65662 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

DEPARTMENT OF EDUCATION

34 CFR Parts 600, 668, 675, and 690

RIN 1845–AA19

Institutional Eligibility; Student

Assistance General Provisions;

Federal Work-Study Programs; and the

Federal Pell Grant Program

AGENCY: Office of Postsecondary

Education, Department of Education.

ACTION: Final regulations.

SUMMARY: The Secretary amends the

Institutional Eligibility, the Student

Assistance General Provisions, the

Federal Work-Study (FWS) Programs,

and the Federal Pell Grant Program

regulations. These final regulations

implement changes negotiated under

the negotiated rulemaking process

mandated by Congress under section

492 of the Higher Education Act of

1965, as amended, (HEA). These

changes streamline the application,

reapplication, and certification

processes for institutions that wish to

participate in the title IV, HEA programs

and provide simplification and

flexibility in other provisions of the

regulations that apply to the title IV

HEA programs.

DATES: Effective Date: These regulations

are effective July 1, 2001.

Implementation Date: The Secretary

has determined, in accordance with

section 482(c)(2)(A) of the HEA (20

U.S.C. 1089(c)(2)(A)), that institutions

that administer title IV, HEA program

funds may, at their discretion, choose to

implement §§ 600.31, 668.5 and 675.19

on or after November 1, 2000. For

further information see

‘‘Implementation Date of These

Regulations’’ under the SUPPLEMENTARY

INFORMATION section of this preamble.

FOR FURTHER INFORMATION CONTACT:

Mark Washington, U.S. Department of

Education, 400 Maryland Avenue, SW.,

Room 3045, ROB–3, Washington, DC

20202–5447. Telephone: (202) 260–

9321.

If you use a telecommunications

device for the deaf (TDD), you may call

the Federal Information Relay Service

(FIRS) at 1–800–877–8339.

Individuals with disabilities may

obtain this document in an alternative

format (e.g., Braille, large print,

audiotape, or computer diskette) on

request to the contact person listed

under FOR FURTHER INFORMATION

CONTACT.

SUPPLEMENTARY INFORMATION: On August

10, 2000 the Secretary published a

notice of proposed rulemaking (NPRM)

for Institutional Eligibility, Student

Assistance General Provisions, Federal

Work-Study Programs (FWS), Federal

Family Education Loan (FFEL) Program,

William D. Ford Direct Loan (Direct

Loan) Program; and the Federal Pell

Grant Program, in the Federal Register

(65 FR 49134).

In the preamble to the NPRM, the

Secretary discussed on pages 49135

through 49147 the major changes

proposed in that document. These

included the following:

• Revising §§ 600.20 and 600.21,

amending §§ 600.10 and 600.31, and

removing §§ 600.9 and 600.30 to

streamline the application,

reapplication and certification processes

for institutions that wish to participate

in the title IV, HEA programs (pages

49149–49152).

• Revising § 600.31 to clarify the

reporting responsibilities for institutions

that undergo a change of ownership that

results in change of control (pages

49151–49152).

• Revising § 668.5 to expand the

possibilities for institutions to create

written agreements with certain other

entities to have part or all of their

eligible programs provided by those

entities (pages 49152–49153).

• Adding flexibility in § 668.13 to the

training requirements for institutional

certification (page 49153).

• Revising in § 668.19 the process for

obtaining a transfer student’s financial

aid history (page 49153).

• Revising § 675.19 to permit

additional certification and record

retention options for FWS program

administration (pages 49153–49154).

• Providing in §§ 682.604 and

685.301 additional flexibility in the loan

disbursement rules for students enrolled

in non-traditional programs (page

49154).

• Clarifying in § 668.165 the

notification requirements when title IV

loan proceeds are credited to a student’s

institutional account (page 49154).

• Adding flexibility in § 682.207 to

lender disbursement requirements and

eligibility determinations for students

receiving loan proceeds under the FFEL

Program (page 49154).

In these final regulations, we make

two significant changes from the

regulations that we proposed in the

NPRM published on August 10, 2000.

First, we will require all institutions to

report to us of their intent to add a

location offering 50 percent or more of

an eligible program, regardless of the

type of institution. A small number of

institutions—those that meet one or

more of the specified conditions

discussed later in the analysis of

comments—will have to await our

approval of the new location before

disbursing title IV, HEA program funds

to students at that location. Other

institutions must report to us their

intent to add additional locations, but

are not required to wait for our approval

of those locations.

Second, public institutions must

report changes in governance to us

within 10 days of their occurrence.

The Secretary published an NPRM on

July 27, 2000, for parts 682 and 685 in

the Federal Register (65 FR 46316). In

the preamble to that NPRM, the

Secretary discussed (on pages 46317–

46320) proposed changes to the FFEL

and Direct Loan regulations. In order to

consolidate the final regulations for the

FFEL and Direct Loan programs into a

single Federal Register publication,

those proposed provisions of parts 682

and 685 that were published in the

August 10, 2000 NPRM are now

included as a part of the final

regulations that respond to the July 27,

2000 NPRM. We strongly encourage the

reader to refer to the preambles from

both of the NPRMs for a full discussion

of these regulations.

Implementation Date of These

Regulations

Section 482(c) of the HEA requires

that regulations affecting programs

under title IV of the HEA be published

in final form by November 1 prior to the

start of the award year (which begins

July 1) to which they apply. However,

that section of the HEA also permits the

Secretary to designate any regulation as

one that an entity subject to the

regulation may choose to implement

earlier. If the Secretary designates a

regulation for early implementation, he

may specify when and under what

conditions the entity may implement it.

Under this authority, the Secretary has

designated the following regulations for

early implementation:

Section 600.31—Change of Ownership

Resulting in a Change of Control for

Private Nonprofit, Private For-Profit and

Public Institutions

These regulations may be

implemented upon publication of this

final rule. This means that if an

institution is subject to loss of eligibility

due to a change in ownership that

results in a change of control, it may ask

the Secretary to permit it to continue to

participate in the title IV, HEA programs

on a provisional basis, provided that the

institution submits a materially

complete application.

This early implementation also

changes the definition of ‘‘ownership

interests’’ to exclude certain

institutional investors, and clarifies

when a shareholder would be deemed a

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65663

controlling shareholder for change of

control issues.

Early implementation means that

public institutions that experience a

change in governance will not be

considered to have undergone a change

in ownership resulting in a change of

control, but these institutions must

report such changes within ten days of

the occurrence.

Finally, early implementation means

that the provisions that define more

clearly ownership in a publicly-traded

institution will be in effect.

Section 668.5—Written Arrangements

To Provide Educational Programs

These regulations may be

implemented by institutions upon

publication of this final rule. This

means that a school may use a single

written arrangement with a studyabroad organization to represent

agreements between the school and one

or more foreign schools. Also, any of the

eligible institutions that are parties to a

written arrangement may make title IV

calculations and disbursements and will

not be considered third-party servicers.

Section 675.19—Fiscal Procedures and

Records

These regulations may be

implemented upon publication of this

final rule. Institutions that administer

the Federal Work-Study (FWS)

Programs will now have the option to

certify FWS timesheets in writing or

electronically. If an institution elects to

use an electronic certification option, it

should be certain to use the appropriate

safeguards, as outlined in the NPRM at

page 49145.

Analysis of Comments and Changes

The regulations in this document

were developed through the use of

negotiated rulemaking. Section 492 of

the HEA requires that, before publishing

any proposed regulations to implement

programs under title IV of the HEA, the

Secretary obtain public involvement in

the development of the proposed

regulations. After obtaining advice and

recommendations, the Secretary must

conduct a negotiated rulemaking

process to develop the proposed

regulations.

These regulations were published in

proposed form on August 10, 2000,

following the completion of the

negotiated rulemaking process. The

Secretary invited comments on the

proposed regulations that were due by

September 25, 2000, and we received

thirty-three comments.

An analysis of the comments we

received and of the changes we made in

the regulations since publication of the

NPRM follows.

We group major issues according to

subject. We discuss other substantive

issues under the sections of the

regulations to which they pertain.

Generally, we do not address technical

and other minor changes—and

suggested changes the law does not

authorize the Secretary to make.

Section 600.20—Application Procedures

for Establishing, Reestablishing,

Maintaining, or Expanding Institutional

Eligibility and Certification

Applying for Additional Locations

(Permanent and Temporary)

Comments: Many commenters

supported exempting public institutions

from applying for approval to add an

additional location at which 50 percent

or more of an eligible program will be

offered, if the additional location is

properly licensed and accredited, and

located within the same state as the

main campus. Commenters opined that

the exemption is warranted because the

Federal government’s interests are

generally protected by sufficient

oversight and systems of control at

public institutions. Additionally, most

of these commenters believed that

sufficient financial backing by those

governing public entities, and

monitoring by accrediting agencies are

suitable to ensure the academic quality

of the location and to protect students

who rely upon title IV assistance.

One commenter believed the

exemption is appropriate because public

institutions that have added locations in

the past have not placed Federal funds

at risk.

Another commenter generally

supported the proposed exemption, but

believed that the exemption should

apply to an additional location even if

the location is not in the same state as

the main campus. That commenter

believed that the reasons given by the

Department for the proposed exemption

for public institutions (sufficient

oversight and financial backing by a

public entity) are valid, regardless of

whether the additional location is

located in the same state as the main

campus.

Six commenters did not support

requiring public institutions to report a

new location. The commenters

contended that, because we have

virtually always approved additional

locations for public institutions,

required reporting would create

unnecessary paperwork and a potential

for delay. Some of the commenters also

believed that the minimal risk

represented by public institutions

delivering title IV, HEA assistance made

reporting unnecessary.

Another commenter supported

requiring public institutions to inform

us of a new location. That commenter

felt that six years between recertification

cycles for participation in the student

aid programs is too long for locations to

go unreported. The commenter believed

that those entities charged with

oversight will improve the quality of

such oversight, by having an awareness

of such locations. The commenter noted

that these benefits appear to outweigh

the minimal burden of reporting the

locations.

Several commenters opposed our

proposal exempting public institutions

from applying for approval of an

additional location. These commenters

felt that treating public institutions

differently from other institutions is

unwarranted, and would give an unfair

advantage to public institutions by

eliminating potential delays. The

commenters believed that one set of

criteria should be developed for all

institutions.

