A. Revising the introductory text to paragraph (h) and paragraph 
(h)(2).
0
B. Revising the authority citation following paragraph (l).
    The revisions read as follows:


Sec.  668.8  Eligible programs.

* * * * *
    (h) Eligibility for Federal Pell Grant, ACG, National SMART Grant, 
and FSEOG Programs. In addition to satisfying other relevant provisions 
of the section--
* * * * *
    (2) An educational program qualifies as an eligible program for 
purposes of the ACG, National SMART Grant, and FSEOG programs only if 
the educational program is an undergraduate program.
* * * * *
    (l) * * *

* * * * *
(Authority: 20 U.S.C. 1070a, 1070a-1, 1070b, 1070c-1, 1070c-2, 1085, 
1087aa-1087hh, 1088, 1091, and 42 U.S.C. 2753)


0
5. Section 668.19(a)(3) is revised to read as follows:


Sec.  668.19  Financial aid history.

    (a) * * *
    (3) For the award year for which a Federal Pell Grant, an ACG, or a 
National SMART Grant is requested, the student's Scheduled Federal Pell 
Grant, ACG, or National SMART Grant Award and the amount of Federal 
Pell Grant, ACG, or National SMART Grant funds disbursed to the 
student;
* * * * *

0
6. Section 668.21 is amended by revising the section heading and 
paragraph (a)(1) to read as follows:


Sec.  668.21  Treatment of Federal Perkins Loan, FSEOG, Federal Pell 
Grant, ACG, and National SMART Grant program funds if the recipient 
withdraws, drops out, or is expelled before his or her first day of 
class.

    (a)(1) If a student officially withdraws, drops out, or is expelled 
before his or her first day of class of a payment period, all funds 
paid to the student for that payment period for institutional or 
noninstitutional costs under the Federal Pell Grant, ACG, National 
SMART Grant, FSEOG, and Federal Perkins Loan programs are an 
overpayment.
* * * * *

0
7. Section 668.24 is amended by:
0
A. In paragraph (e)(1) introductory text, removing the word ``or''; and 
by removing the word ``Program'' and adding, in its place, the words 
``, ACG, or National SMART Grant Program''; and
0
B. Revising the authority citation to read as follows:


Sec.  668.24  Record retention and examinations.

* * * * *

(Authority: 20 U.S.C. 1070a, 1070a-1, 1070b, 1078, 1078-1, 1078-2, 
1078-3, 1082, 1087, 1087a et seq., 1087cc, 1087hh, 1088, 1094, 
1099c, 1141, 1232f; 42 U.S.C. 2753; and section 4 of Pub. L. 95-452, 
92 Stat. 1101-1109)

Sec.  668.26  [Amended]

0
8. Section 668.26 is amended by:
0
A. In paragraph (d)(1) introductory text, removing the words ``or PAS'' 
and adding, in their place, the words ``, ACG, or National SMART 
Grant''.
0
B. In paragraph (e)(1), removing the words ``and PAS programs'' and 
adding, in their place, the words ``, ACG, and National SMART Grant 
programs''.

0
9. Section 668.32 is amended by:
0
A. In paragraph (c)(1), removing the words ``FSEOG Program'' and 
adding, in their place, the words ``ACG, National SMART Grant, and 
FSEOG programs''.
0
B. In paragraph (k)(6), removing the word ``and''.
0
C. Redesignating paragraph (k)(7) as paragraph (k)(8) and adding a new 
paragraph (k)(7) to read as follows:


Sec.  668.32  Student eligibility--general.

* * * * *
    (k) * * *
    (7) 34 CFR 691.75 for the ACG and National SMART Grant programs; 
and
* * * * *

0
10. Section 668.33 is amended by:
0
A. In the introductory text to paragraph (a), removing the words 
``paragraph (b)'' and adding, in their place, the words ``paragraphs 
(b) and (c)''.
0
B. Redesignating paragraphs (c)(1) and (c)(2) as paragraphs (d)(1) and 
(d)(2), respectively, and adding a new paragraph (c) to read as 
follows:


Sec.  668.33  Citizenship and residency requirements.

* * * * *
    (c) Only a student who is a citizen of the United States is 
eligible to receive

[[Page 38003]]

funds under the ACG and National SMART Grant programs.
* * * * *

0
11. Section 668.35 is amended by redesignating paragraph (g)(2) as 
paragraph (g)(4) and adding new paragraphs (g)(2) and (g)(3) to read as 
follows:


Sec.  668.35  Student debts under the HEA and to the U.S.

* * * * *
    (g) * * *
    (2) A student is not liable for an ACG overpayment received in an 
award year if--
    (i) The institution can eliminate that overpayment by adjusting 
subsequent title IV, HEA program (other than Federal Pell Grant, ACG, 
or National SMART Grant) payments in that same award year; or
    (ii) The institution cannot eliminate the overpayment under 
paragraph (g)(2)(i) of this section but can eliminate that overpayment 
by adjusting subsequent ACG payments in that same award year.
    (3) A student is not liable for a National SMART Grant overpayment 
received in an award year if--
    (i) The institution can eliminate that overpayment by adjusting 
subsequent title IV, HEA program (other than Federal Pell Grant, ACG, 
or National SMART Grant) payments in that same award year; or
    (ii) The institution cannot eliminate the overpayment under 
paragraph (g)(3)(i) of this section but can eliminate that overpayment 
by adjusting subsequent National SMART Grant payments in that same 
award year.
* * * * *


Sec.  668.138  [Amended]

0
12. Section 668.138 is amended in paragraph (a) by removing the word 
``or'' the first time it appears, and adding the words ``, ACG, or 
National SMART Grant'' immediately after the words ``Federal Pell 
Grant''.


Sec.  668.139  [Amended]

0
13. Section 668.139 is amended in paragraph (c) by adding the words 
``ACG, National SMART Grant, FSEOG'' immediately after the words 
``Federal Pell Grant,''; and removing the words ``Federal SEOG''.


Sec.  668.161  [Amended]

0
14. Section 668.161(a)(3)(i) is amended by adding the words ``ACG, 
National SMART Grant,'' immediately after the words ``Federal Pell 
Grant,''.


Sec.  668.162  [Amended]

0
15. Section 668.162(d)(1) is amended by adding the words ``ACG, 
National SMART Grant,'' immediately after the words ``Federal Pell 
Grant,''.


Sec.  668.163  [Amended]

0
16. Section 668.163 is amended by:
0
A. In paragraph (c)(2), adding the words ``ACG, National SMART Grant,'' 
immediately after the words ``Federal Pell Grant,''.
0
B. In paragraph (c)(3) introductory text, adding the words ``ACG, 
National SMART Grant,'' immediately after the words ``Federal Pell 
Grant,''.
0
C. In paragraph (c)(4), adding the words ``ACG, National SMART Grant,'' 
immediately after the words ``Federal Pell Grant,''.


Sec.  668.164  [Amended]

0
17. Section 668.164 is amended by:
0
A. In paragraph (g)(1)(ii), adding the words ``ACG, National SMART 
Grant,'' immediately after the words ``Federal Pell Grant,''.

0
B. In paragraph (g)(4)(iv), adding the words ``, an ACG, or a National 
SMART Grant'' immediately after the words ``Federal Pell Grant''.

