**§1.929 Reduction of debt through performance of work-study services.**

\(a\) *Scope*.

\(1\) Subject to the provisions of this section VA may allow an
individual to reduce an indebtedness to the United States through offset
of benefits to which the individual becomes entitled by performance of
work-study services under 38 U.S.C. 3485 and 3537 when the debt arose by
virtue of the individual's participation in a benefits program provided
under any of the following:

\(i\) 38 U.S.C. chapter 30;

\(ii\) 38 U.S.C. chapter 31;

\(iii\) 38 U.S.C. chapter 32;

\(iv\) 38 U.S.C. chapter 34;

\(v\) 38 U.S.C. chapter 35;

\(vi\) 38 U.S.C. chapter 36 (other than an education loan provided under
subpart F, part 21 of this title); or

\(vii\) 10 U.S.C. chapter 1606 (other than an indebtedness arising from
a refund penalty imposed under 10 U.S.C. 16135).

\(2\) This section shall not apply in any case in which the individual
has a pending request for waiver of the debt under §§1.950 through
1.970. (Authority: 38 U.S.C. 3485(e)(1); Pub. L. 102-16)

\(b\) *Selection criteria*.

\(1\) If there are more candidates for a work-study allowance than there
are work-study positions available in the area in which the services are
to be performed, VA will give priority to the candidates who are
pursuing a program of education or rehabilitation.

\(2\) Only after all candidates in the area described in paragraph
(b)(1) of this section either have been given work-study contracts or
have withdrawn their request for contracts will VA offer contracts to
those who are not pursuing a program of education or rehabilitation and
who wish to reduce their indebtedness through performance of work-study
services.

\(3\) VA shall not offer a contract to an individual who is receiving
compensation from another source for the work-study services the
individual wishes to perform.

\(4\) VA shall not offer a contract to an individual if VA determines
that the debt can be collected through other means such as collection in
a lump sum, collection in installments as provided in §1.917 or
compromise as provided in §1.918. (Authority: 38 U.S.C. 3485(e); Pub. L.
102-16)

\(c\) *Utilization*. The work-study services to be performed under a
debt- liquidation contract will be limited as follows:

\(1\) If the individual is concurrently receiving educational assistance
in a program administered by VA, work-study services are limited to
those allowed in the educational program under which the individual is
receiving benefits.

\(2\) If the individual is not concurrently receiving educational
assistance in a program administered by VA, the individual may perform
only those work-study services and activities which are or were open to
those students receiving a work-study allowance while pursuing a program
of education pursuant to the chapter under which the debt was incurred.
(Authority: 38 U.S.C. 3485(e); Pub. L. 102-16)

\(d\) *Contract to perform services*.

\(1\) The work-study services performed to reduce indebtedness shall be
performed pursuant to a contract between the individual and VA.

\(2\) The individual shall perform the work-study services required by
the contract at the place or places designated by VA.

\(3\) The number of hours of services to be performed under the contract
must be sufficient to enable the individual to become entitled to a sum
large enough to liquidate the debt by offset.

\(4\) The number of weeks in the contract will not exceed the lesser of:

> \(i\) The number of weeks of services the individual needs to perform
> to liquidate his or her debt; or
>
> \(ii\) 52.

\(5\) In determining the number of hours per week and the number of
weeks under paragraphs (d)(3) and (d)(4) of this section necessary to
liquidate the debt, VA will use the amount of the account receivable,
including all accrued interest, administrative costs and marshall fees
outstanding on the date the contract is offered to the individual and
all accrued interest, administrative costs and marshall fees VA
estimates will have become outstanding on the debt on the date the debt
is to be liquidated.

\(6\) The contract will automatically terminate after the total amount
of the individual's indebtedness described in paragraph (d)(5) of this
section has been recouped, waived, or otherwise liquidated. An
individual performing work-study services under a contract to liquidate
a debt is released from the contract if the debt is liquidated by other
means.

\(7\) The contract to perform work-study services for the purpose of
liquidating indebtedness will be terminated if:

\(i\) The individual is liquidating his or her debt under this section
while receiving either an educational assistance allowance for further
pursuit of a program of education or a subsistence allowance for further
pursuit of a program of rehabilitation;

\(ii\) The individual terminates or reduces the rate of pursuit of his
or her program of education or rehabilitation; and

\(iii\) The termination or reduction causes an account receivable as a
debt owed by the individual.

\(8\) VA may terminate the contract at any time the individual fails to
perform the services required by the contract in a satisfactory manner.
(Authority: 38 U.S.C. 3485(e), 7104(a); Pub. L. 102-16)

\(e\) *Reduction of indebtedness*.

\(1\) In return for the individual's agreement to perform hours of
services totaling not more than 40 times the number of weeks in the
contract, VA will reduce the eligible person's outstanding indebtedness
by an amount equal to the higher of:

\(i\) The hourly minimum wage in effect under section 6(a) of the Fair
Labor Standards Act of 1938 times the number of hours the individual
works; or

\(ii\) The hourly minimum wage under comparable law of the State in
which the services are performed times the number of hours the
individual works.

\(2\) VA will reduce the individual's debt by the amount of the money
earned for the performance of work-study services after the completion
of each 50 hours of services (or in the case of any remaining hours
required by the contract, the amount for those hours). (Authority: 38
U.S.C. 3485(e); Pub. L. 102-16)

\(f\) *Suspension of collections by offset*. Notwithstanding the
provisions of §1.912a, during the period covered by the work-study
debt-liquidation contract with the individual, VA will ordinarily
suspend the collection by offset of a debt described in paragraph (a)(1)
of this section. However, the individual may voluntarily permit VA to
collect part of the debt through offset against other benefits payable
while the individual is performing work-study services. If the contract
is terminated before its scheduled completion date, and the debt has not
been liquidated, collection through offset against other benefits
payable will resume on the date the contract terminates. (Authority: 38
U.S.C. 3485(e); Pub. L. 102-16)

\(g\) *Payment for additional hours*.

\(1\) If an individual, without fault on his or her part, performs
work-study services for which payment may not be authorized, including
services performed after termination of the contract, VA will pay the
individual at the applicable hourly minimum wage for such services as
the Director of the VA field station of jurisdiction determines were
satisfactorily performed.

\(2\) The Director of the VA field station of jurisdiction shall
determine whether the individual was without fault. In making this
decision he or she shall consider all evidence of record and any
additional evidence which the individual wishes to submit. (Authority:
38 U.S.C. 3485(e); Pub. L. 102-16)

\[62 FR 15401, Apr. 1, 1997\]

**Supplement *Highlights* reference**: 21(2)