[Federal Register Volume 78, Number 127 (Tuesday, July 2, 2013)]
[Rules and Regulations]
[Pages 39613-39617]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15709]


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DEPARTMENT OF EDUCATION

34 CFR Part 690

[Docket ID ED-2012-OPE-0006]
RIN 1840-AD11


Federal Pell Grant Program

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule.

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SUMMARY: The Secretary adopts as final, without change, the interim 
final rule published on May 2, 2012, that amended regulations for the 
Federal Pell Grant program, to prohibit a student from receiving two 
consecutive Federal Pell Grants in a single award year. The final 
amendments implement provisions of the Higher Education Act of 1965 
(HEA), as amended by the Department of Defense and Full-Year Continuing 
Appropriations Act, 2011.

DATES: Effective July 2, 2013.

FOR FURTHER INFORMATION CONTACT: Jacquelyn C. Butler, U.S. Department 
of Education, Office of Postsecondary Education, 1990 K Street NW., 
Room 8053, Washington, DC 20006-8542. Telephone: (202) 502-7890.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.
    Individuals with disabilities can obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or compact 
disc) on request to the program contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: On May 2, 2012, the Secretary published an 
interim final rule in the Federal Register (77 FR 25893), corrected on 
July 11, 2012 (77 FR 40805), implementing provisions of the Higher 
Education Act of 1965 (HEA), as amended by the Department of Defense 
and Full-Year Continuing Appropriations Act, 2011, Public Law 112-10, 
Sec.  1860(a)(2), 125 Stat. 169-70 (2011).
    In the interim final rule, the Secretary--
     Delineated the conditions for calculating a Federal Pell 
Grant for a payment period (77 FR 25894);
     Removed the provision for awarding Federal Pell Grant 
payments from two Scheduled Awards (77 FR 25894);
     Specified when an institution may assign a crossover 
payment period that occurs over two award years (77 FR 25894);
     Specified when an institution may pay a transfer student 
attending more than one institution during an award year (77 FR 25894); 
and
     Removed regulations that established procedures for 
awarding a student his or her second Scheduled Award in an award year 
(77 FR 25895).
    The interim final rule was effective on the date of publication, 
May 2, 2012, and the Secretary requested public comment on whether 
changes to the regulations were warranted. Additionally, the interim 
final rule was corrected on July 11, 2012 (77 FR 40805). After 
considering all comments, the Secretary adopts the interim final rule 
without change. This document contains a discussion of the comments we 
received.

Analysis of Comments and Changes

    In response to the Secretary's invitation, 10 parties submitted 
comments on the interim final rule.
    An analysis of the comments received since publication of the 
interim final rule follows. We group major issues according to subject, 
with appropriate sections of the regulations referenced in parentheses. 
Generally, we do not address technical and other minor changes--and 
suggested changes the law does not authorize the Secretary to make.

General Comments

    Comments: Several commenters expressed support for the regulatory 
changes in the interim final rule. One commenter objected to the 
Secretary's decision to waive rulemaking. The commenter noted that the 
public should have the opportunity to comment on proposed regulations 
through a notice of proposed rulemaking.
    Discussion: The Secretary appreciates the commenters' support. We 
disagree with the comment that these regulations should have been 
submitted to the public as proposed regulations for notice and comment. 
As we discussed in the interim final rule, under the Waiver of 
Rulemaking and Delayed Effective Date section, the Department generally 
offers interested parties the opportunity to comment on proposed 
regulations in accordance with the Administrative Procedure Act (APA) 
(5 U.S.C. 553). However, the APA provides that an agency is not 
required to conduct notice and comment rulemaking when the agency for 
good cause finds that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest (5 
U.S.C. 553(b)(B)). The Secretary determined that there was good cause 
to waive rulemaking under the APA because the statutory change to 
prohibit a student from receiving two Federal Pell Grants in a single 
award year would have resulted in some students losing their Federal 
Pell Grant eligibility if we delayed making the regulatory change to 
amend Sec.  690.64 (77 FR 25897). Notice and comment to amend 
Sec. Sec.  690.63, 690.65, and 690.67 was unnecessary because we merely 
updated these sections to reflect statutory changes in Public Law 112-
10 that prohibit a student from receiving two Federal Pell Grants in a 
single award year.
    Changes: None.