PART 674--FEDERAL PERKINS LOAN PROGRAM

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

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

Sec.  674.2  [Amended]

0
19. Section 674.2(a) is amended by adding, in alphabetical order, the 
terms ``Academic Competitiveness Grant (ACG) Program'' and ``National 
Science and Mathematics Access to Retain Talent Grant (National SMART 
Grant) Program''.

PART 675--FEDERAL WORK-STUDY PROGRAMS

0
20. The authority citation for part 675 continues to read as follows:

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

Sec.  675.2  [Amended]

0
21. Section 675.2(a) is amended by adding, in alphabetical order, the 
terms ``Academic Competitiveness Grant (ACG) Program'' and ``National 
Science and Mathematics Access to Retain Talent Grant (National SMART 
Grant) Program''.

PART 676--FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT 
PROGRAM

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

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

Sec.  676.2  [Amended]

0
23. Section 676.2(a) is amended by adding, in alphabetical order, the 
terms ``Academic Competitiveness Grant (ACG) Program'' and ``National 
Science and Mathematics Access to Retain Talent Grant (National SMART 
Grant) Program''.

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

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

    Authority: 20 U.S.C. 1071 to 1087-2, unless otherwise noted.

Sec.  682.200  [Amended]

0
25. Section 682.200 is amended by in paragraph (a)(1), adding, in 
alphabetical order, the terms ``Academic Competitiveness Grant (ACG) 
Program'' and ``National Science and Mathematics Access to Retain 
Talent Grant (National SMART Grant) Program''.

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

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

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

Sec.  685.102  [Amended]

0
27. Section 685.102 is amended by in paragraph (a)(1), adding, in 
alphabetical order, the terms ``Academic Competitiveness Grant (ACG) 
Program'' and ``National Science and Mathematics Access to Retain 
Talent Grant (National SMART Grant) Program''.

PART 690--FEDERAL PELL GRANT PROGRAM

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

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

0
29. Section 690.2 is amended by:
0
A. In paragraph (a), removing the terms ``Accredited'', ``Educational 
program'', ``Eligible institution'', ``Recognized equivalent of high 
school diploma'', and ``Regular student''.
0
B. In paragraph (b), adding, in alphabetical order, the terms 
``Academic Competitiveness Grant (ACG) Program'',

[[Page 38004]]

``Federal Family Education Loan (FFEL) Program'', ``National Science 
and Mathematics Access to Retain Talent Grant (National SMART Grant) 
Program'', and ``William D. Ford Federal Direct Loan Program''.
0
C. In paragraph (b), removing the term ``Student eligibility''.
0
D. In paragraph (c), adding, in alphabetical order, a definition of 
``Eligible student'' to read as follows:


Sec.  690.2  General definitions.

* * * * *
    (c) * * *
    Eligible student: An eligible student as described in 34 CFR part 
668, subpart C.
* * * * *

0
30. Section 690.7 is amended by redesignating paragraphs (a), (b), (c), 
and (d) as paragraphs (b), (c), (d), and (e) respectively, and adding a 
new paragraph (a) to read as follows:


Sec.  690.7  Institutional participation.

    (a) An institution may not participate in the Federal Pell Grant 
Program if the institution--
    (1) Offers at least one eligible program for purposes of the ACG 
Program, as defined in 34 CFR 691.2(d), but does not participate in the 
ACG Program; or
    (2) Offers at least one eligible program for purposes of the 
National SMART Grant Program, as defined in 34 CFR 691.2(d), but does 
not participate in the National SMART Grant Program.
* * * * *


Sec.  690.8  [Amended]

0
31. Section 690.8 is amended by capitalizing the first word in 
paragraph (b)(3).

0
32. Section 690.63 is amended by:
0
A. In paragraph (c)(3), revising the first equation as set forth below.
0
B. In paragraph (d)(2), adding the word ``and'' after the punctuation 
``;''.
0
C. In paragraph (d)(3), removing ``; and'' following the equation.
0
D. Removing paragraph (d)(4).
0
E. In paragraph (e)(2), after the words ``the lesser of--'', adding 
``(i)'' immediately before the equation.


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

* * * * *
    (c) * * *
    (3) * * *
    [GRAPHIC] [TIFF OMITTED] TR03JY06.009
    
* * * * *

0
33. Section 690.83 is amended by:
0
A. In paragraph (a)(2), removing the word ``contain'' and adding, in 
its place, the word ``contains''.

0
B. Revising paragraphs (b)(1) and (b)(2) to read as set forth below.
0
C. In paragraph (c), adding a comma after ``668.84''.


Sec.  690.83  Submission of reports.

* * * * *
    (b)(1) An institution shall report to the Secretary any change in 
the amount of a grant for which a student qualifies including any 
related Payment Data changes by submitting to the Secretary the 
student's Payment Data that discloses the basis and result of the 
change in award for each student. The institution shall submit the 
student's Payment Data reporting any change to the Secretary by the 
reporting deadlines published by the Secretary in the Federal Register.
    (2) An institution shall submit, in accordance with deadline dates 
established by the Secretary, through publication in the Federal 
Register, other reports and information the Secretary requires and 
shall comply with the procedures the Secretary finds necessary to 
ensure that the reports are correct.
* * * * *

0
34. A new part 691 is added to read as follows:

PART 691--ACADEMIC COMPETITIVENESS GRANT (ACG) AND NATIONAL SCIENCE 
AND MATHEMATICS ACCESS TO RETAIN TALENT GRANT (NATIONAL SMART 
GRANT) PROGRAMS

Subpart A--Scope, Purpose, and General Definitions
Sec.
691.1 Scope and purpose.
691.2 Definitions.
691.3-691.5 [Reserved]
691.6 Duration of student eligibility--undergraduate course of 
study.
691.7 Institutional participation.
691.8 Enrollment status for students taking regular and 
correspondence courses.
691.9-691.10 [Reserved]
691.11 Payments from more than one institution.
Subpart B--Application Procedures
691.12 Application.
691.13-691.14 [Reserved]
691.15 Eligibility to receive a grant.
691.16 Recognition of a rigorous secondary school program of study.
691.17 Determination of eligible majors.
Subparts C-E [Reserved]
Subpart F--Determination of Awards
691.6 1 Submission process and deadline for a Student Aid Report or 
Institutional Student Information Record.
691.62 Calculation of a grant.
691.63 Calculation of a grant for a payment period.
691.64 Calculation of a grant for a payment period which occurs in 
two award years.
691.65 Transfer student: attendance at more than one institution 
during an academic year.
Subpart G--Administration of Grant Payments
691.71 Scope.
691.72-691.74 [Reserved]
691.75 Determination of eligibility for payment.
691.76 Frequency of payment.
691.77 [Reserved]
691.78 Method of disbursement--by check or credit to a student's 
account.
691.79 Liability for and recovery of grant overpayments.
691.80 Redetermination of eligibility for a grant award.
691.81 Fiscal control and fund accounting procedures.
691.82 Maintenance and retention of records.
691.83 Submission of reports.

    Authority: 20 U.S.C. 1070a-1, unless otherwise noted.

Subpart A--Scope, Purpose, and General Definitions


Sec.  691.1  Scope and purpose.

    (a) 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.
    (b) The National SMART Grant Program awards grants to help eligible 
financially needy third- and fourth-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.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.2  Definitions.

