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1

4000-01-U

DEPARTMENT OF EDUCATION

34 CFR Parts 600, 674, 675, 676, 682, 685, 686, 690, 692, 

and 694

[Docket ID ED-2019-OPE-0081]

RIN 1840-AD40, 1840-AD44

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, National Direct Student Loan 

Program, Teacher Education Assistance for College and 

Higher Education Grant Program, Federal Pell Grant Program, 

Leveraging Educational Assistance Partnership Program, and 

Gaining Early Awareness and Readiness for Undergraduate 

Programs

AGENCY: Office of Postsecondary Education, Department of 

Education. 

ACTION: Final regulations.

SUMMARY: In response to the United States Supreme Court 

decision in Trinity Lutheran Church of Columbia, Inc. v. 

Comer (Trinity Lutheran),1 and the United States Attorney 

1 137 S. Ct. 2012 (2017).
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General’s October 7, 2017 Memorandum on Federal Law 

Protections for Religious Liberty pursuant to Executive 

Order No. 13798 (Attorney General’s memorandum),2 the 

Department of Education (Department or we) amends the 

current regulations regarding the eligibility of faithbased entities to participate in the Federal Student Aid 

programs authorized under title IV of the Higher Education 

Act of 1965, as amended (HEA), and the eligibility of 

students to obtain certain benefits under those programs. 

The Department also amends the Teacher Education 

Assistance for College and Higher Education (TEACH) Grant 

Program regulations to minimize the number of TEACH Grants 

that are converted to Federal Direct Unsubsidized Loans, 

and to update, strengthen, and clarify other areas of the 

TEACH Grant Program regulations. 

DATES: These regulations are effective July 1, 2021. 

Implementation date: For the implementation dates of 

the included regulatory provisions, see the Implementation 

Date of These Regulations section of this document. 

FOR FURTHER INFORMATION CONTACT: 

2 U.S. Att’y Gen. Memorandum on Federal Law Protections for Religious 

Liberty (Oct. 6, 2017) (hereinafter “Mem.”), 

https://www.justice.gov/opa/press-release/file/1001891/download.
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For information about the provisions of this 

regulation, contact Sophia McArdle at (202) 453-6318 or by 

email at Sophia.McArdle@ed.gov. 

If you use a telecommunications device for the deaf 

(TDD) or a text telephone (TTY), call the Federal Relay 

Service (FRS), toll free, at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: 

Executive Summary:

Purpose of This Regulatory Action: Through this 

regulatory action, the Department responds to the United 

States Supreme Court decision in Trinity Lutheran Church of 

Columbia, Inc. v. Comer (Trinity Lutheran), and the United 

States Attorney General’s October 7, 2017 Memorandum on 

Federal Law Protections for Religious Liberty pursuant to 

Executive Order No. 13798 (Attorney General’s memorandum) 

in order to ensure that members of religious orders are not 

denied access to title IV funding or benefits under the 

title IV programs. The Department also amends the Teacher 

Education Assistance for College and Higher Education 

(TEACH) Grant Program regulations to minimize the number of 

TEACH Grants that are converted to Federal Direct 

Unsubsidized Loans, and to update, strengthen, and clarify 

other areas of the TEACH Grant Program regulations. A more 
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detailed summary can be found in the Summary of the Major 

Provisions of This Regulatory Action section.

Summary of the Major Provisions of This Regulatory 

Action:

To restore religious liberty to faith-based 

institutions and religious students, these regulations—

• Restore the ability of members of religious orders, 

who also are pursuing courses of study at institutions of 

higher education, to participate in the title IV programs 

by eliminating regulatory provisions that treat members of 

religious orders as having no financial need in certain 

circumstances.

• Allow certain borrowers, who serve as full-time 

volunteers in tax-exempt organizations and give religious 

instruction, conduct worship service, proselytize, or 

fundraise to support religious activities as part of their 

official duties, to defer repayment of Federal Perkins 

Loans, National Direct Student Loans (NDSLs), and Federal 

Family Education Loan Program (FFEL) loans.

• Provide an interpretation of the PSLF regulations that

permits borrowers who work for employers that engage in 
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religious instruction, worship services, or proselytizing 

to qualify for PSLF.

• Clarify requirements for private secondary and 

postsecondary faith-based institutions’ participation in 

the GEAR UP program.

• Conform language in the Leveraging Educational 

Assistance Partnership Program (LEAP) and Federal WorkStudy Programs (FWSP) regulations regarding allowable 

program activities to statutory language.

For the TEACH Grant Program, the regulations—

• Clarify that grant recipients may satisfy the TEACH 

Grant service obligation by teaching for an educational 

service agency that serves low-income students.

• Clarify the beginning date of the eight-year period 

for completing the TEACH Grant service obligation.

• Revise the definition of “highly qualified.”

• Update and expand the conditions under which a TEACH 

Grant recipient may satisfy the TEACH Grant service 

obligation by teaching in a high-need field listed in the 

Department’s annual Teacher Shortage Area Nationwide 

Listing (Nationwide List) at https://tsa.ed.gov.

• Clarify the service obligation requirements for TEACH 

Grant recipients who withdraw from the institution where 
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they received a TEACH Grant before completing the program 

for which they received the grant, then later re-enroll in 

the same program or in a different TEACH Grant eligible 

program at the same academic level.

• Provide that a TEACH Grant recipient may request 

reversal of a voluntary grant-to-loan conversion so that 

the recipient can complete the service obligation, as long 

as the service obligation is completed within eight years 

from when the grant recipient ceased enrollment at the 

institution where the recipient received the grant or, in 

the case of a student who received a TEACH Grant at one 

institution and subsequently transferred to another 

institution and enrolled in another TEACH Grant-eligible 

program, within eight years of ceasing enrollment at the 

other institution, excluding periods of suspension, which 

the recipient could apply for retroactively.

• Expand the information that is provided to TEACH Grant 

recipients during initial, subsequent, and exit counseling, 

and add a new conversion counseling requirement for grant 

recipients whose TEACH Grants are converted to Direct

Unsubsidized Loans. 
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• Provide counseling requirements for TEACH Grant 

recipients who receive reversals of voluntary grant-to-loan 

conversions.

• Add new conditions under which a TEACH Grant recipient 

may receive a temporary suspension of the eight-year period 

for completing the service obligation and for grant 

recipients whose grants were converted to loans in error

and who need additional time to complete the teaching 

service obligation once the error is corrected. 

• Remove the current regulatory requirement for TEACH 

Grant recipients to certify, within 120 days of completing 

the program for which they received TEACH Grants, that they 

have begun qualifying teaching service, or that they have 

not yet begun teaching, but they intend to satisfy the 

service obligation.

• Simplify the regulations specifying the conditions 

under which TEACH Grants are converted to Direct 

Unsubsidized Loans so that for all grant recipients, loan 

conversion will occur only if the recipient asks the 

Secretary to convert his or her TEACH Grants to loans, or 

if the recipient fails to begin or maintain qualifying 

teaching service within a timeframe that would allow the 
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recipient to satisfy the service obligation within the 

eight-year service obligation period. 

• Specify that the Secretary will send grant recipients, 

at least annually, a notice containing detailed information 

about the TEACH Grant service obligation requirements, a 

summary of the grant recipient’s progress toward satisfying 

the service obligation, and an explanation of the process 

by which a grant recipient whose TEACH Grants are converted 

to Direct Unsubsidized Loans may request reconsideration of 

the conversion if he or she believes that the grants were 

converted in error.

• Provide that grant recipients will be automatically 

provided with a “statement of error” when a grant that was

incorrectly converted to a loan is later reconverted to a 

TEACH Grant.

• Describe the actions that the Secretary will take if a 

grant recipient’s request for reconsideration of the

conversion of the grant to a loan is approved or denied.

• Specify that the Secretary will notify a grant 

recipient in advance of the date by which he or she will be 

subject to loan conversion for failure to begin or maintain 

qualifying teaching service within a timeframe that would 

allow the recipient to complete the service obligation 
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within the eight-year service obligation period, and inform 

the recipient of the final date by which he or she must 

provide documentation of teaching service to avoid having 

his or her grants converted to loans. 

• Incorporate statutory changes and update, simplify, 

and clarify various areas of the TEACH Grant Program 

regulations. 

Costs and Benefits: 

As discussed in the Regulatory Impact Analysis section 

of this notice, the Department estimates that these final 

regulations would not result in significant costs. Changes 

regarding faith-based institutions and religious students 

have minimal impacts on financial aid costs to the Federal 

government because these provisions affect relatively few 

students and borrowers. Changes regarding the PSLF program

to comply with the Religious Freedom Restoration Act (RFRA)

carry potential costs related to a relatively small 

increase in the population of eligible recipients. Changes 

regarding the GEAR UP program have no estimated costs as 

participation in the Department’s competitive grant 

programs is voluntary, and the program currently serves a 

small number of religiously affiliated schools. While 

changes to the TEACH Grant Program improve the reporting 

and documentation process for recipients and increase the 
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number of teaching positions in which TEACH Grant 

recipients could satisfy their service obligations, we do 

not believe that the changes would result in a significant

increase in the number of grant recipients.

Implementation Date of These Regulations: Section 482(c) 

of the HEA requires that we publish regulations affecting 

programs under title IV of the HEA in final form by 

November 1, prior to the start of the award year (July 1) 

to which they apply. However, that section also permits 

the Secretary to designate any regulation as one that an 

entity subject to the regulations may choose to implement 

earlier and the conditions for early implementation.

The Secretary is exercising her authority under 

section 482(c) of the HEA to designate the regulatory 

changes to regulations at title 34, parts 600, 674, 675, 

676, 682, 685, 686, 690, 692, and 694, of the Code of 

Federal Regulations included in this document for early 

implementation beginning on [INSERT DATE OF PUBLICATION IN 

FEDERAL REGISTER], at the discretion of each institution, 

or each agency, as appropriate. The Department will 

implement the regulations as soon as possible after the 

implementation date and will publish a separate notice 

announcing the timing of the implementation. Otherwise, 
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the final regulations included in this document are 

effective July 1, 2021.

Public Comment: In response to our invitation in the 

notice of proposed rulemaking (NPRM) published in the 

Federal Register on December 11, 2019 (84 FR 67778), we 

received 46 comments on the proposed regulations. We do 

not discuss comments or recommendations that are beyond the 

scope of this regulatory action or that would require 

statutory change. Generally, we do not address technical 

or other minor changes.

ANALYSIS OF COMMENTS AND CHANGES

We developed these regulations through negotiated 

rulemaking. Section 492 of the HEA requires that, before 

publishing any proposed regulations to implement programs 

under title IV of the HEA, the Secretary must obtain public 

involvement in the development of the proposed regulations. 

After obtaining advice and recommendations, the Secretary 

must conduct a negotiated rulemaking process to develop the 

proposed regulations. The negotiated rulemaking committee 

reached consensus on the proposed regulations that we 

published on December 11, 2019 (84 FR 6778). The Secretary 

requested comments on the proposed regulations by January 

10, 2020, and 46 parties submitted comments. An analysis 
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of the comments and of the changes in the regulations since 

publication of the NPRM follows.

We group major issues according to subject, with 

appropriate sections of the regulations referenced in 

parentheses. We discuss other substantive issues under the 

sections of the regulations to which they pertain. 

Generally, we do not address minor, non-substantive 

changes, recommended changes that the law does not 

authorize the Secretary to make, or comments pertaining to 

operational processes. We also do not address comments 

pertaining to issues that were not within the scope of the 

NPRM.

FAITH-BASED ENTITIES:

General Comments

Comments: Many commenters supported the proposed changes, 

because the proposed revisions better reflect the demands 

of the Free Exercise and Free Speech Clauses of the First 

Amendment to the United States Constitution and the current 

understanding of the Establishment Clause of the First 

Amendment. One commenter noted that even if Trinity 

Lutheran had not been decided and the Attorney General’s 

memorandum had not been issued, the Department’s proposed 

changes would be necessary to bring the Department’s 

regulations into compliance with four decades of Supreme 
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Court jurisprudence, including Widmar v. Vincent,3

Rosenberger v. University of Virginia,4 and Witters v. 

Washington Department of Services for the Blind.5 In 

particular, the commenter noted that the Free Exercise 

Clause prohibits the government from imposing “special 

disabilities” on individuals or institutions based on their 

religious views or status. The commenter also noted that 

RFRA prohibits the Federal government from substantially 

burdening a person’s religious exercise unless it can 

demonstrate a compelling interest unachievable by less 

restrictive means. Another commenter stated that the 

proposed regulations would provide relief to qualified 

student borrowers while maintaining critical safeguards to 

prevent Federal funds from being diverted to religious 

purposes. 

Discussion: We appreciate the commenters’ support. 

Changes: None.

3

454 U.S. 263 (1981)(holding unconstitutional a university’s exclusion 

of religious groups from the use of school facilities made available to 

other student groups and holding that such use would not have the 

“primary effect” of advancing religion in violation of the 

Establishment Clause). 

4515 U.S. 819 (1995) (finding that, to abide by the Establishment 

Clause, it was not necessary for a university to deny eligibility to a 

student publication seeking to print religious viewpoints).

5474 U.S. 481 (1986) (holding that the Establishment Clause permitted a 

State to extend assistance to a blind person who chose to study at a 

religious college to become a pastor, missionary, or youth director). 
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Comments: Some commenters supported the faith-based 

provisions of the proposed regulations and encouraged the 

Department to early implement the new provisions.

Discussion: We agree that institutions should have the 

ability to early implement the faith-based provisions of 

the final regulations where possible, and that borrowers 

should similarly benefit from early implementation by the 

Department of regulatory changes that affect their ability 

to qualify for certain loan repayment benefits. 

Instructions regarding early implementation are discussed 

in the Implementation Date of These Regulations section of 

this preamble.

Changes: The Department provides instructions regarding 

early implementation in the Implementation Date of These 

Regulations section of this preamble.

Comments: Several commenters opposed the Department’s 

faith-based proposed regulations, arguing that the 

regulations misapply Supreme Court precedent. These 

commenters expressed concerns that the Department ignored 

relevant case law in the NPRM, including Mitchell v. Helms6

6 These commenters cited Justice O’Connor’s concurrence, in which she 

disagreed with “the plurality’s conclusion that actual diversion of 

government aid to religious indoctrination is consistent with the 

Establishment Clause” and explained “that we have long been concerned 

that secular government aid not be diverted to the advancement of 
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and Locke v. Davey.7 Commenters also asserted that RFRA 

does not apply to the Department’s current regulations, 

since a borrower who desires to perform non-qualifying work 

should not receive public benefits.

Commenters opined that the current regulations are

sufficient to protect citizens’ religious freedoms, and 

that the proposed regulations regarding title IV programs 

would subsidize religious activities. These commenters 

expressed concern that the Department’s proposed 

regulations would favor religious institutions over their 

secular counterparts and would therefore violate the 

Establishment Clause. Commenters pointed to the facts in 

Locke v. Davey and argued that the State in that case 

refused to extend government funding to Davey, not because 

of his religious status, but because of how he proposed to 

use the funding—to study theology. These commenters argued 

that, because the grantees and recipients at issue in the 

Department’s regulations are religious, they will use 

grants or deferments in a manner similar to Davey and will 

therefore violate the Establishment Clause. One commenter 

religion.” 530 U.S. 793, 840 (2000)(O’Connor, J., concurring in the 

judgment).

7 540 U.S. 712, (2004) (finding that preventing the use of public funds 

for devotional theology instruction does not violate the Free Exercise 

Clause).
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also pointed out that the Establishment Clause still 

prohibits the government from awarding funds for a 

religious purpose or with an effect of advancing religion.

Other commenters stated that Trinity Lutheran has no 

precedential value with respect to the Department’s

regulations. They claimed that the Court in that decision

limited its holding to discrimination based on religious 

identity only with respect to playground resurfacing. One 

commenter disapproved of the Department’s reliance on 

Trinity Lutheran to justify its changes but recognized that 

the Department’s changes would not require public funds to 

be used for religious purposes, and therefore expressed 

support for the changes. But that commenter stated that

the Department did not need to cite Trinity Lutheran to 

support its final regulations. 

Discussion: The Department agrees with commenters that it 

must not violate the Establishment Clause’s prohibition on 

government advancement of religion. The Department agrees 

that Congress may bar the use of government funds for 

religious purposes consistent with the Supreme Court’s 

holding in Locke v. Davey if it wished to do so. We also 

agree that the Department may provide direct aid to 

religious institutions without having the effect of 

advancing religion as long as there is no governmental 
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indoctrination, religion is not used to define recipients, 

and there is no excessive governmental entanglement with 

religion, consistent with Mitchell v. Helms.8

The Department does not agree, however, with those 

commenters who argued that the Establishment Clause 

requires the Department’s previous prohibitions in order to 

bar the use of government funds to advance religion or for 

religious purposes. Those commenters urged the Department 

to go beyond the requirements of the Establishment Clause. 

The Supreme Court has made it clear that a “policy 

preference” of “achieving greater separation of church and 

State than is already ensured under the Establishment 

Clause” is insufficient to justify excluding religious 

organizations from generally available benefits. Trinity 

Lutheran, 137 S. Ct. at 2024 (quoting Widmar v. Vincent, 

454 U.S. 263, 276 (1981)). Indeed, there is substantial 

Supreme Court precedent supporting the proposition that the 

government must not discriminate against individuals or 

entities on the basis of their religious identity. See, 

e.g., Trinity Lutheran, 137 S. Ct. at 2019; Church of the 

Lukumi Babalu Aye, Inc. v. Hialeah, 508 U.S. 520, 533, 542 

(1993); McDaniel v. Paty, 435 U.S. 618, 626 (1978) 

8 530 U.S. 793 at 808.
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(plurality opinion); Everson v. Bd. of Educ. of Ewing, 330 

U.S. 1, 16 (1947).

Some commenters also stated the Department’s changes 

to eligibility requirements for certain aid would have the 

effect of advancing religion. The Department’s aid will 

not advance religion, nor do the Department’s changes 

require aid to be used for religious purposes. In the

final regulations, the Department is correcting prior rules 

that disfavored faith-based institutions and students— not, 

as some commenters worried, to favor them over their 

secular counterparts. The changes affecting faith-based 

institutions and individuals in the final regulations fall 

into two broad categories: first, the eligibility of faithbased entities to participate in Federal Student Aid 

programs under title IV of the HEA; and second, the 

eligibility of students to obtain benefits under those 

programs. Accordingly, the final rules permit members of a 

religious order to receive aid under title IV programs, 

including the Federal Pell Grant Program, the Federal 

Perkins Loan Program, the FWSP, the Federal Supplemental 

Educational Opportunity Grant Program (FSEOG) Program, the 

FFEL Program, and the Direct Loan Program. Also, the rules 

allow private secondary and postsecondary faith-based 

educational institutions to participate in GEAR UP. The 
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final regulations set religious individuals and entities on 

equal footing with their secular counterparts by allowing 

such individuals and entities to qualify for the same aid 

already available to nonreligious individuals and entities. 

Therefore, such treatment is correcting an inequality, not 

creating one.

Because of such inequality, the Department does not 

agree with the commenter who argued that RFRA is not 

implicated by the Department’s current rules excluding 

religious individuals and entities from the ability to 

participate in generally available benefit programs. 

Congress has tasked the Department with the duty to ensure 

that the Department’s actions, including its regulatory

actions, do not substantially burden a person’s exercise of 

religion (absent a compelling government interest and a 

showing that the burden is the least restrictive means of 

furthering that interest). 42 U.S.C. 2000bb, et seq. 

Because the current regulations discriminate against 

religious groups and deny individuals the ability to 

participate in important government programs on the basis 

of their religious status, the current regulations likely 

amount to a substantial burden on those entities’ exercise 

of religion. 
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RFRA defines “religious exercise” as “any exercise of 

religion, whether or not compelled by, or central to, a 

system of religious belief.” 42 U.S.C. § 2000bb-2(4) 

(citing 42 U.S.C. § 2000cc-5). The current rules impose a 

“penalty” on these individuals’ free exercise of religion, 

Trinity Lutheran, 137 S. Ct. at 2021—which they engage in 

by becoming members of religious orders, attending 

religious institutions, participating in or working at 

religious organizations, among other ways—by requiring them 

to “choose between their religious beliefs and receiving a 

government benefit.” Id. at 2023 (quoting Locke, 540 U.S. 

at 720-21);see Sherbert v. Verner, 374 U.S. 398, 404 (1963) 

(finding a substantial burden where it was “apparent that 

appellant’s declared ineligibility for benefits derives 

solely from the practice of her religion,” forcing her “to 

choose between following the precepts of her religion and 

forfeiting benefits, on the one hand, and abandoning one of 

the precepts of her religion in order to accept work, on 

the other hand”); see also 42 U.S.C. 2000bb(b)(1) (“The 

purposes of this chapter are – (1) to restore the 

compelling interest test as set forth in Sherbert v. 

Verner, 374 U.S. 398 (1963) and Wisconsin v. Yoder, 406 

U.S. 205 (1972) and to guarantee its application in all 
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cases where free exercise of religion is substantially 

burdened . . .”).

And the Department’s status-based restrictions are

neither necessary to further a compelling government 

interest, nor are they the least restrictive means of 

furthering any such interest. Therefore, RFRA would require 

the Department to alleviate the substantial burden imposed 

by its regulations.

The Department also disagrees with one commenter’s 

suggestion that RFRA does not apply at all; the statute 

binds the “Government” which includes the Department in its 

regulating capacity, 42 U.S.C. § 2000bb-1(a), and further 

“applies to all Federal law, and the implementation of that 

law, whether statutory or otherwise, and whether adopted 

before or after November 16, 1993.” 42 U.S.C. § 2000bb3(a).

The Department disagrees with commenters who claimed 

that the Department’s current rules are sufficiently 

protective of religious freedom. The Supreme Court has 

upheld some religious-funding restrictions,9 but those 

decisions are in considerable tension with more recent 

9 See Tilton v. Richardson, 403 U.S. 672, 683 (1971), and Committee for 

Public Education & Religious Liberty v. Nyquist, 413 U.S. 756, 762 

(1973).
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Supreme Court cases that recognized that the First 

Amendment permits—and in some situations, requires-the 

government to provide religious organizations with access 

to government property under neutral and generally 

applicable rules. Additionally, the Supreme Court has 

repudiated the principle that the Establishment Clause bars 

government aid from flowing from religiously neutral 

government programs to religious institutions. See, e.g., 

Mitchell v. Helms, 530 U.S. at 835 (plurality opinion) 

(overruling Wolman v. Walter, 433 U.S. 229 (1977) and Meek 

v. Pittenger, 421 U.S. 349 (1975)); id. at 837 (O’Connor, 

J., concurring in the judgment) (same); Agostini v. Felton, 

521 U.S. 203, 235 (overruling Aguilar v. Felton, 473 U.S. 

402 (1985) and School District of the City of Grand Rapids 

v. Ball, 473 U.S. 373 (1985)). 

