Committee III
Refunds, Program and Student Eligibility Issues

Third Meeting
April 6-8, 1999
Washington, DC

The third meeting of Committee III commenced as scheduled at approximately 9:00 a.m. on Tuesday, April 6, 1999 and adjourned on Thursday, April 8, 1999, at approximately 12:00 p.m. The meeting was held at the Department of Education offices in Federal Office Building 6. The meeting was facilitated by and this report was written by Greg Bourne and Greg Sobel.

The meeting began with the facilitators and spokespersons introducing themselves. Next the facilitators provided an overview of activities since the last meeting and the proposed agenda for this meeting. The Draft Meeting #2 Summary was approved without change. Department representatives noted the Website that has been established to follow the progress of the regulatory negotiation and serve as a depository for support materials such as the meeting summaries of all four committees.

The Department also addressed two other issues related to the negotiations. Based on questions raised about preambles, the Department re-emphasized that the Committee should not expect to "negotiate" preambles. As a general rule, issues of critical importance to Committee members should be addressed in the regulations as appropriate. If time permits, however, opportunities for review and comment on preambles will be provided, particularly for those areas where preamble language is important to Committee members.

Second, the Department wanted to know if institutions are expecting Y2K problems. The Higher Education Amendments of 1998 authorize the Secretary to postpone implementing certain requirements that would jeopardize delivery of student assistance due to continuing Y2K problems. The Department wants to begin now establishing a list of institutions that might encounter problems. This will allow sufficient time to work through issues related to Y2K, including whether to postpone implementing certain new requirements. Organizations were asked to notify the Department if they are aware of potential problems at specific institutions.

The Committee then turned to the primary focus of the meeting -- to respond to draft negotiating text and related materials prepared by the Department and other Committee members since the last meeting.

Attachment I summarizes the major outcomes from the discussions of the draft negotiating text. Where agreement was reached on either new language or deletions from existing regulatory language, these are noted. If agreements were contingent on the refinement of proposed language or the resolution of outstanding concerns, the remaining issues are highlighted.

While discussing Return of Title IV Aid issues, the group turned to a discussion of current sub-regulatory guidance on the definition of institutional costs which many Committee members consider to be too prescriptive. They requested more institutional flexibility, citing the following language from the guidance as a good starting point: "Institutional costs are defined as charges that an institution assesses a student for educational expenses that must be paid to the institution directly." [From number one under the Summary on Page 5 of the guidance.] Still, Committee members felt what constitutes "educational expenses" needs further clarification.

Another Return of Title IV Aid issue involving considerable debate was the calculation of the percentage of the period completed for clock-hour schools. The Department described their interpretation of Congress' intent of "period" to be used in the calculation. A number of Committee members, however, noted a significant difference between their reading of the statute and the Department's interpretation. Another aspect of the discussion was the acceptable percentage of hours that were scheduled to be completed by the student in order to use scheduled hours in the calculation. A small sub-group of the Committee conducted further discussions in an attempt to resolve these issues, and decided to continue discussions between now and the next Committee meeting.

At the previous meeting, use of the FAFSA to identify students with potential eligibility problems due to drug convictions was a major topic of discussion. The Department provided an update on this issue. Two general approaches are being considered. One approach is to provide information on the FAFSA about how to get additional information if a student suspects he or she might have an eligibility problem. The SAR would then be used to step the student through a series of questions to help determine if a problem exists. The second approach is to have a series of check boxes on the FAFSA accompanied by a worksheet. Either approach involves self-certification. The major interests being considered are confidentiality, eliminating "false positives" (conviction does not always mean ineligibility) and lifting the burden on institutions to make these determinations. The Department indicated it will continue to inform the Committee of its progress on this issue.

The next scheduled meeting of the Committee is May 3-5, 1999, beginning at 9:00 a.m. on Monday, May 3 and adjourning by 12:00 p.m. on Wednesday, May 5. The meeting will be held at Department of Education offices in Federal Office Building 6 located at 400 Maryland Avenue, S.W. The specific meeting rooms will be announced in the near future.

The agenda for the upcoming meeting is to continue discussions of the negotiating text prepared by the Department and other Committee members, and to explore any other issues for which more information is needed at this stage of the drafting process. At this stage in the process, discussions will focus on those areas needing greatest attention, with the intent to complete negotiation of all the major issues during this session. This will allow a review of the final proposed regulatory language and preambles (if time permits) during the final scheduled meeting in late May.

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Note: At this stage of the process all agreements noted in the meeting summary and Attachment I are preliminary. The Committee will determine its final agreements only after all provisions have been thoroughly considered.

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ATTACHMENT I

Preliminary agreements on Committee III negotiating text, listed by section of regulations, based on discussions held April 6-8, 1999.