    (a) The following definitions used in this part are in the 
regulations for Institutional Eligibility under the Higher Education 
Act of 1965, as amended, 34 CFR part 600:

Award year
Clock hour
Correspondence course
Eligible institution
Regular student
Secretary
State
Title IV, HEA program


[[Page 38005]]


    (b) The following definitions used in this part are in subpart A of 
the Student Assistance General Provisions, 34 CFR part 668:

Academic year
Enrolled
Expected family contribution
Federal Pell Grant Program
Full-time student
HEA
Payment period

    (c) The following definitions used in this part are in 34 CFR part 
77:

Local educational agency (LEA)
State educational agency (SEA)

    (d) Other terms used in this part are:
    ACG Scheduled Award: The amount of an ACG that would be paid to a 
full-time student for a full academic year.
    Eligible major: A major, as identified by the Secretary under Sec.  
691.17, in one of the physical, life, or computer sciences, 
mathematics, technology, engineering, or a critical foreign language.
    Eligible program: An eligible program as defined in 34 CFR 668.8 
that--
    (1) For purposes of the ACG Program, leads to an associate's degree 
or a bachelor's degree; is a two-academic-year program acceptable for 
full credit toward a bachelor's degree; or is a graduate degree program 
that includes at least 3 academic years of undergraduate education; or
    (2) For purposes of the National SMART Grant Program, leads to a 
bachelor's degree in an eligible major or is a graduate degree program 
in an eligible major that includes at least 3 academic years of 
undergraduate education.
    Institutional Student Information Record (ISIR): An electronic 
record that the Secretary transmits to an institution that includes an 
applicant's--
    (1) Personal identification information;
    (2) Application data used to calculate the applicant's EFC; and
    (3) EFC.
    National SMART Grant Scheduled Award: The amount of a National 
SMART Grant that would be paid to a full-time student for a full 
academic year.
    Payment Data: An electronic record that is provided to the 
Secretary by an institution showing student disbursement information.
    Student Aid Report (SAR): A report provided to an applicant by the 
Secretary showing the amount of his or her expected family 
contribution.
    Undergraduate student: A student enrolled in an undergraduate 
course of study at an institution of higher education who--
    (1) Has not earned a baccalaureate or first professional degree; 
and
    (2) Is in an undergraduate course of study which usually does not 
exceed 4 academic years, or is enrolled in a 4 to 5 academic year 
program designed to lead to a first degree. A student enrolled in a 
program of any other length is considered an undergraduate student for 
only the first 4 academic years of that program.
    Valid Institutional Student Information Record (valid ISIR): An 
ISIR on which all the information used in calculating the applicant's 
expected family contribution is accurate and complete as of the date 
the application is signed.
    Valid Student Aid Report (valid SAR): A Student Aid Report on which 
all of the information used in calculating the applicant's expected 
family contribution is accurate and complete as of the date the 
application is signed.

(Authority: 20 U.S.C. 1070a-1)


Sec. Sec.  691.3-691.5  [Reserved]


Sec.  691.6  Duration of student eligibility--undergraduate course of 
study.

    (a) A student is eligible to receive up to one ACG Scheduled Award 
during each of the student's first and second academic years of 
eligible program.
    (b) A student is eligible to receive up to one National SMART Grant 
Scheduled Award during each of the student's third and fourth academic 
years of eligible program.
    (c) A student may not receive more than two ACG Scheduled Awards 
and two National SMART Grant Scheduled Awards.
    (d) For an eligible student enrolled in a summer term of an 
eligible program for which the institution determines payments under 
Sec.  691.63(b) and (c), the student's summer term is considered to 
be--
    (1) For an eligible program offered in semesters or trimesters with 
a single summer term that provides at least 12 semester or trimester 
hours of coursework, one-half of an academic year in weeks of 
instructional time under Sec.  691.63(b)(3)(i) and (c)(4)(i), or one-
third of an academic year in weeks of instructional time under Sec.  
691.63(b)(3)(ii) and (c)(4)(ii); or
    (2) For an eligible program offered in quarters with a single 
summer term that provides at least 12 quarter hours of coursework, one-
third of an academic year in weeks of instructional time under Sec.  
691.63(b)(3)(i) and (c)(4)(i), or one-fourth of an academic year in 
weeks of instructional time under Sec.  691.63(b)(3)(ii) and 
(c)(4)(ii).

(Authority: 20 U.S.C. 1070a-1)


Sec.  691.7  Institutional participation.

    (a) An institution that offers one or more eligible programs, as 
defined in Sec.  691.2(d), for purposes of the ACG Program, and that 
participates in the Federal Pell Grant Program under 34 CFR part 690 
must participate in the ACG Program.
    (b) An institution that offers one or more eligible programs, as 
defined in Sec.  691.2(d), for purposes of the National SMART Grant 
Program, and that participates in the Federal Pell Grant Program under 
34 CFR part 690 must participate in the National SMART Grant Program.
    (c) If an institution begins participation in the ACG or National 
SMART Grant Program during an award year, a student enrolled and 
attending that institution is eligible to receive a grant under this 
part for the payment period during which the institution begins 
participation and any subsequent payment period.
    (d) If an institution becomes ineligible to participate in the ACG 
or National SMART Grant Program during an award year, a student who was 
eligible for a grant under Sec.  691.15 who was attending the 
institution and who submitted a valid SAR to the institution, or for 
whom the institution obtained a valid ISIR, before the date the 
institution became ineligible is paid a grant for that award year for--
    (1) The payment periods that the student completed before the 
institution became ineligible; and
    (2) The payment period in which the institution became ineligible.
    (e)(1) If an institution loses its eligibility to participate in 
the Federal Pell Grant Program under the provisions of subpart M of 34 
CFR part 668, it also loses its eligibility to participate in the ACG 
or National SMART Grant Program for the same period of time.
    (2) That loss of eligibility must be in accordance with the 
provisions of 34 CFR 668.187.
    (f) An institution that becomes ineligible shall, within 45 days 
after the effective date of loss of eligibility, provide to the 
Secretary--
    (1) The name of each eligible student under Sec.  691.15 who, 
during the award year, submitted a valid SAR to the institution or for 
whom it obtained a valid ISIR before it became ineligible;
    (2) The amount of funds paid to each grant recipient for that award 
year;
    (3) The amount due each student eligible to receive a grant through 
the end of the payment period during which the institution became 
ineligible; and
    (4) An accounting of the ACG or National SMART Grant Program

[[Page 38006]]

expenditures for that award year to the date of termination.

(Authority: 20 U.S.C. 1070a-1)


Sec.  691.8  Enrollment status for students taking regular and 
correspondence courses.

    (a) If, in addition to regular coursework, a student takes 
correspondence courses from either his or her own institution or 
another institution having an agreement for this purpose with the 
student's institution, the correspondence work may be included in 
determining the student's enrollment status to the extent permitted 
under paragraph (b) of this section.
    (b) Except as noted in paragraph (c) of this section, the 
correspondence work that may be included in determining a student's 
enrollment status is that amount of work that--
    (1) Applies toward a student's degree or is remedial work taken by 
the student to help in his or her eligible program;
    (2) Is completed within the period of time required for regular 
coursework; and
    (3) Does not exceed the amount of a student's regular coursework 
for the payment period for which the student's enrollment status is 
being calculated.
    (c) A student taking correspondence courses is considered a full-
time student if--
    (1) The student is taking coursework that is commensurate with the 
institution's standard for full-time students; and
    (2) The student's noncorrespondence coursework constitutes at least 
one-half of the institution's required minimum coursework for full-time 
students.