The Supreme Court has made it clear that the 

government should be “neutral in its relations with groups 

of religious believers and non-believers; [the 

Establishment Clause] does not require the state to be 

their adversary.” Everson v. Board of Education, 330 U.S. 

1, 18 (1947). And a law that burdens religious practice 

that is not neutral and not generally applicable “must 

undergo the most rigorous of scrutiny” under the Free 
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Exercise Clause. Church of the Lukumi Babalu Aye, Inc. v. 

City of Hialeah, 508 U.S. 520, 546 (1993). 

In Trinity Lutheran, the Court reiterated that this 

nondiscrimination principle of the Free Exercise Clause 

applies to government benefits and funding. The Court in 

that case rejected the State’s interest in “skating as far 

as possible from religious establishment concerns” as a 

basis for categorically excluding a religious organization 

from a generally available funding program. Trinity 

Lutheran, 137 S. Ct. at 2024. The Court applied “the most 

exacting scrutiny” to the government program, finding that 

it “expressly discriminate[d]” against an entity that would 

be otherwise eligible for the government grant but for that 

entity’s religious character. Id. 

That same basic defect is present in the Department’s 

current regulations: but for the entities’ and individuals’ 

religious character, they would have qualified for 

government aid under title IV. For example, under current

34 CFR 674.9(c)(1), a student is prohibited from receiving 

a Federal Perkins Loan if that student was a “member of a 

religious order” that has as its primary objective “the 

promotion of ideals and beliefs regarding a Supreme Being” 

and which required its members to forego monetary support 

and receive subsistence support from the order. Because 
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the restriction only applies to individuals based on an 

individual’s members in a religious order, that restriction 

is based on the individual’s religious status. The 

Department believes that otherwise-eligible students and 

institutions should not be denied participation in title IV 

programs based solely on their religious identities and,

furthermore, that the Free Exercise Clause prohibits such 

status-based religious discrimination.

The Department considered commenters’ concerns that 

its changes amount to government subsidies for religious 

activities. These commenters included discussions of Locke 

v. Davey, which the Supreme Court distinguished in Trinity 

Lutheran as a case in which the recipient was denied a 

scholarship not because of who he was, but because of how 

he proposed to use the government funding—to prepare for 

ministry. See Trinity Lutheran, 137 S. Ct. at 2023. Under 

this analysis, the Court demonstrated that the 

constitutionality of an aid restriction depends on whether 

the restriction is predicated on the recipient’s religious 

status (which is presumptively unconstitutional), or 

whether it is based upon how the Federal aid will be used 

(which is a permissible restriction under Locke but not 

required under the Free Exercise Clause). Thus, a state 
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could disallow or allow federal aid to be used for 

religious instruction under Locke. 

Some commenters argued that the current regulations 

fall within the latter category—that allowing religious 

individuals and entities to qualify for Federal aid would 

amount to promoting religion, because the recipients would 

use their aid to practice their religion. But those

regulations deny eligibility based on a person’s membership 

in a religious order (see, e.g., 34 CFR 674.9), or because 

a person chose to perform volunteer work for a religious

organization providing services to the community (see, 

e.g., 34 CFR 674.35(c)(5)(iv)). These restrictions are on 

the basis of a person’s or entity’s religious identity;

they are not use-based restrictions. Additionally, Locke 

v. Davey held that the government may refuse to use 

government funds for a degree in devotional theology; that

decision does not require the government to refuse to do 

so. The Department’s determination of how to use any 

leeway allowed under Locke v. Davey must be guided by 

policy and legal considerations, including the statutory 

mandate of RFRA.

The Supreme Court has long held that the government 

may furnish “general . . . benefits to all its citizens 

without regard to their religious belief.” Everson, 330 
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U.S. at 16. In cases following Everson, the Court 

consistently affirmed that an important factor in upholding 

Government aid programs against an Establishment Clause 

attack is those programs’ “neutrality towards religion.” 

Good News Club v. Milford Central School, 533 U.S. 98, 114 

(2001) (quoting Rosenburger, 515 U.S. at 839). The 

Constitution is “respected, not offended,” when the 

Government employs neutral criteria and extends benefits to 

“recipients whose ideologies and viewpoints, including 

religious ones, are broad and diverse.” Rosenberger, 515 

U.S. at 839 (emphasis added). In Mitchell, a plurality of 

justices endorsed the bright-line rule that neutral, 

generally available Government aid does not violate the 

Establishment Clause. See 530 U.S. at 809-14. Later, in 

Zelman v. Simmons-Harris, the Supreme Court held that a 

school voucher program did not need to exclude religious 

recipients to comply with the Establishment Clause. See 

Zelman, 536 U.S. 639, 653-60 (2002). The U.S. Department 

of Justice, Office of Legal Counsel has likewise held that, 

in some circumstances, the Government may provide aid to 

sectarian or religious entities.10 And finally, the 

10 See Authority of the Department of the Interior to Provide Historic 

Preservation Grants to Historic Religious Properties Such as the Old 

North Church, 27 Op. O.L.C. 91, 114 (2003) (concluding that the 
Note: The official version of this document is the document published in the Federal Register.

27

Establishment Clause does not prohibit religious 

organizations from receiving Government benefits such as 

tax deductions and exemptions, which direct significant 

economic benefits to both religious and secular 

organizations, on an equal basis with secular 

organizations. See Walz, 397 U.S. at 674; Zelman, 536 U.S. 

at 665-68 (O’Connor, J., concurring) (discussing tax 

deductions and exemptions). 

Commenters also argued that the Department errs in 

relying on Trinity Lutheran. They argued that, according 

to footnote 3 in the decision, Trinity Lutheran applies 

only to the narrow factual circumstance of a church-run 

school seeking to compete for a playground resurfacing 

grant. 

But footnote 3 is not part of the majority opinion in 

Trinity Lutheran, because two of the six Justices in the 

majority opinion joined the opinion “except as to footnote 

3.” Trinity Lutheran, 137 S. Ct. at 2016. In any event, 

footnote 3 does not limit the force of the Court’s 

reasoning.

Department of the Interior could provide historic preservation grants 

to renovate a still-active house of worship); Authority of FEMA to 

Provide Disaster Assistance to Seattle Hebrew Academy, 26 Op. O.L.C. 

114, 129 (2002) (opining that FEMA could provide disaster relief funds 

for reconstruction after an earthquake to a Hebrew secondary school).
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28

The Court has long held that “[w]hen an opinion issues 

for the Court, it is not only the result but also those 

portions of the opinion necessary to that result by which 

we are bound.” Seminole Tribe of Florida v. Florida, 517 

U.S. 44, 67 (1996). And even broadly applicable principles 

discussed by the Supreme Court often lead to the creation 

of generally applicable legal rules. See Antonin Scalia, 

The Rule of Law as a Law of Rules, 56 U. Chi. L. Review 

1175, 1175-81 (1989). Indeed, in explaining why he did not 

join footnote 3, Justice Gorsuch asserted that the court’s

cases are governed by general principles, rather than ad 

hoc improvisations.” Trinity Lutheran, 137 S. Ct. at 2023 

(quoting Elk Grove Unified School Dist. v. Newdow, 542 U.S. 

1,25 (2004) (Gorsuch, J., concurring in part)). Here, the 

majority opinion in Trinity Lutheran recognized that the 

Court had “repeatedly confirmed that denying a generally 

available benefit solely on account of religious identity 

imposes a penalty on the free exercise of religion that can 

be justified only by a state interest of the highest 

order.” Id. at 2019 (majority op.). It confirmed that 

this principle applies to “the refusal to allow [a Church 

plaintiff]—solely because it is a church—to compete with 

secular organizations for a grant,” id. at 2022, and it 

rejected the argument that a “policy preference for skating 
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29

as far as possible from religious establishment concerns” 

could justify such refusal, id. at 2024. This reasoning is 

persuasive and applicable here.

Changes: None. 

Comments: One commenter raised concerns that the 

Department subjected constitutional principles to 

negotiated rulemaking inappropriately and that there were 

few stakeholders with expertise in church and State issues 

on the negotiated rulemaking committee.

Discussion: The HEA requires the Department to regulate 

all issues relating to title IV of the HEA through a 

negotiated rulemaking process. The Department followed the 

requirements of the HEA when negotiating these issues. To 

ensure adequate expertise on church and State issues, the 

Department created a subcommittee that met three times for 

a total of six days to discuss thoroughly the issues 

relating to church and State, including extensive 

discussion regarding the constitutional issues implicated 

by the proposed regulations. The subcommittee consisted of 

nine members, all of whom had extensive knowledge and 

experience with respect to church and State issues. 

Representatives of national organizations that have 

litigated both sides of these issues in Federal courts

served on the subcommittee. 
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30

Subcommittee representatives presented their proposals

and analysis to the full committee multiple times during 

the negotiated rulemaking. Both sides of issues, those for 

and against the Department’s proposed amendments to the 

regulations, were presented to the full committee. 

Additionally, multiple members of the full committee worked 

for faith-based organizations or otherwise had experience 

working on church and State issues.

The Department agrees with the commenters that the 

work of the negotiated rulemaking committee cannot overrule 

the Constitutional opinions of the U.S. Supreme Court, 

including cases like Trinity Lutheran. As a result, the 

Department has tailored the final rule to be consistent 

with those opinions, as further described herein.

Changes: None.

Student eligibility (§ 674.9); Student eligibility (§ 

675.9); Student eligibility (§ 676.9); Eligibility of 

borrowers for interest benefits on Stafford and 

Consolidation Loans (§ 682.301); Borrower eligibility (§

685.200); Determination of eligibility for payment (§ 

690.75)

Comments: The Department received comments on its proposal

to remove provisions in §§ 674.9, 675.9, 676.9, 

682.301(a)(2), 685.200, and 690.75 that specify that a 
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31

member of a religious order is considered to have no 

financial need if the religious order has as its primary 

objective the promotion of ideals and beliefs regarding a 

supreme being, requires its members to forgo monetary or 

other support substantially beyond the support its 

provides, and directs the member to pursue the course of 

study or provides subsistence support to its members. 

Some commenters agreed with the proposed removal, 

indicating that the current language violates the Free 

Exercise and the Free Speech Clauses. Specifically, 

commenters noted that religious observance, including vows 

of poverty and obedience, are protected by the First 

Amendment of the United States Constitution and should not 

be cited as a reason for exclusion from Federal student aid 

programs. 

Other commenters opposed the proposed removal, because 

they believe that without the current regulatory language, 

the Department would be subsidizing inherently religious 

activities, such as religious education and proselytizing,

in violation of the Establishment Clause. One commenter 

further indicated that the procedural history of the 

regulations indicates that the rationale for the current 

regulations is not based on belief but on real-world 

considerations of financial status of individuals in 
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32

religious orders who may receive financial subsidies even 

if they do not have an income.

Discussion: The Department thanks commenters who supported

the proposed change. The Department disagrees that the 

proposed regulations would cause the Department to 

subsidize inherently religious activities. The Department 

would merely be providing financial aid for otherwise 

eligible students to attend postsecondary education

regardless of their membership in a religious order and

without considering that order’s primary objective. 

Financial aid funds would go to individual students who 

have demonstrated financial need to attend postsecondary 

education and would not fund religious activities. An 

independent decision by a student aid recipient to 

participate in inherently religious activities does not 

create a government subsidy of those activities. 

The formulas for determining financial need in U.S. 

Code Part F consider subsidies received by students from 

any entity, including religious and non-religious entities. 

The current regulatory language that specifies that members 

of religious orders are presumed not to have need singles 

out such members for differential treatment and is likely 

not narrowly tailored to address a compelling interest. 
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33

Such a provision also unnecessary for determining financial 

need as the formulas are themselves sufficient. 

Changes: None.

Deferment of repayment – Federal Perkins loans made before 

July 1, 1993; Deferment of repayment – NDSLs made on or 

after October 1, 1993

Comments: Many commenters supported proposed changes to §§

674.35 and 674.36 that would remove language that denies

deferment of repayment of certain Federal loans for 

borrowers working as volunteers if their volunteer duties 

include giving religious instruction, conducting worship 

services, proselytizing, or fundraising to support 

religious activities. Many commenters agreed with the 

Department that in some cases the provision of secular 

services is inextricably intertwined with inherently 

religious activities and that deferment provisions in the 

current regulations may violate the Free Exercise and Free 

Speech Clauses and RFRA. These commenters noted that the 

Federal government will not violate the Establishment 

Clause if it permits volunteers engaged in religious 

activities to defer loan repayment based on religiously 

neutral criteria. The commenters cited Zelman v. SimmonsHarris, 536 U.S. 639 (2002), Mitchell v. Helms 530 U.S. 793 
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34

(2000), and other Supreme Court cases in support of their 

position. 

Other commenters opposed the removal of these 

provisions, indicating that allowing a borrower to be 

eligible for subsidies if the borrower works on inherently 

religious activities would be directly subsidizing 

individuals engaged in religious activities in violation of 

the Establishment Clause.

Discussion: The Department thanks the commenters for their 

support. The Department agrees with the commenters who 

argued that the Establishment Clause would not be violated 

by the removal of these provisions. The Department 

believes that removal of these provisions is necessary to 

avoid violations of individuals’ rights to freely exercise 

their religions and their free speech rights. These

provisions do not violate the Establishment Clause because

the Supreme Court has long held that the government may 

furnish general benefits to all its citizens without regard 

to their religious belief or their membership in a 

particular religious organization or sect. See Everson, 

330 U.S. at 16 (holding that the State “cannot exclude 

individual Catholics, Lutherans, Mohammedans, Baptists, 

Jews, Methodists, Non-believers, Presbyterians, or the 

members of any other faith, because of their faith, or lack 
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35

of it, from receiving the benefits of public welfare 

legislation.”). In cases following Everson, the Court 

consistently affirmed that an important factor in upholding 

Government aid programs against an Establishment Clause 

attack is those programs’ “neutrality towards religion.” 

Good News Club v. Milford Central School, 533 U.S. 98, 114 

(2001) (quoting Rosenburger, 515 U.S. at 839). The 

Constitution is “respected, not offended,” when the 

Government employs neutral criteria and extends benefits to 

“recipients whose ideologies and viewpoints, including 

religious ones, are broad and diverse.” Rosenberger, 515 

U.S. at 839 (emphasis added). In Mitchell, a plurality of 

justices endorsed the bright-line rule that neutral, 

generally available government aid does not violate the 

Establishment Clause. See 530 U.S. at 809-14. 

Under the current regulations, a borrower may be 

eligible for deferment if working as a full-time volunteer 

for a tax-exempt organization providing services to lowincome persons and their communities to assist them in 

eliminating poverty and poverty-related human, social, and 

environmental conditions for at least one year. However, 

the regulation disqualifies that same borrower from 

deferment if he or she, as part of his or her duties, gives

religious instruction, conducts worship services, engages
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36

in religious proselytizing, or engages in fundraising to 

support religious activities. The regulations thus 

disfavor borrowers participating in otherwise-eligible 

public services merely because that public service is 

performed from a religious perspective. For some borrowers, 

these restrictions may also impose a substantial burden on 

their free exercise of religion by forcing them to choose 

between such religious exercise and eligibility for loan 

deferments. No compelling government interest warrants the 

imposition of such burdens. Ultimately, the eligibility 

requirements in these final regulations maintain the 

government’s stance of neutrality towards religion by not 

disfavoring a particular type of public service. 

The Supreme Court has noted the distinction, for 

Establishment Clause purposes, between direct provision of 

government aid to a religious programs and indirect 

government aid that flows to religious programs based on 

private choice in its Establishment Clause cases. For 

example, in Zelman v. Simmons-Harris, the Supreme Court

held that a school voucher program did not need to exclude 

religious recipients to comply with the Establishment 

Clause where funding would only reach such recipients 

following the private choice of the individual using the 

voucher. See Zelman, 536 U.S. 639, 653-60 (2002).
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37

Likewise, in this case, the borrower receiving the benefit 

of loan deferment under the regulation makes a private 

choice between different volunteer options in the community 

and therefore does not create an Establishment Clause 

problem by choosing to volunteer with a religious entity 

performing religious tasks. As a result of the intervening 

private choice of the borrower, “no imprimatur of state 

approval can be deemed to have been conferred on any 

particular religion, or on religion generally” by the 

borrower’s receipt of a deferment for volunteer work. See

Zelman, 536 U.S. at 650 (internal citations, quotation 

marks omitted).11

Changes: None. 

Eligible employers and general conditions and limitation on 

employment (§ 675.20)

Comments: The Department received comments on proposed 

changes to § 675.20 that would replace language in the FWSP

regulations with language from § 443(b)(1)(C) of the HEA to 

clarify that work performed under the FWSP may “not involve 

the construction, operation, or maintenance of so much of 

any facility as is used or is to be used for sectarian 

11See also Am. Jewish Congress v. Corp. for Nat'l & Cmty. Serv., 399 

F.3d 351 (D.C. Cir. 2005)(government agency placing teachers in 

religious schools did not violate Establishment Clause when some 

teachers chose to teach religion as well as secular subjects).
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38

instruction or as a place for religious worship.” Several 

commenters stated that the statutory language is 

problematic but is clearer than the current regulatory 

language. 

One commenter indicated that both the statute and the 

regulation fail to define “sectarian instruction.” That 

commenter wondered whether the term includes only 

inherently religious instruction or whether it also

includes efforts to integrate religious convictions into 

other subjects. 

Several commenters indicated that the statutory 

language includes unjustified discrimination against 

religion, religious individuals, and religious activities

in violation of the Free Exercise and Free Speech Clauses 

as well as RFRA. One commenter noted that the Department 

has the authority and an independent duty to obey the 

Constitution and RFRA regardless of the statutory language 

in the HEA. 

One commenter contended that the changes would allow

FWSP students to serve in facilities dedicated solely to

religious functions which would violate the separation of 

church and State. 

Discussion: The Department agrees with commenters that it 

has an independent duty to obey the Constitution and RFRA.
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39

The Department does not believe the statute is clearly 

unconstitutional under current Supreme Court precedent. 

Even when the Government has established a secular, neutral 

aid program, it may retain an interest in defining the 

program to exclude certain religious uses. See Religious 

Restrictions on Capital Financing for Historically Black 

Colleges and Universities, 2019 WL 4565486 O.L.C. at 19. 

Under Locke v. Davey, the government—in this case, 

Congress—may lawfully decline to subsidize religious 

activity. See Locke, 540 at 720-21. It therefore does not 

appear that the FWSP restriction violates the Free Exercise 

Clause.

Nor does the Department believe that the restriction 

necessarily runs counter to RFRA. It is true that RFRA 

applies retrospectively and prospectively to “all Federal 

law, and the implementation of that law, whether statutory 

or otherwise, and whether adopted before or after” its 

effective date, 42 U.S.C. § 2000bb–3(a), including the FWSP 

restriction here. On the one hand, because the restriction 

is religious in nature, it is possible that the restriction

could substantially burden the exercise of religion by 

institutions of higher education and/or individual student 

participants. The restriction appears to be aimed at 

preventing the use of government funds to support religious 
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40

activities. However, the restriction is neither required 

by the Establishment Clause in light of the need for 

intervening private choice by an institution of higher 

education and an individual student participant before 

program funds could be linked with religious activity, see 

Zelman, 536 U.S. 639, 653-60 (2002), nor is it a compelling 

government interest for purposes of RFRA, as any remaining 

“policy preference for skating as far as possible from 

religious establishment concerns” cannot qualify as a 

compelling government interest, see Trinity Lutheran, 137 

S. Ct. at 2024. Thus, under RFRA the Department cannot 

enforce the FWSP restriction against any person whose 

exercise of religion is substantially burdened by such 

application. As a result, the Department has added 

language to that effect in the regulation to make clear how 

RFRA applies. Of course, even in the absence of such 

additional clarifying language, the Department interprets 

all of its statutes and regulations through the lens of 

RFRA because none of its statutes contains an explicit 

exemption from RFRA. 42 U.S.C. § 2000bb-3(b).

To the extent that the FWSP restriction does not 

substantially burden a person’s exercise of religion, 

however, it does not appear to violate the Constitution or 

RFRA.
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41

In otherwise amending the regulation to conform to the 

statute, the Department intends to provide as much clarity 

and flexibility as possible within the confines of the HEA

and to ensure adherence to the statute. Chapels and other 

religious structures are often part of larger multi-use 

facilities on college campuses. The Department wishes to 

clarify that FWSP students may construct, operate, or 

maintain portions of multiuse structures that are not 

dedicated solely to religious purposes.

The Department disagrees with commenters who claimed 

that, under the statutory language, FWSP students would be 

involved in the construction, operation, or maintenance of 

facilities dedicated solely to religious functions. The 

statutory language precludes such opportunity by specifying

that work performed under the FWSP may “not involve the 

construction, operation, or maintenance of so much of any 

facility as is used or is to be used for sectarian 

instruction or as a place for religious worship.” 

Therefore, if a building is used solely for sectarian 

instruction or as a place for religious worship, FWSP 

employment may not include the construction, operation, or 

maintenance of that building. For large, multi-use 

structures, however, FWSP employment may include the 

construction, operation, or maintenance of that building.
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42

While neither the statute nor the current regulations 

define the term “sectarian instruction,” the Department

follows a similar definition to that set forth in a 

published opinion by the Department of Justice’s Office of 

Legal Counsel. See Religious Restrictions on Capital 

Financing for Historically Black Colleges and Universities, 

2019 WL 4565486 O.L.C. at 18. In its opinion, the Office of 

Legal Counsel defined the word “sectarian” in the phrase 

“sectarian activities” to mean “devotional activities.” 

Id. According to Black’s Law Dictionary, sectarian 

instruction would ordinarily be defined as instruction that 

“supports a particular religious group and its beliefs,” 

1557 (10th ed. 2014), and Webster’s Third would define it

as instruction that has “the characteristics of one or more 

sects of a religious character,” Webster’s Third New 

International Dictionary 2052 (2002). Thus, instruction 

that is predominately devotional and religious is 

“sectarian instruction.” Sectarian instruction would 

include instruction such as Christian or Jewish homilies or

Islamic khutbahs. Instruction related to the provision of 

generally secular services does not constitute sectarian 

instruction, including various types of counseling or 

educational instruction that may include some sectarian or 

religious content but that is not predominately religious
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43

or devotional in nature. Individuals or organizations may 

integrate religious ideas or teachings into otherwise 

secular instruction without engaging in sectarian 

instruction.

The Department concludes that this reading of the 

restriction is independently justified in light of the 

canon of constitutional avoidance. See, e.g., Clark v. 

