Final Priorities; Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP)-College Savings Account Research Demonstration Project, 5035-5054 [2013-01125]
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Vol. 78
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January 23, 2013
Part III
Department of Education
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34 CFR Chapter VI
Final Priorities; Gaining Early Awareness and Readiness for Undergraduate
Programs (GEAR UP)—College Savings Account Research Demonstration
Project; Final Rule
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Federal Register / Vol. 78, No. 15 / Wednesday, January 23, 2013 / Rules and Regulations
DEPARTMENT OF EDUCATION
34 CFR Chapter VI
[CFDA Number: 84.334D.]
Final Priorities; Gaining Early
Awareness and Readiness for
Undergraduate Programs (GEAR UP)—
College Savings Account Research
Demonstration Project
Office of Postsecondary
Education, Department of Education.
ACTION: Final priorities.
AGENCY:
The Assistant Secretary for
Postsecondary Education announces
priorities under the GEAR UP College
Savings Account Research
Demonstration Project. The Assistant
Secretary may use these priorities for
competitions in fiscal year (FY) 2013
and later years. We take this action to
determine the effectiveness of
implementing college savings accounts
and providing financial counseling in
conjunction with other GEAR UP
activities as part of an overall college
access and success strategy.
DATES: Effective Date: These priorities
are effective February 22, 2013.
FOR FURTHER INFORMATION CONTACT:
Catherine St. Clair, U.S. Department of
Education, 1990 K Street NW., room
7056, Washington, DC 20006–8524.
Telephone: (202) 502–7579 or by email:
Catherine.StClair@ed.gov.
If you use a telecommunications
device for the deaf (TDD) or a text
telephone, call the Federal Relay
Service, toll free, at 1–800–877–8339.
SUPPLEMENTARY INFORMATION:
Purpose of Program: The GEAR UP
Program is a discretionary grant
program that provides financial support
for academic and related support
services that eligible low-income
students, including students with
disabilities, need to enable them to
obtain a secondary school diploma and
prepare for and succeed in
postsecondary education.
Program Authority: 20 U.S.C. 1070a–
21 to 1070a–28.
We published a notice of proposed
priorities (NPP) for this program in the
Federal Register on June 1, 2012 (77 FR
32612). That notice contained
background information and our reasons
for proposing the priorities.
There are differences between the
NPP and this notice of final priorities
(NFP) as discussed in the Analysis of
Comments and Changes section
elsewhere in this notice.
A summary of the major changes
follows.
• GEAR UP State grantees that
received a new State grant in FY 2012
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SUMMARY:
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and will have ninth grade students in
the 2014–2015 academic year are
eligible to apply for funding.
• The Federal matching contribution
has been changed from up to $10 per
month to up to $25 per month for a
maximum of $300 in Federal matching
funds each year for a maximum of four
years.
• The funding eligibility criteria have
been changed so that, to be eligible, a
GEAR UP State grant funded in FY 2011
or FY 2012 must support activities
under this demonstration project in at
least six high schools, each of which
must serve a cohort of at least 30 ninth
grade GEAR UP students. For the
purposes of these priorities, a high
school must serve students in grades 9–
12.
• Applicants must identify the
names, locations, and National Center
for Education Statistics (NCES)
identification numbers of the GEAR UP
high schools that the applicant proposes
to participate in the demonstration
project.
• Project directors and appropriate
project staff are required to participate
in meetings that the Department will
convene, likely in conjunction with the
annual meetings of the National Council
for Community and Education
Partnerships (NCCEP), to provide
professional development and technical
assistance to grantees participating in
the demonstration project.
• In order to protect the integrity of
the project evaluation, grantees may not
solicit, or raise money from, nonFederal sources as additional
contributions to the student’s nonFederal college savings account.
Public Comment: In response to our
invitation in the notice of proposed
priorities, 19 parties submitted
comments.
Generally, we do not address
technical and other minor changes, or
suggested changes the law does not
authorize us to make. In addition, we do
not address general comments that
raised concerns not directly related to
the proposed priorities.
Analysis of Comments and Changes:
An analysis of the comments and of any
changes in the priorities since
publication of the notice of proposed
priorities follows.
Comment: Commenters were
generally very supportive of the
Department’s proposal. They offered
various suggestions for improving the
demonstration program, keeping in
mind the Department’s desire to provide
and promote incentives for greater
college savings by families of GEAR UP
students, keep administrative costs and
effort manageable, provide flexibility
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where possible, and develop and
implement a study design that would
answer important questions about the
usefulness of college savings accounts
as a way to promote increased high
school graduation rates and rates of
enrollment in postsecondary education.
Discussion: The Department
appreciates these comments and is
gratified that the commenters were
generally very supportive of our
proposal and the desirability of this
special GEAR UP project. We address
our responses to areas of specific
commenter recommendations, by topic
heading, in the following discussion.
Changes: None.
Costs, Training, and Support
Comment: One commenter asked for
clarification about whether, given the
GEAR UP program’s match requirement,
grantees would need to raise additional
matching funds on top of the funds they
must already raise to support their
regular GEAR UP projects. The
commenter stated that applicants need
to know the extent of their financial
commitment before they apply, and that
unless these funds are needed to carry
out the demonstration project, the
Department should consider waiving
the additional matching fund
requirement.
Another commenter also sought
clarification about the requirement that
grantees provide a matching
contribution to the amount of the GEAR
UP award for this demonstration
project.
Discussion: Under section 404C(b) of
the HEA, successful GEAR UP
applicants must provide from State,
local, institutional, or private funds, not
less than 50 percent of the cost of the
program. The regulations at 34 CFR
§ 694.7(a) and (b) further require that
applicants must include in their budgets
the percentage of costs of the GEAR UP
project to be provided annually from
non-Federal funds, and grantees must
make substantial progress toward
meeting the matching percentage stated
in the approved application for each
year of the project period.
Successful applicants for the College
Savings Account Research
Demonstration Project must already be
GEAR UP program State grantees, and
the Department expects that most
recipients of these demonstration grants
will not have to provide additional
matching funds beyond what they are
already providing to meet the match for
their initial GEAR UP award. This is
because a grantee may count any ‘‘overmatched’’ non-Federal funds it has
already committed to its regular GEAR
UP project toward its match for the
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demonstration project. Moreover, a
grantee under this demonstration
project may treat contributions of
students, families, or others to a student
savings account as a matching
contribution in its project budget. If,
however, during any project year these
private contributions to savings
accounts are less than anticipated, a
State would have to ensure by the end
of each project year that it had met the
annual matching requirement through
other non-Federal contributions to this
project or to the regular GEAR UP
activities. Thus, we anticipate that only
those grantees that have not ‘‘overmatched’’ non-Federal funds in their
regular GEAR UP projects or that do not
secure sufficient non-Federal deposits
in the students’ savings accounts will
need to contribute non-Federal
matching contributions to their College
Savings Account Research
Demonstration projects.