(Authority: 20 U.S.C. 1070a-1)


Sec. Sec.  691.9-691.10  [Reserved]


Sec.  691.11  Payments from more than one institution.

    A student is not entitled to receive grant payments under this part 
concurrently from more than one institution. A student may only receive 
an ACG or a National SMART Grant at the same institution from which the 
student receives his or her Federal Pell Grant award.

(Authority: 20 U.S.C. 1070a-1)

Subpart B--Application Procedures


Sec.  691.12  Application.

    (a) As the first step to receiving a grant under this part, a 
student shall apply on an approved application form to the Secretary to 
have his or her expected family contribution calculated and to 
determine the student's Federal Pell Grant eligibility. A copy of this 
form is not acceptable.
    (b)(1) The student shall provide any information requested by the 
Secretary in addition to the information necessary to establish 
eligibility for a Federal Pell Grant.
    (2) The additional information may include, but is not limited to, 
information about the rigorous secondary school program of study 
completed by a student applying for an ACG.
    (c) The student shall submit an application to the Secretary by--
    (1) Providing the application form, signed by all appropriate 
family members, to the institution which the student attends or plans 
to attend so that the institution can transmit the application 
information to the Secretary electronically; or
    (2) Sending an approved application form to the Secretary.
    (d) The student shall provide the address of his or her residence 
unless the student is incarcerated and the educational institution has 
made special arrangements with the Secretary to receive relevant 
correspondence on behalf of the student. If such an arrangement is 
made, the student shall provide the address indicated by the 
institution.
    (e) For each award year, the Secretary, through publication in the 
Federal Register, establishes deadline dates for submitting this 
application and additional information and for making corrections to 
the information provided.

(Authority: 20 U.S.C. 1070a-1)


Sec. Sec.  691.13-691.14  [Reserved]


Sec.  691.15  Eligibility to receive a grant.

    (a) General. A student who meets the requirements of 34 CFR part 
668, Subpart C, is eligible to receive an ACG or a National SMART Grant 
if the student--
    (1) Is a U.S. citizen;
    (2) Is receiving a Federal Pell Grant disbursement for the same 
payment period; and
    (3) Is enrolled full-time.
    (b) ACG Program. (1) A student is eligible to receive an ACG if the 
student--
    (i) Meets the eligibility requirements in paragraph (a) of this 
section;
    (ii) For the first academic year of his or her eligible program--
    (A) Has successfully completed, after January 1, 2006, a rigorous 
secondary school program of study recognized by the Secretary under 
Sec.  691.16; and
    (B) Has not previously been enrolled as a regular student in a 
program of undergraduate education;
    (iii) For the second academic year of his or her eligible program--
    (A) Has successfully completed, after January 1, 2005, a rigorous 
secondary school program of study recognized by the Secretary under 
Sec.  691.16; and
    (B) Has successfully completed the first academic year of his or 
her eligible program; and
    (C) For the first academic year of his or her eligible program, 
obtained a grade point average (GPA) of at least 3.0 or higher on a 4.0 
scale, or the equivalent, consistent with other institutional measures 
for academic and title IV, HEA program purposes.
    (2)(i) An institution must document a student's completion of a 
rigorous secondary school program of study under paragraphs 
(b)(1)(ii)(A) and (b)(1)(iii)(A) of this section using--
    (A) Documentation provided directly to the institution by the 
cognizant authority; or
    (B) Documentation from the cognizant authority provided by the 
student.
    (ii) If an institution has reason to believe that the documentation 
provided by the student under paragraph (b)(2)(i)(B) of this section is 
inaccurate or incomplete, the institution shall confirm the student's 
completion of a rigorous secondary school program of study by using 
documentation provided directly to the institution by the cognizant 
authority.
    (3) For purposes of paragraph (b)(2) of this section--
    (i) A cognizant authority includes, but is not limited to--
    (A) An LEA;
    (B) An SEA or other State agency;
    (C) A public or private high school; or
    (D) A testing organization such as the College Board or State 
agency; or
    (ii) For a home-schooled student, the student's parent or guardian 
is the cognizant authority for purposes of providing the documentation 
required under paragraph (b)(2)(i) of this section, of a rigorous 
secondary school program under Sec.  691.16(d)(2), including a 
transcript or the equivalent or a detailed course description listing 
the secondary school courses completed by the student.
    (4) For a student who transfers from an eligible program at one 
institution to an eligible program at another institution, the 
institution to which the student transfers may rely upon the prior 
institution's determination that the student completed a rigorous 
secondary school program of study in accordance with paragraphs 
(b)(1)(ii)(A) and (b)(1)(iii)(A) of this section based on documentation 
that the prior institution may provide, or based on

[[Page 38007]]

documentation of the receipt of an ACG disbursement at the prior 
institution.
    (c) National SMART Grant Program. A student is eligible to receive 
a National SMART Grant for the third or fourth academic year of his or 
her eligible program if the student'
    (1) Meets the eligibility requirements in paragraph (a) of this 
section;
    (2)(i)(A) In accordance with the institution's academic 
requirements, formally declares an eligible major; or
    (B) If the institution's academic requirements do not allow a 
student to declare an eligible major in time to qualify for a National 
SMART Grant on that basis--
    (1) Demonstrates his or her intention to declare an eligible major 
as documented by the institution; and
    (2) Formally declares an eligible major as soon as allowed under 
the institution's academic requirements; and
    (ii) Enrolls in the courses necessary both to complete the degree 
program and to fulfill the requirements of the intended eligible major;
    (3) Has a cumulative GPA through the most recently completed 
payment period of at least 3.0 or higher on a 4.0 scale, or the 
equivalent, consistent with other institutional measures for academic 
and title IV, HEA program purposes, in the student's eligible program;
    (4) For the third academic year, has successfully completed the 
second academic year of his or her eligible program; and
    (5) For the fourth academic year, has successfully completed the 
third academic year of his or her eligible program.
    (d) Transfer student's grade point average. Under the ACG and 
National SMART Grant programs, if a student transfers from another 
institution, the institution to which the student transfers--
    (1) Must calculate the student's GPA for the student's first 
payment period of enrollment using the grades earned by the student in 
the coursework from any prior institution that it accepts towards the 
student's eligible program; or
    (2) If the institution accepts no credits towards the student's 
eligible program, must consider the student to be ineligible until the 
student completes at least one payment period in an eligible program 
with a qualifying GPA.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.16  Recognition of a rigorous secondary school program of 
study.