Martinez, 543 U.S. 371, 381–82 (2005). A broad reading of 

the restriction could potentially cover all buildings where 

instruction takes place at a religious institution, 

potentially converting the restriction from a use-based 

restriction into the kind of status based restriction 

expressly prohibited in Trinity Lutheran, 137 S. Ct. at 

2023. In order to avoid this potential Free Exercise 

Clause problem, the Department construes the restriction 

narrowly to only cover instruction that is predominately 

devotional and religious.

In addition, the Department’s interpretation of 

“sectarian instruction” is independently supported by RFRA. 

A broad reading of the restriction could cover all 

buildings where instruction takes place at a religious 

institution, potentially forcing the institution to choose 

between participation in the FWSP and continuing in its 

religious exercise. This would place a substantial burden 
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44

on such institutions’ exercise of religion without 

advancing any compelling government interest by the least 

restrictive means and would therefore run counter to RFRA.

See, e.g., Hobby Lobby Stores, Inc. v. Sebelius, 723 F.3d 

1114, 1141 (10th Cir. 2013) (en banc), aff'd sub nom. 

Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682 (2014). 

A denial of, or condition on the receipt of, government 

benefits may substantially burden the exercise of religion

if such denial or condition exerts significant pressure on 

an adherent to modify his or her religious observance or 

practice. See U.S. Att’y Gen. Memorandum on Federal Law 

Protections for Religious Liberty (Oct. 6, 2017); Sherbert 

v. Verner, 374 U.S. 398, 405-06 (1963); Hobbie v. 

Unemployment Appeals Comm’n of Fla., 480 U.S. 136, 141 

(1987); Thomas v. Review Board of Indiana Employment 

Security Div., 450 U.S. 707,717-18 (1981)). And for the 

reasons explained above, such a broad restriction would 

neither be required by the Establishment Clause, nor 

justified by a compelling governmental interest. A 

narrower reading of “sectarian instruction” avoids these 

problems and, thus, would appear to be more consistent with 

congressional intent to impose this restriction without 

exempting it from RFRA.
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45

Changes: The Department amends the proposed regulation to 

specify the narrow definition of sectarian instruction and 

to include the exception for situations involving a 

substantial burden on a person’s exercise of religion under 

RFRA. 

Deferment (§ 682.210)

Comments: In response to a directed question in the NPRM, 

the Department received several comments stating that in 

order to provide consistent treatment of deferments across 

loan programs, we should remove § 682.210(m)(1)(iv), which

states that certain FFEL loans cannot be deferred for 

volunteer work unless the borrower “does not as part of his 

or her duties give religious instruction, conduct worship 

services, engage in religious proselytizing, or engage in 

fund-raising to support religious activities.” Commenters 

indicated that it would be unfair and inconsistent to treat 

eligibility for loan deferment under the FFEL program 

differently than under the Perkins and NDSL programs. 

Discussion: The Department agrees with commenters that 

there should be consistent treatment of loan deferments 

across loan programs. 

Changes: The Department has removed § 682.210(m)(1)(iv). 

Public Service Loan Forgiveness Program (§ 685.219)
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46

Comments: The Department received many comments on the 

proposed changes to § 685.219 relating to the PSLF program. 

In particular, commenters were concerned about proposed § 

685.219(c)(4), which would provide that time spent 

participating in religious instruction, worship services, 

or any form of proselytizing while employed by a non-profit 

organization under section 501(c)(3) of the Internal 

Revenue Code would not be included toward meeting the fulltime requirement. 

Many commenters asserted that both the original 

regulatory language and the proposed change violate RFRA, 

because the regulations force borrowers to choose between 

exercising their religion and obtaining a meaningful 

government benefit. Also, commenters stated that the

proposed regulations would unlawfully continue to exclude 

those who are participating in religious exercise and 

speech from qualifying for the generally available benefit 

of loan forgiveness. Commenters believed that, under the 

proposed rules, borrowers could be compelled to work for 

secular organizations over religious organizations in order 

to obtain loan forgiveness. From a practical perspective, 

commenters noted that religious activities may be 

intertwined with secular work, making it difficult to 

clearly separate out the hours and creating uncertainty and 
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47

confusion on the part of the applicants and employing 

organizations. These commenters indicated that religious 

activities should not be excluded in the calculation of 

work hours for PSLF. 

Some commenters stated that the Establishment Clause 

does not require borrowers eligible for loan forgiveness to 

exclude religious activities from their full-time work 

hours. Commenters also contended that the proposed 

provision would raise a significant threat of entanglement 

under the Establishment Clause when the government tries to 

evaluate whether a religious organization’s employees are 

properly defining work that touches on religious education 

or worship. 

Further, commenters asserted that because the proposed 

language is not the least restrictive means of advancing 

any government interest, the language also violates RFRA. 

One commenter also raised concerns that the terms 

“religious instruction,” “worship services,” and 

“proselytizing” are not defined and are not workable. For 

example, the commenter argued that worship cannot be 

separated from the teaching of moral values, and that it is 

not clear whether proselytizing includes secular 

viewpoints. The commenter stated that use of these terms

has the effect of excluding people engaged in religious 
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48

speech. The commenter argued that it would be more 

appropriate to treat all applicants for PSLF equally.

Other commenters expressed concern that it would 

violate the Establishment Clause if borrowers received loan 

forgiveness to work on inherently religious activities. 

One commenter argued that the Department’s justification 

for this proposal misinterprets the decision in Trinity

Lutheran and that RFRA does not apply to this situation in 

which the Government is not preventing the borrower from 

performing the desired religious activities and does not

deny benefits to religious persons engaging in qualified 

work. These commenters urged the Department to maintain 

the proposed language as published in the NPRM. 

Commenters stated that using RFRA to create a 

religious exemption for PSLF work requirements is at odds 

with the tailored approach required by RFRA, and that RFRA 

does not give the Department authority to adjudicate claims 

it anticipates might happen and create blanket exemptions. 

Instead, RFRA requires a “careful, individualized, and 

searching review.”

Many commenters encouraged the Department to adopt the 

proposed language or to maintain the current regulatory 

language. 
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49

Discussion: The Department is persuaded that the proposed 

regulations requiring borrowers to exclude work spent on 

religious activities from full-time work is not required by 

the Establishment Clause and may pose unnecessary burdens. 

The Establishment Clause does not require that borrowers 

work solely for secular organizations to obtain loan 

forgiveness.12 

The Department also recognizes that there are 

practical difficulties associated with separating religious 

work from public service work, as the two may not always be 

cleanly divided. There would be burdens on both the 

borrowers in attempting to record the different time spent 

on religious activities and on the Department in overseeing 

such a restriction. Moreover, concerns about potentially 

overbroad interpretations of the religious activities that 

could not count toward full-time work could dissuade 

borrowers from working for religious organizations or 

pressure them to forgo the economic benefits that flow from 

loan forgiveness. And to the extent that the proposed 

language was interpreted broadly to disqualify from loan 

forgiveness individuals who hold particular views about the 

12 Zelman v. Simmons-Harris, 536 U.S. 639, 652 (2002); Mitchell v. Helms, 

530 U.S. 793, 829 (2000); Rosenberger v. Rector & Visitors of Univ. of 

Virginia, 515 U.S. 819, 839 (1995); Everson v. Bd. of Ed. of Ewing 

Twp., 330 US. 1, 17(1947).
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50

religious nature of their public service—for example, those 

who view their service as a form of proselytization even if 

it contains no explicit call to conversion—would raise Free 

Exercise or RFRA concerns. As a result, the Department has 

not included proposed § 685.219(c)(4) in the final 

regulations. The final regulations will set religious 

individuals and entities on equal footing with their 

secular counterparts by allowing such individuals and 

entities to qualify for the same aid already available to 

nonreligious individuals and entities. 

The Department does not agree with commenters who 

argued that RFRA is not implicated by the Department’s 

current rules excluding religious individuals and entities 

from participation in generally available benefit programs. 

Nor does the Department agree with commenters who argued 

that the Department is using RFRA to create overly broad, 

blanket exceptions. The rule is designed to both correct 

existing RFRA violations under the current regulations and 

to prevent future violations. Congress has tasked the 

Department with the duty to ensure that the Department’s 

regulations do not substantially burden a person’s exercise 

of religion (absent a compelling government interest and a 

showing that the burden is the least restrictive means of 

furthering that interest). 42 U.S.C. 2000bb, et seq. This 
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51

mandate, as previously discussed, applies to “all Federal 

law, and the implementation of that law, whether statutory 

or otherwise.” 42 U.S.C. § 2000bb-3(a). Thus, the 

Department’s establishment of this regulation clearly falls 

under the mandate of RFRA. 

Because the current regulations discriminate against 

religious groups and deny individuals the ability to 

participate in important government programs on the basis 

of their religious status, the current regulations likely 

amount to a substantial burden on those entities’ exercise 

of religion. 

RFRA defines “religious exercise” as “any exercise of 

religion, whether or not compelled by, or central to, a 

system of religious belief.” 42 U.S.C. § 2000bb-2(4) 

(citing 42 U.S.C. § 2000cc-5). The current rules impose a 

“penalty” on these individuals’ free exercise of religion, 

Trinity Lutheran, 137 S. Ct. at 2021—which they engage in 

by becoming members of religious orders, attending 

religious institutions, participating in or working at 

religious organizations, among other ways—by requiring them 

to “choose between their religious beliefs and receiving a 

government benefit.” Id. at 2023 (quoting Locke, 540 U.S. 

at 720-21); see Sherbert v. Verner, 374 U.S. 398, 404 

(1963) (finding a substantial burden where it was “apparent 
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52

that appellant’s declared ineligibility for benefits 

derives solely from the practice of her religion,” forcing 

her “to choose between following the precepts of her 

religion and forfeiting benefits, on the one hand, and 

abandoning one of the precepts of her religion in order to 

accept work, on the other hand”); see also 42 U.S.C. 

2000bb(b)(1) (“The purposes of this chapter are – (1) to 

restore the compelling interest test as set forth in 

Sherbert v. Verner, 374 U.S. 398 (1963) and Wisconsin v. 

Yoder, 406 U.S. 205 (1972) and to guarantee its application 

in all cases where free exercise of religion is 

substantially burdened . . . .”) 

And the Department’s status-based restrictions are 

neither necessary to further a compelling government 

interest, nor are they the least restrictive means of 

furthering any such interest. Therefore, RFRA would 

require the Department to alleviate any such substantial 

burden.

Some commenters believe that the Department’s changes 

to eligibility requirements for certain aid would have the 

effect of advancing religion. The Department’s aid will 

not advance religion, nor do the Department’s changes 

require aid to be used for religious purposes. Rather, the 

Department’s aid will advance public service generally, by 
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53

eliminating a condition on eligibility for loan forgiveness 

that might have deterred individuals from performing such 

volunteer work, and it will accommodate the religious 

exercise of those who seek to perform volunteer work for a 

religious organization. Importantly, the Department’s 

final regulations correct rules that singled out

individuals employed by organizations that are engaged in 

religious activities for disfavored treatment. 

Additionally, the Supreme Court has repudiated the

suggestion, advanced by some commenters, that the 

Establishment Clause bars government aid from flowing from 

religiously neutral government programs to religious 

institutions. See, e.g., Mitchell v. Helms, 530 U.S. 793, 

835 (plurality opinion) (overruling Wolman v. Walter, 433 

U.S. 229 (1977) and Meek v. Pittenger, 421 U.S. 349 

(1975)); id. at 837 (O’Connor, J., concurring in the 

judgment) (same); Agostini v. Felton, 521 U.S. 203, 235 

(overruling Aguilar v. Felton, 473 U.S. 402 (1985) and 

School District of the City of Grand Rapids v. Ball, 473 

U.S. 373 (1985)).

In addition, under the principle set forth in Zelman,

a benefit program like PSLF need not exclude religious 

recipients to comply with the Establishment Clause where 

funding would only reach such recipients following the 
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54

private choice of the individual using the benefit. See 

Zelman, 536 U.S. 639, 653-60 (2002). Likewise, in this 

case, the borrower receiving the benefit of PSLF under the 

regulation makes a private choice between different 

volunteer options in the community and does not create an 

Establishment Clause problem by choosing to volunteer with 

a religious entity that performs religious tasks. As a 

result of the intervening private choice of the borrower, 

“no imprimatur of state approval can be deemed to have been 

conferred on any particular religion, or on religion 

generally.” Zelman, 536 U.S. at 650 (internal citations, 

quotation marks omitted).

Although the current regulations do not raise an 

Establishment Clause problem, they do raise a Free Exercise 

Clause concern. In Trinity Lutheran, the Court reiterated

that the Free Exercise Clause applies to government 

benefits and funding. The Court in that case rejected the 

State’s interest in “skating as far as possible from 

religious establishment concerns” as a basis for 

categorically excluding a religious organization from a 

generally available funding program. Id. at 2021. The 

Court applied “the most exacting scrutiny” to the 

government program, finding that it “expressly 

discriminate[d]” against an entity that would be otherwise 
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55

eligible for the government grant but for that entity’s 

religious character. Id. 

A materially similar fact pattern exists in the 

current regulations: but for the religious character of the 

public service organization that a borrower works for and 

the types of religious activities the organization 

performs, the borrower would have qualified for loan 

forgiveness under title IV. The benefit available under §

685.219 is generally available, except to borrowers who 

work for non-profit organizations that are engaged in 

religious activities. Such an exclusion is based on the 

religious status of an organization and, therefore, is 

unconstitutional. Some commenters argue that the 

Department errs in relying on Trinity Lutheran. They 

contend that, according to footnote 3 in the decision, 

Trinity Lutheran applies only to the narrow factual 

circumstance of a church-run school seeking to compete for 

a playground resurfacing grant. 

As discussed above in the Department’s response to

general comments on Faith-Based Entities, footnote 3 does 

not undermine the force of the reasoning in Trinity 

Lutheran and was only joined by four Justices. Trinity 

Lutheran, 137 S. Ct. at 2016.
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56

Changes: The Department has removed proposed §

685.219(c)(4), which would have prohibited PSLF applicants

from counting hours spent on religious instruction, 

worship, proselytizing, and fund raising towards the fulltime work requirement of the PSLF program.

How does a State administer its community service-learning 

job program? (§ 692.30)

Comments: Several commenters indicated that they have the 

same concerns about the proposed changes to § 692.30 

relating to the LEAP program that they raised with respect 

to § 675.20 relating to the FWSP. 

Discussion: See the discussion on § 675.20 above.

Changes: None.

Who may provide GEAR UP services to students attending 

private schools? (§ 694.6)

Comments: All commenters who opined on § 694.6 supported 

the Department’s proposal with respect to the treatment of 

private schools in the GEAR UP program. Commenters 

indicated that the proposal provides additional 

clarification and retains important protections and 

guidelines for serving GEAR UP students in private schools. 

Commenters noted that the proposal retains the requirement 

that government funded services be “secular, neutral, and 
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57

nonideological” and thus maintains boundaries required by 

the Establishment Clause. 

Discussion: The Department thanks commenters for their 

support.

Changes: None. 

What are the requirements that a Partnership must meet in 

designating a fiscal agent for its project under this 

program? (§ 694.10)

Comments: Many commenters supported the proposed changes 

to § 694.10 to remove language prohibiting pervasively 

sectarian organizations from serving as fiscal agents in 

GEAR UP grants. Some noted that it is inappropriate for 

the government to make determinations as to whether an 

institution is pervasively sectarian. Others noted that 

the term “pervasively sectarian” is outdated and reflects 

an anti-religious bias. Commenters also noted that the

proposed regulations reflect current case law regarding the 

Establishment Clause and the Free Exercise Clause. Others 

indicated that they support the proposed change in 

combination with the retention of the requirement that 

benefits provided to GEAR UP students must be “secular, 

neutral, and nonideological.” 

Discussion: The Department thanks commenters for their 

support. 
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58

Changes: None. 

TEACH GRANT PROGRAM:

General comments

Comments: In general, commenters supported the proposed 

regulations. Commenters believed that, by simplifying the 

requirements, the proposed regulations would reduce the 

number of TEACH Grants inadvertently converted to Direct 

Unsubsidized Loans. They also felt that changes would be 

helpful for TEACH Grant recipients, including expanding and 

strengthening counseling and notification provisions, 

providing additional conditions under which the period for 

completing the teaching service obligation may be 

temporarily suspended, providing a reconsideration process

for TEACH Grants inadvertently converted to loans, and 

expanding options for satisfying the teaching service 

obligation.

Discussion: We thank the commenters for their support. 

Changes: None.

Comments: Some commenters expressed concerns about 

servicer and institutional accountability regarding the 

administration of the TEACH Grant program and recommended 

that the Department impose liabilities and escalating 

consequences on servicers and institutions that fail to 

properly carry out their responsibilities.
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59

Discussion: We appreciate the commenters’ concerns.

However, these concerns are outside the scope of this 

regulatory effort. The Department holds servicers 

accountable through contractual agreements and can impose 

escalating consequences and even terminate a contract of a 

servicer that has failed to properly carry out its 

responsibilities. Institutions can only disburse TEACH 

Grants if they maintain institutional eligibility to 

disburse Federal student aid. One requirement for 

institutional eligibility is that an institution must 

satisfy standards of administrative capability. Failure to 

do so can result in termination of the institution’s 

eligibility. In addition, we note that the Department’s 

Federal Student Aid (FSA) office maintains a Feedback 

System, which includes a formal process for borrowers to 

report issues or file complaints about their loan 

experiences, including problems with servicing. Borrowers 

may also elevate complaints to the FSA Ombudsman Group—a 

neutral and confidential resource available to borrowers to 

resolve disputes related to their loans. 

Changes: None.

Definitions (§ 686.2)

Highly qualified
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60

Comments: A couple of commenters expressed concern that a 

reference to section 602(10) of the Individuals with 

Disabilities Education Act (IDEA) was removed from the 

definition of “highly qualified.” The commenters stated 

that this section should continue to be referenced in the 

“highly qualified” definition.

Discussion: We agree with the commenters. The reference 

to section 602(10) of the IDEA was inadvertently removed.

Changes: We have restored the reference to section 602(10) 

of the IDEA.

Comments: A couple of commenters stated their belief that 

it was inappropriate for the TEACH Grant Program 

regulations to use language from the teacher loan 

forgiveness provisions in sections 428J(g)(3) and 460(g)(3) 

of the HEA to describe how private school teachers who are 

exempt from State certification requirements can meet the 

highly qualified teacher standards. The commenters noted 

that the TEACH Grant program is designed to incentivize 

highly qualified educators, who receive hundreds of hours 

of professionally supervised pre-service field experiences 

and undergo a comprehensive, standards-based curriculum to 

teach in the most underserved schools in the most 

undersupplied subject areas.
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61

Discussion: We disagree with the commenters. As we 

explained in the NPRM, teaching in an eligible non-profit 

private school can be qualifying service for purposes of 

satisfying the TEACH Grant service obligation, but the 

definition of "highly qualified" in the Elementary and 

Secondary Education Act (ESEA) does not address private 

school teachers. Therefore, we are expanding the 

definition of "highly qualified" to include the language 

from sections 428J(g)(3) and 460(g)(3) of the HEA that 

describes how private school teachers who are exempt from 

State certification requirements can meet the highlyqualified teacher standards for teacher loan forgiveness 

purposes. We believe it is appropriate to incorporate this 

language, since student loan borrowers seeking teacher loan 

forgiveness must meet the same highly qualified teacher 

standards that apply to TEACH Grant recipients. 

Changes: None. 

Agreement to serve or repay (§ 686.12)

Comments: A couple of commenters expressed concern with § 

686.12 based on their belief that a TEACH Grant recipient 

who completes a TEACH Grant-eligible educator preparation 

program in the middle of the academic year will lose a full 

calendar year of the eight-year period for satisfying the 
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62

service obligation because of the requirement that a 

teacher teach full-time for a full school year.

Discussion: Under these conditions, a grant recipient who 

starts teaching mid-year would not lose a full calendar 

year of the eight-year period for completing the service 

obligation. The HEA requires that a grant recipient serve 

as a full-time teacher for a total of not less than four 

academic years within eight years after completing the 

course of study for which the TEACH grant was received. 

The current regulations, in part, define “academic year or 

its equivalent for elementary and secondary schools 

(elementary or secondary academic year)” to be one complete 

school year, or two complete and consecutive half-years 

from different school years, excluding summer sessions, 

that generally fall within a 12-month period. To clarify 

this in the regulations, in the NPRM we proposed to replace 

the reference to “eight calendar years” with “eight years”. 

Changes: None.

Comments: A couple of commenters felt that the grace 

period for seeking qualifying employment should be extended 

to the earlier of-- (1) one year from the date a recipient 

is no longer enrolled in a qualifying TEACH Grant program, 

or (2) the date the recipient begins qualifying employment 

in a TEACH-eligible school and subject area.
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63

Discussion: The regulations do not require a TEACH Grant 

recipient to begin qualifying teaching service within a 

certain timeframe after the recipient has ceased to be 

enrolled in the program of study for which he or she 

received a TEACH Grant. Rather, a grant recipient must 

begin and maintain qualifying teaching within a timeframe 

that will allow the recipient to complete the four-year 

service obligation within the eight-year service obligation 

period.

Changes: None.

Counseling Requirements (§ 686.32)

Comments: A couple of commenters disagreed with the policy

reflected in the proposed regulations that prohibited the 

reversal of the conversion of a TEACH Grant to a loan if 

the grant recipient had requested the conversion. The 

commenters believed that the circumstances that led a grant 

recipient to request a conversion could later change such 

that the grant recipient may now want to teach and satisfy 

the service obligation. In such cases, the commenters felt 

that the grant recipient should be able to have the 

conversion reversed so that the recipient could teach and 

help address the nation’s teacher shortages. 

Discussion: We agree that a grant recipient who previously 

requested conversion should be able to have the conversion 
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64

reversed, so that the recipient could perform qualifying 

teaching to satisfy the TEACH Grant service obligation. 