Payment Period in Two Award Years (Sec.  690.64)

    Comments: One commenter asked if, for a crossover payment period, 
more than six months of a payment period occurs in an award year, must 
the Federal Pell Grant award be made from that award year. Another 
commenter thanked the Department for the regulatory change under Sec.  
690.64(a) and (b), noting that the change would allow an institution to 
comply with the regulations governing the standards of administrative 
capability under 34 CFR 668.16 when awarding a Federal Pell Grant.
    Discussion: In August 2008, the Higher Education Opportunity Act 
(HEOA), Public Law 110-315, added section 401(b)(5) to the HEA, and 
allowed an eligible student to receive two Federal Pell Grant Scheduled 
Awards during a single award year. Before then, institutions were 
required

[[Page 39614]]

to assign a payment period that crossed over two award years to the 
award year where more than six months were scheduled to occur. With the 
removal of the two Pell provision from the statute, we did not revert 
back to the pre-HEOA regulations. Instead, the interim final rule 
amended Sec.  690.64(a)(2) to provide that an institution must 
determine for each Federal Pell Grant recipient the award year in which 
the payment period will be placed, giving institutions the ability to 
assign a crossover payment period in a way that best meets the needs of 
its students.
    The Secretary agrees with the commenter about the effect of Sec.  
690.64(a) and (b).
    Changes: None.

Transfer Student: Attendance at More Than One Institution During an 
Award Year (Sec.  690.65(c) and (f))

    Comments: One commenter requested confirmation on whether the 
regulations apply to the annual Scheduled Award amount or the amount of 
the Pell Grant Lifetime Eligibility Used. This commenter also 
questioned whether a transfer student is required to repay the Federal 
Pell Grant funds that exceeded his or her Scheduled Federal Pell Grant 
for the award year. Two commenters were concerned that the change to 
these regulations would negatively affect transfer students. One 
commenter noted that students who transfer mid-year to a different 
school would be harmed by these regulations.
    Discussion: The term used throughout the Federal Pell Grant program 
regulations is ``Scheduled Federal Pell Grant'' which is the amount of 
a Federal Pell Grant that is paid to a full-time student for a full 
academic year. In other publications, e.g., the Federal Student Aid 
Handbook, we use the term ``Scheduled Award'' which has the same 
meaning as ``Scheduled Federal Pell Grant.'' The term ``Pell Grant 
Lifetime Eligibility Used'' is the total of each award year's 
percentage of the student's Scheduled Award that was disbursed for the 
student. The Pell Grant Lifetime Eligibility Used is required to comply 
with the Consolidated Appropriations Act of 2012 (Pub. L. 112-74). The 
law included a provision that limits a student's eligibility for 
Federal Pell Grant funds to a maximum of 12 semesters (or its 
equivalent).
    Because the maximum amount of a Scheduled Federal Pell Grant award 
a student can receive each year is equal to 100 percent, a student's 
Pell Grant Lifetime Eligibility Used must not exceed six years or a 
total of six Scheduled Federal Pell Grants (600 percent).
    Section 690.79 provides that a student is liable for any Federal 
Pell Grant overpayment made to him or her, except if the overpayment 
occurred because the institution failed to follow the procedures in the 
Federal Pell Grant program regulations or the Student Assistance 
General Provisions regulations under 34 CFR part 668, in which case, 
the institution would be liable. A student is not liable for, and the 
institution is not required to attempt recovery of or refer to the 
Secretary, a Federal Pell Grant overpayment if the amount of the 
overpayment is less than $25 and is not a remaining balance.
    A student who receives a Federal Pell Grant at one institution and 
then subsequently transfers to a second institution in the same award 
year may receive a Federal Pell Grant at the second institution for 
that portion of the award year in which the student is enrolled and has 
remaining Federal Pell Grant eligibility at that institution that does 
not exceed the student's Scheduled Award.
    Although the commenter is correct that a transfer student may be 
negatively affected, e.g., the student will receive only the remaining 
portion of his or her Scheduled Federal Pell Grant award rather than a 
full Scheduled Federal Pell Grant award at the second institution, the 
change in the law prohibits a student from receiving more than one 
Scheduled Federal Pell Grant award during a single award year.
    Changes: None.