Changes: We have added a clarifying
citation to 34 CFR § 694.7 in Priority 2,
section I, paragraph (n).
Comment: One commenter
recommended the use of online
resources to facilitate the project.
Discussion: The Department agrees
that online resources are important for
helping students and families manage
their accounts. Under Priority 2,
successful applicants must ensure that
students, students’ parents, or others on
the students’ behalf are able to make
online deposits to accounts. In addition,
students also must be able to view
account balances online. While the
Department believes that online
resources could also be a very useful
source of support for the required
financial counseling or technical
assistance and professional
development for staff, we do not think
it is appropriate to require online access
for these purposes. Rather, grantees
should have flexibility to take advantage
of the resources that they believe are
best suited for their projects.
Changes: None.
Comment: A commenter was
concerned that the Background section
of the notice of proposed priorities
provided conflicting information about
the amount of seed money that grantees
will make available from GEAR UP
funds for GEAR UP students.
Discussion: We agree with this
commenter that the Background section
of the NPP should not have referred to
an approximate amount of seed money.
Changes: This notice of final priorities
clarifies that the amount of seed money
for a GEAR UP-funded account for each
participating GEAR UP student is $200.
The seed amount is set out in Priority
2, Section I, paragraph (b)(1).
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Comment: A commenter suggested
that the Department consider
establishing basic design
requirements—for both program
management and evaluation purposes—
for data and account management as
most grantees will not have experience
in the administration of these kinds of
college savings accounts. The
commenter also suggested that we
provide grantees with data collection
software and training on how to use it.
Other commenters noted that it will be
critical for grantees to receive guidance,
technical assistance, and access to
experts on establishing and maintaining
these savings accounts, and on the
responsibilities of trustees and
custodians.
Another commenter stated that the
Department should be prepared to assist
grantees in negotiating account features
and contract terms with financial
institution partners, and may even need
to solicit financial institution partners
for grantees.
Another commenter stated that based
on its experience with schools, local
governments, and others in the design
and development of college savings
accounts, grantees will likely need
significant technical support from the
Department in various areas of their
projects, particularly in the selection of
savings accounts, program design, and
program administration.
Finally, noting that the Department
had proposed that money families
deposit into students’ college savings
accounts would not count against their
children for purposes of determining
eligibility for Federal student financial
assistance, one commenter
recommended that we likewise ensure
that these savings be excluded from
other means-tested Federal programs,
such as Medicaid and Temporary Aid to
Needy Families. The commenter stated
that if both the Federal-funds account
and the student’s account are held in
trust, the fact that the family does not
have direct ownership of either should
resolve the issue, but the commenter
also noted that any hint of worry about
this issue might create a chilling effect
on deposit activity. The commenter
recommended that the Department
provide guidance to account
administrators on how to address this
issue of asset test at the Federal, State,
and local levels and how to
communicate the answers to students
and families.
Discussion: The Department agrees
that extensive and ongoing technical
assistance on important aspects of
project implementation is crucial to
helping grantees establish and manage
savings accounts, and that this kind of
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support is particularly important for
those with no experience in this area.
To address these concerns, the
Department plans to provide
presentations and other technical
assistance on important aspects of
project implementation at national
GEAR UP conferences. These activities
would include general considerations
that should be taken into account when
implementing these types of savings
accounts. The Department is also
working with the Treasury Department,
the National Credit Union
Administration (NCUA), and the
Federal Deposit Insurance Corporation
(FDIC) to develop materials that will
give applicants key information about
implementing college savings accounts,
including tax and asset test
implications, such as those pertaining to
Medicaid and Temporary Aid to Needy
Families. However, grantees would
tailor account characteristics to best
meet their needs and the needs of their
GEAR UP students, and would select
their own financial partners, provided
the requirements of Priority 2 are met.
The Department would not participate
in grantee (or applicant) discussions
with financial institutions that would
(or might) implement these savings
accounts. With regard to the comment
that the Department provide data
collection software and training in its
use, the Department may not endorse
any specific data-collection software
programs. Grantees should use their
professional judgment in selecting
appropriate software that meets their
needs and the needs of the financial
institutions with which they would
partner. Grant funds may be used to
purchase software and any needed
training in its use for the purpose of
providing and tracking demonstration
project services and outcomes.
Changes: None.
Comment: One commenter wanted
clarity on whether grantees may use
grant funds for costs of programmatic
support, given that certain supportive
project activities, such as outreach and
account administration, are labor
intensive and particularly necessary at
the local level.
Discussion: The Department
understands that college savings
account programs can be labor intensive
and require a significant investment in
outreach and administration to be
successful. In the proposed budgets they
include in their project applications,
applicants should include all expected
costs of implementing the proposed
projects, including provision of
payment to the account administrator,
the account trustee, and costs for
managing and administering the project
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over the course of the project period
(and later if the grantee expects the
account administrator to be conducting
activities after the end of the project
period).
Changes: None.
Comment: One commenter
recommended that demonstration
projects partner with local
organizations, such as public
broadcasting stations, to create highquality digital content and services on
financial literacy.
Another commenter said that the
success of State GEAR UP grantees will
require strong partnerships with local
governments and school districts.
One commenter recommended that
the applications from State grantees
include plans for local partnerships.
This commenter noted that local
partnerships can also help to tie this
savings demonstration project to other
community-based programs, such as
free tax preparation, financial education
resources, and help with the process of
preparing a student’s FAFSA
application.
Discussion: The Department is
currently working with the Treasury
Department, the NCUA, the FDIC, and
other Federal and non-Federal partners
to identify other opportunities to
provide grantees with technical
assistance around financial literacy.
Further, while we agree that grantees
partnering with local organizations to
create high-quality digital content can
be very important for helping students
and their families better understand
financial literacy, we do not believe that
requiring such a partnership is
necessary. Grantees will be working
with local educational agencies that
already are implementing GEAR UP
projects, and those GEAR UP grantees
already engage in community
partnerships that are key to the
successful implementation of a GEAR
UP project. We are confident that if a
State GEAR UP grantee believes that a
local partnership to develop digital
materials would contribute to the
success of this demonstration project, it
will include this activity in its
application. However, because we
believe that applicants should design
their applications using their best
judgment of how best to achieve the
goal of having the largest number of
families of GEAR UP students make
regular deposits in their children’s
college savings accounts, we do not
believe that requiring all grantees to
partner with local organizations that can
help to create high-quality digital
content is either necessary or desirable.