This cannot be an open-ended opportunity, however. The 

grant recipient must still be able to fulfill the service 

obligation within eight years from when the recipient 

ceased enrollment at the institution where the recipient 

received the TEACH grant or, in the case of a student who 

received a TEACH Grant at one institution and subsequently 

transferred to another institution and enrolled in another 

TEACH Grant-eligible program, within eight years of ceasing 

enrollment at the other institution. The eight-year period 

for completing the required four years of teaching does not 

include periods of suspension, which the recipient could 

apply for retroactively, if applicable. However, the 

eight-year period will include the period when the grant 

was in loan status. If a grant recipient requests reversal 

of a prior voluntary conversion at a point when the 

recipient would no longer have enough time to complete the 

service obligation during the eight-year period unless he 

or she qualifies for a retroactive suspension, an 

application for suspension will need to be submitted and 

approved prior to reconversion. This option should be 

explained to the recipient during initial, subsequent, 

exit, and conversion counseling. 
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65

Changes: We have added new § 686.43(a)(8) to provide that, 

in the case of a grant recipient whose TEACH Grant was 

converted to a loan in accordance with § 686.43(a)(1)(i), 

the Secretary will reconvert the loan to a TEACH Grant if 

requested by the grant recipient, and restore the 

recipient's TEACH Grant service obligation, if there is 

sufficient time remaining for the grant recipient to 

complete the required four academic years of qualifying 

teaching service within eight years from the date the grant 

recipient ceased enrollment at the institution where the 

recipient received the grant or, in the case of a student 

who received a TEACH Grant at one institution and 

subsequently transferred to another institution and 

enrolled in another TEACH Grant-eligible program, within 

eight years of ceasing enrollment at the other institution. 

New § 686.43(a)(8) further states that the eight-year 

period for completing the required four years of teaching 

does not include periods of suspension for which the 

recipient qualifies under § 686.41. It also provides that 

a period of suspension for which the recipient applies and 

is determined to be eligible may be applied retroactively.

If the recipient would not have sufficient time remaining 

to complete the service obligation within the eight-year 

period the Secretary will not reconvert the recipient's 
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66

loan to a TEACH Grant unless the recipient first requests 

and is determined to be eligible for a retroactive 

suspension. 

We have removed the language in the proposed 

regulations addressing the initial, subsequent, and exit 

counseling requirements which state that the conversion of 

a TEACH Grant to a loan cannot be reversed if the grant 

recipient requested the conversion, and have revised the 

regulations governing the initial, subsequent, and exit 

counseling requirements in § 686.32(a), (b), and (c), 

respectively, and the new conversion counseling 

requirements in § 686.32(e) by adding for each type of 

counseling a requirement that the counseling explain the 

terms and conditions under which a grant recipient who 

voluntarily requested conversion of a TEACH Grant to a loan

under § 686.43(a)(1)(i) may subsequently request and be 

approved for a reversal of the conversion, as described 

above. We have also added new paragraph § 686.12(b)(7) to 

provide that the contents of the agreement to serve or 

repay must include this same information. 

We believe that the expanded counseling reflected in 

these regulations will help reduce the number of grants 

that are converted to loans. We note, however, that, 

consistent with the rules relating to the Direct Loan 
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67

Program, a recipient’s failure to receive or read the 

counseling materials is not a basis for reconverting the 

loan to a grant. 

The proposed regulations describing the initial, 

subsequent, exit, and conversion counseling included 

language stating that the counseling must explain that a 

TEACH Grant that has been converted to a Direct 

Unsubsidized Loan may be reconverted to a grant if the 

Secretary determines that the grant was converted to a loan 

in error. For consistency with redesignated § 

686.43(a)(5), we have revised this language to state that a 

grant that was converted to a loan may also be reconverted 

to a grant based on documentation showing that the 

recipient was satisfying the service obligation within the 

required time frame. 

We have deleted § 686.43(d), which stated that a TEACH 

Grant that is converted to a Federal Direct Unsubsidized 

Loan cannot be reconverted to a grant, consistent with the 

other changes to this section.

Comments: A couple of commenters recommended that all 

types of TEACH Grant counseling should provide grant 

recipients with information about the options of incomedriven repayment plans and public service loan forgiveness 

for those whose TEACH Grants are converted to loans.
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68

Discussion: In the NPRM, we proposed to provide 

information about income-driven repayment plans and public 

service loan forgiveness in the new conversion counseling

for recipients whose grants are converted to loans. We do 

not believe it is necessary to include this information in 

initial, subsequent, or exit counseling, since the 

information is relevant only to recipients whose grants are 

being converted to loans.

Changes: None.

Documenting the service obligation (§ 686.40)

Comments: A couple of commenters expressed concern about 

removing the requirement for grant recipients to confirm 

their status within 120 days of ceasing enrollment in a 

program for which they received a TEACH Grant. The 

commenters felt that by removing the requirement for 

initial certification, grant recipients would lose track of 

the requirement to certify their progress toward satisfying 

the service obligation in subsequent years, despite seeking 

to obtain, or even working, in qualifying employment. 

Other commenters supported the proposed changes that were 

intended to simplify the procedures for grant recipients to 

certify that they are meeting the required service 

obligation, and the provisions for the Secretary to provide 
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69

periodic notifications to grant recipients reminding them 

of their service obligation requirements.

Discussion: We continue to believe that the current 120-

day certification requirement should be removed because it 

adds unnecessary complexity to the requirements for 

documenting the service obligation. That complexity may,

in some cases, have resulted in grant recipients who were 

otherwise meeting the service obligation requirements 

having their grants converted to loans. Under § 

686.42(a)(2), at least annually during the service 

obligation period the Secretary will provide the grant 

recipient with information that includes the number of 

years of qualifying teaching that the recipient has 

completed and the remaining timeframe within which the 

grant recipient must complete the service obligation. We 

believe that these notifications will provide the 

information the grant recipient needs to stay on track to

fulfill the service obligation.

Changes: None.

Periods of suspension (§ 686.41)

Comments: A couple of commenters noted that there may be 

life circumstances that reasonably prohibit grant 

recipients from securing employment in eligible schools.
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70

Discussion: While we appreciate the commenters’ concern, 

it would be difficult for the Department to determine all 

the life circumstances that might reasonably prohibit grant 

recipients from securing employment in eligible schools, 

and any such determination could be considered arbitrary. 

We note that, under new § 686.41(d), the Secretary may 

provide temporary suspensions of the period for completing

the service obligation on a case-by case-basis if the 

Secretary determines that a grant recipient was unable to 

complete a full academic year of teaching or begin the next 

academic year of teaching due to exceptional circumstances 

significantly affecting the operation of the school or 

educational service agency where the grant recipient was 

employed or the grant recipient’s ability to teach.

Changes: None. 

Obligation to repay the grant (§ 686.43)

Comments: None

Discussion: After further review of the NPRM, the 

Department recognizes that there was substantial overlap 

between proposed § 686.43(a)(5) and § 686.43(a)(6) and that 

the latter section was not clear. Specifically, paragraph 

(a)(6) provided for reconversion of a grant that had been 

“involuntarily” converted (that is, a grant that had been 

converted for a reason other than a voluntary request for 
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71

conversion from the grant recipient, which would include 

the circumstances described in paragraph (a)(5)), and it 

also provided for reconversion of a grant that had been 

“improperly” converted to a loan (that is, a grant that had 

been converted in error), based on documentation provided 

by the recipient or in the Department's records 

demonstrating that the recipient was satisfying the service 

obligation, or that the grant had been converted to a loan 

in error. The Department has revised these sections to 

clarify the requirements.

Changes: The Department has removed proposed § 

686.43(a)(5), redesignated paragraph (a)(6) as (a)(5), 

revised redesignated paragraph (a)(5) for greater clarity, 

and renumbered the remaining paragraphs in § 686.43(a).

Comments: Some commenters felt that, to strengthen the 

effectiveness of provisions regarding incorrect grant-toloan conversions, the Department should automatically 

provide any recipient with a written “statement of error” 

when a grant that was incorrectly converted is reconverted 

to a TEACH Grant. Under the proposed regulations, this

statement of error would have been provided at the 

recipient’s request.

Discussion: We agree with the commenters. Automatically 

providing the grant recipient with a written statement 
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72

confirming that the TEACH Grant had been converted to a 

loan in error when the loan is reconverted to a TEACH grant 

would ensure that the grant recipient has documentation

that the Department determined that the conversion was 

incorrect without further inconveniencing the affected 

individual.

Changes: Proposed § 686.43(a)(7)(iv), which stated that a 

statement of error would be provided to a grant recipient 

at the recipient’s request, has been redesignated as §

686.43(a)(6)(vi) and revised to provide that the Secretary 

will automatically send a statement of error to the 

recipient when a TEACH Grant that was converted to a loan 

in error is reconverted to a TEACH Grant. 

Comments: Some commenters believed that there should be a 

formalized process for a TEACH Grant recipient to request 

reconsideration of other adverse actions that impact the

recipient’s ability to complete the service obligation, 

stating that grant recipients should have the opportunity 

to request reconsideration by the Secretary of any adverse 

action taken against them by the Secretary in connection 

with the servicing of their grant. Such adverse actions 

would include, but would not be limited to, the rejection 

of a certification of teaching service, a determination 

that the recipient's employment does not meet the service 
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73

obligation requirements, or a denial of a request for 

suspension or discharge. The commenters recommended that 

if the Secretary determines that the adverse action was 

taken in error, the Secretary should reverse the adverse 

action and take all other actions necessary to correct the 

adverse action. The commenters believed that implementing 

this type of process would likely result in fewer erroneous 

grant-to-loan conversions resulting from wrongfully 

rejected certifications or other types of erroneous 

actions.

Discussion: We are not aware of widespread problems 

involving “wrongful” rejections of certifications or other 

erroneous actions such as those cited by the commenters. 

The Department rejects a certification form or a 

suspension/discharge request if information needed to 

confirm the qualifying service or approve the 

suspension/discharge is missing, or if the information 

provided on the certification or the suspension/discharge 

request does not confirm qualifying service or establish 

eligibility for the suspension/discharge (e.g., if the 

dates of teaching are missing or incomplete, or if the 

school listed on the certification form is not listed in 

the Teacher Cancellation Low Income Directory). These 

situations are generally resolved by the recipient 
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74

providing the missing or additional information. If 

information is missing, a letter is sent to the recipient 

explaining what information the recipient needs to submit 

so the certification or request can be processed. If the 

information provided does not confirm that the individual

has performed qualifying service or does not support the 

recipient’s eligibility for suspension/discharge, the 

recipient receives a letter explaining the reason for the 

rejection and has an opportunity to provide information 

documenting the qualifying service or suspension/discharge 

eligibility. In addition, if recipients continue to 

disagree with the decision, they may contact the 

Department’s Federal Student Aid Ombudsman’s office to try 

to resolve the issue. Thus, we do not believe it is 

necessary to establish a formalized process for grant 

recipients to request reconsideration of actions such as 

rejections of certification forms or denials of suspension 

or discharge requests. Processes are already in place for 

recipients to be notified of any problems with a 

certification form or suspension/discharge request, and to 

provide an opportunity for the recipient to submit 

corrected or missing information. We further note that the 

simplified requirements for documenting the service 
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75

obligation in these final regulations should significantly 

reduce the number of grant-to-loan conversions.

Changes: None.

Directed questions

Comments: In response to the directed questions that were 

included in the NPRM, a commenter supported the suggestion

that a student’s service obligation period be extended by 

the number of years their TEACH grants were incorrectly in 

loan status, regardless of whether the student completed 

one or more years of qualifying service during the period 

during which the grant was treated as a loan as described 

in the first directed question, or did not complete any 

qualifying service during the erroneous conversion period 

as described in the second directed question. The 

commenter felt that, in either scenario, the TEACH 

recipient may have left qualifying service at some point 

after the grant-to-loan conversion. The commenter further 

stated that re-entering qualifying service is not a simple 

undertaking, noting that grant recipients may have 

relocated to an area without qualifying service positions 

or made other life choices that would hinder their ability 

to immediately re-enter a qualifying position. The 

commenter felt that extending the timeframe for completing 

the service obligation would give these individuals 
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76

sufficient time to find qualifying positions to establish 

their eligibility for TEACH grants with minimal disruption 

to their lives and would mitigate the harm they have 

already suffered from the erroneous grant-to-loan 

conversion.

Discussion: We agree with the commenter that the eightyear service obligation period should not include the 

period of time that the TEACH Grant was incorrectly in loan 

status, and that individuals whose grants were converted to 

loans in error may have stopped teaching because they 

believed that they would no longer receive credit for their 

service or for other reasons, and that after the erroneous 

conversion has been corrected it may take a significant 

period of time for these recipients to find qualifying 

teaching positions. However, because it provides more time 

for a recipient to find qualifying employment and to 

complete the teaching service obligation, we believe it 

would be more appropriate to adopt the alternative approach

described in the directed question scenarios. That is, 

after the correction of the erroneous conversion we would 

provide the grant recipient with an additional period of 

time, equal to eight years minus the number of full 

academic years of qualifying teaching that the recipient

had completed prior to the reconversion of the recipient's 
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77

loan to a TEACH Grant (including any years of qualifying 

teaching that the recipient completed during the period 

when the grant was incorrectly in loan status), to complete 

the remaining portion of the service obligation. This 

approach is illustrated by Example 1 below.

Example 1

• A grant recipient completes the program for which he 

or she received a TEACH Grant and enters the service 

obligation period. 

• The recipient receives no suspensions and does not 

begin qualifying teaching until the start of the fifth 

year of the eight-year service obligation period. 

• The recipient completes two academic years of 

qualifying teaching during the fifth and sixth years 

of the eight-year service obligation period. At the 

beginning of the seventh year of the service 

obligation period, the recipient's TEACH Grant is 

converted to a loan in error and remains incorrectly 

in loan status for three years.

• During the period when the grant is incorrectly in 

loan status, the recipient completes one additional 

academic year of qualifying teaching service.
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78

• After the erroneous conversion is reversed and the 

recipient's loan is reconverted to a TEACH Grant, the 

three years of completed service (including the year 

of teaching completed while the grant was incorrectly 

in loan status) is subtracted from eight years, giving 

the recipient an additional five years following the 

correction of the erroneous conversion to complete the 

remaining one year of teaching required under the 

service obligation. 

In contrast to the approach described in the directed 

question and illustrated by the above example, under the 

proposed regulations the grant recipient in Example 1 would 

have had only two years following the correction of the 

erroneous conversion to complete the remaining one year of 

the service obligation. 

Changes: We have redesignated proposed § 686.43(a)(7) as § 

686.43(a)(6), and now address this issue in § 

686.43(a)(6)(ii) and (iii), which provide that after the 

Secretary reconverts an incorrectly converted loan to a 

TEACH Grant, the Secretary (1) applies any full academic 

years of qualifying teaching that the recipient completed 

during the period when the grant was incorrectly in loan 

status toward the grant recipient's four-year service 

obligation requirement, and (2) provides the recipient with 
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an additional period of time to complete the remaining 

portion of the service obligation equal to eight years, 

minus the number of full academic years of qualifying 

teaching that the recipient completed prior to the 

correction of the erroneous conversion. 

Executive Orders 12866, 13563, and 13771

Regulatory Impact Analysis

Under Executive Order 12866, the Office of Management 

and Budget (OMB) must determine whether this regulatory 

action is “significant” and, therefore, subject to the 

requirements of the Executive order and subject to review 

by OMB. Section 3(f) of Executive Order 12866 defines a 

“significant regulatory action” as an action likely to 

result in a rule that may—

(1) Have an annual effect on the economy of $100 

million or more, or adversely affect a sector of the 

economy, productivity, competition, jobs, the environment, 

public health or safety, or State, local, or Tribal 

governments or communities in a material way (also referred 

to as an “economically significant” rule);

(2) Create serious inconsistency or otherwise 

interfere with an action taken or planned by another 

agency;
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80

(3) Materially alter the budgetary impacts of 

entitlement grants, user fees, or loan programs or the 

rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of 

legal mandates, the President's priorities, or the 

principles stated in the Executive order.

Under Executive Order 12866, section 3(f)(1), the 

changes proposed in this regulatory action would materially 

alter the rights and obligations of recipients of Federal 

financial assistance under title IV of the HEA. Therefore, 

OMB has determined that this is a significant regulatory 

action subject to review by OMB. 

Under Executive Order 13771, for each new regulation 

that the Department proposes for notice and comment or 

otherwise promulgates that is a significant regulatory 

action under Executive Order 12866 and that imposes total 

costs greater than zero, it must identify two deregulatory 

actions. For FY 2020, any new incremental costs associated 

with a new regulation must be fully offset by the 

elimination of existing costs through deregulatory actions. 

The final regulations are a significant regulatory action 

under Executive Order 12866. However, Executive Order 

13771 does not apply to “transfer rules” that cause only 

income transfers between taxpayers and program 
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beneficiaries. Because the portion of the regulatory

changes relating to the TEACH Grant Program and PSLF are a 

transfer rule and the remaining proposed regulatory changes 

impose minimal estimated costs of approximately $1.27

million in annualized net PRA costs at a 7 percent discount 

rate, discounted to a 2016 equivalent, over a perpetual 

time horizon, the requirement to offset new regulations in 

Executive Order 13771 does not apply to this final 

regulation. Accordingly, the Department is not required to 

identify deregulatory actions under Executive Order 13771. 

We have also reviewed these final regulations under 

Executive Order 13563, which supplements and explicitly 

reaffirms the principles, structures, and definitions 

governing regulatory review established in Executive Order 

12866. To the extent permitted by law, Executive Order 

13563 requires that an agency—

(1) Propose or adopt regulations only on a reasoned 

determination that their benefits justify their costs 

(recognizing that some benefits and costs are difficult to 

quantify);

(2) Tailor its regulations to impose the least burden 

on society, consistent with obtaining regulatory objectives 

and taking into account—among other things and to the 

extent practicable—the costs of cumulative regulations;
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82

(3) In choosing among alternative regulatory 

approaches, select those approaches that maximize net 

benefits (including potential economic, environmental, 

public health and safety, and other advantages; 

distributive impacts; and equity);

(4) To the extent feasible, specify performance 

objectives, rather than the behavior or manner of 

compliance a regulated entity must adopt; and

(5) Identify and assess available alternatives to 

direct regulation, including economic incentives—such as 

user fees or marketable permits—to encourage the desired 

behavior, or provide information that enables the public to 

make choices.

Executive Order 13563 also requires an agency “to use 

the best available techniques to quantify anticipated 

present and future benefits and costs as accurately as 

possible.” The Office of Information and Regulatory 

Affairs of OMB has emphasized that these techniques may 

include “identifying changing future compliance costs that 

might result from technological innovation or anticipated 

behavioral changes.”

We are issuing these final regulations only on a 

reasoned determination that their benefits justify their 

costs. Based on the analysis that follows, the Department 
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83

believes that these regulations are consistent with the 

principles in Executive Order 13563.

We also have determined that this regulatory action 

does not unduly interfere with State, local, or Tribal 

governments in the exercise of their governmental 

functions.

In this regulatory impact analysis, we discuss the 

need for regulatory action, the potential costs and 

benefits, assumptions, limitations, and data sources, as 

well as regulatory alternatives we considered. 

Need for Regulatory Action

In 2007, Congress established the Teacher Education 

Assistance for College and Higher Education (TEACH) Grant 

Program to increase the number of teachers in high-need 

fields in low-income schools. In exchange for receiving a 

TEACH Grant, recipients agree to teach in a high-need 

field13 such as reading, mathematics, or science, at a lowincome school for at least four years in an eight-year 

period and annually certify that they intend to meet this 

requirement. If a recipient does not meet the grant 

requirements or the annual certification requirements, the 

13 Section 420N(b)(1)(C) of the HEA describes high-need fields as 

mathematics, science, foreign languages, bilingual education, special 

education, reading specialist, or another field documented as high-need 

by the Federal Government, State government, or LEA, and approved by 

the Secretary.
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grant converts to a Federal Direct Unsubsidized Loan with 

interest charged from the date of each TEACH Grant 

disbursement.

A 2015 Government Accountability Office (GAO) report 

found that around 36,000 out of more than 112,000 TEACH 

Grant recipients had not fulfilled TEACH Grant requirements 

and had their grants converted to loans (GAO, 2015).14 GAO 

concluded that the Department needs to explore ways to 

increase awareness among students of how the TEACH Grant 

program operates and improve program management, especially 

with respect to the grant-to-loan conversion dispute 

process. GAO further noted that the Department should take 

steps to understand why teachers often do not meet the 

TEACH program requirements. GAO reiterated that the goal 

of reducing grant-to-loan conversions and increasing 

program completion should help drive the Department’s 

efforts. GAO cited inconsistent and confusing external 

guidance regarding grant to loan conversions and the 

dispute process available to recipients as a failure of 

“Federal internal control standards that highlight

effective external communication.” The revised regulations 

14 Government Accountability Office. (2015). Higher Education: Better 

Management of Federal Grant and Loan Forgiveness Programs for Teachers 

Needed to Improve Participant Outcomes (GAO 15-314). Washington, DC: 

United States Government Accountability Office.
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85

help to address GAO’s concerns by improving the 

administration of the program and providing clearer

information to recipients earlier in their service to 

prevent future problems, and more thoroughly explaining the 

dispute process if issues do arise.

A 2018 study conducted for the Department by the 

American Institutes for Research (U.S. Department of 

Education, 2018)15 found that as of June 2016, 63 percent of 

TEACH Grant recipients who started their eight-year service 

obligation period before July 2014 had their grants 

converted to Unsubsidized Loans because they did not meet 

the service obligation requirements or the annual 

certification requirements. For instance, the study

reported that 39 percent of recipients who were in loan 

status cited teaching in a position that did not qualify 

for TEACH Grant service and 33 percent cited not working as 

a certified teacher. Thirty-two percent said they did not 

understand the service requirements. Other factors related 

to teachers having grants converted to loans included not 

knowing about annual certification (19 percent), challenges 

related to the certification process (13 percent), 

15 U.S. Department of Education. (2018). Study of the Teacher Education 

Assistance for College and Higher Education (TEACH) Program. 

Respondents could select more than one option.
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86

forgetting about annual certification (9 percent) and other 

factors made up 24 percent, such as recipients who were 

never certain of their intention to teach or who changed

their employment to a nonteaching position prior to meeting 

their service obligation. 

To address the concerns raised by these studies, we 

are changing the regulations to facilitate the process of 

documenting satisfaction of the service obligation 

requirements and ensure that recipients who fulfill their 

service obligation receive credit for it. Additionally, 

these regulations create a process to remediate conversions

caused by life events (including on a case-by-case basis as 

determined by the Secretary) or administrative error to 

facilitate the completion of service obligation 

requirements for those who seek to do so. This will help 

reduce the percentage of TEACH Grants that erroneously 

convert to Direct Unsubsidized Loans and fulfill the TEACH 

Grant Program’s intended outcomes.