Receiving Up to Two Scheduled Awards During a Single Award Year (Sec.  
690.67)

    Comments: Four commenters opposed the removal of the provision that 
allows an otherwise eligible student to receive a second Federal Pell 
Grant Scheduled Award in an award year. One commenter noted that with 
the reduction in Federal Pell Grant funds, students will be limited by 
the number of classes they may register for, and this may discourage 
accelerated program completion. Other commenters opined that without 
the additional Federal Pell Grant funds, students will be forced to 
incur more loan debt in order to complete their postsecondary 
education.
    Discussion: Section 1860(a)(2) of division B of the Department of 
Defense and Full-Year Continuing Appropriations Act, 2011 (Public Law 
112-10), repealed section 401(b)(5) of the HEA under which an otherwise 
eligible student could receive more than one Federal Pell Grant in an 
award year. While we understand the commenters' concerns, the Secretary 
does not have the authority to change statutory requirements.
    Changes: None.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by the 
Office of Management and Budget (OMB). Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as an action likely 
to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive Order.
    The statutory elimination of the two Pell Grant option as reflected 
in this regulatory action is economically significant and subject to 
review by OMB under section 3(f)(1) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things, and to the extent practicable--the costs 
of cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety,

[[Page 39615]]

and other advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are adopting this interim rule as final without change only 
after a reasoned determination that its benefits justify its costs. In 
choosing among alternative regulatory approaches, we selected those 
approaches that maximize net benefits. Based on the analysis presented 
in the interim final rule, the Department believes that these 
regulations are consistent with the principles in Executive Order 
13563.
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    In accordance with the Executive orders, the Department has 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action. We discussed the potential 
costs and benefits of these regulations in the interim final rule. (77 
FR 25895).

Waiver of Delayed Effective Dates

    The Administrative Procedure Act (APA) generally requires that 
regulations be published at least 30 days before their effective date, 
unless the agency has good cause to implement its regulations sooner (5 
U.S.C. 553(d)(3)). In addition, these final regulations are a major 
rule for purposes of the Congressional Review Act (CRA) (5 U.S.C. 801, 
et seq.). Generally, under the CRA, a major rule takes effect 60 days 
after the date on which the rule is published in the Federal Register. 
Section 808(2) of the CRA, however, provides that any rule which an 
agency for good cause finds (and incorporates the finding and a brief 
statement of reasons therefore in the rule issued) that notice and 
public procedure thereon are impracticable, unnecessary, or contrary to 
the public interest, shall take effect at such time as the Federal 
agency promulgating the rule determines.
    As stated in detail in the interim final rule, 77 FR 25897 (May 2, 
2012), because these final regulations merely reflect statutory changes 
and remove obsolete regulatory provisions and, in the case of Sec.  
690.64, protect students from receiving reduced amounts of Pell Grant 
funds, there is good cause to waive the delayed effective dates under 
the APA and the CRA and make these final regulations effective on the 
day they are published.

Regulatory Flexibility Act

Final Regulatory Flexibility Analysis

    These final regulations affect institutions that participate in 
title IV, HEA programs, and individual Pell Grant recipients. The 
effect of the elimination of two Pell Grants in one year will depend on 
the extent students replace the funds from other sources or change 
their academic plans, the distribution of recipients of a second Pell 
Grant, and the alternative use of the funds. This Final Regulatory 
Flexibility Analysis presents an estimate of the effect on small 
institutions of the statutory changes implemented through these final 
regulations. In the interim final rule, the Department welcomed 
comments about the estimates of the costs and benefits of the changes 
implemented in these final regulations. While some commenters 
questioned the benefits of Pell Grants or the effect of the changes on 
transfer students, no comments were received about the specific 
estimates of the effect on small entities presented in the Initial 
Regulatory Flexibility Analysis (77 FR 25895-25897).