Changes: None.
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Comment: One commenter
recommended the Department take
specific actions to promote financial
literacy, such as providing support to
grantees to identify and select quality
financial education curricula.
Discussion: The Department will offer
ongoing trainings to grantees that will
include group format trainings (at
annual GEAR UP conferences or via
Webinar) and one-on-one advising, as
needed. The Department is also holding
discussions with Federal and nonFederal partners to identify other
opportunities to provide support for
grantees. This includes developing
materials that will give applicants key
information about implementing college
savings accounts. The Department will
also monitor financial education
delivery over time to ensure quality.
Changes: None.
Funding Eligibility
Comment: A number of commenters
recommended that the Department
expand eligibility so that the
demonstration project may benefit
priority students served in a State GEAR
UP project as well as students who are
in a cohort.
One commenter noted that by limiting
eligibility to State GEAR UP grantees
that use the cohort approach, the
Department is making ineligible many
valuable, experienced, and interested
stakeholders, including existing GEAR
UP grantees, and it is limiting its ability
to identify crucial barriers to
implementation on a broader scale.
A second commenter did not question
our proposal that eligibility not extend
to schools in which members of a GEAR
UP cohort already are the beneficiaries
of a matched college savings account
program. Rather, it urged the
Department to permit schools to be
eligible if these college savings accounts
were only made available in those
schools to GEAR UP priority students
who would not participate in this
demonstration project. The commenter
stated that one State would soon be
implementing this kind of hybrid
program and did not believe ineligible
students under the State’s program
should also be ineligible under this
demonstration program.
Another commenter recommended
that eligibility be expanded to include
both partnership and State GEAR UP
grantees that meet all requirements of
this competition.
Discussion: We appreciate the broad
interest in the project. While the
Department agrees that both State and
partnership grantees using the priority
model for determining student
eligibility are engaging in important and
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high-quality work, we have limited the
pool of eligible grantees to State GEAR
UP grantees that determine eligibility
using the cohort approach for two
reasons.
First, permitting students who are
selected for the regular GEAR UP project
on the basis of priority to participate in
this college savings account
demonstration is incompatible with the
project’s research design. In order to
ensure that the potential effects of
savings accounts are properly evaluated,
grantees will need to serve entire
cohorts (i.e., grades) of students in at
least six GEAR UP high schools that (1)
can be randomly assigned, and (2) have
a sufficient number of GEAR UP
participants in a ninth grade cohort
whose progress and outcomes can be
tracked over the grant period. We think
that being able to evaluate the effects of
savings accounts provided to all
students in a cohort is important,
because serving all students may create
peer effects that indicate the importance
of providing such accounts to every
student, as opposed to a few individuals
in a given school. Such a structure,
however, necessitates that entire grades
participate in the GEAR UP program,
which is the case for a State grant that
selects students using the cohort
approach but not for grants that select
students using the priority approach.
Second, with regard to the comment
that we extend eligibility to apply for a
grant under this demonstration project
to GEAR UP partnership grantees that
select students using the cohort
approach, we first note that under
section 404D(a) and (b) of the HEA,
GEAR UP funds may be used for
scholarships and other financial
assistance for participating students
only as provided in section 404E of the
HEA; therefore the use of GEAR UP
funds for college savings accounts is
permissible only as a supplement to the
GEAR UP funds that a grantee is already
reserving for financial assistance under
section 404E in its regular GEAR UP
project. Few GEAR UP partnership
grantees reserve GEAR UP funds in their
regular projects under requirements in
section 404E. Furthermore, we believe
State GEAR UP grantees, unlike the few
partnership grantees that reserve GEAR
UP funds for financial assistance under
section 404E, have the needed capacity
and infrastructure in place to manage
this demonstration project.
Changes: None.
Comment: One commenter
recommended maintaining the cohort
approach, believing that ‘‘universality’’
is critical to creating a college-going
culture. This commenter also expressed
concern about precluding States and
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municipalities with strong knowledge
and experience in establishing student
accounts from applying and
recommended that the Department
extend eligibility to States that are not
now current GEAR UP grantees and to
GEAR UP partnership grantees with
strong municipal partners.
Discussion: While the Department
appreciates that a number of States and
municipalities have been conducting
some innovative and promising
experiments on college savings, the
Department needs to limit this
competition to existing GEAR UP
grantees. Under section 404C(a) of the
HEA, the Department may provide
GEAR UP funds only to applicants that
submit an application to conduct the
full panoply of GEAR UP activities
required by law, and the Department
does not have program funding
available to support new GEAR UP
grantees that would conduct all of these
program activities and also implement
this demonstration project.
In addition, an important part of
evaluating the effectiveness of college
savings accounts is to do so in the
context of wraparound services—that is,
supports that combine academic
activities like providing tutoring or
encouragement to enroll in challenging
coursework with mentoring,
information on student financial aid,
building family engagement, and other
help that is not explicitly academic in
nature. By providing grants to existing
programs that have been operating for at
least a year or two, we are ensuring that
demonstration project grantees have had
the time needed to put those
wraparound services into place in a way
that new grantees could not.
Finally, we are not extending
eligibility to local GEAR UP projects
with strong municipal partners for the
reasons expressed in response to the
prior comment.
Changes: None.
Comment: One commenter requested
that we clarify whether the
demonstration project is open to all
students in a cohort or only to those
who are low-income and, if the latter,
how income requirements would be set.
Discussion: The demonstration
project is open to any students in a
GEAR UP cohort beginning in ninth
grade, so long as they attend a school
that has been randomly selected to
receive seed and match funding for the
college savings accounts. There are no
additional tests for income or poverty
beyond those in section 404B(d) of the
HEA that apply to the schools in which
the cohorts of students are enrolled and
in which State GEAR UP grantees are
already providing GEAR UP services.
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Changes: None.
Comment: Several commenters
requested that the Department expand
grantee eligibility under Priority 1 to
allow FY 2012 GEAR UP State grantees
with ninth graders in the fall of the
2014–2015 school year to participate in
the demonstration project. These
commenters stated that the
Department’s proposal unnecessarily
limits the pool of potential State GEAR
UP grantees eligible to participate in
this project.
Discussion: We agree with these
comments. Under Proposed Priority 1,
GEAR UP State grantees that received a
new award in FY 2012 and that select
students on the basis of the cohort
approach would not have been eligible
to receive funding under this
demonstration project because their
students would predominantly be in the
eighth grade during the 2013–2014
academic year. However, we think it is
appropriate to revise Priority 1 to permit
GEAR UP State grantees that received
new awards in 2012 and that are using
the cohort approach to apply for
funding under this demonstration
project. Doing so will help to ensure
that more State GEAR UP grantees are
able to participate without undermining
the evaluation of the demonstration
project.