    (a) For an award year, the Secretary recognizes in each State at 
least one rigorous secondary school program of study as established by 
an SEA or, if legally authorized by the State to establish a separate 
secondary school program of study, an LEA.
    (b) For each award year, the Secretary establishes a deadline for 
SEAs and LEAs to submit information about the secondary school program 
or programs that the SEA or LEA identifies as a rigorous secondary 
school program of study, and, in the case of an LEA, documentation that 
the LEA is legally authorized by the State to establish a separate 
secondary school program of study.
    (c) In identifying a rigorous secondary school program of study, 
the SEA, or the LEA if applicable, must consider separate identifiable 
secondary programs that--
    (1) Are offered by secondary schools in the State, including 
public, charter, private, tribal, and home schools;
    (2) Are considered by the SEA, or by the LEA if applicable, to 
prepare a student to pursue postsecondary education successfully; and
    (3) Are not General Education Development (GED) Certificate 
programs.
    (d) In addition to those programs identified by States or LEAs and 
recognized by the Secretary as rigorous under paragraphs (b) and (c) of 
this section, the Secretary recognizes the following secondary school 
programs of study as rigorous:
    (1) Advanced or honors secondary school programs established by 
States and in existence for the 2004-2005 or 2005-2006 school year, as 
identified by the Secretary.
    (2) Any secondary school program in which a student completes at a 
minimum the following courses:
    (i) Four years of English.
    (ii) Three years of mathematics, including algebra I and a higher-
level class such as algebra II, geometry, or data analysis and 
statistics.
    (iii) Three years of science, including one year each of at least 
two of the following courses: biology, chemistry, and physics.
    (iv) Three years of social studies.
    (v) One year of a language other than English.
    (3) A secondary school program identified by a State--level 
partnership that is recognized by the State Scholars Initiative of the 
Western Interstate Commission for Higher Education (WICHE), Boulder, 
Colorado.
    (4) Any secondary school program for a student who completes at 
least two courses in the International Baccalaureate Diploma Program 
sponsored by the International Baccalaureate Organization, Geneva, 
Switzerland, and receives a score of ``4'' or higher on the 
examinations for at least two of those courses.
    (5) Any secondary school program for a student who completes at 
least two Advanced Placement courses and receives a score of ``3'' or 
higher on the College Board's Advanced Placement Program Exams for at 
least two of those courses.
    (e) For each award year, the Secretary publishes a list of rigorous 
secondary school programs of study that the Secretary recognizes.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.17  Determination of eligible majors.

    (a) Eligible major. For each award year, the Secretary identifies 
the eligible majors in the physical, life, or computer sciences, 
mathematics, technology, engineering, or, as determined under paragraph 
(b) of this section, critical foreign languages.
    (b) Critical foreign languages. For each award year, the Secretary 
identifies the foreign languages that are critical to the national 
security of the United States after consulting with the Director of 
National Intelligence.
    (c) Duration of eligible major. A major that ceases to be listed as 
an eligible major under paragraph (a) of this section for an award year 
remains an eligible major in subsequent award years for a student who 
pursues that major and receives a National SMART Grant in the award 
year in which the major was an eligible major.

(Authority: 20 U.S.C. 1070a-1)

Subparts C-E [Reserved]

Subpart F--Determination of Awards


Sec.  691.61  Submission process and deadline for a Student Aid Report 
or Institutional Student Information Record.

    (a) Submission process. (1) Except as provided in paragraph (a)(2) 
of this section, an institution must disburse an ACG or a National 
SMART Grant to a student who is eligible under Sec.  691.15 and is 
otherwise qualified to receive that disbursement and electronically 
transmit disbursement data to the Secretary for that student if--
    (i) The student submits a valid SAR to the institution; or
    (ii) The institution obtains a valid ISIR for the student.
    (2) In determining a student's eligibility to receive a grant under 
this part, an institution is entitled to assume that the SAR 
information or ISIR information is accurate and complete except under 
the conditions set forth in 34 CFR 668.16(f) and 668.60.

[[Page 38008]]

    (b) Student Aid Report or Institutional Student Information Record 
deadline. Except as provided in the verification provisions of 34 CFR 
668.60 and the late disbursement provisions of 34 CFR 668.164(g) of 
this chapter, for a student to receive a grant under this part in an 
award year, the student must submit the relevant parts of the valid SAR 
to his or her institution or the institution must obtain a valid ISIR 
by the earlier of--
    (1) The last date that the student is still enrolled and eligible 
for payment at that institution; or
    (2) By the deadline date established by the Secretary through 
publication of a notice in the Federal Register.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.62  Calculation of a grant.

    (a)(1) For each award year, the Secretary establishes and announces 
the ACG and National SMART Grant Scheduled Awards depending on the 
availability of funds for all students who are eligible for a grant 
under Sec.  691.15.
    (2) The Secretary may revise the ACG and National SMART Grant 
Scheduled Awards in an award year depending on the availability of 
funds for all students who are eligible for a grant under Sec.  691.15.
    (b)(1) The maximum ACG Scheduled Award for an eligible student may 
be up to--
    (i) $750 for the first academic year of the student's eligible 
program; and
    (ii) $1,300 for the second academic year of the student's eligible 
program.
    (2) The maximum National SMART Grant Scheduled Award for an 
eligible student may be up to $4,000 for each of the third and fourth 
academic years of the student's eligible program.
    (c) The amount of a student's grant under this part for an academic 
year, in combination with the student's EFC and other student financial 
assistance available to the student, including the student's Federal 
Pell Grant, may not exceed the student's cost of attendance. Other 
student financial assistance is estimated financial assistance as 
defined in 34 CFR 673.5(c), 682.200(b), and 685.102(b).

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.63  Calculation of a grant for a payment period.

    (a)(1) Programs using standard terms with at least 30 weeks of 
instructional time. A student's payment for a payment period is 
calculated under paragraphs (b) or (d) of this section if--
    (i) The student is enrolled in an eligible program that--
    (A) Measures progress in credit hours;
    (B) Is offered in semesters, trimesters, or quarters;
    (C) Requires the student to enroll for at least 12 credit hours in 
each term in the award year to qualify as a full-time student; and
    (D) Is not offered with overlapping terms; and
    (ii) The institution offering the program--
    (A) Provides the program using an academic calendar that includes 
two semesters or trimesters in the fall through the following spring, 
or three quarters in the fall, winter, and spring; and
    (B) Provides at least 30 weeks of instructional time in the terms 
specified in paragraph (a)(1)(ii)(A) of this section.
    (2) Programs using standard terms with less than 30 weeks of 
instructional time. A student's payment for a payment period is 
calculated under paragraph (c) or (d) of this section if--
    (i) The student is enrolled in an eligible program that--
    (A) Measures progress in credit hours;
    (B) Is offered in semesters, trimesters, or quarters;
    (C) Requires the student to enroll in at least 12 credit hours in 
each term in the award year to qualify as a full-time student; and
    (D) Is not offered with overlapping terms; and
    (ii) The institution offering the program--
    (A) Provides the program using an academic calendar that includes 
two semesters or trimesters in the fall through the following spring, 
or three quarters in the fall, winter, and spring; and
    (B) Does not provide at least 30 weeks of instructional time in the 
terms specified in paragraph (a)(2)(ii)(A) of this section.
    (3) Other programs using terms and credit hours. A student's 
payment for a payment period is calculated under paragraph (d) of this 
section if the student is enrolled in an eligible program that--
    (i) Measures progress in credit hours; and
    (ii) Is offered in academic terms other than those described in 
paragraphs (a)(1) and (a)(2) of this section.
    (4) Programs not using terms or using clock hours. A student's 
payment for any payment period is calculated under paragraph (e) of 
this section if the student is enrolled in an eligible program that--
    (i) Is offered in credit hours but is not offered in academic 
terms; or
    (ii) Is offered in clock hours.
    (5) Programs for which an exception to the academic year definition 
has been granted under 34 CFR 668.3. If an institution receives a 
waiver from the Secretary of the 30 weeks of instructional time 
requirement under 34 CFR 668.3, an institution may calculate a 
student's payment for a payment period using the following 
methodologies:
    (i) If the program is offered in terms and credit hours, the 
institution uses the methodology in--
    (A) Paragraph (b) of this section provided that the program meets 
all the criteria in paragraph (a)(1) of this section, except that in 
lieu of paragraph (a)(1)(ii)(B) of this section, the program provides 
at least the same number of weeks of instructional time in the terms 
specified in paragraph (a)(1)(ii)(A) of this section as are in the 
program's academic year; or
    (B) Paragraph (d) of this section.
    (ii) The institution uses the methodology described in paragraph 
(e) of this section if the program is offered in credit hours without 
terms or clock hours.
    (b) Programs using standard terms with at least 30 weeks of 
instructional time. The payment for a payment period, i.e., an academic 
term, for a student in a program using standard terms with at least 30 
weeks of instructional time in two semesters or trimesters or in three 
quarters as described in paragraph (a)(1)(ii)(A) of this section, is 
calculated by--
    (1) Confirming his or her full-time enrollment status for the term;
    (2) Determining his or her ACG or National SMART Grant Scheduled 
Award; and
    (3) Dividing the amount described under paragraph (b)(2) of this 
section by--
    (i) Two at institutions using semesters or trimesters or three at 
institutions using quarters; or
    (ii) The number of terms over which the institution chooses to 
distribute the student's ACG or National SMART Grant Scheduled Award 
if--
    (A) An institution chooses to distribute all of the student's ACG 
or National SMART Grant Scheduled Award determined under paragraph 
(b)(2) of this section over more than two terms at institutions using 
semesters or trimesters or more than three quarters at institutions 
using quarters; and
    (B) The number of weeks of instructional time in the terms, 
including the additional term or terms, equals the weeks of 
instructional time in the program's academic year.
    (c) Programs using standard terms with less than 30 weeks of 
instructional time. The payment for a payment period, i.e., an academic 
term, for a student in a program using standard terms with less than 30 
weeks of