Succinct Statement of the Objectives of, and Legal Basis for, These 
Final Regulations

    These final regulations remove regulatory provisions related to the 
availability of two Pell Grants in one year to comply with section 
1860(a)(2) of division B of the Department of Defense and Full-Year 
Continuing Appropriations Act, 2011 (Pub. L. 112-10), which repealed 
section 401(b)(5) of the HEA under which an otherwise eligible student 
could receive more than one Federal Pell Grant in an award year.

Description of and, Where Feasible, an Estimate of the Number of Small 
Entities to Which These Final Regulations Will Apply

    These final regulations affect institutions that participate in 
title IV, HEA programs and loan borrowers. The definition of ``small 
entity'' in the Regulatory Flexibility Act encompasses ``small 
businesses,'' ``small organizations,'' and ``small governmental 
jurisdictions.'' The definition of ``small business'' comes from the 
definition of ``small business concern'' under section 3 of the Small 
Business Act as well as regulations issued by the U.S. Small Business 
Administration (SBA). The SBA defines a ``small business concern'' as 
one that is ``organized for profit; has a place of business in the 
U.S.; operates primarily within the U.S. or makes a significant 
contribution to the U.S. economy through payment of taxes or use of 
American products, materials or labor . . . .'' ``Small organizations'' 
are further defined as any ``not-for-profit enterprise that is 
independently owned and operated and not dominant in its field.'' The 
definition of ``small entity'' also includes ``small governmental 
jurisdictions,'' which includes ``school districts with a population 
less than 50,000.''
    Data from the Integrated Postsecondary Education Data System 
(IPEDS) indicate that roughly 3,448 institutions representing 
approximately 63 percent of those institutions participating in the 
Federal student assistance programs meet the definition of ``small 
entities'' when all private nonprofit institutions are classified as 
small because none is dominant in the field. If the $7 million in 
revenue requirement were applied to private nonprofit institutions, the 
number of small entities would be reduced to 2,386 or 43.6 percent of 
institutions. Table 2 summarizes small institutions and their percent 
of AY 2008-2009 Pell Grant recipients and amounts by sector.

[[Page 39616]]



                        Table 2--AY 2008-2009 Pell Grant Recipients and Amounts by Sector
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                                                        Small institutions
                                                 --------------------------------   Percent of
                                                                    Percent of      Pell Grant      $ (percent)
                                                  Recipients No.      sector        recipients
                                                                    recipients
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Public 4-year...................................               4             0.7             0.0             0.0
Private nonprofit 4-year*.......................             444            30.0             5.6             5.9
Private for-profit 4-year.......................              52            24.6             1.0             1.0
Public 2-year...................................              88             8.5             0.8             0.7
Private nonprofit 2-year*.......................             147            86.5            54.6            53.3
Private for-profit 2-year.......................             405            69.6            21.1            21.5
Public <2-year..................................             202            87.4            62.6            61.6
Private nonprofit <2-year*......................              61            93.8            51.4            51.1
Private for-profit <2-year......................             983            89.4            44.5            44.4
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Source: IPEDS 2008-2009.
* Applies $7 million revenue standard to private nonprofit institutions for informational purposes. If not
  applied, the number of institutions in the private nonprofit sectors would be 1,479 four-year, 170 two-year,
  and 65 less-than-two-year institutions. All Pell Grant recipients and Pell Grant disbursements in the private
  nonprofit sectors would be small entities.

    Using the distribution of Pell Grant recipients and amounts at 
small institutions from Table 2 and the Department's estimated two Pell 
Grant recipients and amounts, the estimated maximum cost to small 
institutions across all sectors for the period from 2011-2012 to 2015-
2016 is approximately $1.67 billion. The estimated recipients and 
amounts by type of institution are summarized in Table 3. The amount of 
grant aid lost for any individual institution will depend on the extent 
the second Pell Grant option was utilized at that school. If 
distributed evenly across all small entities, with nonprofit 
institutions subject to the $7 million revenue requirement for a more 
uniform profile of institutions, an annual average of $150,000 would 
not be available from second Pell Grants in one award year. As 
discussed in the Summary of Potential Cost and Benefits section of the 
interim final rule, much of this revenue will be available from other 
sources including the preservation of the maximum grant level in the 
Pell Grant Program, student earnings or savings, and increased student 
debt.