The regulations also ensure that faith-based entities, 

students who are members of religious orders, and borrowers 

fulfilling service obligations are not further burdened by 

their religious beliefs, and instead have equal access to 

broadly available programs and government funding. In 

response to the Supreme Court’s decision in Trinity
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87

Lutheran and Executive Order 13798 (U.S. Attorney General 

Memorandum on Federal Law Protections for Religious Liberty 

(October 6, 2017)), the Department engaged in a full review 

of its regulations related to title IV, HEA programs in 

order to identify provisions that may discriminate against 

otherwise eligible students and faith-based entities by 

disqualifying them from title IV, HEA programs due to their 

religious beliefs in violation of the Free Exercise Clause 

of the First Amendment to the United States Constitution

(Free Exercise Clause). The Department proposes to make 

changes to regulatory provisions that may discriminate 

against students or faith-based entities as a result of

their religious beliefs to ensure compliance with the Free 

Exercise Clause.

Discussion of Costs, Benefits and Transfers

The Department has analyzed the costs and benefits of 

complying with these final regulations and our estimates 

are a function of the uncertainty and limitations of

relevant data. As discussed below, we believe that these 

final regulations will result in modest transfers from the 

Federal government and will benefit recipients of support 

under the affected programs. 

Benefits of the Final Regulations
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With respect to the TEACH Grant Program, we anticipate 

that by simplifying and clarifying certification procedures

and providing greater flexibility to recipients to meet 

their service obligation, the final regulations will result 

in a decrease in the number of TEACH Grant recipients that 

have their grants converted to loans. We further 

anticipate that this outcome and the expansion of 

opportunities that students can use to fulfill the service 

obligation will result in more teachers teaching in highneed fields at low-income schools as well as in authorized 

teacher shortage areas.

The final regulations related to other programs will

also reduce the potential for discrimination against 

students and faith-based institutions due to their 

religious beliefs in violation of the Free Exercise Clause. 

Net Budget Impacts

Regarding changes to the TEACH Grant Program, the 

changes improve the reporting and documentation process for 

grant recipients and could lead to a reduction in the 

number of grant-to-loan conversions. According to 

Department data, the percentage of TEACH Grant recipients 

demonstrating effort to fulfill their service requirement 

by performing one or more years of qualified teaching 

service after six or more years following their last TEACH 
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award has been increasing steadily. The improvements to 

the process for recipients to document their teaching 

service included in these final regulations will help 

prevent or resolve unintended grant to loan conversions. 

For FY 2020, The Department estimates that 

approximately 32,000 recipients will receive $92 million in 

TEACH Grants with an average award of slightly over $3,000.

Over the past five years from fiscal year 2014 through 

fiscal year 2019, the Department has provided a total of 

$524.6 million in TEACH grant funding to 190,686 students.

Based on program data through FY 2019, the Department

estimates that 64 percent of students receiving TEACH 

Grants will fail to complete their required service 

commitment and will have their grants converted to Direct

Unsubsidized Stafford Loans. 

Using a sensitivity analysis of grant-to-loan 

conversions, we estimate that for the 2020 cohort, a one 

percentage point reduction in the grant-to-loan conversion 

would result in a transfer from the Federal Government of 

$727,034, since each grant that is not converted to a loan 

where the student is obligated to pay it back remains a 

grant. The Department recognizes that the percentage 

change that the final regulations would have on the 

percentage of conversions is uncertain. The Department
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intends that these regulatory changes will reduce the loan 

conversion rate. However, students fail to meet the TEACH 

Grant service requirements for many reasons, including

teaching in positions that do not qualify or changing to 

non-teaching employment. For instance, the PPSS/AIR study 

cited earlier reported that approximately 39 percent of 

TEACH recipients whose grants had been converted to loans 

reported teaching in a position that did not qualify for 

the TEACH program, 33 percent reported not teaching or not 

completing the teaching certificate program, 32 percent 

stated they did not understand the service requirements, 

and about 44 percent of respondents reported factors 

related to the annual certification process as influencing

them to not complete the program requirements. Since 

respondents could select more than one response category, 

the total percentage does not add to 100 percent. Of those 

that indicated the annual certification process was a 

problem, the distribution revealed that about 19 percent 

said they did not know about the annual certification 

process; 13 percent reported not certifying because of 

challenges to the certification process; 9 percent reported 

not certifying because they forgot, and about 2 percent

listed other reasons.
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While predicting how recipients might change their 

behavior due to the final regulations is speculative, the 

PPSS/AIR responses give us reason to assume that there will

be improvement based on the recipients who cited the 

certification process as a factor in their conversion.

Such improvement would logically lead to some reduction in 

the grant-to-loan conversion rate.

Given an estimated grant-to-loan conversion rate, it 

is possible to identify a series of transfers for a series 

of percentage reductions that give context to the potential 

impact that the proposed regulations would have.

Five Percentage Point Interval Grant-to-Loan 

Conversion Impacts

Percentage Point Reduction Cost ($Millions)

5% 3.6

10% 7.3

15% 10.9

20% 14.6

25% 18.2

The above table suggests that if the grant-to-loan 

conversion rate were reduced from the estimated 64 percent 

to 59 percent—a five percentage point reduction—the Federal 

Government would incur additional transfers of
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approximately $3.6 million based on the 2020 cohort. And, 

if the projected 64 percent rate were reduced by 10 

percentage points to 54 percent for the same 2020 cohort, 

there would be a cost of about $7.3 million. However, this 

transfer from the Federal Government would also result in a 

benefit to student TEACH Grant recipients who would not 

have to repay their TEACH Grants which would not be

converted to loans. Note that these are five percentage 

percentage-point intervals, and not percentage decreases of 

the current rate.

Currently, a TEACH Grant recipient may not satisfy the 

service obligation by teaching in a geographic region of a 

State that has been designated in the Nationwide List (at 

https://tsa.ed.gov) as having a shortage of teachers, or by 

teaching at a particular grade level not associated with a 

high-need field that has been designated in the Nationwide 

List as having a shortage of teachers. Instead, the 

recipient must teach in a high-need field listed in the 

Nationwide List. 

The final regulations remove this limitation. For 

example, under the final regulations, a grant recipient 

could satisfy the service obligation by serving as a fulltime highly qualified general elementary school or 

secondary school teacher at a low-income school in a State 
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that has reported a general shortage of elementary or 

secondary teachers in the Nationwide List. This is not 

currently allowed. Therefore, the final regulations allow 

grant recipients who are unable to find qualifying teaching 

jobs in a high-need field to meet the service obligation by 

teaching at a low-income school located in a geographic 

teacher shortage area or at a grade level where there is a 

shortage of teachers. This could facilitate increased

opportunities for TEACH recipients toward meeting the 

service obligation and perhaps impact the conversion rate 

to loans. More importantly, it could serve as an important 

incentive to attract highly qualified teachers to serve in 

higher need areas and fields. It would be speculative to 

assume any specific amount of change in the conversion rate

attributable to potential expanded teaching opportunities.

Also, the proposed change might result in some grant 

recipients simply transferring from one low-income school 

to another low-income school to accept a teaching position 

that might previously have not been eligible.

Based on available data from the Department’s Teacher 

Shortage Area listing,16 there are about 10 States,

including California, Idaho, Illinois, Maine, Michigan, 

16 https://tsa.ed.gov/#/reports
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North Dakota, South Dakota, Pennsylvania, Virginia, West 

Virginia, and the District of Columbia, that appear to have 

teacher shortages, particularly in the elementary education 

area, that could potentially expand the eligible teaching 

opportunities for TEACH Grant recipients. According to 

National Center for Education Statistics data, these States 

represented approximately 27 percent of teachers in public 

elementary and secondary schools in the 2011-12 Schools and 

Staffing Survey data, both for overall teachers and for 

those in their first 10 years of teaching.17 As indicated 

in the PPSS/AIR responses, approximately 15 percent of 

those respondents whose grants converted to loans said they 

were unable to find a job in a high-need field and,

adjusting for the nationwide percentage of public schools 

with 30 percent or more of students receiving a free and 

reduced lunch of approximately 70 percent18, we estimate 

that the changes removing the high needs field requirement 

in qualifying States will reduce the overall grant-to-loan 

17 U.S. Department of Education, National Center for Education 

Statistics, Digest of Education Statistics 2017, Table 209.30. Highest 

degree earned, years of full-time teaching experience, and average 

class size for teachers in public elementary and secondary schools, by 

state: 2011-12. Data not reported for 5 states, including the District 

of Columbia, so percentage is adjusted to be total of those reporting. 

18 United States Department of Education, National Center for Education 

Statistics, Condition of Education – Characteristics of Traditional 

Public Schools and Charter Schools, Figure 3. Percentage of traditional 

public schools and public charter schools, by percentage of students 

eligible for free or reduced-price lunch: School year 2016–17. 

Available at https://nces.ed.gov/programs/coe/indicator_cla.asp
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conversion rate by approximately 3 percent, so relieving 

that requirement for those States would have some net 

budget impact. Nevertheless, while the changes expand 

options for grant recipients to meet the service obligation

by allowing grant recipients who are not teaching in a 

high-need subject area to qualify by teaching at a lowincome school in a geographic shortage area or in a gradelevel shortage area, we do not believe the final

regulations would lead to a significant increase in the 

actual number of TEACH grant recipients. 

Overall, the final regulations have the potential to 

improve some aspects of the certification process and 

opportunities for recipients to meet their service 

requirements, which would benefit recipients, in keeping 

with the original goal of the program. As several 

provisions are expected to decrease the grant-to-loan 

conversion rate and result in additional cost to the 

Federal Government, we have estimated a net budget impact 

of that change. 

In addition to the 3 percent decrease attributed to 

the changes to the high needs field requirements, we assume 

that the additional changes to the TEACH Grant program 

described in this preamble will decrease grant-to-loan 

conversions. We expect this effect will be lower for 
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existing cohorts as improved counseling is provided to 

future participants and participants who took out TEACH 

Grants several years ago may be established in jobs that 

may not qualify or may have moved on from the profession, 

possibly limiting the ways those with older TEACH grants 

may respond to the changes made by these regulations. As a 

result, we applied the decreases shown in Table [2] to the 

grant-to-loan conversion rate to the President’s Budget 

2021 baseline. For past cohorts, the changes are applied 

only to future years of activity. 

Table 2: Grant-to-Loan Conversion Rate Decrease Factor

Cohorts Decrease

2008-2012 4%

2013-2019 9%

2020-2029 15%

The estimated net budget impact is a cost of $141.4

million, including a modification to existing cohorts of 

$16.6 million and a cost for cohorts 2020 to 2029 of $124.8

million. 

A number of the changes to the regulations relate to 

the eligibility of certain entities and recipients to 

participate in the title IV programs. The final

regulations remove language prohibiting borrowers with 

Perkins loans made before July 1, 1993 and National Defense 
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Student Loans (NDSL) made between October 1, 1980 and July 

1, 1993 from obtaining deferments during periods of 

otherwise eligible full-time volunteer work that includes 

providing religious instruction, conducting religious 

services, proselytizing, or engaging in fundraising to 

support religious activities. Due to the small group of 

borrowers expected to benefit from these changes and the 

heavy discounting effect that would apply to any deferment

costs on such old loans, we do not estimate any budget 

impact from these changes.

The final regulations remove current provisions that 

state that a member of a religious order pursuing a course 

of study in an institution of higher education has no 

financial need for purposes of the Pell Grant Program, 

Federal Perkins Loan Program, FWSP, FSEOG, FFEL Program, or 

the Direct Loan Program. 

Despite this change, the additional eligibility for 

student aid for a very small group of participants in a 

given religious order would not, in our estimation, result 

in any additional significant financial aid costs to the 

government. We have little firm data on the number of 

members in religious orders subject to these changes who 

would actually choose to accept the financial aid for which 

they are eligible. For instance, the Franciscans are 
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perhaps the largest and most well-known mendicant religious 

order, which means the priests take a vow of poverty. 

According to a 2013 reference,19 there are around 14,000 

first order Franciscan members, including 9,700 priests. 

Even considering other orders within the Franciscans and 

additional smaller monastic sects such as the Benedictines 

and Dominicans, the membership estimates would not be 

large. Thus, the Department believes that the pool of 

members potentially impacted by this regulatory change is 

already small to begin with and the final regulations are 

not going to induce changes in member practices and would 

not result in measurable financial aid estimates. Note 

that there are already many postsecondary institutions with 

a faith-based mission that are title IV eligible and are 

not affected by these final regulations. Therefore, the 

changes would allow our regulations to be consistent with 

the Supreme Court decision in Trinity Lutheran without 

involving a significant economic impact.

The regulatory changes would also affect PSLF. Under 

the final regulations, certain institutions that are taxexempt under section 501(c)(3) of the Internal Revenue Code

that are religious organizations would be considered public 

19 Annuario Pontificio 2013 (Libreria Editrice Vaticana 2013 ISBN 978-88-

209-9070-1), p. 1422.
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service eligible employers for purposes of PSLF. The 

application form for PSLF (OMB No. 1845-0110) specifically 

states that a qualifying employer includes a “not-forprofit organization that is tax-exempt under Section 

501(c)(3) of the Internal Revenue Code” but makes no 

exclusion for religious purposes. The current application 

makes it clear that, in performing job duties toward the 

full-time requirement, a borrower’s qualifying employment 

at a 501(c)(3) organization or a not-for-profit 

organization does not include time spent participating in 

religious instruction, worship services, or any form of 

proselytizing. This provision is changed in the final 

regulations in response to concerns that such provisions 

would violate RFRA. There is little to no existing data 

within the Department to isolate the potential population 

that may be newly eligible after this changed rule. The 

Department’s assumption under the NPRM was that eligible 

501(c)(3) employers and workers would cooperate in the 

structure of their work responsibilities to allow all 

potentially eligible workers not engaging in exclusively 

religious activity to meet the existing qualification 

requirements. However, there may have been previously

ineligible workers, primarily clergy, who will be eligible 

under the changed rule. While their employers may have met 
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the 501(c)(3) criteria, they were prohibited from receiving 

forgiveness due to the ineligibility of their work 

activities under the existing regulation. Based on an 

analysis of Bureau of Labor Statistics (BLS) data, the 

percentage of workers at non-profit religious organizations 

as a proportion of the total population of workers 

potentially eligible for Public Service Loan Forgiveness is 

very small, approximately 0.50% of total workers. This 

high-level potential population is further reduced by 

isolating the BLS occupation clergy, a proxy for our 

analysis purposes of workers engaged in exclusively 

previously ineligible activity at otherwise eligible 

501(c)(3) employers. Further characteristics that filter 

this population are the percentage who borrow, percentage 

who work full-time, and finally, the percentage who the 

Department estimates will successfully complete the 

requirements for PSLF, that is 120 qualifying payments and 

10 years of service. These estimated adjustments to the 

currently eligible PSLF population for this newly eligible 

potential population results in a 0.06% increase in the 

population qualifying for PSLF from the current baseline. 

Transfers in the Direct Loan Program for subsidy costs 

related to this potential group of newly eligible potential 
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population may be as much as $213 million, $122 million for 

existing cohorts and $91 million for future cohorts.

The changes to the GEAR UP program regulations would 

clarify that providers of GEAR UP services to students 

enrolled in private schools must be contracted 

independently of the private schools and would allow 

pervasively sectarian institutions of higher education to 

serve as fiscal agents for GEAR UP grants. In general, the 

Department does not estimate costs associated with changes 

to regulations governing competitive grant programs as 

participation in such programs is voluntary and funding 

still must be limited to what is appropriated by Congress. 

However, it is possible that certain changes in the 

regulatory framework governing a competitive grant program 

could produce transfers in program benefits among entities 

or recipients of services. 

Regarding the provision requiring providers of 

services to students enrolled in private schools to be 

independent of the school, the Department first assessed 

the extent to which GEAR UP services are currently provided 

to students enrolled in such schools. During the most 

recent reporting period, GEAR UP grantees reported serving 

students in 4,033 schools. Of those schools, the 

Department was able to identify only five private schools 
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in which students received GEAR UP services. In total, 

private schools represented only 0.1 percent of schools 

served by the program and, even among the grantees serving 

such schools, private schools represented 0.9 percent of 

the total schools they served. As such, we do not believe 

that the requirement relating to the employment 

relationship between individuals providing services in such 

schools and the schools themselves is likely to have a 

large impact on the administration of the program.

Regarding who may serve as a fiscal agent for a GEAR 

UP Grant, as noted above, the final regulations would allow 

pervasively sectarian institutions of higher education to 

serve in such a capacity. However, nothing in the current 

GEAR UP regulations precludes a pervasively sectarian 

institution of higher education from being a member of a 

GEAR UP partnership. As such, pervasively sectarian 

institutions can currently participate in and provide 

services under a GEAR UP grant. The Department does not 

have readily available data to identify all members of GEAR 

UP partnerships and whether they are pervasively sectarian. 

With such information, the Department could more easily 

quantify the potential number of partnerships affected by 

the change. However, even without such information, given 

that pervasively sectarian institutions are already 
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eligible members of partnerships, we do not believe the 

change to allow them to serve as fiscal agents would 

dramatically change the makeup of the GEAR UP applicant 

pool. Any pervasively sectarian institution that currently 

wishes to participate in the GEAR UP program may do so and 

this change would only result in a shift in who has primary 

fiscal liability for the grant. 

Alternatives Considered

With respect to the TEACH Grant program, we considered 

maintaining the current regulations as is, that is not 

including provisions related to the current reconsideration 

process in the final regulations, maintaining the current 

counseling requirements without adding a separate 

conversion counseling requirement, maintaining, instead of 

expanding, the current regulations related to qualifying 

teacher shortage areas for fulfilling the service 

obligation, and not expanding allowable suspensions beyond 

those that are currently available. As we describe in 

previous sections, making these changes gives the 

Department the opportunity to address GAO concerns

specifically, and generally provide from more information 

and clarity to recipients of the TEACH Grant program. 
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104

For the faith-based provisions, we considered not making 

the changes and leaving the current regulatory language in 

place as written.

Regulatory Flexibility Act Certification

The Secretary certifies that the final regulations

will not have a significant economic impact on a 

substantial number of small entities. In fact, the primary 

entities who are affected by the final regulations are 

individual students, not organizations, businesses, or 

governmental units. This holds true for the faith-based 

component of the final regulations that address individuals

participating in religious orders, or student borrowers 

applying for PSLF. Similarly, the changes to the TEACH 

Grant Program regulations primarily affect students who are 

interested in teaching and apply for a TEACH grant. 

Of the entities that would be affected by the final

regulations, many institutions, especially institutions 

with a faith-based mission, would be considered small. The 

Department recently proposed a size classification based on 

enrollment using IPEDS data that established the percentage 

of institutions in various higher education sectors 
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105

considered to be small entities, as shown in Table [6].20 

This size classification was described in the NPRM 

published in the Federal Register on July 31, 2018 for the 

proposed borrower defense rule (83 FR 37242, 37302). Under 

the Department’s proposed size standards, “small entities” 

have an enrollment of 1,000 students or less at 4-year 

schools or 500 students or less at 2-years schools. The 

Department has discussed the proposed standard with the 

Chief Counsel for Advocacy of the Small Business 

Administration, and while no change has been finalized, the 

Department continues to believe this approach better 

reflects a common basis for determining size categories 

that is linked to the provision of educational services.

Table 6: Small Entities Under Enrollment Based Definition

Level Type Small Total Percent

2-year Public 342 1,240 28%

2-year Private 219 259 85%

2-year Proprietary 2,147 2,463 87%

4-year Public 64 759 8%

20 U.S. Department of Education, National Center for Education 

Statistics.

Integrated Postsecondary Education Data System 2016 Institutional

Characteristics: Directory Information survey file downloaded March 3, 

2018.

Available at nces.ed.gov/ipeds/datacenter/DataFiles.aspx.
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106

4-year Private 799 1,672 48%

4-year Proprietary 425 558 76%

Total 3,996 6,951 57%

The final regulations would affect students who belong 

to religious orders and those students most likely attend 

institutions with a religious mission. In general, we 

believe faith-based institutions are more likely to be 

small institutions. However, the final regulations do not 

affect the title IV eligibility of such institutions. 

Accordingly, The Secretary certifies that the final 

regulations will not have a significant economic impact on 

a substantial number of small entities. Nothing in the 

final regulations would compel institutions, small or not, 

to engage in substantive changes to their programs. 

Therefore, there is no estimated associated institutional 

burden. 

Even if the affected institutions were considered 

small entities, the final regulations are designed to 

permit them to participate in title IV programs without 

jeopardizing their religious mission. Nothing in the final

regulations would require institutions to expand their 

enrollment, take on additional students, or to participate 
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107

in title IV aid programs, but the final regulations would 

give them that opportunity. 

Paperwork Reduction Act of 1995

As part of its continuing effort to reduce paperwork 

and respondent burden, the Department provides the general 

public and Federal agencies with an opportunity to comment 

on proposed and continuing collections of information in 

accordance with the Paperwork Reduction Act of 1995 (PRA) 

(44 U.S.C. 3506(c)(2)(A)). This helps ensure that: the 

public understands the Department’s collection 

instructions, respondents can provide the requested data in 

the desired format, reporting burden (time and financial 

resources) is minimized, collection instruments are clearly 

understood, and the Department can properly assess the 

impact of collection requirements on respondents.

Part 686 contains information collection requirements. 

Under the PRA the Department has submitted a copy of these 

sections to OMB for its review.

A Federal agency may not conduct or sponsor a 

collection of information unless OMB approves the 

collection under the PRA and the corresponding information 

collection instrument displays a currently valid OMB 

control number.
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108

Notwithstanding any other provision of law, no person 

is required to comply with, or is subject to penalty for 

failure to comply with, a collection of information if the 

collection instrument does not display a currently valid 

OMB control number.

In the final regulations we will display the control 

numbers assigned by OMB to any collection requirements 

adopted in the final regulations.

Section 686.12 – Agreement to serve or repay.

Requirements: Under final § 686.12, the TEACH Grant 

agreement to serve or repay will be expanded and updated 

with revised definitions, requirements, and explanations of 

the program and participant conditions, and options as 

discussed in the preamble.

Burden Calculation: These final regulations will require 

changes to the TEACH Grant agreement to serve form 

currently approved under OMB Control Number 1845-0083. We 

do not believe those changes will impact the current burden 

associated with this form. We estimate that, on average, 

it will take a grant recipient 30 minutes (.50 hours) to 

review and complete the updated agreement, which is done 

electronically. We continue to anticipate 50,793 TEACH 

applicants will annually utilize the agreement accepting 

the program terms, including the required teaching service, 
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109

or the conversion of the grant to a Direct Unsubsidized 

Loan if such service is not met or the applicant does not 

otherwise comply with the terms of the agreement. Based on 

one response per applicant, we continue to estimate an 

annual reporting burden for individuals of 25,397 hours 

(50,793 x .50 hours). 

§686.12 – Agreement to serve or repay. – OMB Control Number 

1845-0083

Entity Respondent Responses Time to 

Respond

Burden 

Hours

Individual 50,793 50,793 .50 hours 25,397

TOTAL 50,793 50,793 25,397

Section 686.32 - Counseling requirements.