Changes: Eligibility has been
expanded to include 2012 GEAR UP
State grantees that select participating
students using the cohort approach and
that provide GEAR UP services to ninth
graders in the fall of the 2014–2015
school year.
Comment: Several commenters
requested that the Department revise
Priority 1 to lower the minimum class
size of participating schools from the
proposed 50 students in order to avoid
bias against applicants serving rural
schools.
Discussion: The Department had
initially proposed a class size of 50 to
ensure that services are provided in a
cost-effective manner and to provide a
sufficient cushion so that even if some
students and their families chose not to
agree to participate in the surveys
needed for the project evaluation, the
evaluation would still have a
sufficiently large sample of students and
families. However, we agree with these
comments that the proposed minimum
class size of 50 students may have been
unnecessarily high and would have
made it difficult for many rural schools
to participate even if their State is
among the successful applicants.
Historical data from State grantees
indicate that high schools served by
GEAR UP using the cohort approach
have an average of far more than 30
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participants in the ninth grade cohorts.
Using the lower number alleviates any
potential rural bias but still ensures a
sufficient number of GEAR UP students
in each participating school both to
enable cost-efficient administration of
the demonstration activities and to
sustain the integrity of the evaluation
design.
Changes: We have revised paragraph
(a) in Section I of Priority 1 to state that
when the applicant begins providing
college savings accounts to its GEAR UP
ninth grade students, each of the
applicant’s participating schools must
serve a cohort of a minimum of 30 ninth
graders.
Comment: One commenter noted the
possibility that limiting applications to
projects that select eligible GEAR UP
students using the cohort approach
could lead to overrepresentation of
applications from certain geographic
parts of the country. The commenter
suggested that the Department consider
having applicants identify their
proposed projects as urban, rural, or
suburban, and in the selection process
give preference to applicants whose
projects would serve urban and rural
schools.
Discussion: The Department agrees
that the demonstration project should
not unnecessarily disadvantage projects
based upon the geographic location of
their schools, particularly those serving
schools in rural areas. That is why we
are revising paragraph (a) in Section I of
Priority 1 to specify that the applicant’s
high schools must each serve a
minimum ninth grade class-size of 30
GEAR UP participants. Historical data
from State GEAR UP grantees indicate
that high schools using the cohort
approach have an average of far more
than 30 participants in the ninth grade
cohorts. Therefore, we believe that
reducing the minimum number of
participants to 30 will be sufficient to
address any concerns about geographic
distribution and that no other actions
are required. The Department believes
that urban schools do not need special
priority. As applicants for grants under
this demonstration project are State
GEAR UP grantees, the size of schools
that a State identifies for inclusion in
the proposed project should have no
impact on the quality of the
applications. Hence reducing the
required size of the ninth grade cohort
to 30 will not negatively impact larger
urban schools. Moreover, these urban
schools already make up a large portion
of existing GEAR UP projects. Finally,
the Department has found no correlation
between a State GEAR UP grantee’s
geographic location and its choice to
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administer a cohort- or priority-based
approach.
Changes: We have revised paragraph
(a) of Priority 1 to state that the schools
that an applicant would serve must have
at least 30 GEAR UP participants who
will be in ninth grade during the 2013–
2014 or 2014–2015 academic year
(depending on whether they received
their new GEAR UP award in FY 2011
or FY 2012).
Comment: One commenter
recommended that the Department
expand eligibility to include a GEAR UP
State grantee initially funded in 2008,
asserting that its State has had
significant experience with college
savings accounts since 2003 and has the
Nation’s highest proportion of
disadvantaged students.
Another commenter recommended
that the Department begin establishing
the savings accounts and availability of
match well before ninth grade for needy
students whose parents are not college
educated, given that these students
would benefit from starting to save
earlier in life.
Discussion: The College Savings
Accounts Research Demonstration
Project is designed to study whether a
combination of supported personal
savings accounts and associated
financial incentives and counseling
provided during GEAR UP students’
high school years will have a positive
effect on a variety of measures of college
readiness, financial well-being, high
school graduation, and college
enrollment. GEAR UP students
participating in a State grant funded in
2008 would be in the twelfth grade at
the start of the research study.
Therefore, if we extended eligibility to
include a GEAR UP State grantee
initially funded in 2008, not only would
GEAR UP funds provide these students
with a very small amount of funding to
be used for college expenses, but the
research purpose of the demonstration
project would not be realized.
With respect to starting the
demonstration project with students not
yet in ninth grade, the Department
recognizes that there may be some
benefits to exploring the effectiveness of
starting college savings earlier than
ninth grade. However, one of the goals
of the demonstration project is to look
at the effects of college saving for a
multiyear period while students are in
high school. By starting with students in
ninth grade cohorts, the Department can
ensure that all students receiving
college savings accounts will be
attending high schools where they can
receive the wraparound GEAR UP
services that we think may be important
for success in preparing them for, and
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promoting their enrollment in, college.
By contrast, starting the demonstration
projects when students are in an earlier
grade could result in some students
receiving valuable services while in
middle school but then moving to high
schools where they may not receive
wraparound GEAR UP supports or the
required financial counseling for the
savings accounts. Moreover, in view of
limitations on the amount of GEAR UP
funds the Department has available to
support this demonstration project, and
our interest in receiving robust
evaluation results earlier rather than
later, we believe that beginning this
demonstration project while students
are in middle school would seriously
undermine project results.
Changes: None.
Comment: One commenter
recommended that any State-level
project demonstrate clear and strong
support of State political leadership,
including the Governor, State treasurer,
and school district leadership. The
commenter stated that the
demonstration projects would likely
need cooperation among these offices
for permissions and other data. The
commenter further noted that State
leadership would be particularly
important if grantees used banks or
credit unions rather than 529 college
savings plans because individual banks
and credit unions have their own
account structures, unlike 529 plans.
Discussion: The Department notes
that, consistent with our proposal,
paragraph (c) in Section II of Priority 2
requires a letter of support from the
LEAs that would participate in the
project. The Department agrees that a
broad demonstration of support for the
project is important to help ensure its
success. However, we think
demonstrations of support are most
important from the districts and schools
that participate. They will have to work
with grantees to give students
wraparound services, provide financial
literacy information, and help ensure
that the account administrator and
trustee have the data they need for
deposits, withdrawals, and distribution
of GEAR UP funds. By contrast, while
we think that having the endorsements
of a State’s political leadership could be
helpful, projects can likely succeed
without these endorsements, and
requiring them would add additional,
and we think unnecessary, burden to
the application process.