                   Table 3--Estimated Pell Grant Recipients and Amounts at Small Institutions
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                                               Estimated Pell Grant recipients at small institutions
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                                    AY 2011-12      AY 2012-13      AY 2013-14      AY 2014-15      AY 2015-16
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Public 2 yr.....................           4,060           4,963           4,997           5,123           5,256
Public 4 yr.....................             143             175             176             181             185
Private.........................          18,152          22,190          22,342          22,904          23,501
Proprietary.....................          78,907          96,459          97,120          99,562         102,157
                                 -------------------------------------------------------------------------------
    Total.......................         101,263         123,787         124,636         127,770         131,100
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                                          Estimated Pell Grant amounts in millions at small institutions
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                                    AY 2011-12      AY 2012-13      AY 2013-14      AY 2014-15      AY 2015-16
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Public 2 yr.....................            10.6            13.0            13.3            13.8            14.5
Public 4 yr.....................             0.4             0.5             0.5             0.5             0.5
Private.........................            43.9            53.8            55.1            57.3            59.9
Proprietary.....................           215.7           264.4           270.8           282.0           294.6
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Total...........................           270.5           331.6           339.6           353.7           369.4
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Source: IPEDS 2008-2009 and Department of Education estimates.

Description of the Projected Reporting, Recordkeeping and Other 
Compliance Requirements of These Final Regulations, Including an 
Estimate of the Classes of Small Entities That Will Be Subject to the 
Requirement and the Type of Professional Skills Necessary For 
Preparation of the Report or Record

    These final regulations do not impose any new reporting, record 
keeping, or other compliance requirements on institutions.

Identification, to the Extent Practicable, of All Relevant Federal 
Regulations That May Duplicate, Overlap, or Conflict With These Final 
Regulations

    These final regulations are unlikely to conflict with or duplicate 
existing Federal regulations.

Alternatives Considered

    No alternatives were considered for the amendments to Sec. Sec.  
690.63(g)(1), 690.63(h), 690.65(c), 690.65(f), and 690.67 because these 
changes implement changes to the HEA enacted by Congress and the 
Department did not exercise discretion in developing these amendments. 
With respect to Sec.  690.64, the Department could have left the 
current regulations in place. However, such an action would have led to 
potentially serious adverse effects on students, as described in the 
Waiver of Rulemaking and Delayed Effective Date

[[Page 39617]]

section of the preamble in the interim final rule.

Paperwork Reduction Act of 1995

    These final regulations do not create any information collection 
requirements. With the removal of Sec. Sec.  690.63(h) and 690.67 and 
the revision of Sec.  690.64, due to the statutory changes, the 
paperwork burden associated with those sections are also removed. This 
change results in the discontinuation of information collection 1845-
0098 and, therefore, the elimination of 109,605 burden hours associated 
with that collection.

Intergovernmental Review

    This program is not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Adobe Portable Document Format (PDF). To use PDF, 
you must have Adobe Acrobat Reader, which is available free at the 
site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.
    You may also view this document in text or PDF at the following 
site: www.ifap.ed.gov.

(Catalog of Federal Domestic Assistance Number: 84.063 Federal Pell 
Grants)

List of Subjects in 34 CFR Part 690

    Colleges and universities, Elementary and secondary education, 
Grant programs-education, Student aid.

    Dated: June 26, 2013.
Arne Duncan,
Secretary of Education.

    For the reasons discussed in the preamble, the interim final rule 
that amended 34 CFR part 690, published at 77 FR 25893 on May 2, 2012, 
is adopted as final without change.

[FR Doc. 2013-15709 Filed 7-1-13; 8:45 am]
BILLING CODE 4000-01-P