Two commenters felt that the unfair

competitive advantage referred to above

would not serve the needs of students

nor the public interest, because it would

not produce the best range of

educational offerings or encourage the

most efficient use of resources. Another

commenter noted that in some highly

competitive disciplines, such as

computer science, information

technology, and business administration

or executive management, even a 35 day

head start (our stated goal for the length

of time within which we will process

applications for approval) constitutes a

significant advantage in terms of public

relations and market share.

Three commenters believed that there

are many poorly performing public

institutions and that such an exemption

would unnecessarily put taxpayer funds

at risk. One of these commenters was

specifically concerned that the proposed

exemption for public institutions would

permit higher-risk public institutions,

such as those on provisional

certification or the reimbursement

payment method, to open new locations

and disburse title IV aid without our

approval. The commenter felt that this

scenario would contradict the purpose

of provisional certification and

reimbursement, which is to permit us to

more closely monitor higher-risk

institutions. The commenter felt that it

was arbitrary and capricious to allow

such high-risk public institutions to

open additional locations without our

approval, while denying this benefit to

non-public institutions with strong

65664 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

records of administrative capability and

regulatory compliance.

Another commenter stated that there

was no publicly available evidence to

support the contention that all public

institutions provide better oversight and

control, plan better, and have more

fiscal resources than institutions in

other sectors. The commenter was

convinced that there is evidence to the

contrary, such as the placement of

public institutions on provisional

certification, the failure of public

institutions to meet their unique

financial responsibility standards, and

those public institutions with high

student loan default rates.

Some commenters that did not

support the exemption for public

institutions suggested a number of

general criteria that should be used in

determining whether any institution

qualifies for an exemption. One

commenter suggested that the criteria

should reward those institutions that

have demonstrated appropriate

administrative capability. Another

commenter felt that the Federal interest

in additional locations should focus on

an institution’s maintenance of quality

in their educational programs. The

commenter stated that we seemed to

acknowledge that the quality of

programs is the issue by our statement

in the preamble to the NPRM that,

‘‘some non-public institutions grew so

rapidly that the integrity of their

educational and student aid programs

was compromised’’.

Other commenters offered specific

ideas about criteria that should be used

to determine if any institution should be

granted an exemption from reporting

additional locations. One commenter

suggested that an exemption should be

given to an institution that: satisfies the

criteria we proposed in § 600.20(d)(2)

for temporary locations, is fully

certified, meets the general standards of

financial responsibility, has no late

audits or significant audit findings in

the last two years, has no significant

program review liabilities, and was not

subject to a limitation, suspension, or

termination action within the last three

years. Another commenter generally

agreed with the suggested criteria but

instead of supporting the proposed

criteria in § 600.20(d)(2), suggested the

following criteria: the institution has

full regional or national accreditation,

would not be subject to a loss of

eligibility under § 668.188 if it adds a

new location, and has not added more

than 10 locations at which it offered 50

percent or more of an educational

program since it was last certified to

participate in the title IV programs. The

commenter also believed that to qualify

for an exemption, an institution should

have no late audits or significant audit

findings in the last five years and never

have been subject to a program review

liability.

Another commenter believed that it is

appropriate for us to learn about

temporary locations that have been

opened through annual compliance

audits. The commenter did not feel that

a separate notification would be needed.

However, another commenter

representing the largest professional

association of certified public

accountants disagreed. In particular, the

commenter stated that we should

require institutions to submit

information on temporary locations

directly to us. The commenter noted

that if we want independent third-party

assurances on an institution’s

management’s assertions regarding the

institution’s compliance with such a

requirement, compliance objectives and

associated auditor reporting could be

developed as part of the annual

compliance audit.

One commenter supported the

provision that would exempt a nonpublic institution from applying for

approval of licensed and accredited

temporary locations if it met the

proposed criteria, including the

limitation on adding no more than six

locations offering 50 percent or more of

a program since it was last certified.

Another commenter felt that it is more

appropriate to focus on the number of

such locations established in a short

period of time rather than over the

entire certification period. The

commenter recommended that no more

than two such locations should be

added during any 12-month period, and

that for any more locations an

institution should be required to obtain

our approval prior to disbursing any

title IV funds to students attending

those locations.

Another commenter suggested that

the criteria for exemption of temporary

locations should include a certification

from the institution’s Chief Executive

Officer that the institution currently

meets all applicable federal

requirements regarding financial and

administrative capability (based on the

institution’s most recent audited

financial statement and compliance

audit, recent regulatory reviews, and

program participation agreement). The

commenter believed that no more title

IV funds should be disbursed to

students at a temporary location after

the end of the first year, until we have

approved the location, unless the

institution submitted a materially

complete application for our approval at

least 35 days before the end of the

period.

The commenter also felt that the

proposed requirement that the

institution must not have acquired the

assets of another institution that

formerly provided programs at that site

was stated in an overly broad manner.

Instead, the commenter recommended

that the institution must not have

acquired a substantial amount of the

assets of another institution that

formerly provided programs at that site

within the past 12 months. The

commenter believed that this would

address significant, recent acquisitions

or transfers of assets that we need to be

aware of without providing for

unnecessary scrutiny of insignificant

transactions that do not pose concern.

Finally, one commenter noted

inconsistencies between the proposed

regulatory language for § 600.20(d)(2)(ii)

(which refers to locations at which more

than 50 percent of a program is added)

and the description of the proposed

provision (which refers to locations as

‘‘offering at least 50 percent of an

educational program’’ in one place and

‘‘offered more than 50 percent of an

educational program’’ in another). The

commenter believed that the correct

wording is ‘‘at least 50 percent’’.

Discussion: We appreciate the careful

analysis and consideration given to

these issues by the commenters. With

regard to the last comment, the

commenter is correct that we

inadvertently used imprecise language

in describing the requirement when we

published the NPRM. The correct term,

and the one used in the regulations is

‘‘50 percent or more’’.

We carefully considered the

comments received on both the proposal

to exempt public institutions from

applying for approval of an additional

location where the institution will offer

50 percent or more of an eligible

program, and the proposal to exempt all

institutions from the requirement to

apply for approval of an additional

location if it will be in operation for less

than 12 months.

We agree that the approach to

additional locations in the NPRM had

the potential to bar some high

performing, non-public institutions

from the benefits and incentives we

desire to make available to those who

administer our programs properly.

We stated in the NPRM our belief that

the proposed regulations would

enhance efficiency and provide

administrative relief for a sizable

segment of the population of eligible

institutions, by not requiring them to

report locations they add until the next

scheduled recertification. Upon

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65665

consideration of the comments, we

believe there is an opportunity to meet

that objective in a manner that may

benefit more schools than we initially

anticipated. This is possible if we focus

on reviewing and approving those

institutions that give us clear reasons for

special attention, while allowing others

that demonstrate good compliance and

stability to merely report to us of their

actions. Thus, we can preserve our

desire to provide regulatory and

administrative relief where merited by

compliance and performance. This

flexibility is supported by a set of

standards that identifies those schools

that we should review before approving

their ability to disburse title IV, HEA

funds at a new location, regardless of

the type of institution.

Based upon the comments received

on these issues and our plans to

improve the efficiency of the reporting

process, we are persuaded that it is

prudent and not particularly

burdensome, to require all institutions

report to us if they wish to disburse title

IV, HEA program funds to students

enrolled at a new additional location, at

which 50 percent or more of an eligible

program will be offered.

For the purposes of these regulations,

reporting consists of submitting an

electronic application which provides

specific information and required

supporting documentation regarding the

new location.

While all institutions must report

their new locations, only those that

meet certain criteria are required to wait

for our approval before disbursing title

IV, HEA program funds to eligible

students at those locations. A full

explanation of those criteria follows

later in this discussion. For the

purposes of these regulations, approval

consists of the Secretary’s written

response to an application, granting

specific permission to an institution to

disburse funds to students enrolled at

the specified location. If an institution

is not required to wait for our approval,

it must simply report to us through the

electronic application process prior to

disbursing title IV, HEA program funds.

These provisions replace the

proposed across-the-board exemption

from reporting or approval for public

institutions and the exemption for

temporary locations included in the

NPRM.

Under these new provisions, no

distinction is made between temporary

and permanent locations. All

institutions are required to report to us

any new location where 50 percent or

more of an eligible program is offered.

The report must include supporting

documentation and be provided before

the institution disburses title IV, HEA

funds to students at that location. Those

institutions that are only required to

report to us before they disburse federal

student aid need not wait for our

approval. However, those institutions

that meet any of the criteria discussed

below must report to us and then wait

for our approval before they can

disburse title IV, HEA program funds to

eligible students at the new location.

We will only require an institution to

apply and wait for our approval to

disburse title IV, HEA program funds at

locations where they offer 50 percent or

more of an eligible location if the

institution: (1) Is provisionally certified,

(2) is on the reimbursement or cash

monitoring system of payment, (3) has

acquired the assets of another

institution that provided educational

programs at that location during the

preceding year, and the other institution

participated in the title IV, HEA

programs during that year, (4) would be

subject to a loss of eligibility under the

cohort default rate regulations at

§ 688.188 if it adds that location, or if

(5) the Secretary previously prohibited

it from disbursing title IV, HEA program

funds to students enrolled at an

additional location before the Secretary

notifies it that the location is eligible to

participate in the title IV, HEA

programs.

Under the last criteria we may

preclude an institution from adding

locations due to financial,

administrative, compliance or other

concerns about an institution. In this

case, the institution will receive a

written notice that sets out the reason it

will be required to apply for approval

for additional locations. The institution

may request reconsideration of that

decision if it shows there are material

errors in the facts we considered in

making our determination.

With regard to the criteria related to

provisional certification, the Secretary

plans to publish a change to the

provision in 34 CFR 668.16(m) that

relates to placing an institution on

provisional certification if it has a

cohort default rate in the FFEL and/or

Direct Loan programs of 25 percent or

greater. That change will provide more

flexibility to the Secretary in choosing

whether or not to place such an

institution on provisional certification.