Changes: None.
Comment: One commenter strongly
recommended that students who enroll
in GEAR UP schools in a grade whose
cohort is served by a GEAR UP grant
after the beginning of the demonstration
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project be allowed to participate and be
given access to seeded savings accounts.
The commenter stated that while
researchers could track these students
separately, the grantee should maintain
a grade-level cohort.
Discussion: In order to properly
evaluate the effectiveness of the
demonstration project, we need to start
with a cohort of students in the ninth
grade and then follow them throughout
high school. Adding students who join
the cohort after ninth grade would add
costs to the project. And while the
evaluation could separately track these
students (with presumably smaller
amounts of deposits in student
accounts), doing so will add complexity
to the evaluation. Therefore, we are not
changing Priority 2 to require that
grantees include in this project students
who enter a participating school and
join the cohort of GEAR UP students
after the ninth grade.
That said, we understand that
prohibiting these students from
receiving services and savings accounts
provided through this project could be
difficult to explain and could create
very undesirable tensions in the school
communities. For this reason, we
believe that grantees should, if they
desire, be able to establish accounts for
students who join the grantees’ ninth
grade cohort by enrolling after ninth
grade in high schools in which cohort
members have already received
accounts. However, if a grantee chooses
to provide savings accounts to these
new members of the cohort, it must
ensure that it has sufficient GEAR UP
program funds to first provide matching
deposits for students it is required to
serve.
Changes: We have added a new
paragraph (f)(4) in Section I of Priority
2 that, at the discretion of the grantee,
permits students who become members
of the GEAR UP cohort during the
project period after transferring from a
non-treatment high school into a
treatment GEAR UP high school after
ninth grade to have an account with the
$200 seed money and availability of
matching funds, provided that the
grantee ensures that it has sufficient
GEAR UP program funds to first provide
matching deposits for students it is
required to serve.
Comment: None.
Discussion: In Proposed Priority 1, the
funding eligibility criteria would have
required a GEAR UP State grant funded
in FY 2011 or FY 2012 to support
activities in ‘‘multiple’’ high schools.
Through internal Department
deliberation, we concluded that the
term ‘‘multiple’’ was too vague and that
the better approach is to specify a
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precise minimum number. We chose to
use six schools as the threshold because
it represents the minimum number of
participating schools in each SEA that
will make the project cost-effective to
implement and evaluate.
Changes: We have revised paragraph
(a) of Priority 1: Funding Eligibility to
provide that an applicant must
implement a GEAR UP project in ‘‘at
least six high schools’’ rather than
simply ‘‘multiple high schools.’’
Comment: None.
Discussion: Proposed Priority 1 states
that an applicant must have received a
GEAR UP project grant that supports
activities in ‘‘at least six high schools,’’
but does not define ‘‘high school’’ or
what grade span would be considered
‘‘high school.’’ Through internal
Department deliberation, we concluded
that it is necessary to clarify that, for the
purposes of these priorities, a ‘‘high
school’’ must be a school that serves
students in grades 9–12. This
clarification is needed first to ensure
that grantees will be able to provide
participating students with GEAR UP
services for the entirety of the project.
In addition, participating students in
high schools that serve grades 9–12 will
be able to receive the required financial
counseling for four years in conjunction
with their savings accounts. By serving
students in the ninth grade who then
may transfer to a non-GEAR UP high
school for grades 10–12, many of these
counseling benefits would be lost.
Change: We have revised paragraph
(a) of Priority 1: Funding Eligibility to
provide a note clarifying that for the
purposes of this notice of final
priorities, a high school must be a
school that serves students in grades 9–
12.
Savings Account Matching
Contributions
Comment: Several commenters
requested that the Department revise
Priority 2 and increase the proposed
Federal matching contribution of $10
per month so as to provide greater
incentives for GEAR UP students to go
on to college and for families to save for
their children’s college expenses.
One commenter recommended that
between the $200 per student seed
money and the GEAR UP matching
funds, the total amount of possible
Federal funds deposited into each
account be a number that is easy for a
family to remember, such as $1,500 or
$2,000.
Another commenter recommended
that the Department provide flexibility
in the amount of Federal matching
funds that would be provided based on
grantee determination of the needed
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family contribution. This commenter
noted that having a variety of minimum
matching rates would impact the
evaluation but believes that the size of
the treatment group should allow for
such flexibility and help to answer the
question of what level of match
optimizes families’ savings
contributions. Another commenter
recommended that the Department not
establish a monthly match based on a
fixed amount of family savings but
instead focus on regular savings
because, according to the commenter,
research suggests this approach would
be more effective in promoting
accumulated savings.
Discussion: We agree with some of
these comments.
Having examined the level of GEAR
UP program funding that we expect to
be available for this demonstration
project, we believe that we can offer
greater financial incentives for GEAR
UP students or their families to save
money for postsecondary education
than the $10 per month Federal match
that we had proposed. We therefore are
revising the priority to specify that
grantees will be able to match up to $25
per month. Thus, rather than the
maximum of $120 of GEAR UP funds
per year (and up to $480 over the
maximum four years of savings) that we
had proposed, grantees now will be able
to provide each GEAR UP student a
contribution of up to $300 per year (and
up to $1,200 over this four-year period).
The increase in the Federal matching
contribution should increase the
incentive for families to save for college
and result in higher levels of family
savings. We believe that $1,200 over
four years will also give students and
families a clearer amount of total seed
and match funding available. While we
appreciate one commenter’s suggestion
that matching amounts vary based upon
a determination of family need, we do
not think this approach is appropriate
here. Varying the match would increase
complexity for administrators, who
would have to develop a needs-analysis
formula and find ways to communicate
these differences to students and
families clearly. Beyond having grantees
make available this fixed amount, the
Department believes that providing
other options for families to receive
further deposits of GEAR UP funds
beyond those specified in Priority 2
adds too much complexity to the
administration of the project.
Changes: We have revised paragraph
(b)(2), of Section I of Priority 2: College
Savings and Financial Counseling to
increase the Federal matching
contribution from up to $10 per month
to up to $25 per month, for a maximum
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5041
of $300 in Federal matching funds each
year for four years.
Comment: One commenter
recommended the Department lower the
match rate and raise the Federal
matching contribution cap to maximize
savings contributions. The commenter
stated that families would be more
motivated to save if the Department
raised the amount of GEAR UP funds
available for these savings accounts but
lowered the match percentage from the
50 percent that we had proposed. The
commenter offered this approach,
stating that it would increase the
amount of funds families would have
available for college savings without
greatly increasing the level of
commitment of GEAR UP funds.