Requirements: The final regulations in §686.32 will expand 

the information that is provided to TEACH Grant recipients 

during initial, subsequent, and exit counseling. The final

regulations will add a new conversion counseling 

requirement for grant recipients whose TEACH Grants are 

converted to Direct Unsubsidized Loans. 

Burden Calculation: Currently there is burden of 24,459 

hours assessed to 37,749 respondents for the counseling 

requirements of §686.32 in the regulatory information 

collection 1845-0084 as filed in January 2018. These 

figures do not include the new conversion counseling that 

will be required under the final regulations. The 
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110

expansion and revision of the required program counseling 

will require changes to the counseling currently available.

We anticipate that approximately 1,520 TEACH Grant 

recipients will either voluntarily convert their grant to a 

loan or will run out of time to complete the teaching 

obligation and have the grant converted to a loan. This is 

based on the number of voluntary and out of time 

conversions noted for 2019. We do not believe there will 

be a significant increase or decrease in such activity.

We believe that it will take a TEACH Grant recipient the 

same approximate 20 minutes (.33 hours) to review the new 

conversion counseling materials as it takes them to review 

the other required counseling materials. We estimate the 

total burden of 502 hours (1,520 x .33 hours) for 

recipients to review the conversion counseling material.

 The changes to the initial, subsequent, exit, and new 

conversion counseling information collection will be 

completed and a full public clearance filing will be made

after publication of the final rule and before being made 

available for use by the effective date of the regulations. 

§686.32 – Counseling requirements. – OMB Control Number 

1845-0084 New Conversion Counseling Figures Only

Entity Respondent Responses Time to 

Respond

Burden 

Hours

Individual 1,520 1,520 .33 hours 502
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111

TOTAL 1,520 1,520 502

Section 686.40 – Documenting the service obligation.

Requirements: The final regulations clarify the 

requirements regarding the documentation of completion of 

the teaching service obligation in the TEACH Grant Program 

and how it is reported. To support the requirement, we 

provided a draft “TEACH Grant Certification of Completed 

Teaching” form with the Notice of Proposed Rulemaking. 

While no public comments were received regarding the form, 

we have determined that we need to add to the form. We are 

modifying the “TEACH Grant Certification of Completed 

Teaching” form by adding an option to allow TEACH Grant 

recipients to certify that they have begun qualifying 

teaching service within a timeframe that will allow them to 

complete the service obligation within the eight year 

service obligation period, to avoid having their TEACH 

Grants converted to loans in accordance with Section 

686.43(a)(1)(ii). This form continues to require both 

TEACH grant recipient and eligible school official 

information.

Burden Calculation: The changes to the regulations 

relating to the required service obligation will require a 

new certification form. During the 2018 calendar year, 
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112

Department records indicate we received documentation for 

52,989 grantees regarding yearly service obligation 

completion. We estimate that to meet the requirements of 

§686.40 each respondent will need 20 minutes (.33 hours) to 

complete the certification form. We estimate the total 

burden of 17,486 hours (52,989 x .33 hours) for completion 

of this form.

We believe that the second certification option on the 

“TEACH Grant Certification of Completed Teaching” form is 

needed to allow TEACH Grant recipients who have not yet 

completed any qualifying teaching, but who have sufficient 

time remaining in the eight-year service obligation period 

to complete the required four-years of teaching, to certify 

that they have begun qualifying teaching to avoid 

conversion of the TEACH Grants to loans under Section 

686.43(a)(1)(ii). We estimate that to meet the 

certification requirements each respondent will need 20 

minutes (.33 hours) to complete the certification form. We 

estimate that approximately 24 TEACH Grant recipients will 

submit the certification form for this purpose. We 

estimate a total burden of 8 hours (24 x .33 hours = 8 

hours) for completion of the form. 

We estimate the total burden of 17,494 hours (53,013 x 

.33 hours) under OMB Control Number 1845-0158.
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113

§ 686.40 – Documenting the service obligation. – OMB 

Control Number 1845-0158

Entity Respondent Responses Time to 

Respond

Burden 

Hours

Individual

documenting 

service 

obligation

52,989 52,989 .33 hours 17,486

Individual 

documenting 

beginning 

eligible 

teaching 

 24 24 .33 hours 8

TOTAL 53,013 53,013 17,494

Section 686.41 – Periods of suspension.

Requirements: The final regulations add new conditions 

under which a TEACH Grant recipient may receive a temporary 

suspension of the period for completing the service 

obligation. 

Burden Calculation: The final regulations added new 

conditions that will allow a TEACH Grant recipient to 

receive a temporary suspension of the period for completing 

the service obligation. These new conditions, including 

completion of licensure requirements, military orders for 

the grantee’s spouse, and residing or being employed in a 

federally declared major disaster area require new 

temporary suspension forms. The qualifying leave under the 

Family and Medical Leave Act of 1993, and the call to 

military service are retained in the regulations.
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114

 Department records indicate that, during the 2018 

calendar year, we received documentation supporting 

suspension of 589 grantees for enrollment to complete 

licensure requirements. We estimate that to meet the 

requirements in final §686.41(a)(1)(ii), each respondent 

will need 20 minutes (.33 hours) to complete the 

certification form. We estimate a total burden of 194 

hours (589 x .33 hours).

Department records indicate that, during the 2018 

calendar year, we received documentation supporting 

suspension of 334 grantees for qualifying leave under the 

Family and Medical Leave Act of 1993. We estimate that to 

meet the requirements in final §686.41(a)(1)(iii), each 

respondent will need 20 minutes (.33 hours) to complete the 

certification form. We estimate a total burden of 110 

hours (334 x .33 hours).

Department records indicate that, during the 2018 

calendar year, we received documentation supporting 

suspension of 24 grantees for call to military service. We 

estimate that to meet the requirements in final

§686.41(a)(1)(iv), each respondent will need 20 minutes 

(.33 hours) to complete the certification form. We 

estimate a total burden of 8 hours (24 x .33 hours).
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115

We anticipate that we will receive documentation 

supporting suspension of 25 grantees based on military 

orders for the grantee’s spouse. We estimate that to meet 

the requirements in final §686.41(a)(1)(v), each respondent 

will need 20 minutes (.33 hours) to complete the 

certification form. We estimate a total burden of 8 hours 

(25 x .33 hours).

We anticipate that we will receive documentation 

supporting suspension of 500 grantees based on residing or 

being employed in a federally declared major disaster area. 

We estimate that to meet the requirements in final

§686.41(a)(1)(vi), each respondent will need 20 minutes 

(.33 hours) to complete the certification form. We 

estimate a total burden of 165 hours (500 x .33 hours).

We estimate the total burden of 485 hours (1,472 x .33 

hours) under OMB Control Number 1845-0158.

§ 686.41 – Periods of suspension. – OMB Control Number 

1845-0158

Entity Respondent Responses Time to 

Respond

Burden 

Hours

Individual

(a)(1)(ii)

 589 589 .33 hours 194

Individual

(a)(1)(iii)

 334 334 .33 hours 110

Individual

(a)(1)(iv)

 24 24 .33 hours 8

Individual

(a)(1)(v)

 25 25 .33 hours 8

Individual

(a)(1)(vi)

 500 500 .33 hours 165
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116

TOTAL 1,472 1,472 485

Section 686.42 – Discharge of agreement to serve or repay.

Requirements: The final regulations revise the conditions 

under which a TEACH Grant recipient may discharge an

agreement to serve or repay based on military service. 

Burden Calculation: Department records indicate that, 

during the 2018 calendar year, we received documentation 

supporting suspension of 10 grantees for discharge due to 

an extended call to military service. We estimate that to 

meet the requirements in final § 686.42(c), each respondent 

will need 20 minutes (.33 hours) to complete the new

certification form also used for military service 

suspension. 

We estimate a total burden of 3 hours (10 x .33 hours) 

under OMB Control Number 1845-0158.

§ 686.42 – Discharge of agreement to serve or repay. –

OMB Control Number 1845-0158

Entity Respondent Responses Time to 

Respond

Burden 

Hours

Individual 10 10 .33 hours 3

TOTAL 10 10 3

Section 686.43 – Obligation to repay the grant.

Requirements: The final regulations simplify the rules 

governing when a TEACH Grant will be converted to a Direct 

Unsubsidized Loan and provide for annual notifications from 
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117

the Secretary to the recipient regarding the status of a 

recipient’s TEACH Grant service obligation. Under the

final regulations, a TEACH Grant recipient can request 

conversion of the grant to a loan if the recipient decides 

not to fulfill the TEACH Grant obligations for any reason 

or if the recipient fails to begin or maintain qualifying 

teaching service within a timeframe that would allow the 

recipient to complete the service obligation in the 

requisite eight-year period. Additionally, the final

regulations describe the notifications the Secretary will

annually send to all TEACH Grant recipients regarding the 

service obligation requirements. 

Burden Calculation: We believe that the final regulations 

will require action on the part of TEACH grant recipients. 

Based on Department data, during the 2018 calendar year 

there were 52,989 TEACH Grant recipients who submitted 

evidence of completed teaching service. We estimate that 

an additional 25 percent of that figure or about 13,247 

grant recipients will be working toward their teaching 

obligation for a total of 66,236 grant recipients who will

receive the annual notice from the Secretary as required 

under final §686.43(a)(2). We estimate that grant 

recipients will require 10 minutes (.17 hours) to review 

the information provided in each annual notice. We 
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118

estimate the total burden of 11,260 hours (66,236 X .17 

hours). 

There will be burden on those recipients who are 

notified that their TEACH Grant will be converted to a loan 

if the recipient does not submit required documentation to 

show that they are satisfying the service obligation. 

Based on the Department’s data, during calendar year 2018 

there were a total of 10,591 TEACH Grant recipients whose 

grants were converted to loans based on the recipients’ 

voluntary request, or because the recipient was out of time 

to perform the service obligation or because the recipient 

did not provide evidence of meeting the service obligation 

as required under §686.43(a)(4). We estimate that grant 

recipients will require 10 minutes (.17 hours) to review 

the information in the notice. We estimate a total burden 

of 1,800 burden hours (10,591 X .17 hours).

Additionally, there will be burden on any TEACH Grant 

recipient whose grant was involuntarily converted to a 

Direct Unsubsidized Loan to request reconsideration from 

the Secretary. Based on the Department’s data, during 

calendar year 2018 there were 282 correctable conversions 

of TEACH Grants into loans. We estimate that a recipient 

will require 15 minutes (.25 hours) to gather documentation 

to present to the Secretary and make such a request as 
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119

required under §686.43(a)(5). We estimate a total burden 

of 71 burden hours (282 X .25 hours). 

We estimate a total burden of 13,131 burden hours 

under OMB Control Number 1845-0157.

§ 686.43 – Obligation to repay the grant. – OMB Control 

Number 1845-0157

Entity Respondent Responses Time to 

Respond

Burden 

Hours

Individual

(a)(2)

66,236 66,236 .17 hours 11,260

Individual

(a)(4)

 * 10,591 .17 hours 1,800

Individual

(a)(5)

 * 282 .25 hours 71

TOTAL 66,236 77,109 13,131

*These respondents will be part of the universe of 

respondents who receive the annual notifications and are 

not summed to avoid duplication of respondents.

The estimated cost to the recipients is $$1,680,714, 

based on the $29.48 per hour averaged for 2018 elementary, 

middle school and high school teacher salaries from the 

2019 Bureau of Labor Statistics Occupational Handbook.
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120

Regulatory 

section

Information 

collection

OMB 

Control 

No. and 

estimated 

burden 

(change in 

burden)

Estimated 

costs

§ 686.12 

Agreement to 

serve or 

repay

Under final § 686.12 

the TEACH Grant 

agreement to serve or 

repay will need to be 

expanded and updated 

with revised 

definitions, 

requirements, and 

explanations of the 

program and 

participant 

conditions, and 

options as discussed 

in the preamble.

1845-0083

+25,397 

hours

$748,704

§ 686.32

Counseling 

requirements

The final regulations 

in §686.32 will 

expand the 

information that is 

provided to TEACH 

Grant recipients 

during initial, 

subsequent, and exit 

counseling. The 

final regulations add 

a new conversion 

counseling 

requirement for grant 

recipients whose 

TEACH Grants are 

converted to Direct 

Unsubsidized Loans.

1845-0084

+502 hours

$14,799
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121

§ 686.40 

Documenting 

the service 

obligation

The final regulations 

will clarify the 

requirements 

regarding the 

documentation of 

completion of the 

teaching service 

obligation in the 

TEACH Grant Program 

and how it is 

reported.

1845-0158

+17,494

hours

$515,723

§ 686.41

Periods of 

suspension

The final regulations 

will add new 

conditions under 

which a TEACH Grant 

recipient may receive 

a temporary 

suspension of the 

period for completing 

the service 

obligation.

1845-0158

+485 hours

$14,298

§ 686.42

Discharge of 

agreement to 

serve or 

repay

The final regulations 

will revise the 

language for 

conditions under 

which a TEACH Grant 

recipient may 

discharge an

agreement to serve or 

repay based on 

military service.

1845-0158

+3 hours

$88
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122

§ 686.43

Obligation to 

repay the 

grant

The final regulations

will simplify the 

rules governing when 

a TEACH Grant will be 

converted to a Direct 

Unsubsidized Loan, as 

well as provide for 

annual notifications 

from the Secretary to 

the recipient 

regarding the status 

of a recipient’s 

TEACH Grant service 

obligation. Under 

the final

regulations, TEACH 

Grant recipients can

request conversion if 

the recipient decides 

not to fulfill the 

TEACH Grant 

obligations for any 

reason or if the 

recipient fails to 

begin or maintain 

qualifying teaching 

service within a 

timeframe to complete 

the service 

obligation in the 

requisite eight-year 

period. 

Additionally, the

final regulations 

describe the 

notifications the 

Secretary will

annually send to all 

TEACH Grant 

recipients regarding 

the service 

obligation 

requirements.

1845-0157

+13,131 

hours

$387,102
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123

Collections of Information

The total burden hours and change in burden hours 

associated with each OMB control number affected by the 

final regulations follows:

Control No. Total burden 

hours

Change in 

burden hours

1845-0083 25,397 hours No change in hours

1845-0084 37,175 hours +502 hours

1845-0158 17,982 hours +17,982 hours

1845-0157 13,131 hours +13,131 hours

Total 93,685 hours 31,615 hours

Intergovernmental Review 

These programs are not subject to Executive Order 

12372 and the regulations in 34 CFR part 79. 

Assessment of Educational Impact 

In the NPRM we requested comments on whether the 

regulations would require transmission of information that 

any other or authority of the United States gathers or 

makes available.

Based on the response to the NPRM and on our review, 

we have determined that these final regulations do not

require transmission of information that any other agency 
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124

or authority of the United States gathers or makes 

available.

Accessible Format: Individuals with disabilities can 

obtain this document in an accessible format (e.g., 

braille, large print, audiotape, or compact disc) on 

request to the program contact person listed under FOR 

FURTHER INFORMATION CONTACT.

Electronic Access to This Document: The official version 

of this document is the document published in the Federal 

Register. You may access the official edition of the 

Federal Register and the Code of Federal Regulations at 

www.govinfo.gov. At this site you can view this document, 

as well as all other documents of this Department published 

in the Federal Register, in text or Adobe Portable Document 

Format (PDF). To use PDF, you must have Adobe Acrobat 

Reader, which is available free at the site.

You may also access documents of the Department 

published in the Federal Register by using the article 

search feature at: www.federalregister.gov. Specifically, 

through the advanced search feature at this site, you can 

limit your search to documents published by the Department. 

(Catalog of Federal Domestic Assistance Number does not 

apply.)

List of Subjects
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125

34 CFR Part 674 

Loan programs-education, Reporting and recordkeeping, 

Student aid.

34 CFR Part 675

Colleges and universities, Employment, Grant programseducation, Reporting and recordkeeping requirements, 

Student aid.

34 CFR Part 676 

Grant programs-education, Reporting and recordkeeping 

requirements, Student aid.

34 CFR Part 682

Administrative practice and procedure, Colleges and 

universities, Loan programs-education, Reporting and 

recordkeeping requirements, Student aid, Vocational 

education.

34 CFR Part 685 

Administrative practice and procedure, Colleges and 

universities, Loan programs-education, Reporting and 

recordkeeping requirements, Student aid, Vocational 

education.

34 CFR Part 686

 Administrative practice and procedure, Colleges and 

universities, Education, Elementary and secondary 
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126

education, Grant programs—education, Reporting and 

recordkeeping requirements, Student aid.

34 CFR Part 690

Colleges and universities, Education of disadvantaged, 

Grant programs-education, Reporting and recordkeeping 

requirements, Student aid.

34 CFR Part 692

Colleges and universities, Grant programs-education, 

Reporting and recordkeeping requirements, Student aid.

34 CFR Part 694

Colleges and universities, Elementary and secondary 

education, Grant programs-education, Reporting and 

recordkeeping requirements, Student aid.

 ______________________ 

 Betsy DeVos,

 Secretary of Education.
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127

For the reasons discussed in the preamble, the 

Secretary of Education amends parts 674, 675, 676, 682, 

685, 686, 690, 692, and 694 of title 34 of the Code of 

Federal Regulations as follows:

PART 674—FEDERAL PERKINS LOAN PROGRAM

1. The authority citation for part 674 continues to 

read as follows: 

AUTHORITY: 20 U.S.C. 1070g, 1087aa-1087hh; Pub. L. 111-256, 

124 Stat. 2643; unless otherwise noted.

2. Section 674.9 is amended by:

a. In the introductory text, adding the words “Prior 

to October 1, 2017,” at the beginning of the sentence.

b. In the introductory text, removing the word “is”,

and adding, in its place, the word “was”.

c. Revising paragraph (c).

The revision reads as follows:

§ 674.9 Student eligibility.

* * * * *

(c) Has financial need as determined in accordance 

with part F of title IV of the HEA.

§ 674.35 [Amended]

3. Section 674.35 is amended by removing paragraph 

(c)(5)(iv) and redesignating paragraph (c)(5)(v) as 

(c)(5)(iv).
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128

4. Section 674.36 is amended by revising paragraph 

(c)(4) to read as follows:

§ 674.36 Deferment of repayment—NDSLs made on or after 

October 1, 1980, but before July 1, 1993.

* * * * *

(c) * * *

(4) A full-time volunteer in service which the 

Secretary has determined is comparable to service in 

the Peace Corps or under the Domestic Volunteer Service Act 

of 1973 (ACTION programs). The Secretary considers that a 

borrower is providing comparable service if he or she 

satisfies the following four criteria:

(i) The borrower serves in an organization that is 

exempt from taxation under the provisions of section 

501(c)(3) of the Internal Revenue Code of 1954.

(ii) The borrower provides service to low-income 

persons and their communities to assist them in eliminating 

poverty and poverty-related human, social, and 

environmental conditions.

(iii) The borrower does not receive compensation that 

exceeds the rate prescribed under section 6 of the Fair 

Labor Standards Act of 1938 (the Federal minimum wage), 

except that the tax-exempt organization may provide health, 

retirement, and other fringe benefits to the volunteer that 
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129

are substantially equivalent to the benefits offered to 

other employees of the organization.

(iv) The borrower has agreed to serve on a full-time 

basis for a term of at least one year.

PART 675—FEDERAL WORK-STUDY PROGRAMS 

5. The authority citation for part 675 continues to 

read as follows: 

AUTHORITY: 20 U.S.C. 1070g, 1087, 1094; 42 U.S.C. 2751-

2756b; unless otherwise noted.

6. Section 675.9 is amended by revising paragraph (c) 

to read as follows:

§ 675.9 Student eligibility.

* * * * *

(c) Has financial need as determined in accordance 

with part F of title IV of the HEA.

7. Section 675.20 is amended by revising paragraph

(c)(2)(iv) to read as follows:

§ 675.20 Eligible employers and general conditions and 

limitation on employment. 

* * * * *

(c) * * *

(2) * * *

(iv) Involve the construction, operation, or 

maintenance of so much of any facility as is used or is to 
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130

be used for instruction that is predominantly devotional 

and religious or as a place for religious worship, except 

to the extent that excluding such work would impose a 

substantial burden on a person’s exercise of religion.

PART 676—FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT 

PROGRAM

8. The authority citation for part 676 continues to 

read as follows: 

AUTHORITY: 20 U.S.C. 1070b—1070b-3, unless otherwise 

noted.

9. Section 676.9 is amended by revising paragraph (c)

to read as follows:

§ 676.9 Student eligibility.

* * * * *

(c) Has financial need as determined in accordance 

with part F of title IV of the HEA.

PART 682—FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

10. The authority citation for part 682 continues to 

read as follows: 

AUTHORITY: 20 U.S.C. 1071-1087-4, unless otherwise noted.

 § 682.210 [Amended]

11. Section 682.210 is amended by removing and 

reserving paragraph(m)(1)(iv).

§ 682.301 [Amended]
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131

12. Section 682.301 is amended by:

a. Removing paragraph (a)(2) and

b. Redesignating paragraph (a)(3) as paragraph

(a)(2).

PART 685—WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

13. The authority citation for part 685 continues to 

read as follows: 

AUTHORITY: 20 U.S.C 1070g, 1087a, et seq., unless 

otherwise noted.

§ 685.200 [Amended]

14. Section 685.200 is amended by removing and 

reserving paragraph (a)(2)(ii).

15. Section 685.219 is amended by:

a. In paragraph (b), revising the definition of 

“public service organization” and

b. Revising paragraph (c)(1)(ii).

The revisions read as follows:

§ 685.219 Public Service Loan Forgiveness Program.

* * * * *

(b) * * *

Public service organization means:

(1) A Federal, State, local, or Tribal government 

organization, agency, or entity;

(2) A public child or family service agency;
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132

(3) A non-profit organization under section 501(c)(3) 

of the Internal Revenue Code that is exempt from taxation 

under section 501(a) of the Internal Revenue Code;

(4) A Tribal college or university; or

(5)(i) A private organization that provides the 

following public services: emergency management, military 

service, public safety, law enforcement, public interest 

law services, early childhood education (including licensed 

or regulated child care, Head Start, and State funded prekindergarten), public service for individuals with 

disabilities and the elderly, public health (including 

nurses, nurse practitioners, nurses in a clinical setting, 

and full-time professionals engaged in health care 

practitioner occupations and health care support 

occupations, as such terms are defined by the Bureau of 

Labor Statistics), public education, public library 

services, school library or other school-based services; 

and

(ii) Is not a business organized for profit, a labor 

union, or a partisan political organization.