[[Page 38009]]

instructional time in two semesters or trimesters or in three quarters 
as described in paragraph (a)(2)(ii)(A) of this section, is calculated 
by--
    (1) Confirming his or her full-time enrollment status for the term;
    (2) Determining his or her ACG or National SMART Grant Scheduled 
Award;
    (3) Multiplying his or her ACG or National SMART Grant Scheduled 
Award determined under paragraph (c)(2) of this section by the 
following fraction as applicable:
    In a program using semesters or trimesters--
    [GRAPHIC] [TIFF OMITTED] TR03JY06.010
    
    ; or
    In a program using quarters--
    [GRAPHIC] [TIFF OMITTED] TR03JY06.011
    
    ; and
    (4)(i) Dividing the amount determined under paragraph (c)(3) of 
this section by two for programs using semesters or trimesters or three 
for programs using quarters; or
    (ii) Dividing the student's ACG or National SMART Grant Scheduled 
Award determined under paragraph (c)(2) of this section by the number 
of terms over which the institution chooses to distribute the student's 
ACG or National SMART Grant Scheduled Award if--
    (A) An institution chooses to distribute all of the student's ACG 
or National SMART Grant Scheduled Award determined under paragraph 
(c)(2) of this section over more than two terms for programs using 
semesters or trimesters or more than three quarters for programs using 
quarters; and
    (B) The number of weeks of instructional time in the terms, 
including the additional term or terms, equals the weeks of 
instructional time in the program's academic year definition.
    (d) Other programs using terms and credit hours. The payment for a 
payment period, i.e., an academic term, for a student in a program 
using terms and credit hours, other than those described in paragraphs 
(a)(1) or (a)(2) of this section, is calculated by--
    (1)(i) For a student enrolled in a semester, trimester, or quarter, 
determining his or her full-time enrollment status for the term; or
    (ii) For a student enrolled in a term other than a semester, 
trimester, or quarter, determining his or her full-time enrollment 
status for the term by--
    (A) Dividing the number of weeks of instructional time in the term 
by the number of weeks of instructional time in the program's academic 
year;
    (B) Multiplying the fraction determined under paragraph 
(d)(1)(ii)(A) of this section by the number of credit hours in the 
program's academic year to determine the number of hours required to be 
enrolled to be considered a full-time student; and
    (C) Determining a student's enrollment status by comparing the 
number of hours in which the student enrolls in the term to the number 
of hours required to be considered full-time under paragraph 
(d)(1)(ii)(B) of this section for that term;
    (2) Based upon that full-time enrollment status, determining his or 
her ACG or National SMART Grant Scheduled Award; and
    (3) Multiplying his or her ACG or National SMART Grant Scheduled 
Award determined under paragraph (d)(2) of this section by the 
following fraction:
[GRAPHIC] [TIFF OMITTED] TR03JY06.012

    (e) Programs using clock hours or credit hours without terms. The 
payment for a payment period for a student in a program using credit 
hours without terms or using clock hours is calculated by--
    (1) Determining that the student is attending at least full-time;
    (2) Determining the student's ACG or National SMART Grant Scheduled 
Award;
    (3) Multiplying the amount determined under paragraph (e)(2) of 
this section by the lesser of--
    (i)
    [GRAPHIC] [TIFF OMITTED] TR03JY06.013
    
    ; or
    (ii) One; and
    (4) Multiplying the amount determined under paragraph (e)(3) of 
this section by--
[GRAPHIC] [TIFF OMITTED] TR03JY06.014

    (f) Maximum disbursement. A single disbursement may not exceed 50 
percent of any award determined under paragraph (d) or (e) of this 
section. If a payment for a payment period calculated under paragraphs 
(d) or (e) of this section would require the disbursement of more than 
50 percent of a student's ACG or National SMART Grant Scheduled Award 
in that payment period, the institution shall 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 ACG 
or National SMART Grant Scheduled 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) Definition of academic year. For purposes of this section, 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.
    (h) Payment period with two academic years. In a payment period, if 
a student is completing the remaining portion of the first academic 
year or second academic year for an ACG or the third academic year for 
a National SMART Grant Scheduled Award, the student's payment for the 
payment period--
    (1) Is from the ACG or National SMART Grant Scheduled Award of the 
academic year being completed; and
    (2) Is calculated based on the total credit or clock hours, and, 
for a credit-hour program, weeks of instructional time, in the payment 
period.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.64  Calculation of a grant for a payment period which occurs 
in two award years.

    (a) If a student enrolls in a payment period that is scheduled to 
occur in two award years--
    (1) The entire payment period must be considered to occur within 
one award year;
    (2) The institution shall determine for each ACG or National SMART 
Grant recipient the award year in which the payment period will be 
placed subject to the restrictions set forth in paragraphs (a)(3) and 
(a)(6) of this section;

[[Page 38010]]

    (3) The institution shall place a payment period with more than six 
months scheduled to occur within one award year in that award year;
    (4) If the institution places the payment period in the first award 
year, it shall pay a student with funds from the first award year;
    (5) If the institution places the payment period in the second 
award year, it shall pay a student with funds from the second award 
year; and
    (6) The institution must assign the payment period for both the ACG 
or National SMART Grant and the Federal Pell Grant to the same award 
year.
    (b) An institution may not make a payment that results in the 
student receiving more than his or her ACG or National SMART Grant 
Scheduled Award for an academic year of the student's eligible program.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.65  Transfer student: Attendance at more than one institution 
during an academic year.

