Archived Information

Reauthorization of the Higher Education Act

Title IV--Student Financial Assistnace

Part A--Grants to Students

Section 400. Section 400 of the bill would amend section 400 of the Act to conform with other changes proposed in the bill, including updating references to the Federal Pell Grant program, and the repeal of the State Student Incentive Grant program and the Special Child Care Services for Disadvantaged College Students program.


Section 401. Section 401 of the bill would amend section 401 of the Act to make several changes to the Federal Pell Grant program. Section 401(a) of the bill would update the subpart heading to reflect the current name of the program, and throughout section 401 of the bill references to "basic grants" would be updated to refer to "Federal Pell Grants." Section 401(b)(2) of the bill would amend sections 401(a)(1) and (2) to extend the program through FY 2003, eliminate unnecessary language, reword a cross-reference, and eliminate the current statutory requirement that the Secretary advance 85 percent of the funds requested by institutions to provide Federal Pell Grants to their students prior to the start of each payment period. The Secretary could continue the current advance funding practices as necessary, while seeking to ensure a prompt and smooth transition to an electronic payment disbursement system.

The current requirement for advancing funds has resulted in mismatches between institutions' needs and the funding that they receive due to variations in institutions' actual need for Federal Pell Grant funds from one award year to the next, or even from one payment period to the next. Excess funds advanced to one institution must be reallocated by the Secretary to another institution that received insufficient advance funds, and this process is unnecessarily burdensome and inefficient. Although tightened reporting regulations and improved procedures have been implemented in recent years to reduce the level of undisbursed funds that institutions may have at any one time and reduce the delays in reallocating the de-obligated funds to other schools, advancing lump sums still leaves the potential for unnecessary burden and inefficiency in managing Federal Pell Grant funds.

Under the "just-in-time" system, institutions would submit requests for each recipient's Federal Pell Grant payment, singly or in batches, prior to, or during, the payment period. Upon approval, the funds necessary to meet the payment request would then be electronically transferred from the Federal Government to the institution. The institution would then disburse the Federal Pell Grant payment to the student. This approach would alleviate the "float" of undisbursed funds at institutions with no immediate need, and would allow Federal Pell Grant funds to be directed efficiently and quickly to institutions based on their actual needs. This shift to more technologically advanced payment processing methods would streamline accounting procedures for the Department as well as institutions.

Section 401(b)(3) of the bill would amend section 401(b) of the Act by rewording and reordering that provision to improve clarity. With only minor clarifications, the award rules remain unchanged. The bill would eliminate current section 401(b)(1) of the Act, which states that the purpose of the Federal Pell Grant program is to provide a grant that, in combination with the expected family contribution, a Federal Supplemental Educational Opportunity Grant, and a State Student Incentive Grant, will meet at least 75 percent of a student's cost of attendance. This goal, while laudable, is not realistic given budgetary constraints. Instead, proposed new section 401(b)(1) of the Act would state that, except as provided in proposed new section 401(b)(2), (3), (4), and (5), the amount of the Federal Pell Grant that may be awarded to an eligible student for an academic year shall be the amount remaining after subtracting the student's expected family contribution for that year, as determined under part F, from the maximum Federal Pell Grant established for that academic year. The maximum Federal Pell Grant would be $3,100 for academic year 1999-2000, and established for succeeding academic years in the applicable appropriations Act, subject to such other eligibility factors as may be established in such Act. This would replace specific maximum Federal Pell Grant amounts for the outyears, and would acknowledge that the maximums in section 401(b) have ordinarily been overridden in appropriations Acts.

Proposed new section 401(b)(2) of the Act would contain the award rule currently in section 401(b)(3)(A) of the Act, as rewritten to improve clarity. A reference to "fees" that was probably an inadvertent omission from the current law, would be added to this provision. In addition, the dependent care and disability related expenses included in this award rule would be modified from a flat $750 to the amounts established under sections 472(7) and (8) (as renumbered in section 472 of the bill), respectively, in order to provide consistency between the award rules and the cost of attendance definition used for purposes of determining need for title IV assistance.

Proposed new section 401(b)(3) of the Act would contain the provisions regarding reduction of Federal Pell Grant awards for students attending institutions of higher education on a less than full-time basis that are currently in section 401(b)(2)(B) of the Act. Proposed new section 401(b)(4) of the Act would contain the same award rule as that provision does under current law, but it would be reworded to eliminate unnecessary language.

Proposed new section 401(b)(5) of the Act would contain the current minimum Federal Pell Grant award provisions, with only minor stylistic changes. Section 401(b)(6) of the Act would not be changed by the bill, and section 401(b)(7) of the Act would be eliminated as unnecessary. Current section 401(b)(8) of the Act would be moved to proposed new section 401(b)(7) of the bill with only stylistic changes.

Section 401(b)(4)(A) of the bill would amend section 401(c)(1) of the Act to set new limits on the period during which a student may receive Federal Pell Grants. Current law limits the receipt of Federal Pell Grants to the period of time--no matter how long--required for the completion of the student's first undergraduate baccalaureate degree. As amended, a student could not receive Federal Pell Grants for more than the full-time equivalent of 150 percent of the period normally required for the completion of each course of study in which the student is enrolled, as determined by the institution, with an overall maximum equal to the full time equivalent of eight academic years. (An institution would, however, be required to modify these limits to the extent necessary to accommodate the rights of students with disabilities under section 504 of the Rehabilitation Act of 1973.) These amendments are an attempt to seek a balance between allowing financially needy students time to successfully complete their course of study, while preventing abuse of the Federal Pell Grant program by students dragging out their studies excessively (the so-called "professional student"). In addition to preventing the potential abuse, it is also hoped that time limits will, in general, encourage students to finish their courses of study on a timely basis.

Section 401(b)(4)(B) of the bill would amend section 401(c)(2) of the Act to address concerns with the effectiveness of, and potential for abuse in, some English as a Second Language (ESL) "stand-alone" programs that teach English exclusively and are not part of a larger program of study. (The Department is not considering any change with respect to remedial programs or ESL programs that are part of larger programs.). The proposed new section 401(c)(2)(B) of the Act would assist the Secretary in determining which programs are providing an adequate level of instruction for purposes of participation in the Federal Pell Grant program, by requiring students who complete ESL stand­alone programs to take an independently-administered, standard exam, such as The College Board's Test of English as a Foreign Language (TOEFL), as a measure of minimal English language proficiency. The ESL program's eligibility for the Federal Pell Grant program would be based on a minimum percentage of the program's graduates passing the standardized test. The Secretary would establish in regulation which standardized test or tests of English language proficiency may be used, the minimum percentage of students who must achieve a passing score, and other requirements necessary to implement this provision.

Section 401(b)(5) of the bill would eliminate section 401(d) of the Act, concerning the submission of applications by students seeking to obtain Federal Pell Grants. This provision is unnecessary and duplicative of section 483 of the Act.

Section 401(b)(6) of the bill would eliminate unnecessary language in section 401(e) of the Act that specifies the manner in which Federal Pell Grants funds are to be credited to a student's account by the institution. The Department's cash management regulations, which are designed to clarify and consolidate current policies and requirements, improve the delivery of Title IV funds, reduce burden, and improve program accountability, include a streamlined policy on crediting a student's account at the institution. See 34 C.F.R. 668.164.

Section 401(b)(7) of the bill would eliminate section 401(f) of the Act, which contains processing and other requirements for the calculation of Federal Pell Grant amounts, and which, apart from a few minor differences, duplicates the requirements of section 483 of the Act.



Last updated: April 4, 2002 by [pss]

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