(c) * * *

(1) * * *

(i) * * *
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133

(ii) Is employed full-time by a public service 

organization or serving in a full-time AmeriCorps or Peace 

Corps position--

 (A) When the borrower makes the 120 monthly payments

described under paragraph (c)(1)(iii) of this section;

 (B) At the time of application for loan forgiveness; 

and

 (C) At the time the remaining principal and accrued 

interest are forgiven.

(2) * * *

(3) * * *

* * * * *

Part 686 TEACHER EDUCATION ASSISTANCE FOR COLLEGE AND 

HIGHER EDUCATION (TEACH) GRANT PROGRAM

16. The authority citation for part 686 continues to 

read as follows:

Authority: 20 U.S.C. 1070g, et seq., unless otherwise 

noted.

17. Section 686.1 is revised to read as follows: 

§ 686.1 Scope and Purpose.

The TEACH Grant program awards grants to students who 

intend to teach, to help meet the cost of their 

postsecondary education. In exchange for the grant, the 

student must agree to serve as a full-time teacher in a 
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134

high-need field in a school serving low-income students, or 

as a full-time teacher in a high-need field for an 

educational service agency serving low-income students, for 

at least four academic years within eight years of ceasing 

enrollment at the institution where the student received 

the grant or, in the case of a student who receives a TEACH 

Grant at one institution and subsequently transfers to 

another institution and enrolls in another TEACH Granteligible program, within eight years of ceasing enrollment 

at the other institution. The eight-year period for 

completing the required four years of teaching does not 

include periods of suspension in accordance with §686.41. 

If the student does not satisfy the service obligation, the 

amounts of the TEACH Grants received are treated as a 

Direct Unsubsidized Loan and must be repaid with interest 

charged from the date of each TEACH Grant disbursement. A 

TEACH Grant that has been converted to a Direct 

Unsubsidized Loan can be reconverted to a grant only in 

accordance with § 686.43.

18. Section 686.2 is amended by:

a. In paragraph (b), adding in alphabetical order the 

words “Free application for Federal student aid (FAFSA)”;
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135

b. In paragraph (d), removing the definition of 

“Agreement to serve (ATS)” and adding a new definition for

the term “Agreement to serve or repay”;

c. In paragraph (d), adding in alphabetical order a

definition for “Educational service agency”;

d. In paragraph (d), in paragraph (5) of the 

definition of “High-need field”, adding the punctuation and 

words “, including, but not limited to, computer science”

after the word “Science”; 

e. In paragraph (d), in paragraph (7) of the 

definition of “High-need field”, removing the words “in 

accordance with 34 CFR 682.210(q)”;

f. In paragraph (d), revising the definition of 

“Highly qualified”;

g. In paragraph (d), removing the term and definition 

of “School serving low-income students (low-income school)”

and adding a definition for “School or educational service 

agency serving low-income students (low-income school)”;

h. In paragraph (d), revising the definition of 

“TEACH Grant-eligible program”; and

i. In paragraph (d), adding in alphabetical order a

definition for “Teacher Shortage Area Nationwide Listing 

(Nationwide List)”.

 The additions and revisions read as follows:
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136

§ 686.2 Definitions.

* * * * *

(d) * * *

Agreement to serve or repay: An agreement under which 

the individual receiving a TEACH Grant commits to meet the 

service obligation or repay the loan as described in 

§686.12 and to comply with notification and other 

provisions of the agreement.

* * * * *

Educational service agency: A regional public 

multiservice agency authorized by State statute to develop, 

manage, and provide services or programs to local 

educational agencies (LEAs).

* * * * *

Highly qualified: Has the meaning set forth in 

paragraphs (1) through (4) of this definition, or the 

meaning set forth in section 602(10) of the Individuals 

With Disabilities Education Act.

(1) When used with respect to any public elementary 

school or secondary school teacher in a State, means that-

(i) The teacher has obtained full State certification 

as a teacher (including certification obtained through 

alternative routes to certification) or passed the State 

teacher licensing examination, and holds a license to teach 
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137

in such State, except that when used with respect to any 

teacher teaching in a public charter school, the term means 

that the teacher meets the requirements set forth in the 

State's public charter school law; and

(ii) The teacher has not had certification or 

licensure requirements waived on an emergency, temporary, 

or provisional basis.

(2) When used with respect to—

(i) An elementary school teacher who is new to the 

profession, means that the teacher—

(A) Holds at least a bachelor's degree; and

(B) Has demonstrated, by passing a rigorous State 

test, subject knowledge and teaching skills in reading, 

writing, mathematics, and other areas of the basic 

elementary school curriculum (which may consist of passing 

a State-required certification or licensing test or tests 

in reading, writing, mathematics, and other areas of the 

basic elementary school curriculum); or

(ii) A middle or secondary school teacher who is new 

to the profession, means that the teacher holds at least a 

bachelor's degree and has demonstrated a high level of 

competency in each of the academic subjects in which the 

teacher teaches by—
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138

(A) Passing a rigorous State academic subject test in 

each of the academic subjects in which the teacher teaches 

(which may consist of a passing level of performance on a 

State-required certification or licensing test or tests in 

each of the academic subjects in which the teacher 

teaches); or

(B) Successful completion, in each of the academic 

subjects in which the teacher teaches, of an academic 

major, a graduate degree, coursework equivalent to an 

undergraduate academic major, or advanced certification or 

credentialing.

(3) When used with respect to an elementary, middle, 

or secondary school teacher who is not new to the 

profession, means that the teacher holds at least a 

bachelor's degree and—

(i) Has met the applicable standard in paragraph (2) 

of this definition, which includes an option for a test; or 

(ii) Demonstrates competence in all the academic 

subjects in which the teacher teaches based on a highly 

objective uniform State standard of evaluation that—

(A) Is set by the State for both grade-appropriate 

academic subject matter knowledge and teaching skills;

(B) Is aligned with challenging State academic 

content and student academic achievement standards and 
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139

developed in consultation with core content specialists, 

teachers, principals, and school administrators;

(C) Provides objective, coherent information about 

the teacher's attainment of core content knowledge in the 

academic subjects in which a teacher teaches;

(D) Is applied uniformly to all teachers in the same 

academic subject and the same grade level throughout the 

State;

(E) Takes into consideration, but is not based 

primarily on, the time the teacher has been teaching in the 

academic subject;

(F) Is made available to the public upon request; and

(G) May involve multiple, objective measures of 

teacher competency.

(4)(i) When used with respect to any public, or other 

non-profit private, elementary or secondary school teacher 

who is exempt from State certification requirements means 

that the teacher is permitted to and does satisfy rigorous 

subject knowledge and skills tests by taking competency 

tests in the applicable grade levels and subject areas. 

(ii) For purposes of paragraph (4)(i) of this 

definition, the competency tests taken by a private school 

teacher must be recognized by five or more States for the 

purpose of fulfilling the highly qualified teacher 
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140

requirements as described in paragraphs (1), (2), and (3) 

of this definition, and the score achieved by the teacher 

on each test must equal or exceed the average passing score 

of those five States. 

* * * * *

School or educational service agency serving lowincome students (low-income school): An elementary school, 

secondary school, or educational service agency that is 

listed in the Department's Teacher Cancellation Low-Income 

(TCLI) Directory. The Secretary considers all elementary 

and secondary schools and educational service agencies 

operated by the Bureau of Indian Education (BIE) in the 

Department of the Interior or operated on Indian 

reservations by Indian Tribal groups under contract or 

grant with the BIE to qualify as schools or educational 

service agencies serving low-income students.

* * * * *

TEACH Grant-eligible program: An eligible program, as 

defined in 34 CFR 668.8, is a program of study at a TEACH 

Grant-eligible institution that is designed to prepare an 

individual to teach as a highly qualified teacher in a 

high-need field and leads to a baccalaureate or master's 

degree, or is a post-baccalaureate program of study. A 

two-year program of study that is acceptable for full 
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141

credit toward a baccalaureate degree is considered to be a 

program of study that leads to a baccalaureate degree.

* * * * *

Teacher Shortage Area Nationwide Listing (Nationwide 

List): A list of teacher shortage areas, as defined in 34 

CFR 682.210(q)(8)(vii), in each State.

* * * * *

19. Section 686.10 is revised to read as follows:

§ 686.10 Application.

To receive a grant under this part, a student must—

(a) Complete and submit the Free application for 

Federal student aid (FAFSA) in accordance with the 

instructions in the FAFSA; 

(b) Complete and sign an agreement to serve or repay 

in accordance with §686.12; and

(c) Provide any additional information requested by 

the Secretary and the institution.

§ 686.11 [Amended]

20. Section 686.11 is amended by:

a. In paragraph (a)(1)(i), removing the words 

“submitted a completed application” and adding, in their 

place, the words “met the application requirements in §

686.10”;

b. Removing paragraph (a)(1)(ii);
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142

c. Redesignating paragraphs (a)(1)(iii), (iv), and 

(v) as paragraphs (a)(1)(ii), (iii), and (iv), 

respectively;

d. In paragraph (b) introductory text, removing the 

words “submitted a completed application” and adding, in 

their place, the words “met the application requirements in 

§ 686.10”;

e. Removing paragraph (b)(1); and

f. Redesignating paragraphs (b)(2) and (b)(3) as 

paragraphs (b)(1) and (b)(2), respectively.

21. Section 686.12 is revised to read as follows:

§ 686.12 Agreement to serve or repay.

(a) General. A student who meets the eligibility 

requirements in § 686.11 may receive a TEACH Grant only 

after he or she signs an agreement to serve or repay 

provided by the Secretary and receives counseling in 

accordance with § 686.32.

(b) Contents of the agreement to serve or repay. The 

agreement to serve or repay—

(1) Provides that, for each TEACH Grant-eligible 

program for which the student received TEACH Grant funds, 

the grant recipient must fulfill a service obligation by 

performing creditable teaching service by serving—
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143

(i) As a full-time teacher for a total of not less 

than four elementary or secondary academic years within 

eight years after the date the recipient ceased to be 

enrolled at the institution where the recipient received 

the TEACH Grant, or in the case of a student who receives a 

TEACH Grant at one institution and subsequently transfers 

to another institution and enrolls in another TEACH Granteligible program, within eight years of ceasing enrollment 

at the other institution;

(ii) In a low-income school as defined in § 686.2(d) 

and subject to the requirements under § 686.40(a)(3);

(iii) As a highly qualified teacher as defined in 

§686.2(d); and

(iv) In a high-need field in the majority of classes 

taught during each elementary and secondary academic year;

(2) Requires the grant recipient to submit, upon 

completion of each year of service, documentation of the 

service in the form of a certification by a chief 

administrative officer of the school; 

(3) Explains that the eight-year period for 

completing the service obligation does not include periods 

of suspension in accordance with § 686.41;
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144

(4) Explains the conditions under which a TEACH Grant 

may be converted to a Direct Unsubsidized Loan, as 

described in § 686.43;

(5) Explains that, if a TEACH Grant is converted to a 

Direct Unsubsidized Loan, the grant recipient must repay 

the loan in full, with interest charged from the date of 

each TEACH Grant disbursement; and

(6) Explains that to avoid further accrual of 

interest as described in paragraph (b)(5) of this section, 

a grant recipient who decides not to teach in a qualified 

school or field, or who for any other reason no longer 

intends to satisfy the service obligation, may request that 

the Secretary convert his or her TEACH Grant to a Direct 

Unsubsidized Loan so that the grant recipient may begin 

repaying immediately, instead of waiting for the TEACH 

Grant to be converted to a loan under the condition 

described in § 686.43(a)(1)(ii); and

(7) Explains that a grant recipient whose TEACH Grant 

was converted to a Direct Unsubsidized Loan based on a 

request from the recipient in accordance with § 

686.43(a)(1)(i) may request that the Secretary reconvert 

the recipient's loan to a TEACH Grant as provided in § 

686.43(a)(8); and
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(8) Requires the grant recipient to comply with the 

terms, conditions, and other requirements consistent with 

§§ 686.40 through 686.43 that the Secretary determines to 

be necessary.

(c) Completion of the service obligation. (1) A 

grant recipient must complete one service obligation for 

all TEACH Grants received for undergraduate study, and one 

service obligation for all TEACH Grants received for 

graduate study. Each service obligation begins when the 

grant recipient ceases enrollment at the institution where 

the TEACH Grants were received, or, in the case of a grant 

recipient who receives a TEACH Grant at one institution and 

subsequently transfers to another institution, within eight 

years from the date the grant recipient ceases enrollment 

at the other institution. However, creditable teaching 

service, a suspension approved under § 686.41(a)(2), or a 

military discharge granted under § 686.42(c)(2) may apply 

to more than one service obligation.

(2) Unless paragraph (c)(3) of this section applies--

(i) In the case of a TEACH Grant recipient who 

withdraws from an institution before completing a 

baccalaureate or post-baccalaureate program of study for 

which he or she received TEACH Grants, but later re-enrolls 

at the same institution or at a different institution in 
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either the same baccalaureate or post-baccalaureate program 

or in a different TEACH Grant-eligible baccalaureate or 

post-baccalaureate program prior to the date that his or 

her TEACH Grants are converted to Direct Unsubsidized Loans 

under § 686.43(a)(1)(ii) and receives additional TEACH 

Grants or the Secretary otherwise confirms that the grant 

recipient has re-enrolled in a TEACH Grant-eligible 

program, the Secretary adjusts the starting date of the 

period for completing the service obligation to begin when 

the grant recipient ceases to be enrolled at the 

institution where he or she has re-enrolled; and

(ii) In the case of a TEACH Grant recipient who 

withdraws from an institution before completing a master’s 

degree program of study for which he or she received TEACH 

Grants, but later re-enrolls at the same institution or at 

a different institution in either the same master’s degree 

program or in a different TEACH Grant eligible master’s 

degree program prior to the date that his or her TEACH 

Grants are converted to Direct Unsubsidized Loans under §

686.43(a)(1)(ii) and receives additional TEACH Grants or 

the Secretary otherwise confirms that the grant recipient 

has re-enrolled in a TEACH Grant-eligible program, the 

Secretary adjusts the starting date of the period for 

completing the service obligation to begin when the grant 
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147

recipient ceases to be enrolled at the institution where he 

or she has re-enrolled.

(3) In the case of a TEACH Grant recipient covered 

under paragraph (c)(2)(i) or (ii) of this section who 

completed one or more complete academic years of creditable 

teaching service as described in § 686.12(b) during the 

period between the grant recipient’s withdrawal and reenrollment—

(i) The Secretary does not adjust the starting date 

of the period for completing the service obligation unless 

requested by the recipient;

(ii) The completed teaching service counts toward 

satisfaction of the grant recipient’s service obligation 

under paragraph (c)(2)(i) of this section; and

(iii) If the grant recipient continues to perform 

creditable teaching service after re-enrolling in a TEACH 

Grant-eligible program, the grant recipient may receive 

credit toward satisfaction of the service obligation for 

any complete academic years of creditable teaching 

performed while the recipient is concurrently enrolled in 

the TEACH Grant-eligible program only if the recipient does 

not request and receive a temporary suspension of the 

period for completing the service obligation under 

§686.41(a)(1)(i).
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148

(d) Teaching in a high-need field listed in the 

Nationwide List. For a grant recipient’s teaching service 

in a high-need field listed in the Nationwide List to count 

toward satisfying the recipient’s service obligation, the 

high-need field in which he or she prepared to teach must 

be listed in the Nationwide List for the State in which the 

grant recipient teaches—

(1) For teaching service performed before July 1, 

2010, at the time the grant recipient begins teaching in 

that field, even if that field subsequently loses its highneed designation for that State; or

(2) For teaching service performed on or after July 

1, 2010—

(i) At the time the grant recipient begins teaching 

in that field, even if that field subsequently loses its 

high-need designation for that State; or

(ii) At the time the grant recipient signed the 

agreement to serve or repay or received the TEACH Grant, 

even if that field subsequently loses its high-need 

designation for that State before the grant recipient 

begins teaching in that field.

§ 686.21 [Amended]

22. Section 686.21 is amended by:
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149

a. In paragraph (a)(2)(i), removing the word 

“aggregate” and adding, in its place, the word “total”;

b. In paragraph(a)(2)(ii), removing the word 

“aggregate” and adding, in its place, the word “total”; and

 c. In paragraph(a)(2)(ii), removing the words “a 

master’s degree” and adding, in their place, the words 

“graduate study”.

§ 686.31 [Amended]

23. Section 686.31 is amended by:

a. In paragraph (a)(3), adding the words “or repay” 

after the word “serve” and

b. In paragraph (e)(2)(ii), removing the word 

“Federal” before the words “Direct Unsubsidized Loan”.

24. Section 686.32 is amended by:

a. Revising paragraph (a)(3);

b. Revising paragraph (b)(3);

c. Revising paragraph (c)(4);

d. Revising paragraph (d); and

e. Adding a new paragraph (e). 

The revisions and addition read as follows:

§ 686.32 Counseling Requirements.

(a) * * *

(3) The initial counseling must—
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150

(i) Explain the terms and conditions of the TEACH 

Grant agreement to serve or repay as described in § 686.12;

(ii) Provide the grant recipient with information 

about how to identify low-income schools and documented 

high-need fields;

(iii) Inform the grant recipient that, for the 

teaching to count towards the recipient’s service 

obligation, the high-need field in which he or she has 

prepared to teach must be—

(A) One of the six high-need fields listed in §686.2; 

or

(B) A high-need field that is listed in the 

Nationwide List for the State in which the grant recipient 

teaches-

(1) At the time the grant recipient begins teaching 

in that field, even if that field subsequently loses its 

high-need designation for that State; or 

(2) For teaching service performed on or after July 

1, 2010, at the time the grant recipient signed the 

agreement to serve or repay or received the TEACH Grant, 

even if that field subsequently loses its high-need 

designation for that State before the grant recipient 

begins teaching in that field;
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(iv) Inform the grant recipient of the opportunity to 

request a suspension of the eight-year period for 

completion of the agreement to serve or repay and the 

conditions under which a suspension may be granted in 

accordance with § 686.41;

(v) Explain to the grant recipient that conditions, 

such as conviction of a felony, could preclude the grant 

recipient from completing the service obligation;

(vi) Emphasize to the grant recipient that if the 

grant recipient fails or refuses to complete the service 

obligation contained in the agreement to serve or repay or 

any other condition of the agreement to serve or repay-

(A) The TEACH Grant must be repaid as a Direct 

Unsubsidized Loan; and

(B) The grant recipient will be obligated to repay 

the full amount of each grant and the accrued interest from 

each disbursement date;

(vii) Explain the circumstances, as described in § 

686.43, under which a TEACH Grant will be converted to a 

Direct Unsubsidized Loan;

(viii) Explain that to avoid further accrual of 

interest as described in §686.12(b)(4)(ii), a grant 

recipient who decides not to teach in a qualified school or 

field, or who for any other reason no longer intends to 
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satisfy the service obligation, may request that the 

Secretary convert his or her TEACH Grant to a Direct 

Unsubsidized Loan that the grant recipient may begin 

repaying immediately, instead of waiting for the TEACH 

Grant to be converted to a loan under the condition 

described in § 686.43(a)(1)(ii); 

(ix) Emphasize that, once a TEACH Grant is converted 

to a Direct Unsubsidized Loan, it may be reconverted to a 

grant only if—

(A) The Secretary determines, based on documentation 

provided by the recipient or in the Secretary's records,

that the grant recipient was satisfying the service 

obligation as described in § 686.12 or that the grant was

converted to a loan in error; or 

(B) In the case of a grant recipient whose TEACH 

Grant was converted to a Direct Unsubsidized Loan in 

accordance with § 686.43(a)(1)(i), the grant recipient 

requests that the Secretary reconvert the loan to a grant 

and is determined to be eligible for reconversion in 

accordance with § 686.43(a)(8); 

(x) Review for the grant recipient information on the 

availability of the Department’s Federal Student Aid

Ombudsman’s office;
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153

(xi) Describe the likely consequences of loan 

default, including adverse credit reports, garnishment of 

wages, Federal offset, and litigation; and

(xii) Inform the grant recipient of sample monthly 

repayment amounts based on a range of student loan 

indebtedness.

(b) * * *

(3) Subsequent counseling must—

(i) Review the terms and conditions of the TEACH 

Grant agreement to serve or repay as described in § 686.12;

(ii) Emphasize to the grant recipient that if the 

grant recipient fails or refuses to complete the service 

obligation contained in the agreement to serve or repay or 

any other condition of the agreement to serve or repay-

(A) The TEACH Grant must be repaid as a Direct 

Unsubsidized Loan; and

(B) The grant recipient will be obligated to repay 

the full amount of the grant and the accrued interest from 

the disbursement date;

(iii) Explain the circumstances, as described in § 

686.43, under which a TEACH Grant will be converted to a 

Direct Unsubsidized Loan;

(iv) Explain that to avoid further accrual of 

interest as described in § 686.12(b)(4)(ii), a grant 
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154

recipient who decides not to teach in a qualified school or 

field, or who for any other reason no longer intends to 

satisfy the service obligation, may request that the 

Secretary convert his or her TEACH Grant to a Direct 

Unsubsidized Loan that the grant recipient may begin 

repaying immediately, instead of waiting for the TEACH 

Grant to be converted to a loan under the condition 

described in § 686.43(a)(1)(ii); 

(v) Emphasize that, once a TEACH Grant is converted 

to a Direct Unsubsidized Loan, it may be reconverted to a 

grant only if-–

(A) The Secretary determines, based on documentation 

provided by the recipient or in the Secretary's records,

that the grant recipient was satisfying the service 

obligation as described in §686.12 or that the grant was

converted to a loan in error; or 

(B) In the case of a grant recipient whose TEACH 

Grant was converted to a Direct Unsubsidized Loan in 

accordance with § 686.43(a)(1)(i), the grant recipient 

requests that the Secretary reconvert the loan to a grant 

and is determined to be eligible for reconversion in 

accordance with § 686.43(a)(8); and
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155

(vi) Review for the grant recipient information on 

the availability of the Department’s Federal Student Aid

Ombudsman’s office.