Discussion: The Department agrees
with one of the recommendations in the
comment. The match cap has been
raised to $25 per month for a maximum
of $300 in Federal matching funds each
year for four years. The Department is
not lowering the match rate, one dollar
of GEAR UP contribution to the savings
account for every dollar of student or
family contribution, because we do not
believe that lowering the match rate will
result in increased non-Federal savings
contributions.
Changes: The Federal matching
contribution cap has been increased to
$25 per month.
Comment: One commenter
recommended revising the proposed
priorities to allow grantees the option of
matching family deposits in excess of
the Federal limit, thereby providing an
opportunity to leverage other incentive
programs, such as savings match
programs through a Section 529 plan.
Discussion: While we agree that
offering more matching funds would
provide a greater incentive to save, the
demonstration project is designed to
determine the impact of a fairly specific
set of college-savings-oriented services
and the provision of a set amount of
Federal funds as a match for private
savings accounts. Grantees actively
seeking to encourage additional family
deposits in college savings accounts by
offering a match against other nonFederal contributions will interfere with
the project evaluation. Therefore, the
amount of matching must be kept
consistent for all participating GEAR UP
grantees.
Changes: None.
Comment: One commenter
recommended that the Department
provide greater funding to accounts of
families with fewer resources. The
commenter noted that while this
approach presents unique challenges,
such as asking for a child’s Social
Security number in order that the child
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participates in the demonstration, this
effort is needed if the demonstration is
serious about policy influence.
Discussion: The Department does not
agree with the commenter. We believe
that existing eligibility requirements of
the GEAR UP program ensure that large
numbers of participating students will
be low-income and first-generation
college students. Moreover, changing
the amount of matching funding based
upon additional factors will call into
question the reliability of the results of
the project, add complexity to
administering the program, and make it
harder to communicate to students and
families about the level of available
funding. Therefore, we want to offer a
consistent level of seed and match
funding for all participating students.
Changes: None.
Comment: One commenter asked that
we clarify whether the family’s
contribution to its college savings
account must be made monthly in order
to receive the full Federal contribution.
Specifically, the commenter asked
whether the project would contribute
the full monthly level of matching
contributions if the family had overmatched in one month and undermatched in another, but averaged at
least $25 per month. The commenter
also asked the Department to consider
other savings models, such as
permitting a family to receive the
maximum amount of the GEAR UP
contribution to the federally funded
college savings account so long as it has
made the required match at any point
over this period.
Discussion: A student or family that
has over-matched its account in one
month and under-matched in another
would not be able to have the amount
of its over-matches count for future
monthly matches, including any catchup period contributions. One of the
goals of the demonstration project is to
encourage students and families to
regularly save for college. Allowing the
amount of over-matching in one month
to count toward the matching amount in
subsequent months would discourage
regular saving and make the program
more complex and costly to administer.
The Department appreciates the
comment that the match be available to
families so long as the required
contribution is made at any point over
this period. While we think that families
should have some flexibility and
opportunities to make up for lost
contributions, those opportunities
should not be provided indefinitely.
That is why we are requiring grantees to
provide families a quarterly catch-up
period of two weeks. We believe these
frequent catch-up opportunities balance
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the desire to give families the
opportunity to make up for missed
contributions with a project goal of
providing regular deadlines that
encourage savings.
Changes: Paragraph (p) in Section I of
Priority 2 has been revised to clarify that
a family that over-matches the Federal
account in any month may not receive
credit for the amount of over-match in
any future month, including a catch-up
period, for purposes of meeting that
month’s GEAR UP program matching
contribution.
Comment: Rather than offer monthly
matching contributions of GEAR UP
funds, a number of commenters
recommended that the Department
instead add to accounts when certain
levels of private savings are achieved,
provide bonuses when families have
added to accounts for perhaps six
consecutive months, or, after making the
initial deposit of GEAR UP funds,
provide periodic deposits of Federal
funds when students reach particular
ages. One commenter said that these
approaches would both be much
simpler to implement than our proposal
and that the latter option has proven
successful in the United Kingdom. The
commenter further recommended that
rather than contributing Federal funds
through matching, the Department
should consider providing Federal
funds for student accounts as behavioral
incentives at certain milestones for
financial or educational achievement.
The commenter stated that this
approach might be a more effective way
to motivate student behavior and that
research suggests that the approach also
might better encourage long-term
savings compared to matching monthly
deposits.
Discussion: While we appreciate the
summary of research presented by the
commenter, the Department does not
agree that the proposed approaches are
feasible for the purposes of this
demonstration project. We think
matching savings account contributions
when they occur provides immediate
positive feedback to students and
families that will encourage additional
saving. Moreover, we think that
additional benefits, such as bonuses for
repeatedly saving, will make accounts
more complicated and costly to
administer and harder for students and
families to understand. As for providing
matches based upon student age or
other milestones, we think that
including these other benefits would
likewise make administering the
accounts more complicated and make it
too burdensome for grantees to manage
them. Therefore, we are not including
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additional matches for meeting other
milestones.
Changes: None.
Comment: One commenter
recommended that grantees be able to
raise funds for savings accounts from
community and philanthropic
organizations, but it cautioned that in
this case there should be restrictions on
the use of these funds for activities that
are related to education or finance, and
supported by adequate documentation.
Discussion: Proper evaluation of the
demonstration project requires that
students served by all project grantees
are subject to the same maximum
matching and seeding amounts. Proper
evaluation also requires that grantees
not solicit or otherwise seek funds from
sources other than the student’s family
and friends to contribute to the
student’s non-Federal account. Doing
otherwise could compromise the
demonstration project evaluation.
Changes: Paragraph (c) in Section I of
Priority 2 has been revised to clarify that
a grantee may not solicit or raise money
from non-Federal sources as additional
contributions to the student’s nonFederal college savings account.
Requirements for Savings Accounts
Comment: Several commenters
emphasized that, in order to meet the
needs of their communities, the
Department should allow grantees
flexibility in the design of their
programs and thus not require all
grantees to use the same type of savings
account.
One commenter recommended that in
providing such flexibility, the
Department should require that all
accounts have certain minimum
qualities, such as making the accounts
accessible, safe, and effective, avoiding
excessive fees to students, and being
easy to use. The commenter also stated
that this approach allows for some
uniformity while also providing
variation for research purposes, and
added that if the Department decides to
require a single account type, it should
not use 529 savings plans. The
commenter stated that despite their
positive features, these plans have more
onerous data disclosure requirements
than alternative account models and
thus would exclude more students than
necessary from participation.