Sec. 668.22 Return of Title IV Aid

The Committee agreed with the proposed new language added to statutory language under (a) General. (1), "grant or loan assistance".

The Committee agreed with deleting the phrase under (a)(2)(i), fifth line, "or that could have been disbursed", also located in the same position under (a)(2)(ii).

Also under (a)(2)(ii), the Department said they would review a suggestion to change the proposed addition of the word "must" to "may" in "...the difference between these two amounts must/may be disbursed...". The Department will also consider the recommendation to delete the last phrase of this subsection "...unless the disbursement is declined by the student."

Finally, under (a)(2)(i) and (a)(2)(ii), it was recommended that this section should include references to PLUS and disbursement either crediting the students account and/or cash. If the Department is considering merging language with Section 668.164 (g), the suggestion was made to clarify the sections to reduce confusion.

The Department indicated it would add a new section on timelines to help create more clarity.

Under (b), several suggestions were made for further consideration:

1. The Department should clarify in (b)(1) that the definition of withdrawal date pertains to determining the treatment of Title IV funds when a student withdraws, not for academic purposes.
2. Under (1)(i), add the clause "...or no later than 30 days after awareness of withdrawal;"
3. Under (1)(ii)(A), some requested more specificity while others indicated more concern for assuring institutional flexibility.
4. Under (1)(ii)(B), the word "otherwise" should not be deleted as currently proposed.
5. Directions should indicate that (A) and (B) are not hierarchical.
6. The Department should address the issue of a student's notice of future withdrawal.
7. Under (1)(ii)(C), consider deleting the proposed added language; if retained, change "class attendance" to language such as "academic activity."
8. Under (1)(ii)(D), should address the issue of "retroactivity" to the date of the incident.
9. Under (3), consider deleting all definitions of "acceptable documentation."

Some Committee members suggested deleting all proposed sections outlined on Pages 3 and 4 of the negotiating text, including all provisions under (b)(3) and (b)(4), because the statutory language seemed sufficient. Questions remain abouth whether to retain (b)(2).

Some Committee members offered refinements to the proposed language for provisions under (c), including:

1. Under (1)(A), add "...using professional judgement for multiple leaves;"
2. Under (1)(F), add "...with the exception of a de minimus processing charge."
3. Under (2), additional discussion is needed concerning applicability.
4. Under (3)(B), delete "is the calendar year that"

Under (3)(C)(2), the Department will consider a modification to indicate institutions should be required to document requests for leave.

The Committee agreed with the proposed language for provisions under (d) with the following recommendations:

1. Both (2)(A) and (2)(B) should be rewritten to create parallel descriptions.
2. Both (4)(A) and (4)(B) should be held for further consideration and discussion.

Under (e), a typographical error was noted; "...paragraph (d)(2)(a)..." should be "...paragraph (d)(2)(A)..."

Substantively under (e)(1), the Department and Proprietary Schools have differing perspectives concerning the intent of "period" linked with percentage to be applied under (e)(1)(B)(2). [Further discussions will occur to clarify the issues and determine if a mutually satisfactory solution can be found.]

Under (f), the Committee expressed the need to reconsider sub-regulatory guidance on the issue of "institutional charges." It was the opinion of many that the guidance is too detailed and unrealistic, but that "good" parts of the guidance should be gleaned. More discussion is needed.

Under (g), several suggestions were made for further consideration:

1. Under (1), although some suggested providing additional clarity on the order of steps required, the Department indicated it believes the statute is specific on the order to be followed.
2. An appropriate cross-reference should be added to (2)(B)(2).
3. Under (3), major differences in interpretation exist on this provision; many Committee members consider the 50% repayment issue to refer to 50% of the total grant received by the student, the Department interprets this to mean 50% of the "unearned" grant amount. Further discussion is required.

Under (h), the following issues require resolution:

1. Do "outstanding balances" include fees? The Department indicated its view that the amount used throughout the calculation is the net rather than gross amount, and that this could be addressed in guidance instead of the regulation.
2. Whether to state explicitly the conditions for SSIG/LEAP refunds.
3. SEOG policy also needs to be clarified; some suggest this be handled in the regulations rather sub-regulatory guidance, others are satisfied with the guidance.
4. The Department indicated it will re-evaluate sub-regulatory guidance, not to back away from existing policies but to determine if more flexibility can be provided.

The Committee agreed to the proposed additional language under provision (h)(2)(iii), "...grant or loan..."

Under (i), Consumer Information, the Committee suggested that the "50% rule" and the "scheduled hours" issues need to be clearly explained so they can be understood by students. Also, it was suggested that "prospective students" should be added after "students," though this issue may be addressed by Committee IV in the "consumerism" context. Otherwise, the Committee agreed with this provision.