We believe that many more

institutions will benefit from the

provision that they must only report to

us and not await our approval, since it

allows them to begin disbursing aid at

these new locations immediately upon

their reporting to us. We anticipate the

number of institutions that qualify for

this flexibility will be much greater than

the number of institutions that will be

required to await our approval before

disbursing title IV, HEA program funds

to eligible students at those locations.

Also, the minimal reporting burden

required of an institution enables us to

maintain accurate and updated records

of all locations where students who are

receiving title IV, HEA funds are

enrolled.

Institutions are responsible for

knowing whether they need to obtain

our approval to disburse title IV, HEA

program funds to eligible students at the

new location. If an institution is unsure

whether it meets the criteria requiring it

to wait for our approval, it may contact

us for specific guidance. Institutions

that add locations without obtaining our

approval when they knew, or should

have known, that they were required to

wait may be subject to administrative

repayments and other sanctions.

Changes: We are revising § 600.20(c)

to eliminate the exemptions for public

institutions and for temporary

additional locations that were proposed

in § 600.20(d) of the NPRM and any

related references to those exemptions.

Under § 600.21(a)(3), all institutions are

required to report to us if they wish to

add an additional location where they

offer or will offer 50 percent or more of

an eligible program. Section 600.20(c)

provides that an institution must apply

to us for approval if it has added an

additional location and must await the

Secretary’s approval before disbursing

title IV, HEA program funds at that

location if it meets one or more of the

conditions described above and

included in the regulation at

§ 600.20(c)(1)(i)–(v).

Comments: One commenter, in

focusing on the Secretary’s possible

responses to an application as proposed

in § 600.20(f)—§ 600.20(e) in these final

rules —, asked us to clarify the

difference between a ‘‘program in which

it is eligible to participate’’ versus

‘‘programs in which it is eligible to

apply for funds’’ in § 600.20(f)(2)

—§ 600.20(e)(2) in these final rules —.

The commenter also asked for

clarification of the reference to a branch

campus in § 600.20(f)(4)–§ 600.20(e)(6)

in these final rules.

Discussion: Section 600.20(e)(2)

reflects the current regulations at

§ 600.21(a), which identifies the

conditions and applications to which

the Secretary will respond. Section

600.20(e)(2)(i) states that the Secretary

will notify an institution whether it is

eligible to participate in the title IV,

HEA programs. Section 600.20(e)(2)(ii)

states that the notification will

enumerate the specific title IV, student

aid programs in which the institution is

65666 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

eligible to participate. Section

600.20(e)(2)(iii) states that the Secretary

notifies the institution of the specific

title IV, student aid programs for which

the institution must submit an

additional application to receive

funding. For example, the campus-based

programs require submission of an

annual application (FISAP) before funds

are allocated to an institution.

Notices sent according to

§ 600.20(e)(2)(iv) and 600.20(e)(2)(v)

will indicate the effective dates of

eligibility, and any conditions, related

to that eligibility respectively.

We agree with the commenter that

§ 600.20(f)(4) in the NPRM does not

provide a reference to § 600.20(c)(4) and

(5). We will make the necessary

corrections.

Changes: Section 600.20(e) has been

revised to identify how the Secretary

responds to applications for branch

campuses.

Section 600.31—Change in Ownership

Resulting in a Change in Control for

Private Nonprofit and Private For-Profit

Institutions

Publicly-Traded Corporations

Comments: A commenter

recommended that we include a

succinct definition of the term

‘‘institutional investor’’ that specifically

mentions the following types of

investors: investment companies,

registered investment advisors, business

development companies, employee

benefit plans, banks, insurance

companies, pension funds, and

securities dealers.

Discussion: We agree that our

definition of the term ‘‘institutional

investor’’ should be clarified. However,

we find that definitions of this industry

term are often more descriptive of

entities to be included, rather than

exhaustive of the characteristics of such

entities. Therefore, we defer to the

Securities and Exchange Commission’s

(SEC) regulatory definition of a U.S.

institutional investor, with which

publicly-traded corporations and most

investors can be expected to be familiar.

Changes: We have added a crossreference from the SEC regulations in 17

CFR 240.15a–6(b)(7) to the reference

‘‘U.S. institutional investor’’ in the

definitions at § 600.31(b)(2)(ii) and

600.31(c)(2)(ii)(A). Although illustrative

of the entities that will be considered

institutional investors under this

regulation, the reference is not intended

to be exhaustive.

Comments: One commenter felt that

the proposed definition of a ‘‘controlling

shareholder’’ equates ‘‘voting stock’’

with ‘‘shares’’. The commenter noted

that voting stock is not always

equivalent to the number of shares of

stock an individual may own in a

corporation, as in the case where nonvoting stock has been issued. The

commenter believed that if this

definition is based on other regulatory

provisions that raise the same issue, we

should address all occurrences of this in

the final regulations. Another commenter suggested

clarifying in proposed

§ 600.31(c)(2)(ii)(A) that the controlling

shareholder be determined through

measuring only the voting stock, by

adding the phrase ‘‘of the voting stock’’

after the word ‘‘shares’’ to read: ‘‘A

controlling shareholder is a shareholder

who holds or controls through

agreement both 25 percent or more of

the total outstanding voting stock of the

corporation and more shares of the

voting stock than any other

shareholder.’’

Discussion: We agree that the term

‘‘share’’ is not synonymous with actual

voting stock. The integral element of

this topic relates to a shareholder’s

ability to significantly impact or control

the actions of a corporation, or its

management. Thus, we agree that

revising the regulation to focus on

ownership and control of voting stock is

appropriate. Changes: Section 600.31(c)(2)(ii)(A)

has been changed to add the words ‘‘of

voting stock’’ after the word ‘‘shares’’,

signaling that the regulation applies to

stock that contains voting privileges. Comments: A commenter believed

that the proposed wording used to

describe who is not a controlling

shareholder in § 600.31(c)(2)(ii)(A)

should be modified. The commenter

suggested that the regulation should

exclude from consideration all shares

held in the categories listed, rather than

only excluding such stock if it

represents the individual’s sole holdings

in that corporation. The commenter

recommended revising the third

sentence to exclude all of the shares

held in the excluded capacities in

determining whether the shareholder is

a controlling shareholder to read: ‘‘Any

shares of the corporation’s voting stock

held by a shareholder (1) as an

institutional investor, (2) in mutual

funds, (3) through a profit-sharing plan

or (4) in an Employee Stock Ownership

Plan (ESOP) are excluded for purposes

of determining whether the shareholder

is a controlling shareholder.’’ Discussion: We disagree. When

identifying those shareholders whose

ability to influence a corporation’s

management of student assistance

merits scrutiny, we believe that it is

reasonable to exclude large, institutional

investors whose only investment with a

specific corporation exists solely for the

investment value. We consider these

investors generally to have investment

objectives that differ from other

investors who take a controlling

position in a corporation. The objectives

of the institutional investor normally

prompt a lesser interest in influencing

management policies that may affect the

administration of student assistance

than those of other controlling

shareholders. It is reasonable to infer

that a shareholder who acquires control

of the voting rights of stock held by

others who qualify as institutional

investors does not show this same lack

of interest in those management

policies.

Therefore, a person who controls 25

percent or more of the outstanding

voting stock of a company and more

stock than any other person by a

combination of personal investment

ownership and representation of

institutional investors uniquely

classifies one as a controlling

shareholder, who can reasonably be

expected to exercise real influence over

management and its policies. The effect

of this kind of shareholder’s control on

the corporation deserves the same

scrutiny as that of any other shareholder

who can control corporate policies.

Thus, to determine whether a

shareholder is a controlling shareholder

under the bright-line test, the rule

counts all voting stock held or

controlled by a shareholder, unless all

stock held by that shareholder is held as

an institutional investor.

Changes: None.

Comments: One commenter disagreed

with our proposal to suspend eligibility

by defining a change of ownership

resulting in a change of control to occur

when a stockholder’s ownership share

crosses what he believed to be an

arbitrary ‘‘bright line’’. He thought it

was unfair to define a decrease in stock

ownership by a controlling shareholder

in a way that caused the negative result

of suspending an institution’s eligibility

until a new application has been

reviewed and approved. The commenter

noted that, while the SEC and GAAP

may require certain reporting activities

for certain events, they do not cause

immediate suspension of business

activities or licenses. The commenter

recommended that eligibility should be

continued if financial responsibility and

administrative capability has already

been demonstrated and has not been

downgraded by the ownership change.

The commenter felt that the 25 percent

threshold is arbitrary. The commenter

contended that, while 25 percent may

be a large enough percentage of stock to

allow an individual to influence a

corporation, more than 50 percent of the

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65667

stock must be owned for an individual

to have control of the corporation. The

commenter also noted that control does

not necessarily change with purchase or

sale of stock. He stated that control is

exercised by a corporation’s Board of

Directors, which does not automatically

change with purchase and sale of stock.

He felt that any review or suspension of

an institution’s eligibility should be

predicated on a precipitous change in

Directors, not stock ownership.

Discussion: We disagree with the

commenter’s notion that the use of a

clear threshold in determining

ownership and control is unfair or

arbitrary. Quite the contrary, we sought

to avoid such treatment by referencing

established standards and guidelines of

the accounting industry, which are

accepted and adopted by most publiclytraded corporations.

Since most financial transactions are

accounted for in accordance with the

established system of accounting

principles, we patterned our ‘‘bright

line’’ threshold directly after

Accounting Principles Board Opinion

No. 18, which defines for GAAP

purposes the percentage of ownership

that can reasonably be presumed to give

an investor the ability to exercise

significant influence over an investee.

GAAP provides that control of 20

percent of the voting stock of a

corporation raises a rebuttable

presumption of control of the

corporation and conversely, that control

of a smaller percentage of a

corporation’s stock raises a rebuttable

presumption that the holder lacks

control. We chose that adoption of an

irrebutable ‘‘bright line’’ test was

desirable both to allow institutions to

plan their financial affairs with greater

predictability, and to eliminate the

burden of our examining the

circumstances surrounding each

significant diminution in ownership

interest of an institution owned by a

publicly-traded corporation. We believe

that a higher threshold than 20 percent

should be used in return for adoption of

a ‘‘bright line’’ standard. The choice of

25 percent as the threshold is not

compelled by statute or regulation, but

is a reasonable choice. We therefore

choose to retain 25 percent as the

‘‘bright line’’ measure of control.