    (a) If a student who receives a grant under this part at one 
institution subsequently enrolls at a second institution in the same 
award year, the student may receive a grant at the second institution 
only if--
    (1)(i) The student submits a valid SAR to the second institution; 
or
    (ii) The second institution obtains a valid ISIR; and
    (2) The student is receiving a Federal Pell Grant for the same 
payment period.
    (b) The second institution shall calculate the student's award 
according to Sec.  691.63.
    (c) The second institution may pay a grant only for that portion of 
the academic year of the student's eligible program in which a student 
is enrolled at that institution. The grant amount must be adjusted, if 
necessary, to ensure that the grant does not exceed the student's ACG 
or National SMART Grant Scheduled Award for that academic year.
    (d) If a student transfers between award years and the student's 
ACG or National SMART Grant Scheduled Award at the second institution 
differs from the ACG or National SMART Grant Scheduled Award at the 
first institution for that academic year of the student's eligible 
program, the grant amount at the second institution is calculated as 
follows--
    (1) The amount received at the first institution is compared to the 
ACG or National SMART Grant Scheduled Award at the first institution to 
determine the percentage of the ACG or National SMART Grant Scheduled 
Award that the student has received.
    (2) That percentage is subtracted from 100 percent.
    (3) The remaining percentage is the percentage of the ACG or 
National SMART Grant Scheduled Award at the second institution to which 
the student is entitled.
    (e) The student's ACG or National SMART Grant payment for each 
payment period is calculated according to the procedures in Sec.  
691.63 unless the remaining percentage of the ACG or National SMART 
Grant Scheduled Award at the second institution, referred to in 
paragraph (d)(3) of this section, is less than the amount the student 
would normally receive for that payment period. In that case, the 
student's payment is equal to that remaining percentage.
    (f) A transfer student shall repay any amount received that exceeds 
his or her ACG or National SMART Grant Scheduled Award for an academic 
year in accordance with Sec.  691.79.

(Authority: 20 U.S.C. 1070a-1)

Subpart G--Administration of Grant Payments


Sec.  691.71  Scope.

    This subpart deals with program administration by an eligible 
institution.

(Authority: 20 U.S.C. 1070a-1)

Sec. Sec.  691.72-691.74  [Reserved]


Sec.  691.75  Determination of eligibility for payment.

    (a) For each payment period, an institution may pay a grant under 
this part to a student only after it determines that the student--
    (1) Qualifies as a student who is eligible under Sec.  691.15;
    (2) Is enrolled as an undergraduate student in an eligible program;
    (3) If enrolled in a self-paced credit-hour program without terms 
or a self-paced clock-hour program, as described in paragraph (e), is 
progressing as a full-time student after completing at least--
    (i) Fifty percent of the credit or clock hours of the payment 
period for which the student is being paid; or
    (ii) For a credit-hour program, 50 percent of the academic 
coursework of the payment period for which the student is being paid if 
the institution is unable to determine when the student has completed 
one-half of the credit hours of the payment period; and
    (4) If enrolled in a credit-hour program without terms or a clock-
hour program, has completed the payment period as defined in 34 CFR 
668.4 for which he or she has been paid a grant.
    (b)(1) If an institution determines at the beginning of a payment 
period that a student is not maintaining satisfactory progress, but 
reverses that determination before the end of the payment period, the 
institution may pay a grant under this part to the student for the 
entire payment period.
    (2) For purposes of the ACG Program, if an institution determines 
at the beginning of a payment period that a student enrolled in the 
second academic year of his or her eligible program is not maintaining 
the necessary GPA for an ACG under Sec.  691.15(b)(1)(iii)(C), but 
reverses that determination before the end of the payment period, the 
institution may pay an ACG to the student for the entire payment 
period.
    (3) For purposes of the National SMART Grant Program, if an 
institution determines at the beginning of a payment period that a 
student is not maintaining the necessary GPA for a National SMART Grant 
under Sec.  691.15(c)(3) or is no longer pursuing a required major 
under Sec.  691.15(c)(2), but reverses that determination before the 
end of the payment period, the institution may pay a National SMART 
Grant to the student for the entire payment period.
    (c) If an institution determines at the beginning of a payment 
period that a student is not maintaining satisfactory progress or the 
necessary GPA for an ACG under Sec.  691.15(b)(1)(iii)(C), a National 
SMART Grant under Sec.  691.15(c)(3), or, in the case of a National 
SMART Grant is no longer pursuing a required major under Sec.  
691.15(c)(2), but reverses that determination after the end of the 
payment period, the institution may neither pay the student an ACG or a 
National SMART Grant for that payment period nor make adjustments in 
subsequent payments to compensate for the loss of aid for that period.
    (d) Subject to the requirement of paragraph (d)(2), an institution 
may make one disbursement for a payment period to an otherwise eligible 
student if--
    (1)(i) For the first payment period of the student's ACG for the 
second academic year, a student's GPA for the first academic year under 
Sec.  691.15(b)(1)(iii)(C) is not yet available; or
    (ii) For a payment period for a National SMART Grant, a student's 
cumulative GPA through the prior payment period under Sec.  
691.15(c)(3) for the student's enrollment in the eligible program 
through the prior payment period under Sec.  691.15(c)(3) is not yet 
available; and
    (2) The institution assumes liability for any overpayment as a 
result of the

[[Page 38011]]

student failing to meet the required GPA to qualify for the 
disbursement.
    (e) For purposes of this section, a self-paced program is an 
educational program without terms that allows a student--
    (1) To complete courses without a defined schedule for completing 
the courses; or
    (2) At the student's discretion, to begin courses within a program 
either at any time or on specific dates set by the institution for the 
beginning of courses without a defined schedule for completing the 
program.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.76  Frequency of payment.

    (a) In each payment period, an institution may pay a student at 
such times and in such installments as it determines will best meet the 
student's needs.
    (b) The institution may pay funds in one lump sum for all the prior 
payment periods for which the student was eligible under Sec.  691.15 
within the award year. The student must have completed the prior 
payment period as a full-time student.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.77  [Reserved]


Sec.  691.78  Method of disbursement--by check or credit to a student's 
account.

    (a) An institution shall disburse funds to a student or the 
student's account in accordance with the provisions in 34 CFR 668.164.
    (b) The institution shall return to the ACG or National SMART Grant 
account any funds paid to a student who, before the first day of 
classes--
    (1) Officially or unofficially withdraws; or
    (2) Is expelled.
    (c)(1) An institution that intends to pay a student directly must 
notify the student in accordance with 34 CFR 668.165(a).
    (2) If a student does not pick up the check on time, the 
institution shall still pay the student if he or she requests payment 
within 20 days after the last date that his or her enrollment ends in 
that award year.
    (3) If the student has not picked up his or her payment at the end 
of the 20-day period, the institution may credit the student's account 
only for any outstanding charges for tuition and fees and room and 
board for the award year incurred by the student while he or she was 
eligible.
    (4) A student forfeits the right to receive the payment if he or 
she does not pick up a payment by the end of the 20-day period.
    (5) Notwithstanding paragraph (c)(4) of this section, the 
institution may, if it chooses, pay a student who did not pick up his 
or her payment, through the next payment period.
    (6) An institution shall make a late disbursement to an ineligible 
student in accordance with the provisions in 34 CFR 668.164(g).