Another commenter, urging the
Department to maintain flexibility in the
type of account the applicant would
select, noted that 529 plans generally
cannot be accessed by deposits into
local bank branches and may prove
difficult to use by unbanked low-income
households since in-person deposits
would be very difficult. The commenter
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noted that 529 accounts often have
minimum deposit requirements, often in
the $15 to $25 range, and require
deposits to be made online or by mail;
the commenter stated that these
considerations would obstruct the use of
these 529 accounts by many low-income
families, particularly since the
commenter’s experience is that the
ability to make small cash deposits is
very important for this population.
On the other hand, a number of
commenters recommended that we have
grantees use existing 529 savings plans.
One commenter noted that these plans
provide a ready common infrastructure
designed to support college savings that
is not readily available in the case of
banks or credit unions, that they would
be available to students and parents
after the end of this demonstration
project, and that experience in one State
demonstrates that use of a Section 529
account by all participating students has
made it possible to monitor savings
patterns and performance very
accurately. The commenter also noted
that, for this demonstration project,
these Section 529 savings plans would
need to be flexibly implemented, and
urged the Department to clarify that
States may work with the 529 providers
to craft special arrangements for account
opening, account-holder information
requirements, and account structure that
are specific to the demonstration
project.
Finally, two organizations that work
with members to enhance 529 plans
submitted joint comments that, among
other things, stated that the 2004 studies
referenced in the NPP with regard to
income bands and typical 529 plan
participation are outdated and do not
reflect efforts made in recent years to
expand knowledge about and
participation in 529 plans. In this
regard, the commenters provided copies
of two reports provided to the United
States Treasury in February 2010 about
529 plans and efforts of those
implementing the plans to broaden their
reach.
The commenters also stated that 529
plans do encourage savings by those
with modest incomes and that virtually
all of these plans have required
contributions of as little as $10 to $25
per month; have a wide variety of
savings instruments, including very
conservative ones; and low-fee options.
The commenters said that they would
defer to the State applicants about the
specifics of implementing the
Department’s proposed study and the
logistics of funding of the GEAR UP
supplementary college savings accounts
with required criteria and
characteristics, particularly privacy
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aspects, but asked the Department to
remain open to allowing a variety of
funding vehicles in the study. The
commenters emphasized that the greater
the flexibility that is available for
implementation efforts, the greater the
chances of success. The commenters
also said that the State educational
agency (SEA) in each State should work
with the State’s 529 plan wherever
possible, since by utilizing 529 plans for
this purpose, it will take advantage of an
existing infrastructure that administers
college savings programs and in many
instances administers a matching grant
or other type of program for law and
moderate income families.
Discussion: We appreciate these
comments, but we believe it is
important to provide appropriate
flexibility to grantees to choose the type
of savings vehicle that works best for
them and that they believe will work
best for participating students and their
families. As we proposed, the
Department is providing each grantee
flexibility to determine which type of
savings program administration they
will use, provided that the grantee
ensures that:
(a) It has a partnership with a
financial institution that will provide
GEAR UP students starting in ninth
grade with an account that allows
saving in a federally insured deposit
account that accumulates interest, an
account composed of U.S. Government
Treasury securities, or a fully
guaranteed savings option within a
Section 529 college savings plan.
Accounts may also provide students and
families with investment options that
present risks in exchange for the
potential for larger returns but that are
in no way guaranteed.
(b) Federal funds are maintained in a
single ‘‘notional’’ account that is in fact
separate from any non-Federal funds.
The amount of Federal GEAR UP seed
and matching funds and accrued
interest earned by each student is
tracked, each student is permitted to see
both the Federal funds and associated
interest earned as well as any nonFederal funds and interest earned in a
single account statement, and Federal
funds are invested only in federally
insured vehicles or U.S. Treasury
securities.
Even with these conditions, grantees
will have many different types of
accounts to choose from, such as
501(c)(3) plans and 529 plans.
With regard to the comment raising
concerns about 529 plans, the
Department believes that the
requirements outlined in the priority
will protect against those concerns such
that plans that have the flaws the
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commenter identified would not meet
the requirements for selection.
Similarly, we are confident that these
requirements do not preclude grantees
from using 529 plans but instead
provide grantees with sufficient
flexibility to choose what works best for
them.
Changes: None.
Comment: One commenter from an
association of financial institutions
offered to leverage its member bank and
banking contacts to help identify
institutions interested in participating
in the project, should the Department
select savings accounts as an eligible
account type.
Discussion: The Department
appreciates the commenter’s interest in
partnering with grantees to administer
accounts. However, the Department
thinks it is important that grantees have
flexibility in selecting the provider that
is best for them, and so we cannot
recommend a specific type of account or
provider. We do encourage the
commenter to work with applicants and
grantees to determine if their
partnership would be appropriate.
Changes: None.
Comment: One commenter suggested
that the Department allow for, and even
encourage, maximum flexibility and
experimentation across many of the
dimensions of the accounts specified in
Proposed Priority 2.
Another commenter offered
recommendations about the way the
savings accounts should be set up,
suggesting for example that (1) the basic
savings accounts be interest bearing
with no minimum balance and no fees,
(2) parents be able to invest funds in a
certificate of deposit or investment
product such as a mutual fund, (3)
accounts be in the student’s name so
that assets in the accounts not affect
family eligibility for Medicaid and
Temporary Assistance for Needy
Families (TANF), and (4) withdrawals
for unauthorized purposes result in loss
of GEAR UP matching funds.
Another commenter stated that while
flexibility was important, there are a
number of advantages of structuring the
saving accounts using a custodial or
trustee model and holding all funds
under a single tax identification
number. These advantages include:
accounts can be opened automatically
and universally and without the need
for Social Security number or parental
consent, funds are protected from early
or non-qualified withdrawals, account
earnings accrue tax free without the
need of parents to report these earnings,
and assets are not held in a family’s
name, thus avoiding asset tests for
public benefits eligibility.
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Yet another commenter recommended
that the Department have grantees
structure their accounts and projects so
that (1) they are free of any fees on the
students or the custodians, (2) all funds
are insured by the FDIC, (3) there is no
minimum balance or deposit amount,
(4) parents and students have a range of
deposit options, (5) there is strong
competency in the management and
exchange of data between the projects
and financial institutions, (6) while
making available limited withdrawals,
families are provided access to their
funds in the case of an emergency, and
(7) families have access to account
balances through an online system.
Discussion: The Department
acknowledges the recommendations
received on the structure and
implementation of the savings accounts.