We also disagree that while 25

percent ownership of stock may be

influential, 50 percent is required to

control an entity. For publicly-traded

corporations, the opposite inference is

compelling: The more widely held the

stock of a corporation, the smaller the

percentage of its stock that need be

controlled by a person in order to allow

that person to ‘‘direct or cause the

direction of the management and

policies’’ of the corporation (see,

§ 600.31(b) definition of ‘‘control’’). The

investing public and the accounting

profession recognize that a shareholder

can control a corporation while owning

or controlling far less than 50 percent of

its stock. There is no reason that we

should ignore that same conclusion.

Finally, the position that eligibility

and certification lapse upon a change in

ownership that results in a change in

control is not a position that we

arbitrarily adopted, but is required by

the HEA. Section 498(i) mandates that

eligibility must be reestablished after a

change in ownership resulting in a

change in control, and that the transfer

of the controlling interest of stock of the

institution is an action that results in

such a change in control.

Changes: None.

Comments: Another commenter

supported adding specific references to

‘‘private nonprofit and private for-profit

institutions’’. The commenter believed

that these terms help nonprofit

institutions recognize that certain

change of ownership provisions apply

to them, because the words ‘‘change of

ownership’’ could suggest applicability

only to the for-profit sector. The

commenter did not feel that the

proposed changes to § 600.31(c)(7) are

an appropriate recognition of

differences among the sectors in

postsecondary education, and believes

that the change of ownership

regulations for independent nonprofit

institutions should be reconsidered in

negotiated rulemaking in the near

future. The commenter believed that

some mergers between institutions

should be allowed without triggering a

change of ownership resulting in a

change of control, such as the merger of

two independent nonprofit institutions,

both of which are participating in good

standing in the title IV programs. The

commenter believed that such a merger

could serve the best interest of students

and society by allowing distinctive

educational programs to continue to be

available to students, supported by the

stronger financial and administrative

base of the merged institution.

Discussion: We believe Congress

considered similar arguments when it

deliberated the latest reauthorization of

the HEA. While the specific terminology

suggested by the commenter may not

appear in the statute, the very example

that the commenter provides regarding

a merger between institutions is

specifically addressed in section

498(i)(2)(C) of the HEA. We considered

suggestions that we should implement

certain labels to clarify the full extent

and application of this section to all

institutions, regardless of unique

sectors. Thus we included the terms

‘‘private nonprofit’’ and ‘‘private forprofit’’ as descriptive modifiers where

appropriate. We disagree with the

notion that certain entities are

disadvantaged by general labels or the

lack of more specific ones.

Changes: None.

Public Institutions

Comments: Nine commenters

supported the proposed provision that

does not regard a change in governance

at a public institution as a change in

ownership, if the institution’s new

governing body is in the same State

included in the institution’s program

participation agreement and the new

governing body has acknowledged the

institution’s responsibilities under its

program participation agreement. The

commenters felt this exemption was

appropriate for the same reasons that

some commenters supported exempting

public institutions from applying for our

approval of an additional location:

sufficient oversight and systems of

control by governing public entities,

sufficient financial backing of the

governing public entity, and monitoring

by the institution’s accrediting agency to

ensure that the Federal government’s

interests are protected.

One commenter supported the

provision that would provide that a

change in governance at a public

institution is not a change in ownership.

Additionally, the commenter did not

believe that it was necessary to limit

this to changes in governance in the

same state included in the program

participation agreement. The

commenter felt that the same assurances

associated with the fact that public

oversight of the institution exists would

also apply in the rare instance that the

governance of a public institution

switched from one state to another. The

commenter also did not believe that it

would be necessary to require the new

governing authority to acknowledge the

institution’s responsibilities under its

program participation agreement. The

commenter noted that the institution

remains the same institution and,

therefore, retains the responsibilities it

acquired by signing its program

participation agreement.

Five commenters did not believe that

a particular form of acknowledgement

should be required for institutions that

must acknowledge their continuing

responsibilities under the program

participation agreement because the

formal transfer of governing authority

might not include such an

acknowledgement. These commenters

felt it would be more useful for

65668 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

institutions to tailor their

acknowledgement to reflect the specific

circumstances of the transfer of

governance. One commenter felt that a

letter or statement from the institutional

authority would be sufficient.

Three commenters did not support

the proposed provision allowing a

change in governance at a public

institution to not be considered a

change in ownership if the institution’s

new governing body is in the same

State. The commenters contended that

there are several circumstances where a

public institution should be considered

to have had a change in ownership.

The commenters also believed that a

change in ownership has occurred when

a public institution is transferred from

control from a higher level of

governmental authority (such as a State)

to a lower one (such as a county) which

may not have the same level of

resources to commit to the institution.

One commenter believed that in such a

case there was no guarantee of

continuing operational effectiveness.

The commenter felt that such an

exemption for all public schools would

put taxpayers’ funds at risk. Two of the

commenters believed that, at the very

least, the institution should be required

to inform us of the change so that we

can determine whether it meets the

requirements for the exemption.

One commenter felt that new types of

‘‘quasi public’’ institutions, such as

charter colleges are not likely to have

the same level of oversight and financial

stability as a traditional public

institution, and should not be given

broad regulatory exemptions. The

commenter also felt that we should

retain an interest in approving a change

in which an institution, for the first

time, will be administering the Federal

financial aid programs. The commenter

gave an example of several two-year

colleges in a state that have been

managed by four-year institutions, but

may be given autonomy to operate (and

presumably, participate in the title IV,

HEA programs) on their own. The

commenter concluded by noting that all

of the public institutions in that state

may have their state funding tied to

meeting specific performance goals.

Discussion: We explained in the

NPRM and in the earlier discussion

related to additional locations that there

has been a consistent history of stability,

compliance and accountability in the

operation of public institutions that

supports the proposal to exempt certain

governance changes within the State

from being considered changes of

ownership resulting in changes of

control. Moreover, this level of

accountability has been present at every

level of government that operates public

institutions. For that reason, we are not

persuaded that the level of oversight or

the systems of control that monitor the

performance of these institutions will

change drastically because of a transfer

in control between governing public

entities within a State.

We are not persuaded to extend the

scope of the proposal to permit a public

institution in one State to acquire a

public institution in another State

without having that change considered

a change of ownership resulting in a

change in control, and thus requiring

the institution to apply for approval of

a change of ownership. In such an

instance, the ownership and control of

the institution would be changing from

one State to another, so that an entirely

different public constituency would be

assuming responsibility for the

institution. This type of structure would

also raise questions about State

licensing, since the public institution

owned by one State would be operating

under the State licensing requirements

of a different State. We have considered

the suggestions from commenters that

public institutions should be required to

report to us when a change of

governance takes place even if that

change is not considered a change in

ownership resulting in a change in

control, and we agree. Such information

will permit us to examine the

transaction to ensure that it meets the

definitional requirements and to

determine if there are any other issues

involving the institution warranting

further action.

We agree with the comments that

cautioned against exempting changes of

governance at a public institution that is

transferred to a ‘‘quasi public’’ entity

such as a charter college or other hybrid

entity. As we stated in the NPRM, the

provision does not apply if a change in

governance involves a hybrid entity,

such as a corporation with limited

liability, public-private partnerships, or

joint ownership with out-of-State

entities.

Changes: Section 600.21(a)(9) has

been added to require public

institutions to report to us within 10

days of when they experience a change

in governance.

Comments: A commenter asked us to

clarify the manner in which the

institution’s continuing responsibilities

must be acknowledged. The commenter

noted that in the preamble to the NPRM

(page 49141), we stated that the

acknowledgment must be written and

must be a part of the documents that

transfer control to the new governing

body. The commenter felt that the next

sentence confuses the meaning of the

previous sentence by stating that the

written acknowledgment, if not

included in the documents transferring

control, can be submitted separately to

us. The commenter believed that we

intended to say that notification without

acknowledgment suffices if that

acknowledgment is included in the

official transfer documents; otherwise,

notification of the change (not simply

acknowledgement of its official records)

is required.

Discussion: As explained above, the

regulation is being changed to require

public institutions to report to us within

10 days of undergoing a change in

governance. If documentation

transferring the governance from one

public entity to another within the State

explicitly acknowledges the institution’s

continuing responsibilities under its

Program Participation Agreement, that

documentation is sufficient, and no

additional acknowledgment must be

provided in the notice, or separately.

Such an acknowledgment may be based

on the circumstances of the transfer, and

simply included in the official transfer

documentation. If the documentation

transferring control of the public

institution to another in-State public

entity does not acknowledge the

institution’s continuing responsibilities

under its Program Participation

Agreement, the institution must

acknowledge its continuing

responsibilities by separate letter or in

the notice advising us of the change in

governance.

Changes: None.

Section 668.5—Written Arrangements

To Provide Educational Programs

Comments: One commenter from a

public institution noted that the

proposed flexibilities that would extend

to institutions participating in studyabroad programs would eliminate many

current deterrents for students trying to

gain access to aid for those programs. He

believed that the existing guidance

regarding contractual and consortium

agreements often causes confusion. The

commenter stated that the proposed

regulation would clarify the required

procedures and effectively minimize

such confusion. The commenter noted

the clarification the proposed regulation

makes by defining third-party providers

and study-abroad organizations as

appropriate constituent groups in studyabroad programs.

Another commenter representing a

large, private university supported the

proposed revisions, and expected a

significant reduction in the

administrative burden experienced, as

schools currently must obtain and

maintain separate agreements with each

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65669

foreign institution that its students are

attending. The commenter believed that

the ability to make agreements with

study-abroad organizations will enhance

the quality and consistency of

information shared between home and

host institutions, and will likely create

more expedient delivery of the title IV,

HEA program funds to students in these

programs.

Discussion: We appreciate the

positive responses to this proposal. We

anticipate that these regulations will

make it substantially easier for students

to receive financial aid while enrolled

in eligible domestic programs away

from their home institutions. We believe

that the ability for either home or host

institutions to pay the student’s title IV,

HEA program funds is a significant

feature that will enhance and expand

diverse learning opportunities.