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.79  Liability for and recovery of grant overpayments.

    (a)(1) Except as provided in paragraphs (a)(2) and (a)(3) of this 
section, a student is liable for any grant overpayment made to him or 
her under this part.
    (2) The institution is liable for a grant overpayment if the 
overpayment occurred because the institution failed to follow the 
procedures set forth in this part or 34 CFR part 668. The institution 
must restore an amount equal to the overpayment to its ACG or National 
SMART Grant account, as applicable.
    (3) A student is not liable for, and the institution is not 
required to attempt recovery of or refer to the Secretary, a grant 
overpayment under this part if the amount of the overpayment is less 
than $25 and is not a remaining balance.
    (b)(1) Except as provided in paragraph (a)(3) of this section, if 
an institution makes an overpayment under this part for which it is not 
liable, it must promptly send a written notice to the student 
requesting repayment of the overpayment amount. The notice must state 
that failure to make that repayment, or to make arrangements 
satisfactory to the holder of the overpayment debt to repay the 
overpayment, makes the student ineligible for further title IV, HEA 
program funds until final resolution of the overpayment.
    (2) If a student objects to the institution's overpayment 
determination on the grounds that it is erroneous, the institution must 
consider any information provided by the student and determine whether 
the objection is warranted.
    (c) Except as provided in paragraph (a)(3) of this section, if the 
student fails to repay an overpayment under this part or make 
arrangements satisfactory to the holder of the overpayment debt to 
repay the overpayment, after the institution has taken the action 
required by paragraph (b) of this section, the institution must refer 
the overpayment to the Secretary for collection purposes in accordance 
with procedures required by the Secretary. After referring the 
overpayment to the Secretary under this section, the institution need 
make no further efforts to recover the overpayment.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.80  Redetermination of eligibility for a grant award.

    (a) Change in receipt of Federal Pell Grant. If, after the 
beginning of a payment period, a student otherwise eligible for an ACG 
or a National SMART Grant begins or ceases to receive a Federal Pell 
Grant for that payment period, the institution must redetermine the 
student's eligibility for an ACG or a National SMART Grant for that 
payment period.
    (b) Change in enrollment status. (1) If the student's enrollment 
status changes from one payment period to another within the same award 
year, the institution shall determine whether the student qualifies for 
an ACG or a National SMART Grant for the new payment period.
    (2)(i) If the student's projected enrollment status changes during 
a payment period after the student has begun attendance in all of his 
or her classes for that payment period, the institution may (but is not 
required to) establish a policy under which the institution may 
redetermine eligibility for the student's award for the payment period. 
If such a policy is established, it must apply to all students and be 
the same as the policy established for the Federal Pell Grant Program.
    (ii) If a student's projected enrollment status changes to less-
than-full-time during a payment period before the student begins 
attendance in all of his or her classes for that payment period, the 
institution shall determine that the student is ineligible for a grant 
under this part for that payment period.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.81  Fiscal control and fund accounting procedures.

    (a) An institution shall follow provisions for maintaining general 
fiscal records in this part and in 34 CFR 668.24(b).
    (b) An institution shall maintain funds received under this part in 
accordance with the requirements in 34 CFR 668.164.

(Authority: 20 U.S.C. 1070a-1)

Sec.  691.82  Maintenance and retention of records.

    (a) An institution shall follow the record retention and 
examination provisions in this part and in 34 CFR 668.24.
    (b) For any disputed expenditures in any award year for which the 
institution cannot provide records, the Secretary

[[Page 38012]]

determines the final authorized level of expenditures.

(Authority: 20 U.S.C. 1070a-1, 1232f)

Sec.  691.83  Submission of reports.

    (a)(1) An institution may receive either a payment from the 
Secretary for an award to an ACG or a National SMART Grant recipient, 
or a corresponding reduction in the amount of Federal funds received in 
advance for which it is accountable, if--
    (i) The institution submits to the Secretary the student's Payment 
Data for that award year in the manner and form prescribed in paragraph 
(a)(2) of this section by September 30 following the end of the award 
year in which the grant is made, or, if September 30 falls on a 
weekend, on the first weekday following September 30; and
    (ii) The Secretary accepts the student's Payment Data.
    (2) The Secretary accepts a student's Payment Data that is 
submitted in accordance with procedures established through publication 
in the Federal Register, and that contains information the Secretary 
considers to be accurate in light of other available information 
including that previously provided by the student and the institution.
    (3) An institution that does not comply with the requirements of 
this paragraph may receive a payment or reduction in accountability 
only as provided in paragraph (d) of this section.
    (b)(1) An institution shall report to the Secretary any change in 
the amount of a grant for which a student qualifies including any 
related Payment Data changes by submitting to the Secretary the 
student's Payment Data that discloses the basis and result of the 
change in award for each student. The institution shall submit the 
student's Payment Data reporting any change to the Secretary by the 
reporting deadlines published by the Secretary in the Federal Register.
    (2) An institution shall submit, in accordance with deadline dates 
established by the Secretary, through publication in the Federal 
Register, other reports and information the Secretary requires and 
shall comply with the procedures the Secretary finds necessary to 
ensure that the reports are correct.
    (3) An institution that timely submits, and has accepted by the 
Secretary, the Payment Data for a student in accordance with this 
section shall report a reduction in the amount of an award that the 
student received when it determines that an overpayment has occurred, 
unless that overpayment is one for which the institution is not liable 
under Sec.  691.79(a).
    (c) In accordance with 34 CFR 668.84, the Secretary may impose a 
fine on the institution if the institution fails to comply with the 
requirements specified in paragraphs (a) or (b) of this section.
    (d)(1) Notwithstanding paragraph (a) or (b) of this section, if an 
institution demonstrates to the satisfaction of the Secretary that the 
institution has provided ACGs or National SMART Grants in accordance 
with this part but has not received credit or payment for those grants, 
the institution may receive payment or a reduction in accountability 
for those grants in accordance with paragraphs (d)(4) and either (d)(2) 
or (d)(3) of this section.
    (2) The institution must demonstrate that it qualifies for a credit 
or payment by means of a finding contained in an audit report of an 
award year that was the first audit of that award year and timely 
submitted to the Secretary under 34 CFR 668.23(a).
    (3) An institution that timely submits the Payment Data for a 
student in accordance with paragraph (a) of this section but does not 
timely submit to the Secretary, or have accepted by the Secretary, the 
Payment Data necessary to document the full amount of the award to 
which the student is entitled, may receive a payment or reduction in 
accountability in the full amount of that award, if--
    (i) A program review demonstrates to the satisfaction of the 
Secretary that the student was eligible to receive an amount greater 
than that reported in the student's Payment Data timely submitted to, 
and accepted by the Secretary; and
    (ii) The institution seeks an adjustment to reflect an underpayment 
for that award that is at least $100.
    (4) In determining whether the institution qualifies for a payment 
or reduction in accountability, the Secretary takes into account any 
liabilities of the institution arising from that audit or program 
review or any other source. The Secretary collects those liabilities by 
offset in accordance with 34 CFR part 30.

(Authority: 20 U.S.C. 1070a-1, 1094, 1226a-1)
[FR Doc. 06-5937 Filed 6-29-06; 8:45 am]

BILLING CODE 4000-01-P