(c) * * *

(4) The exit counseling must—

(i) Review the terms and conditions of the TEACH 

Grant agreement to serve or repay as described in § 686.12 

and emphasize to the grant recipient that the four-year 

service obligation must be completed within the eight-year 

period described in § 686.12;

(ii) Explain the treatment of a grant recipient who 

withdraws from and then reenrolls in a TEACH Grant-eligible 

program at a TEACH Grant eligible institution as described 

in § 686.12(c);

(iii) Inform the grant recipient of the opportunity 

to request a suspension of the eight-year period for 

completion of the service obligation and the conditions 

under which a suspension may be granted in accordance with 

§ 686.41;

(iv) Provide the grant recipient with information 

about how to identify low-income schools and documented 

high-need fields;

(v) Inform the grant recipient that, for the teaching 

to count towards the recipient's service obligation, the 
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156

high-need field in which he or she has prepared to teach 

must be—

(A) One of the six high-need fields listed in §686.2; 

or

(B) A high-need field that is listed in the 

Nationwide List for the State in which the grant recipient 

teaches—

(1) At the time the grant recipient begins teaching 

in that field, even if that field subsequently loses its 

high-need designation for that State; or 

(2) For teaching service performed on or after July 

1, 2010, at the time the grant recipient signed the 

agreement to serve or repay or received the TEACH Grant, 

even if that field subsequently loses its high-need 

designation for that State before the grant recipient 

begins teaching in that field;

(vi) Emphasize to the grant recipient that if the 

grant recipient fails or refuses to complete the service 

obligation contained in the agreement to serve or repay or 

fails to meet any other condition of the agreement to serve 

or repay—

(A) The TEACH Grant must be repaid as a Direct 

Unsubsidized Loan; and
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157

(B) The grant recipient will be obligated to repay 

the full amount of each grant and the accrued interest from 

each disbursement date;

(vii) Explain to the grant recipient that the 

Secretary will, at least annually during the service 

obligation period, send the recipient the notice described 

in § 686.43(a)(2); 

(viii) Explain the circumstances, as described in §

686.43, under which a TEACH Grant will be converted to a 

Direct Unsubsidized Loan;

(ix) Explain that to avoid further accrual of 

interest as described in § 686.12(b)(4)(ii), a grant 

recipient who decides not to teach in a qualified school or 

field, or who for any other reason no longer intends to 

satisfy the service obligation, may request that the 

Secretary convert his or her TEACH Grant to a Direct 

Unsubsidized Loan that the grant recipient may begin 

repaying immediately, instead of waiting for the TEACH 

Grant to be converted to a loan under the condition 

described in § 686.43(a)(1)(ii); 

(x) Emphasize that once a TEACH Grant is converted to 

a Direct Unsubsidized Loan it may be reconverted to a grant 

only if—
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158

(A) The Secretary determines, based on documentation 

provided by the recipient or in the Secretary's records,

that the grant recipient was satisfying the service 

obligation as described in §686.12 or that the grant was 

converted to a loan in error; or 

(B) In the case of a grant recipient whose TEACH 

Grant was converted to a Direct Unsubsidized Loan in 

accordance with § 686.43(a)(1)(i), the grant recipient 

requests that the Secretary reconvert the loan to a grant 

and is determined to be eligible for reconversion in 

accordance with § 686.43(a)(8); and

(xi) Explain to the grant recipient how to contact 

the Secretary.

(5) If exit counseling is conducted through 

interactive electronic means, an institution must take 

reasonable steps to ensure that each grant recipient 

receives the counseling materials and participates in and 

completes the exit counseling.

(d) Compliance. The institution must maintain 

documentation substantiating the institution's compliance 

with paragraphs (a) through (c) of this section for each 

TEACH Grant recipient.

(e) Conversion counseling. (1) At the time a TEACH 

Grant recipient’s TEACH Grant is converted to a Direct 
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159

Unsubsidized Loan, the Secretary conducts conversion 

counseling with the recipient by interactive electronic 

means and by mailing written counseling materials to the 

most recent address provided by the recipient. 

(2) The conversion counseling—

(i) Informs the borrower of the average anticipated 

monthly repayment amount based on the borrower's 

indebtedness;

(ii) Reviews for the borrower available repayment 

plan options, including standard, graduated, extended, 

income-contingent, and income-based repayment plans, 

including a description of the different features of each 

plan and the difference in interest paid and total payments 

under each plan; 

(iii) Explains to the borrower the options to prepay 

each loan, to pay each loan on a shorter schedule, and to 

change repayment plans; 

(iv) Provides information on the effects of loan 

consolidation including, at a minimum—

(A) The effects of consolidation on total interest to 

be paid, and length of repayment; 

(B) The effects of consolidation on a borrower's 

underlying loan benefits, including grace periods, loan 

forgiveness, cancellation, and deferment opportunities; and 
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160

(C) The options of the borrower to prepay the loan 

and to change repayment plans; 

(v) Includes debt-management strategies that are 

designed to facilitate repayment; 

(vi) Explains to the borrower the availability of 

Public Service Loan Forgiveness and teacher loan 

forgiveness; 

(vii) Explains how the borrower may request 

reconsideration of the conversion of the TEACH Grant to a 

Direct Unsubsidized Loan if the borrower believes that the 

grant was converted to a loan in error, or if the borrower 

can provide documentation showing that he or she was 

satisfying the service obligation as described in § 686.12; 

(viii) Describes the likely consequences of default, 

including adverse credit reports, delinquent debt 

collection procedures under Federal law, and litigation; 

(ix) Informs the borrower of the grace period as 

described in § 686.43(c);

(x) Provides—

(A) A general description of the terms and conditions 

under which a borrower may obtain full or partial 

forgiveness or discharge of the loan (including under the 

Public Service Loan Forgiveness Program), defer repayment 
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161

of the loan, or be granted a forbearance on repayment of 

the loan; and 

(B) A copy, either in print or by electronic means, 

of the information the Secretary makes available pursuant 

to section 485(d) of the HEA; 

(xi) Requires the borrower to provide current 

information concerning name, address, Social Security 

number, and driver's license number and State of issuance, 

as well as the borrower's permanent address; 

(xii) Reviews for the borrower information on the 

availability of the Federal Student Aid Ombudsman's office; 

(xiii) Informs the borrower of the availability of 

title IV loan information in the National Student Loan Data 

System (NSLDS) and how NSLDS can be used to obtain title IV 

loan status information; 

(xiv) Provides a general description of the types of 

tax benefits that may be available to borrowers; 

(xv) Informs the borrower of the amount of interest 

that has accrued on the converted TEACH Grants and explains 

that any unpaid interest will be capitalized at the end of 

the grace period; and

(xvi) In the case of a borrower whose TEACH Grant was 

converted to a Direct Unsubsidized Loan in accordance with 

§ 686.43(a)(1)(i), explains that the borrower may request 
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162

that the Secretary reconvert the loan to a grant as 

provided in § 686.43(a)(8).

25. Section 686.40 is revised to read as follows:

§ 686.40 Documenting the service obligation.

(a) If a grant recipient is performing full-time 

teaching service in accordance with the agreement to serve 

or repay, or agreements to serve or repay if more than one 

agreement exists, the grant recipient must, upon completion 

of each of the four required elementary or secondary 

academic years of teaching service, provide to the 

Secretary documentation of that teaching service on a form 

approved by the Secretary and certified by the chief 

administrative officer of the school or educational service 

agency in which the grant recipient is teaching. The 

documentation must show that the grant recipient-

(1) Taught full-time in a low-income school as a 

highly qualified teacher as defined in § 686.2(d); and 

(2)(i) Taught a majority of classes during the period 

being certified in any of the high-need fields of 

mathematics, science, a foreign language, bilingual 

education, English language acquisition, special education, 

or as a reading specialist; or

(ii) Taught a majority of classes during the period 

being certified in another high-need field designated by 
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163

that State and listed in the Nationwide List, in accordance 

with §686.12(d). 

(b) For purposes of completing the service obligation, 

the elementary or secondary academic year may be counted as 

one of the grant recipient's four complete elementary or 

secondary academic years if the grant recipient completes 

at least one-half of the elementary or secondary academic 

year and the grant recipient's school employer considers 

the grant recipient to have fulfilled his or her contract 

requirements for the elementary or secondary academic year 

for the purposes of salary increases, tenure, and 

retirement if the grant recipient is unable to complete an 

elementary or secondary academic year due to—

(1) A condition that is a qualifying reason for leave 

under the Family and Medical Leave Act of 1993 (FMLA) (29 

U.S.C. 2612(a)(1) and (3));

(2) A call or order to Federal or State active duty, 

or Active Service as a member of a Reserve Component of the 

Armed Forces named in 10 U.S.C. 10101, or service as a 

member of the National Guard on full-time National Guard 

duty, as defined in 10 U.S.C. 101(d)(5); or

(3) Residing in or being employed in a federally 

declared major disaster area as defined in the Robert T. 
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164

Stafford Disaster Relief and Emergency Assistance Act (42 

U.S.C. 5122(2)).

(c)(1) A grant recipient who taught in more than one 

qualifying school or qualifying educational service agency 

during an elementary or secondary academic year and 

demonstrates that the combined teaching service was the 

equivalent of full-time, as supported by the certification 

of one or more of the chief administrative officers of the 

schools or educational service agencies involved, is 

considered to have completed one elementary or secondary 

academic year of qualifying teaching.

(2) If the school or educational service agency at 

which the grant recipient is employed meets the 

requirements of a low-income school in the first year of 

the grant recipient's four elementary or secondary academic 

years of teaching and the school or educational service 

agency fails to meet those requirements in subsequent 

years, those subsequent years of teaching qualify for 

purposes of satisfying the service obligation described in 

§686.12(b).

26. Section 686.41 is revised to read as follows:

§686.41 Periods of suspension.

(a)(1) A grant recipient who has completed or who has 

otherwise ceased enrollment in a TEACH Grant-eligible 
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165

program for which he or she received TEACH Grant funds may 

request a suspension from the Secretary of the eight-year 

period for completion of the service obligation based on—

(i) Enrollment in a program of study for which the 

recipient would be eligible for a TEACH Grant or in a 

program of study that has been determined by a State to 

satisfy the requirements for certification or licensure to 

teach in the State's elementary or secondary schools;

(ii) Receiving State-required instruction or 

otherwise fulfilling requirements for licensure to teach in 

a State’s elementary or secondary schools;

(iii) A condition that is a qualifying reason for 

leave under the FMLA; 

(iv) A call to order to Federal or State active duty 

or Active Service as a member of a Reserve Component of the 

Armed Forces named in 10 U.S.C. 10101, or service as a 

member of the National Guard on full-time National Guard 

duty, as defined in 10 U.S.C. 101(d)(5);

(v) Military orders for the recipient’s spouse for—

(A) Deployment with a military unit or as an 

individual in support of a call to Federal or State Active 

Duty, or Active Service; or

(B) A change of permanent duty station from a 

location in the continental United States to a location 
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166

outside of the continental United States or from a location 

in a State to any location outside of that State; or

(vi) Residing in or being employed in a federally 

declared major disaster area as defined in the Robert T. 

Stafford Disaster Relief and Emergency Assistance Act (42 

U.S.C. 5122(2)).

(2) A grant recipient may receive a suspension 

described in paragraphs (a)(1)(i) through (vi) of this 

section in one-year increments that-–

(i) Does not exceed a combined total of three years 

under paragraphs (a)(1)(i), (ii), and (iii) of this 

section; 

(ii) Does not exceed a total of three years under 

paragraph (a)(1)(iv) of this section;

(iii) Does not exceed a total of three years under 

paragraph (a)(1)(v) of this section; or 

(iv) Does not exceed a total of three years under 

paragraph (a)(1)(vi) of this section. 

(b) A grant recipient, or his or her representative 

in the case of a grant recipient who qualifies under 

paragraph (a)(1)(iv) or (vi) of this section, must apply 

for a suspension on a form approved by the Secretary, prior 

to being subject to any of the conditions under § 
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167

686.43(a)(1) through (a)(5) that would cause the TEACH 

Grant to convert to a Direct Unsubsidized Loan.

(c) A grant recipient, or his or her representative 

in the case of a grant recipient who qualifies under 

paragraph (a)(1)(iv) or (vi) of this section, must provide 

the Secretary with documentation supporting the suspension 

request as well as current contact information including 

home address and telephone number.

(d) On a case-by-case basis, the Secretary may grant 

a temporary suspension of the period for completing the 

service obligation if the Secretary determines that a grant 

recipient was unable to complete a full academic year of 

teaching or begin the next academic year of teaching due to

exceptional circumstances significantly affecting the 

operation of the school or educational service agency where 

the grant recipient was employed or the grant recipient’s 

ability to teach.

(e) The Secretary notifies the grant recipient 

regarding the outcome of the application for suspension.

27. Section 686.42 is amended by:

a. Revising the heading of the section by adding the 

words “or repay” after the word “serve”;

b. In paragraph (a)(1), adding the words “or repay” 

after the word “serve”;
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168

c. In paragraph (a)(2), adding the words “or repay” 

after the word “serve”;

d. Revising paragraph (b); and

e. In paragraph (c)(4), removing the words “and the 

Coast Guard” and adding, in their place, the words “the 

Coast Guard, a reserve component of the Armed Forces named 

in 10 U.S.C. 10101, or the National Guard”.

The revisions read as follows:

§ 686.42 Discharge of agreement to serve or repay.

* * * * *

(b)(1) A grant recipient's agreement to serve or 

repay is discharged if the recipient becomes totally and 

permanently disabled, as defined in 34 CFR 685.102(b), and 

the grant recipient applies for and satisfies the 

eligibility requirements for a total and permanent 

disability discharge in accordance with 34 CFR 685.213.

(2) If at any time the Secretary determines that the 

grant recipient does not meet the requirements of the 

three-year period following the discharge as described in 

34 CFR 685.213(b)(7), the Secretary will notify the grant 

recipient that the grant recipient’s obligation to satisfy 

the terms of the agreement to serve or repay is reinstated.

(3) The Secretary's notification under paragraph 

(b)(2) of this section will—
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169

(i) Include the reason or reasons for reinstatement;

(ii) Provide information on how the grant recipient 

may contact the Secretary if the grant recipient has 

questions about the reinstatement or believes that the 

agreement to serve or repay was reinstated based on 

incorrect information; and 

(iii) Inform the TEACH Grant recipient that he or she 

must satisfy the service obligation within the portion of 

the eight-year period that remained after the date of the 

discharge. 

(4) If the TEACH Grant made to a recipient whose 

TEACH Grant agreement to serve or repay is reinstated is 

later converted to a Direct Unsubsidized Loan, the 

recipient will not be required to pay interest that accrued 

on the TEACH Grant disbursements from the date the 

agreement to serve or repay was discharged until the date 

the agreement to serve or repay was reinstated.

* * * * *

28. Section 686.43 is revised to read as follows:

§ 686.43 Obligation to repay the grant.

(a)(1) The TEACH Grant amounts disbursed to the 

recipient will be converted into a Direct Unsubsidized 

Loan, with interest accruing from the date that each grant 

disbursement was made and be collected by the Secretary in 
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170

accordance with the relevant provisions of subpart A of 34 

CFR part 685 if—

(i) The grant recipient, regardless of enrollment 

status, requests that the TEACH Grant be converted into a 

Direct Unsubsidized Loan because he or she has decided not 

to teach in a qualified school or educational service 

agency, or not to teach in a high-need field, or for any 

other reason; or

(ii) The grant recipient does not begin or maintain 

qualified employment within the timeframe that would allow 

that individual to complete the service obligation within 

the number of years required under § 686.12.

(2) At least annually during the service obligation 

period under § 686.12, the Secretary notifies the grant 

recipient of—

(i) The terms and conditions that the grant recipient 

must meet to satisfy the service obligation;

(ii) The requirement for the grant recipient to 

provide to the Secretary, upon completion of each of the 

four required elementary or secondary academic years of 

teaching service, documentation of that teaching service on 

a form approved by the Secretary and certified by the chief 

administrative officer of the school or educational service 

agency in which the grant recipient taught and emphasizes
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171

the necessity to keep copies of this information and copies 

of the recipient’s own employment documentation; 

(iii) The service years completed and the remaining 

timeframe within which the grant recipient must complete 

the service obligation;

(iv) The conditions under which the grant recipient 

may request a temporary suspension of the period for 

completing the service obligation; 

(v) The conditions as described under § 686.43(a)(1) 

under which the TEACH Grant amounts disbursed to the 

recipient will be converted into a Direct Unsubsidized 

Loan; 

(vi) The potential total interest accrued; 

(vii) The process by which the recipient may contact 

the Secretary to request reconsideration of the conversion, 

the deadline by which the grant recipient must submit the 

request for reconsideration, and a list of the specific 

documentation required by the Secretary to reconsider the 

conversion; and 

(viii) An explanation that to avoid further accrual 

of interest as described in § 686.12(b)(4)(ii), a grant 

recipient who decides not to teach in a qualified school or 

field, or who for any other reason no longer intends to 

satisfy the service obligation, may request that the 
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172

Secretary convert his or her TEACH Grant to a Direct 

Unsubsidized Loan that the grant recipient may begin 

repaying immediately, instead of waiting for the TEACH 

Grant to be converted to a loan under the condition 

described in § 686.43(a)(1)(ii). 

(3) On or about 90 days before the date that a grant 

recipient’s TEACH Grants would be converted to Direct 

Unsubsidized Loans in accordance with paragraph (a)(1)(ii) 

of this section, the Secretary notifies the grant recipient 

of the date by which the recipient must submit 

documentation showing that the recipient is satisfying the 

obligation.

(4) If the TEACH Grant amounts disbursed to a 

recipient are converted to a Direct Unsubsidized Loan, the 

Secretary notifies the recipient of the conversion and 

offers conversion counseling as described in § 686.32(e).

(5) Except as provided in paragraph (a)(8) of this 

section, if a grant recipient’s TEACH Grant was converted 

to a Direct Unsubsidized Loan, the Secretary will reconvert 

the loan to a TEACH Grant based on documentation provided 

by the recipient or in the Secretary's records 

demonstrating that the recipient was satisfying the service 

obligation as described in § 686.12 or that the grant was 

converted to a loan in error.
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173

(6) If a grant recipient who requests reconsideration 

demonstrates to the satisfaction of the Secretary that a 

TEACH Grant was converted to a loan in error, the 

Secretary—

(i) Reconverts the loan to a TEACH Grant;

(ii) Applies any academic years of qualifying 

teaching service that the grant recipient completed before 

or during the period when the grant was incorrectly in loan 

status toward the grant recipient’s four-year service 

obligation requirement; 

(iii) Upon reconversion of the loan to a TEACH Grant, 

provides the grant recipient with an additional period of 

time, equal to eight years minus the number of full 

academic years of teaching that the recipient completed 

prior to the reconversion of the loan to a TEACH Grant, 

including any years of qualifying teaching completed during 

the period when the TEACH Grant was incorrectly in loan 

status, to complete the remaining portion of the service 

obligation. 

(iv) Ensures that the grant recipient receives credit 

for any payments that were made on the Direct Unsubsidized 

Loan that was reconverted to a TEACH Grant; 

(v) Notifies the recipient of the reconversion to a 

grant and explains that the recipient is once again 
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174

responsible for meeting all requirements of the service 

obligation under § 686.12; and

(vi) Requests deletion of any derogatory information 

reported to the consumer reporting agencies related to the 

grant while it was in loan status and furnishes a statement 

confirming that the grant was converted to a loan in error 

that the recipient may provide to creditors until the 

recipient’s credit history has been corrected. 

(7) If a grant recipient who requests reconsideration 

does not demonstrate to the satisfaction of the Secretary 

that a TEACH Grant was converted to a loan in error, the 

Secretary—

(i) Notifies the recipient that the loan cannot be 

converted to a TEACH Grant;

(ii) Explains the reason or reasons why the loan 

cannot be converted to a TEACH Grant; and

(iii) Explains how the recipient may contact the 

Federal Student Aid Ombudsman if he or she continues to 

believe that the TEACH Grant was converted to a loan in 

error. 

(8) In the case of a grant recipient whose TEACH 

Grant was converted to a Direct Unsubsidized Loan in 

accordance with § 686.43(a)(1)(i), the Secretary will 
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175

reconvert the loan to a grant and restore the recipient's 

service obligation if—

(i) The grant recipient submits a request to the 

Secretary to reconvert the loan to a TEACH Grant;

(ii) Excluding any periods of suspension granted 

under §686.41, there is sufficient time remaining for the 

grant recipient to complete the required four academic 

years of qualifying teaching service within eight years 

from the date the grant recipient ceased enrollment at the 

institution where the recipient received the grant or, in 

the case of a student who received a TEACH Grant at one 

institution and subsequently transferred to another 

institution and enrolled in another TEACH Grant-eligible 

program, within eight years from the date the recipient 

ceased enrollment at the other institution; and

(iii) In the case of a recipient who would not have 

sufficient time remaining to complete the service 

obligation within the eight-year period as described in 

paragraph (a)(8)(ii) of this section unless the recipient 

qualifies for a suspension under § 686.40, which may be 

granted retroactively, the recipient requests and is 

determined to be eligible for the suspension.

(9) A TEACH Grant recipient remains obligated to meet 

all requirements of the service obligation under § 686.12, 
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176

even if the recipient does not receive the notices from the 

Secretary as described in paragraph (a)(2) of this section. 

(b) A TEACH Grant that is converted to a loan, and is 

treated as a Direct Unsubsidized Loan, is not counted 

against the grant recipient's annual or aggregate loan

limits under 34 CFR 685.203.

(c) A grant recipient whose TEACH Grant has been 

converted to a Direct Unsubsidized Loan—

(1) Enters a six-month grace period prior to entering 

repayment, and

(2) Is eligible for all of the benefits of the Direct 

Loan Program.

PART 690—FEDERAL PELL GRANT PROGRAM

29. The authority citation for part 690 continues to 

read as follows: 

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

§ 690.75 [Amended]

30. Section 690.75 is amended by removing paragraph

(d).

PART 692—LEVERAGING EDUCATIONAL ASSISTANCE PARTNERSHIP 

PROGRAM

31. The authority citation for part 692 continues to 

read as follows: 
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177

AUTHORITY: 20 U.S.C. 1070c-1070c-4, unless otherwise 

noted.

32. Section 692.30 is amended by revising paragraph

(c)(5) to read as follows:

§ 692.30 How does a State administer its community 

service-learning job program?

* * * * *

(c) * * *

(5) Not involve the construction, operation, or 

maintenance of so much of any facility as is used or is to 

be used for sectarian instruction or as a place for 

religious worship; and

* * * * *

PART 694—GAINING EARLY AWARENESS AND READINESS FOR 

UNDERGRADUATE PROGRAMS (GEAR UP)

33. The authority citation for part 694 continues to 

read as follows: 

AUTHORITY: 20 U.S.C. 1070a-21 to 1070a-28.

34. Section 694.6 is amended by:

a. Revising paragraph (b) and

b. Removing paragraph (c).

The revision reads as follows:

§ 694.6 Who may provide GEAR UP services to students 

attending private schools?
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178

* * * * *

(b) When providing GEAR UP services to students 

attending private schools, the employee, individual, 

association, agency, or organization must be employed or 

contracted independently of the private school that the 

students attend, and of any other organization affiliated 

with the school, and that employment or contract must be 

under the control and supervision of the public agency.

§ 694.10 [Amended]

35. Section 694.10 is amended by, in paragraph (b), 

removing the words “that is not pervasively sectarian”.