Changes: None.

Section 668.13—Certification

Procedures

Comments: One commenter agreed

with our proposal to permit the chief

executive of an institution to designate

another executive level officer to serve

as an alternate for certification training

purposes. The commenter also thought

it made sense not to require schools to

attend training when a participating

institution was merely adding a new

title IV, HEA program.

Discussion: We believe that all

eligible, participating institutions

should receive basic training about the

federal regulations and procedural

requirements that pertain to

administering the title IV, HEA

programs. We want to assure students

and taxpayers that they can expect an

accurate application of the program

requirements and a consistent level of

proficiency on the part of the

institutions we authorize to deliver title

IV assistance.

We regularly review the training

requirements to ensure that relevance,

accuracy, and practicality are reflected

in the subject matter. We also seek to

continually simplify the training

requirements without diluting the core

content, to encourage institutions to

make use of these resources when

assessing and maintaining the technical

readiness of their staffs.

Changes: None.

Section 668.19—Financial Aid History

Comments: Several commenters

supported the proposal to eliminate the

paper financial aid transcript (FAT)

requirements for all transfer students in

favor of a process under which the

National Student Loan Data System

(NSLDS) provides financial aid history

information about current-year transfer

students directly to schools that need it

for one or more of their transfer

students.

Discussion: We appreciate the support

of the commenters.

Changes: None.

Comments: One commenter asked

whether the school or the student is

liable for an overpayment of title IV aid

based on the financial aid history

information the school receives from

NSLDS after the seven day timeframe.

Discussion: Once a school receives

information that limits a student’s

eligibility, it may not disburse

additional title IV, HEA aid to that

student until the problem is revolved.

As currently provided in Dear Colleague

Letter GEN–96–13, a school that follows

the procedures in obtaining financial

aid history information from NSLDS

may rely on that information in making

eligibility and award determinations.

The school is not liable for any

overpayments. The same is true under

this rule. A school that notifies NSLDS

and either waits seven days or checks

NSLDS on-line before it disburses title

IV, HEA program funds is not liable for

any overpayments based on information

it receives from NSLDS at a later date.

However, a student may be liable for

any overpayment that is the result of

information the school receives after it

follows the procedures in these rules.

This concept is explained more fully in

Dear Colleague Letter GEN–96–13.

Changes: None.

Comments: One commenter suggested

that the Secretary designate this

regulation as one that a school may

implement as soon as it is published as

a final rule instead of waiting until it

normally takes effect on July 1, 2001.

Discussion: We are currently

discussing with schools and other

partners various administrative

approaches that could be used to

implement this rule. After we complete

those discussions, system improvements

and enhancements need to be made to

NSLDS before schools can use it for this

purpose. Therefore, it is unlikely that

we will have the systems support

needed to implement the new

provisions before July 1, 2001.

Changes: None.

Comments: One commenter stated

that the NSLDS information on an

Institutional Student Information

Record (ISIR) should be current with all

financial aid transactions contained in

NSLDS. This case requires no

distinction between current-year and

prior-year transfer students with respect

to the ISIR information a school uses to

make eligibility and award

determinations. The commenter further

stated that if the information on an ISIR

is not the same as that in NSLDS, as

implied in the preamble discussion, we

should provide current NSLDS

information to schools via the ISIR

process.

Discussion: The financial aid history

information on an ISIR reflects NSLDS

information as of the date that the ISIR

is created. Currently, an ISIR is not

updated solely to reflect disbursements

of title IV aid that are reported by an

NSLDS data provider. This is because,

under such a process, every school that

a student listed on the FAFSA would be

required to receive an updated ISIR

every time new disbursements were

reported to NSLDS, including the school

that reported those disbursements.

Certainly, there is no benefit in

providing to schools, at considerable

costs to the taxpayers and institutions,

millions of updated ISIR records that

contain information they do not need.

On the other hand, we agree with the

commenter’s general view that there

should be a single process under which

a school receives updated financial aid

history information for all transfer

students. However, in many cases

(particularly for prior-year transfer

students) the updated information will

not affect those students’ current year

eligibility or award amounts. Moreover,

currently we have no way of

determining which school a transfer

student is attending until after NSLDS

receives disbursement information

identifying that school.

For these reasons, we proposed a

targeted approach under which a school

would inform NSLDS of the transfer

students that are attending (or planning

to attend) their school and NSLDS

would provide, directly to that school,

updated information about those

students. Although these rules apply

only to current-year transfer students, a

school may use the new NSLDS process

to receive updated information for any

transfer student.

Changes: None.

Section 668.165—Notices and

Authorizations

Comments: Two commenters

representing a large coalition in the

higher education community stated that

requiring confirmation and retention of

electronic notices is counter-productive,

and diminishing to the efficiencies

inherent in constantly advancing

technologies. By comparison they noted

that we do not require similar tracking

and confirmation of receipt for mail sent

via the U.S. Postal Service (USPS).

Discussion: After many discussions

regarding the practical complications of

documenting receipt of electronic mail,

65670 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

we agree that some schools may

experience an impractical, although

unintended, burden to maintain copies

of the student’s or parent’s confirmation

of a disbursement notice. Given the

range and diversity of capabilities in

various e-mail and other electronic

applications, we believe that

institutions should determine the best

way for them to confirm that a student

or parent received an electronic notice.

Thus, the language in the NPRM, and in

the final rule, allows electronic notices,

while only requiring that institutions

confirm that those notices reached the

intended parties.

We noted in the NPRM that we

support the presumption recognized in

the law that mail deposited with the

USPS is delivered. Certainly, there are

documented cases where this

presumption fails because of the

potential for error that accompanies any

system dependent upon human

interaction. However, we see the

differences between an established,

federally supported, national delivery

system and an electronic delivery

method that operates independently and

through many different private software

providers without a uniform standard,

as very significant.

The USPS has several proven

methods and systems that it may use to

track mail deposited in its system. It

also utilizes uniform automated systems

that process mail throughout the nation.

The USPS also sets coherent operating

standards and employs a system of

quality assurance to monitor the

application and effectiveness of those

standards.

On the contrary, both the software

applications and the hardware upon

which they operate generally limit email capabilities. There are no observed

standards or mandated features inherent

in all e-mail software applications that

provide the quality assurance or

maintain a similar level of consistency

that parallels that of the USPS.

Changes: None.

Section 675.19—Fiscal Procedures and

Records

Comments: One commenter strongly

supported our proposal to allow

electronic certification of Federal WorkStudy (FWS) timesheets. The

commenter believed that this option

alleviates some of the inconvenience of

loss, damage, forgery and other

complications that may occur when

using paper certifications. The

commenter also felt that the proposed

regulations will enhance the timeliness

of the delivery of FWS funds, and will

improve the security and retention of

the related records.

Another commenter was also

supportive of our proposal to allow

electronic certification by a supervisor

to approve FWS hours recorded on a

student’s time record. The commenter

noted that many of the departments at

her school have several hundred

employees each. Accordingly, the

commenter was aware that several of

these departments have implemented

electronic timekeeping systems, which

have vastly improved the accuracy of

the timekeeping function for such a

large number of employees. The

commenter also felt that being able to

move the FWS payroll employees to a

more technologically advanced system

would be less burdensome, and would

avoid having to keep a separate time

system for FWS students. The

commenter believed that these

regulations would improve the

utilization of FWS in both on-campus

jobs and increasingly, in off-campus

employment.

Discussion: We appreciate the support

for these regulations. Just as we do with

manual certification systems, we

continue to urge institutions to assess

the adequacy of their systems and

internal controls, to assure that

reasonable safeguards exist to secure

certifications that will be completed

electronically.

We refer those who administer the

FWS Program to page 49145 of the

August 10, 2000 NPRM for a full

discussion of the safeguards we expect

schools to include in any electronic

certification process they implement.

Changes: None.

Executive Order 12866

We have reviewed these final

regulations in accordance with

Executive Order 12866. Under the terms

of the order we have assessed the

potential costs and benefits of this

regulatory action.

The potential costs associated with

the final regulations are those resulting

from statutory requirements and those

we have determined to be necessary for

administering these programs effectively

and efficiently.

In assessing the potential costs and

benefits—both quantitative and

qualitative—of these final regulations,

we have determined that the benefits of

the regulations justify the costs.

We have also determined that this

regulatory action does not unduly

interfere with state, local, and tribal

governments in the exercise of their

governmental functions.

We discussed the potential costs and

benefits of these final regulations in the

preamble to the NPRM under Executive

Order 12866 (see page 49147 of the

NPRM) Potential Costs and Benefits.

Paperwork Reduction Act of 1995

The Paperwork Reduction Act of 1995

does not require you to respond to a

collection of information unless it

displays a valid Office of Management

and Budget (OMB) control number. We

display the valid OMB control numbers

assigned to the collections of

information in these final regulations at

the end of the affected sections of the

regulations.

Assessment of Educational Impact

In the NPRM we requested comments

on whether the proposed regulations

would require transmission of

information that any other agency or

authority of the United States gathers or

makes available.

Based on the response to the NPRM

and on our review, we have determined

that these final regulations do not

require transmission of information that

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(Catalog of Federal Domestic Assistance

Number: 84.033 Federal Work-Study

Program; 84.063 Federal Pell Grant Program)

List of Subjects

34 CFR Part 600

Administrative practice and

procedure, Colleges and universities,

Consumer protection, Grant programseducation, Reporting and recordkeeping

requirements, Student aid.

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65671

34 CFR Part 668

Administrative practice and

procedure, Colleges and universities,

Consumer protection, Grant programs—

education, Loan programs—education,

Reporting and recordkeeping

requirements, Student aid.

34 CFR Part 675

Colleges and universities,

Employment, Grant programs—

education, Reporting and recordkeeping

requirements, Student aid.

34 CFR Part 690

Grant programs—education,

Reporting and recordkeeping

requirements, Student aid.

Dated: October 25, 2000.

Richard W. Riley,

Secretary of Education.