The Committee agreed with the proposed language for provisions under (j) with one exception, replacing "term" with language such as "unit of time/instruction." A representative of Proprietary Schools suggested this might be an issue for those schools that charge by the program rather than a period of enrollment. They will confer with the Department on this.

Sec. 668.32 Student Eligibility for Federal Financial Aid

1. Delete "Either" in (e)(4).
2. Delete "or" at the end of (i) and add "and if required by the State"
3. Clarify that "State" refers to the State where the student was home-schooled.

Sec. 668.38 Student Eligibility for Federal Financial Aid

The Committee agreed to all the proposed language, both additions and deletions, for these provisions related to Telecommunications Courses.

Sec 668.32 Student Eligibility for Federal Financial Aid

The Committee generally agreed with the proposed language in this section, with the stipulation that language should match statutory terms such as illegal drugs and controlled substances.

Sec. 668.40 Conviction for Possession or Sale of Illegal Drugs

The Committee cited two issues that need to be addressed by the proposed language for these provisions: institutional liability for disbursement to ineligible students and time period for renewed eligibility.

Under (2)(b)(1)(ii), "date of conviction" should be modified to read "date of second conviction."

Under (2)(c)(1), the Committee discussed the need to address sealed records (for juveniles) as one mitigating factor for eligibility.

For provision (d), additional clarification is needed on what is meant by "successfully completes."

Several comments were made about proposed new language pertaining to drug rehabilitation programs under provision (e):

1. (2)(ii) should be broadened beyond "government program."
2. Consideration should be given to deleting (2)(i) and (2)(ii).
3. If (2)(i) is retained, consideration should be given to replacing "approved" by "recognized."
4. Language in the preamble might be helpful here to differentiate between "providers" and "programs."
5. Rehabilitation programs should perhaps be different for different types of drug convictions.

Sec. 668.32 Student Eligibility

The Committee agreed with the proposed language for provisions under (c)(1), (c)(2) and (c)(3) related to Teacher Certification Candidates.

Sec. 690.6 Duration of Student Eligibility

The Committee generally agreed with the proposed language under this entire section, but expressed two concerns:

1. A possible conflict under (c) with section 668.8(h) regarding an eligible educational program.
2. Whether specific reference is needed in (c)(2) regarding receipt of a certificate that is required for licensure.

Sec. 690.7 Loss of Institutional Eligibility for High Default Rates

The Committee agreed that this issue is best addressed by Committee II, as they are discussing similar provisions. This provision should simply include a cross-reference to the provisions being negotiated by Committee II under Section 668.17.

Sec. 674.10 Selection of Students for Loans (Federal Perkins Loans)

The Committee agreed to proposed language under this section with additional language specifying Perkins loans and with the terms "offer" and "reasonable portion" to be clarified in the preamble.

Sec. 675.10 Selection of Students for FWS Employment

The Committee agreed to proposed language under this section, with the terms "offer" and "reasonable portion" to be clarified in the preamble.

Sec. 676.10 Selection of Students for FSEOG Awards

The Committee agreed to proposed language under this section, with the terms "offer" and "reasonable portion" to be clarified in the preamble.

Sec. 673.5 Overaward (Treatment of Veterans/AmeriCorps Benefits)

The Committee agreed to the proposed language under this section with the exception of (c)(2)(iii). Under this provision, the Committee suggested maintaining institutional flexibility in packaging financial aid following language from the existing regulations. Also, only National Service education award funds used for current expenses should be included in the aid eligibility determination.

Sec 668.161 Scope and Purpose (Direct Crediting to Student Accounts)

The Committee agreed with the proposed language for this section.

Sec. 675.16 Payments to Students

The Committee agreed with the proposed changes in (a)(1).

The Committee generally agreed with the proposed language under (a)(2), but asked for clarification on when the institution must notify the student. The Committee also recommended changing "...the student can expect to earn,..." to language such as "...the student will be permitted to earn,..."

The Committee agreed to the proposed language under (a)(3) with additional language in (a)(3)(ii) and (a)(3)(iii) stating that the student's authorization must be obtained before direct crediting of his or her FWS compensation.

The Committee agreed with the proposed language under (a)(4) with one comment: consider split authorizations; one for institutional accounts and one for bank accounts.

Under (a)(5), the Committee agreed to the proposed language with one addition: clarify that institutions must identify other costs that could be covered by the authorization. The Department said it would consider this suggestion.

The Committee agreed with the proposed language under (a)(6)(i) and (a)(6)(ii).

Under (a)(7), the Committee agreed with the proposed language except for the "immediate" payment of the credit balance. Many Committee members suggested that this should coincide with normal payment periods and cash management regulations.

The Committee agreed with the proposed language under (b)(1).

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