For the reasons stated in the

preamble, the Secretary amends title 34

of the Code of Federal Regulations by

amending parts 600, 668, 675, and 690

as follows:

PART 600—INSTITUTIONAL

ELIGIBILITY UNDER THE HIGHER

EDUCATION ACT OF 1965, AS

AMENDED

1. The authority citation for part 600

continues to read as follows:

Authority: 20 U.S.C. 1001, 1002, 1003,

1088, 1091, 1094, 1099b, and 1099c, unless

otherwise noted.

§§ 600.9 and 600.30 [Removed and

reserved]

2. Sections 600.9 and 600.30 are

removed and reserved.

3. Section 600.10 is amended by

removing and reserving paragraph (a)(2)

and by revising paragraphs (b)(3)(i) and

(b)(3)(ii) to read as follows:

§ 600.10 Date, extent, duration, and

consequence of eligibility.

* * * * *

(b) * * *

(3) * * *

(i) The Secretary approves that

location under § 600.20(e)(4); or

(ii) The location is licensed and

accredited, the institution does not have

to apply to the Secretary for approval of

that location under § 600.20(c), and the

institution has reported to the Secretary

that location under § 600.21.

(Approved by Office of Management and

Budget under control number 1845–0098)

4. Section 600.20 is revised to read as

follows:

§ 600.20 Application procedures for

establishing, reestablishing, maintaining, or

expanding institutional eligibility and

certification.

(a) Initial eligibility application. An

institution that wishes to establish its

eligibility to participate in any HEA

program must submit an application to

the Secretary for a determination that it

qualifies as an eligible institution under

this part. If the institution also wishes

to be certified to participate in the title

IV, HEA programs, it must indicate that

intent on the application, and submit all

the documentation indicated on the

application to enable the Secretary to

determine that it satisfies the relevant

certification requirements contained in

34 CFR part 668, subparts B and L.

(b) Reapplication. (1) A currently

designated eligible institution that is not

participating in the title IV, HEA

programs must apply to the Secretary

for a determination that the institution

continues to meet the requirements in

this part if the Secretary requests the

institution to reapply. If the institution

wishes to be certified to participate in

the title IV, HEA programs, it must

submit an application to the Secretary

and must submit all the supporting

documentation indicated on the

application to enable the Secretary to

determine that it satisfies the relevant

certification requirements contained in

subparts B and L of 34 CFR part 668.

(2) A currently designated eligible

institution that participates in the title

IV, HEA programs must apply to the

Secretary for a determination that the

institution continues to meet the

requirements in this part and in 34 CFR

part 668 if the institution wishes to—

(i) Continue to participate in the title

IV, HEA programs beyond the

scheduled expiration of the institution’s

current eligibility and certification

designation;

(ii) Reestablish eligibility and

certification as a private nonprofit,

private for-profit, or public institution

following a change in ownership that

results in a change in control as

described in § 600.31; or

(iii) Reestablish eligibility and

certification after the institution changes

its status as a proprietary, nonprofit, or

public institution.

(c) Application to expand eligibility.

A currently designated eligible

institution that wishes to expand the

scope of its eligibility and certification

and disburse title IV, HEA Program

funds to students enrolled in that

expanded scope must apply to the

Secretary and wait for approval to—

(1) Add a location at which the

institution offers or will offer 50 percent

or more of an educational program if

one of the following conditions applies,

otherwise it must report to the Secretary

under § 600.21:

(i) The institution participates in the

title IV, HEA programs under a

provisional certification, as provided in

34 CFR 668.13.

(ii) The institution receives title IV,

HEA program funds under the

reimbursement or cash monitoring

payment method, as provided in 34 CFR

part 668, subpart K.

(iii) The institution acquires the assets

of another institution that provided

educational programs at that location

during the preceding year and

participated in the title IV, HEA

programs during that year.

(iv) The institution would be subject

to a loss of eligibility under 34 CFR

668.188 if it adds that location.

(v) The Secretary previously notified

the institution that it must apply for

approval of an additional location.

(2) Increase its level of program

offering (e.g., adding graduate degree

programs when it previously offered

only baccalaureate degree programs);

(3) Add an educational program if the

institution is required to apply to the

Secretary for approval under § 600.10(c);

(4) Add a branch campus at a location

that is not currently included in the

institution’s eligibility and certification

designation; or

(5) Convert an eligible location to a

branch campus.

(d) Application format. To satisfy the

requirements of paragraphs (a), (b), and

(c) of this section, an institution must

apply in a format prescribed by the

Secretary for that purpose and provide

all the information and documentation

requested by the Secretary to make a

determination of its eligibility and

certification.

(e) Secretary’s response to

applications. (1) If the Secretary

receives an application under paragraph

(a) or (b)(1) of this section, the Secretary

notifies the institution—

(i) Whether the applicant institution

qualifies in whole or in part as an

eligible institution under the

appropriate provisions in §§ 600.4

through 600.7; and

(ii) Of the locations and educational

programs that qualify as the eligible

institution if only a portion of the

applicant qualifies as an eligible

institution;

(2) If the Secretary receives an

application under paragraphs (a) or (b)

of this section and that institution

applies to participate in the title IV,

HEA programs, the Secretary notifies

the institution—

(i) Whether the institution is certified

to participate in those programs;

65672 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

(ii) Of the title IV, HEA programs in

which it is eligible to participate;

(iii) Of the title IV, HEA programs in

which it is eligible to apply for funds;

(iv) Of the effective date of its

eligibility to participate in those

programs; and

(v) Of the conditions under which it

may participate in those programs;

(3) If the Secretary receives an

application under paragraph (b)(2) of

this section, the Secretary notifies the

institution whether it continues to be

certified, or whether it reestablished its

eligibility and certification to participate

in the title IV, HEA programs and the

scope of such approval.

(4) If the Secretary receives an

application under paragraph (c)(1) of

this section for an additional location,

the Secretary notifies the institution

whether the location is eligible or

ineligible to participate in the title IV,

HEA programs, and the date of

eligibility if the location is determined

eligible;

(5) If the Secretary receives an

application under paragraph (c)(2) of

this section for an increase in the level

of program offering, or for an additional

educational program under paragraph

(c)(3) of this section, the Secretary

notifies the institution whether the

program qualifies as an eligible

program, and if the program qualifies,

the date of eligibility; and

(6) If the Secretary receives an

application under paragraphs (c)(4) or

(c)(5) of this section to have a branch

campus certified to participate in the

title IV, HEA programs as a branch

campus, the Secretary notifies the

institution whether that branch campus

is certified to participate and the date

that the branch campus is eligible to

begin participation.

(f) Disbursement rules related to

applications. (1)(i) Except as provided

under paragraph (f)(1)(ii) of this section

and 34 CFR 668.26, if an institution

submits an application under paragraph

(b)(2)(i) of this section because its

participation period is scheduled to

expire, after that expiration date the

institution may not disburse title IV,

HEA program funds to students

attending that institution until the

institution receives the Secretary’s

notification that the institution is again

eligible to participate in those programs.

(ii) An institution described in

paragraph (f)(1)(i) of this section may

disburse title IV, HEA program funds to

its students if the institution submits to

the Secretary a materially complete

renewal application in accordance with

the provisions of 34 CFR 668.13(b)(2),

and has not received a final decision

from the Department on that

application.

(2)(i) Except as provided under

paragraph (f)(2)(ii) of this section and 34

CFR 668.26, if a private nonprofit,

private for-profit, or public institution

submits an application under paragraph

(b)(2)(ii) or (b)(2)(iii) of this section

because it has undergone or will

undergo a change in ownership that

results in a change of control or a

change in status, the institution may not

disburse title IV, HEA program funds to

students attending that institution after

the change of ownership or status until

the institution receives the Secretary’s

notification that the institution is

eligible to participate in those programs.

(ii) An institution described in

paragraph (f)(2)(i) of this section may

disburse title IV, HEA program funds to

its students if the Secretary issues a

provisional extension of certification

under paragraph (g) of this section.

(3) If an institution must apply to the

Secretary under paragraphs (c)(1)

through (c)(4) of this section, the

institution may not disburse title IV,

HEA program funds to students

attending the subject location, program,

or branch until the institution receives

the Secretary’s notification that the

location, program, or branch is eligible

to participate in the title IV, HEA

programs.

(4) If an institution applies to the

Secretary under paragraph (c)(5) of this

section to convert an eligible location to

a branch campus, the institution may

continue to disburse title IV, HEA

program funds to students attending

that eligible location.

(5) If an institution does not apply to

the Secretary to obtain the Secretary’s

approval of a new location, program,

increased level of program offering, or

branch, and the location, program, or

branch does not qualify as an eligible

location, program, or branch of that

institution under this part and 34 CFR

part 668, the institution is liable for all

title IV, HEA program funds it disburses

to students enrolled at that location or

branch or in that program.

(g) Application for provisional

extension of certification. (1) If a private

nonprofit institution, a private for-profit

institution, or a public institution

participating in the title IV, HEA

programs undergoes a change in

ownership that results in a change of

control as described in 34 CFR 600.31,

the Secretary may continue the

institution’s participation in those

programs on a provisional basis, if the

institution under the new ownership

submits a ‘‘materially complete

application’’ that is received by the

Secretary no later than 10 business days

after the day the change occurs.

(2) For purposes of this section, a

private nonprofit institution, a private

for-profit institution, or a public

institution submits a materially

complete application if it submits a

fully completed application form

designated by the Secretary supported

by—

(i) A copy of the institution’s State

license or equivalent document that—as

of the day before the change in

ownership—authorized or will

authorize the institution to provide a

program of postsecondary education in

the State in which it is physically

located;

(ii) A copy of the document from the

institution’s accrediting association

that—as of the day before the change in

ownership—granted or will grant the

institution accreditation status,

including approval of any non-degree

programs it offers;

(iii) Audited financial statements of

the institution’s two most recently

completed fiscal years that are prepared

and audited in accordance with the

requirements of 34 CFR 668.23; and

(iv) Audited financial statements of

the institution’s new owner’s two most

recently completed fiscal years that are

prepared and audited in accordance

with the requirements of 34 CFR 668.23,

or equivalent information for that owner

that is acceptable to the Secretary.

(h) Terms of the extension. (1) If the

Secretary approves the institution’s

materially complete application, the

Secretary provides the institution with a

provisional Program Participation

Agreement (PPA). The provisional PPA

extends the terms and conditions of the

program participation agreement that

were in effect for the institution before

its change of ownership.

(2) The provisional PPA expires on

the earlier of—

(i) The date on which the Secretary

signs a new program participation

agreement;

(ii) The date on which the Secretary

notifies the institution that its

application is denied; or

(iii) The last day of the month

following the month in which the

change of ownership occurred, unless

the provisions of paragraph (h)(3) of this

section apply.

(3) If the provisional PPA will expire

under the provisions of paragraph

(h)(2)(iii) of this section, the Secretary

extends the provisional PPA on a

month-to-month basis after the

expiration date described in paragraph

(h)(2)(iii) of this section if, prior to that

expiration date, the institution provides

the Secretary with—

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65673

(i) A ‘‘same day’’ balance sheet

showing the financial position of the

institution, as of the date of the

ownership change, that is prepared in

accordance with Generally Accepted

Accounting Principles (GAAP)

published by the Financial Accounting

Standards Board and audited in

accordance with Generally Accepted

Government Auditing Standards

(GAGAS) published by the U.S. General

Accounting Office;

(ii) If not already provided, approval

of the change of ownership from the

State in which the institution is located

by the agency that authorizes the

institution to legally provide

postsecondary education in that State;

(iii) If not already provided, approval

of the change of ownership from the

institution’s accrediting agency; and

(iv) A default management plan

unless the institution is exempt from

providing that plan under 34 CFR

668.14(b)(15).

(Approved by the Office of Management and

Budget under control number 1845–0098)

(Authority: 20 U.S.C. 1001, 1002, 1088, and

1099c)

5. Section 600.21 is revised to read as

follows:

§ 600.21 Updating application information.

(a) Reporting requirements. Except as

provided in paragraph (b) of this

section, an eligible institution must

report to the Secretary in a manner

prescribed by the Secretary no later than

10 days after the change occurs, of any

change in the following:

(1) Its name, the name of a branch, or

the name of a previously reported

location.

(2) Its address, the address of a

branch, or the address of a previously

reported location.

(3) Its establishment of an accredited

and licensed additional location at

which it offers or will offer 50 percent

or more of an educational program if the

institution wants to disburse title IV,

HEA program funds to students enrolled

at that location, under the provisions in

paragraph (d) of this section.

(4) The way it measures program

length (e.g., from clock hours to credit

hours, or from semester hours to quarter

hours).

(5) A decrease in the level of program

offering (e.g. the institution drops its

graduate programs).

(6) A person’s ability to affect

substantially the actions of the

institution if that person did not

previously have this ability. The

Secretary considers a person to have

this ability if the person—

(i) Holds alone or together with

another member or members of his or

her family, at least a 25 percent

‘‘ownership interest’’ in the institution

as defined in § 600.31(b);

(ii) Represents or holds, either alone

or together with other persons, under a

voting trust, power of attorney, proxy, or

similar agreement at least a 25 percent

‘‘ownership interest’’ in the institution,

as defined in § 600.31(b); or

(iii) Is a general partner, the chief

executive officer, or chief financial

officer of the institution.

(7) The individual the institution

designates under 34 CFR 668.16(b)(1) as

its title IV, HEA Program administrator.

(8) The closure of a branch campus or

additional location that the institution

was required to report to the Secretary.

(9) The governance of a public

institution.

(b) Additional reporting from

institutions owned by publicly-traded

corporations. An institution that is

owned by a publicly-traded corporation

must report to the Secretary any change

in the information described in

paragraph (a)(6) of this section when it

notifies its accrediting agency, but no

later than 10 days after the institution

learns of the change.

(c) Secretary’s response to reporting.

The Secretary notifies an institution if

any reported changes affects the

institution’s eligibility, and the effective

date of that change.

(d) Disbursement rules related to

additional locations. When an

institution must report to the Secretary

about an additional location under

paragraph (a)(3) of this section, the

institution may not disburse title IV,

HEA funds to students at that location

before it reports to the Secretary about

that location. Unless it is an institution

that must apply to the Secretary under

§ 600.20(c)(1), once it reports to the

Secretary about that location, the

institution may disburse those funds to

those students if that location is

licensed and accredited.

(e) Consequence of failure to report.

An institution’s failure to inform the

Secretary of a change described in

paragraph (a) of this section within the

time period stated in that paragraph

may result in adverse action against the

institution.

(f) Definition. The Secretary considers

a member of a person’s family to be his

or her—

(1) Parent, sibling, spouse or child;

(2) Spouse’s parent or sibling;

(3) Child’s spouse; and

(4) Sibling’s spouse.

(Approved by the Office of Management and

Budget under control number 1845.0098)

(Authority: 20 U.S.C. 1001, 1002, 1088, and

1099c)

6. Section 600.31 is amended by:

A. Revising the section heading.

B. Revising paragraph (a)(1).

C. Redesignating paragraph (a)(2) as

paragraph (a)(3) and adding a new

paragraph (a)(2).

D. Removing the definition of

‘‘ownership’’ in paragraph (b) and

adding, in its place, the definition of

‘‘ownership or ownership interest’’.

E. Revising paragraphs (c)(2), (c)(6),

and (c)(7).

F. Revising paragraph (d)(7).

The additions and revisions read as

follows:

§ 600.31 Change in ownership resulting in

a change in control for private nonprofit,

private for-profit and public institutions.

(a)(1) Except as provided in paragraph

(a)(2) of this section, a private nonprofit,

private for-profit, or public institution

that undergoes a change in ownership

that results in a change in control ceases

to qualify as an eligible institution upon

the change in ownership and control. A

change in ownership that results in a

change in control includes any change

by which a person who has or thereby

acquires an ownership interest in the

entity that owns the institution or the

parent corporation of that entity,

acquires or loses the ability to control

the institution.

(2) If a private nonprofit, private forprofit, or public institution has

undergone a change in ownership that

results in a change in control, the

Secretary may, under the provisions of

§ 600.20(g) and (h), continue the

institution’s participation in the title IV,

HEA programs on a provisional basis,

provided that the institution submits,

under the provisions of § 600.20(g), a

materially complete application—

(i) No later than 10 business days after

the change occurs; or

(ii) For an institution owned by a

publicly-traded corporation, no later

than 10 business days after the

institution knew, or should have known

of the change based upon SEC filings,

that the change occurred.

* * * * *

(b) * * *

Ownership or ownership interest. (1)

Ownership or ownership interest means

a legal or beneficial interest in an

institution or its corporate parent, or a

right to share in the profits derived from

the operation of an institution or its

corporate parent.

(2) Ownership or ownership interest

does not include an ownership interest

held by—

(i) A mutual fund that is regularly and

publicly traded;

(ii) A U.S. institutional investor, as

defined in 17 CFR 240.15a–6(b)(7);

65674 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

(iii) A profit-sharing plan of the

institution or its corporate parent,

provided that all full-time permanent

employees of the institution or

corporate parent are included in the

plan; or

(iv) An Employee Stock Ownership

Plan (ESOP).

* * * * *

(c) * * *

(2) Publicly traded corporations

required to be registered with the

Securities and Exchange Commission

(SEC). A change in ownership and

control occurs when—

(i) A person acquires such ownership

and control of the corporation so that

the corporation is required to file a

Form 8K with the SEC notifying that

agency of the change in control; or

(ii) (A) A person who is a controlling

shareholder of the corporation ceases to

be a controlling shareholder. A

controlling shareholder is a shareholder

who holds or controls through

agreement both 25 percent or more of

the total outstanding voting stock of the

corporation and more shares of voting

stock than any other shareholder. A

controlling shareholder for this purpose

does not include a shareholder whose

sole stock ownership is held as a U.S.

institutional investor, as defined in 17

CFR 240.15a–6(b)(7), held in mutual

funds, held through a profit-sharing

plan, or held in an Employee Stock

Ownership Plan (ESOP).

(B) When a change of ownership

occurs as a result of paragraph

(c)(2)(ii)(A) of this section, the

institution may submit its most recent

quarterly financial statement as filed

with the SEC, along with copies of all

other SEC filings made after the close of

the fiscal year for which a compliance

audit has been submitted to the

Department of Education, instead of the

‘‘same day’’ balance sheet.

(C) If a publicly-traded institution is

provisionally certified due to a change

in ownership under paragraph (c)(2)(ii)

of this section, and that institution

experiences another change of

ownership under paragraph (c)(2)(ii) of

this section, an approval of the

subsequent change in ownership does

not extend the original expiration date

for the provisional certification

provided that any current controlling

shareholder was listed on the change of

ownership application for which the

original provisional approval was

granted.

* * * * *

(6) Nonprofit institution. A nonprofit

institution changes ownership and

control when a change takes place that

is described in paragraph (d) of this

section.

(7) Public institution. The Secretary

does not consider that a public

institution undergoes a change in

ownership that results in a change of

control if there is a change in

governance and the institution after the

change remains a public institution,

provided—

(i) The new governing authority is in

the same State as included in the

institution’s program participation

agreement; and

(ii) The new governing authority has

acknowledged the public institution’s

continued responsibilities under its

program participation agreement.

(d) * * *

(7) A change in status as a for-profit,

nonprofit, or public institution.

* * * * *

(Approved by the Office of Management and

Budget under control number 1845–0098)

PART 668—STUDENT ASSISTANCE

GENERAL PROVISIONS

7. The authority citation for part 668

is revised to read as follows:

Authority: 20 U.S.C. 1001, 1002, 1003,

1085, 1091, 1091b, 1092, 1094, 1099c, and

1099c–1, unless otherwise noted.

8. Section 668.2(b) is amended by

revising paragraphs (2)(ii) and (iii) and

adding paragraph (2)(iv) to the

definition of the term ‘‘academic year’’

to read as follows:

§ 668.2—General definitions.

* * * * *

(b) * * *

Academic year: * * *

(2) * * *

(ii) If an institution provides an

educational program using a semester,

trimester, or quarter system, or in clock

hours, the Secretary considers that the

institution provides one week of

instructional time in that program

during any week the institution

provides for that program—

(A) At least one day of regularly

scheduled instruction or examinations;

or

(B) After the last scheduled day of

classes for a term, at least one day of

study for initial examinations.

(iii) If an institution provides an

educational program using credit hours

but not a semester, trimester, or quarter

system, the Secretary considers that the

institution provides one week of

instructional time in that program

during any week the institution

provides for that program—

(A) At least 12 hours of regularly

scheduled instruction or examinations;

or

(B) After the last scheduled day of

classes for a payment period, at least 12

hours of study for final examinations.

(iv) Instructional time does not

include any vacation periods,

homework, or periods of orientation or

counseling.

9. A new § 668.5 is added to read as

follows:

§ 668.5 Written arrangements to provide

educational programs.

(a) Written arrangements between

eligible institutions. If an eligible

institution enters into a written

arrangement with another eligible

institution, or with a consortium of

eligible institutions, under which the

other eligible institution or consortium

provides all or part of the educational

program of students enrolled in the

former institution, the Secretary

considers that educational program to

be an eligible program if it otherwise

satisfies the requirements of § 668.8.

(b) Written arrangements for studyabroad. Under a study abroad program,

if an eligible institution enters into a

written arrangement with a foreign

institution, or an organization acting on

behalf of a foreign institution, under

which the foreign institution provides

part of the educational program of

students enrolled in the eligible

institution, the Secretary considers that

educational program to be an eligible

program if it otherwise satisfies the

requirements of paragraphs (c)(1)

through (c)(3) of this section.

(c) Written arrangements between an

eligible institution and an ineligible

institution or organization. If an eligible

institution enters into a written

arrangement with an institution or

organization that is not an eligible

institution under which the ineligible

institution or organization provides part

of the educational program of students

enrolled in the eligible institution, the

Secretary considers that educational

program to be an eligible program if—

(1) The ineligible institution or

organization has not had its eligibility to

participate in the title IV, HEA programs

terminated by the Secretary, or has not

voluntarily withdrawn from

participation in those programs under a

termination, show-cause, suspension, or

similar type proceeding initiated by the

institution’s State licensing agency,

accrediting agency, guarantor, or by the

Secretary;

(2) The educational program

otherwise satisfies the requirements of

§ 668.8; and

(3)(i) The ineligible institution or

organization provides not more than 25

percent of the educational program; or

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations 65675

(ii)(A) The ineligible institution or

organization provides more than 25

percent but not more than 50 percent of

the educational program;

(B) The eligible institution and the

ineligible institution or organization are

not owned or controlled by the same

individual, partnership, or corporation;

and

(C) The eligible institution’s

accrediting agency, or if the institution

is a public postsecondary vocational

educational institution, the State agency

listed in the Federal Register in

accordance with 34 CFR part 603, has

specifically determined that the

institution’s arrangement meets the

agency’s standards for the contracting

out of educational services.

(d) Administration of title IV, HEA

programs. (1) If an institution enters

into a written arrangement as described

in paragraph (a), (b), or (c) of this

section, except as provided in paragraph

(d)(2) of this section, the institution at

which the student is enrolled as a

regular student must determine the

student’s eligibility for title IV, HEA

program funds, and must calculate and

disburse those funds to that student.

(2) In the case of a written

arrangement between eligible

institutions, the institutions may agree

in writing to have any eligible

institution in the written arrangement

make those calculations and

disbursements, and the Secretary does

not consider that institution to be a

third-party servicer for that

arrangement.

(3) The institution that calculates and

disburses a student’s title IV, HEA

program assistance under paragraph

(d)(1) or (d)(2) of this section must—

(i) Take into account all the hours in

which the student enrolls at each

institution that apply to the student’s

degree or certificate when determining

the student’s enrollment status and cost

of attendance; and (ii) Maintain all

records regarding the student’s

eligibility for and receipt of title IV,

HEA program funds.

(Authority: 20 U.S.C. 1094)

10. Section 668.8 is amended by

revising paragraphs (b)(3) and (b)(4) to

read as follows:

§ 668.8 Eligible program.

* * * * *

(b) * * *

(3)(i) If an institution provides an

educational program using a semester,

trimester, or quarter system, or in clock

hours, the Secretary considers that the

institution provides one week of

instructional time in that program

during any week the institution

provides—

(A) At least one day of regularly

scheduled instruction or examinations;

or

(B) After the last scheduled day of

classes for a term, at least one day of

study for final examinations.

(ii) If an institution provides an

educational program using credit hours

but not a semester, trimester, or quarter

system, the Secretary considers that the

institution provides one week of

instructional time in that program

during any week the institution

provides—

(A) At least 12 hours of regularly

scheduled instruction or examinations;

or

(B) After the last scheduled day of

classes for a payment period, at least 12

hours of study for final examinations.

(4) Instructional time does not include

any vacation periods, homework, or

periods of orientation or counseling.

* * * * *

(Approved by the Office of Management and

Budget under control number 1845–0537)

§ 668.12 [Removed and reserved]

11. Section 668.12 is removed and

reserved.

12. Section 668.13 is amended by

revising paragraph (a) read as follows:

§ 668.13 Certification procedures.

(a) Requirements for certification. (1)

The Secretary certifies an institution to

participate in the title IV, HEA programs

if the institution qualifies as an eligible

institution under 34 CFR part 600,

meets the standards of this subpart and

34 CFR part 668, subpart L, and satisfies

the requirements of paragraph (a)(2) of

this section.

(2) Except as provided in paragraph

(a)(3) of this section, if an institution

wishes to participate for the first time in

the title IV, HEA programs or has

undergone a change in ownership that

results in a change in control as

described in 34 CFR 600.31, the

institution must require the following

individuals to complete title IV, HEA

program training provided or approved

by the Secretary no later than 12 months

after the institution executes its program

participation agreement under § 668.14:

(i) The individual the institution

designates under § 668.16(b)(1) as its

title IV, HEA program administrator.

(ii) The institution’s chief

administrator or a high level

institutional official the chief

administrator designates.

(3)(i) An institution may request the

Secretary to waive the training

requirement for any individual

described in paragraph (a)(2) of this

section.

(ii) When the Secretary receives a

waiver request under paragraph (a)(3)(i)

of this section, the Secretary may grant

or deny the waiver, require another

institutional official to take the training,

or require alternative training.

* * * * *

(Approved by the Office of Management and

Budget under control number 1845–0537)

13. Section 668.19 is revised to read

as follows:

§ 668.19 Financial aid history.

(a) Before an institution may disburse

title IV, HEA program funds to a student

who previously attended another

eligible institution, the institution must

use information it obtains from the

Secretary, through the National Student

Loan Data System (NSLDS) or its

successor system, to determine—

(1) Whether the student is in default

on any title IV, HEA program loan;

(2) Whether the student owes an

overpayment on any title IV, HEA

program grant or Federal Perkins Loan;

(3) For the award year for which a

Federal Pell Grant is requested, the

student’s scheduled Federal Pell Grant

and the amount of Federal Pell Grant

funds disbursed to the student;

(4) The outstanding principal balance

of loans made to the student under each

of the title IV, HEA loan programs; and

(5) For the academic year for which

title IV, HEA aid is requested, the

amount of, and period of enrollment for,

loans made to the student under each of

the title IV, HEA loan programs.

(b)(1) If a student transfers from one

institution to another institution during

the same award year, the institution to

which the student transfers must

request from the Secretary, through

NSLDS, updated information about that

student so it can make the

determinations required under

paragraph (a) of this section; and

(2) The institution may not make a

disbursement to that student for seven

days following its request, unless it

receives the information from NSLDS in

response to its request or obtains that

information directly by accessing

NSLDS, and the information it receives

allows it to make that disbursement.

(Approved by the Office of Management and

Budget under control number 1845–0537)

(Authority: 20 U.S.C. 1091 and 1094)

14. Section 668.165(a)(3)(ii) is revised

to read as follows:

§ 668.165 Notices and authorizations.

(a) * * *

(3) * * *

65676 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Rules and Regulations

(ii) Either in writing or electronically.

If the institution sends the notice

electronically, it must confirm receipt

by the student or parent of the

electronic notification and must

maintain documentation of that

confirmation.

* * * * *

(Approved by the Office of Management and

Budget under control number 1845–0697)

(Authority: 20 U.S.C. 1094)

* * * * *

PART 675—FEDERAL WORK-STUDY

PROGRAMS

15. The authority citation for part 675

continues to read as follows:

Authority: 42 U.S.C. 2751–2756b, unless

otherwise noted.

16. Section 675.19 is amended by

revising paragraphs (b)(1) and (b)(2) to

read as follows:

§ 675.19 Fiscal procedures and records.

* * * * *

(b) * * *

(1) An institution must follow the

record retention and examination

provisions in this part and in 34 CFR

668.24.

(2) The institution must also establish

and maintain program and fiscal records

that—

(i) Include a certification by the

student’s supervisor, an official of the

institution or off-campus agency, that

each student has worked and earned the

amount being paid. The certification

must include or be supported by, for

students paid on an hourly basis, a time

record showing the hours each student

worked in clock time sequence, or the

total hours worked per day;

(ii) Include a payroll voucher

containing sufficient information to

support all payroll disbursements;

(iii) Include a noncash contribution

record to document any payment of the

institution’s share of the student’s

earnings in the form of services and

equipment (see § 675.27(a)); and

(iv) Are reconciled at least monthly.

* * * * *

(Approved by the Office of Management and

Budget under control number 1845–0535)

* * * * *

PART 690—FEDERAL PELL GRANT

PROGRAM

17. The authority citation for part 690

continues to read as follows:

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

otherwise noted.

§ 690.9 [Removed]

18. Section 690.9 is removed.

19. Section 690.75 is amended by

removing the words ‘‘financial aid

transcript’’ in paragraph (a); by

removing the reference to ‘‘34 CFR

668.7’’ in paragraph (a)(1) and adding,

in its place, ‘‘34 CFR part 668, subpart

C’’; and by revising the OMB control

number to read as follows:

§ 690.75 Determination of eligibility for

payment.

* * * * *

(Approved by the Office of Management and

Budget under control number 1845–0681)

[FR Doc. 00–27894 Filed 10–31–00; 8:45 am]

BILLING CODE 4000–01–P