We agree that allowing grantees to tailor
account characteristics to their preferred
circumstances could have some
benefits, and, as discussed previously,
the Department has proposed to provide
flexibility in choosing the type of
savings account administration program
provided certain core requirements are
met. At the same time, we need to limit
flexibility in other areas such as the
amount of seeding or matching funds to
ensure that the demonstration project is
evaluating a specific set of college
savings-oriented services. The
responsibility for designing and
managing these accounts, within the
specified guidelines, rests with the State
GEAR UP grantee. Successful applicants
will propose an implementation plan
that is most effective for their State and
target population.
Changes: None.
Comment: A number of commenters
recommended the elimination of the
requirement that savings account
administrators establish and maintain
parallel accounts for each student, one
for GEAR UP funds and the other for
family contributions.
One commenter stated that the family
contributions should instead be held in
sub-accounts of the single master
account, meaning that there would be
no need for parallel accounts since the
Federal seed deposit and match funds
could be accurately and easily tracked
using a ledger system.
Another commenter stated that while
some college savings account programs
use the dual-account approach the
Department had proposed, others use
software to track and accrue savings
matches virtually while keeping the
matching funds in a pooled account.
Under this approach, when it is time for
qualified withdrawals, the appropriate
amount is withdrawn from the pool and
paid to the institution of higher
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education or other vendor. The
reduction in the number of separate
accounts creates large decreases in
administrative burden.
Similarly, another commenter stated
that to decrease administrative burden,
the Department should make use of
notional accounts in which the Federal
funds would be placed in an account
that is parallel to the account holding
non-Federal funds. The commenter
noted that while the Department might
be legally required to use this
arrangement, given the enormous
number of potential savings accounts
and the fact that it could not be a viable
method of account delivery in the long
term, the commenter urged the
Department to use a single account
design that would use software to track
and account for Federal and nonFederal deposits.
Discussion: We appreciate these
comments. While we agree that
eliminating the requirement for grantees
to maintain parallel accounts for
students would reduce by half the
number of accounts, we think the
provisions in Priority 2 that concern use
of Federal dollars deposited into these
accounts make parallel accounts
preferable. In order to make sure Federal
dollars are properly invested, they must
be invested in federally insured vehicles
or U.S. Treasury securities. Were we to
require only a single account type, nonFederal matches would be restricted to
similar investments, which would
restrict savings options. Moreover,
GEAR UP funds deposited into these
accounts that are unused will need to be
returned to the Department, something
that would be very hard to manage with
a single account for deposits of both
Federal GEAR UP funds and private
savings. Therefore, we think it is
necessary that the two-fund structure be
maintained.
Changes: None.
Comment: One commenter
recommended establishing a process
that allows for quick and easy deposit
of funds to a student’s savings accounts.
Another commenter recommended that
the Department give priority to
applicants that provide a convenient or
automatic way for families to make
deposits into students’ accounts, while
another commenter provided research
findings that automatic enrollment in a
savings account yields much greater and
sustained participation than having
individuals open accounts on their own.
However, another commenter stressed
its concern that auto-enrollment without
parental consent would be less effective
for achieving both the needed parental
buy-in to college savings and the
student enthusiasm for college that
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would come from requiring parental
engagement, such as a requirement that
parents expressly ‘‘opt-in’’ to the
project. And another commenter stated
that while 529 accounts offer
convenience and simplicity, requiring
grantees to use these accounts may (1)
lead to the removal of other attractive
features of accounts, such as the need
for families that already had savings
accounts to open and add deposits to
another, and (2) create much greater
administrative burden that could
dampen support by those administering
the project.
Discussion: The Department believes
that making it easier for students to
enroll in the savings accounts,
particularly by doing so in an automatic
or near-automatic fashion, is important
for encouraging participation and
savings. Therefore, we agree with
commenters recommending easy
enrollment and note that proposed
Priority 2 allows quick and easy deposit
of funds to a student’s savings account.
Each successful applicant will be
required to ensure that individual
deposits can be made easily and at no
cost to the student, the student’s
parents, or others who make deposits on
the student’s behalf. Consistent with the
proposal, a student or parent would be
able to deposit funds online, in person
at convenient locations, or by mail.
While the Department agrees that more
engaged parents may be more likely to
contribute to savings accounts and build
enthusiasm for college, we think that
requiring an express ‘‘opt-in’’ would
make it more complicated to enroll and
participate and could depress usage.
Instead, we encourage grantees to work
with families to build their interest and
knowledge in the program, including
through required financial counseling.
Changes: None.
Comment: One commenter
recommended that the Department
provide a strong preference for ensuring
that grantees work with a single
financial institution that can provide
accounts with uniform terms and
conditions, and at low cost, across the
State. The commenter stated that such
an approach would promote a better test
of a college savings plan that included
all students, would decrease
administrative burden throughout the
project, limit variability in savings
accounts for administrative and
evaluative purposes, and facilitate
tracking and submission of more
complete and accurate data about the
projects.
Discussion: We agree with much of
this comment. With respect to requiring
a single financial institution, we
recognize that for many grantees a single
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partner may be sufficient and indeed
even preferable to using multiple
institutions. However, we also recognize
that such a structure would not
necessarily work in a larger State or in
other circumstances. Therefore, we
encourage grantees to use their
professional judgment when
determining how many financial
partnerships they need to set up the
college savings accounts for
participating students in their States.
Changes: None.
Comment: One commenter
recommended that the Department have
grantees invite account personnel to
attend regular meetings of parents at
which they offer envelopes for mailing
deposits and other ways to encourage
savings.
Discussion: While the Department
thinks it is important that grantees have
flexibility in deciding how counseling
to parents should be provided, this
requirement would not preclude
account personnel from providing some
or all of this assistance.
Changes: None.
Comment: While fully supporting the
Department’s proposal to require that
grantees provide families with
automatic enrollment and
encouragement of automatic savings
deposits as useful design elements to
encourage saving for a student’s college
education, a commenter recommended
that the Department also consider a
number of other behavioral design
elements. While these recommendations
are addressed under the next topic
headings, the commenter recommended
that under Priority 2, the Department
require each State grantee to secure
technical assistance in designing
behavioral interventions that suit the
particular implementation of this
project and that are customized to the
operational constraints of the
participating schools, account
administrators, and the financial
situation of participating students and
their families.
Discussion: The Department does not
agree with this comment. Grantees may
certainly design their projects to provide
various approaches that they believe
will be effective in encouraging families
to focus on the importance of saving for
college, and grantees may use GEAR UP
funds to secure any desired technical
assistance. However, while we
appreciate that different behavioral
designs may result in interesting
variations in savings accounts, proper
evaluation of the accounts requires
consistent administration across
grantees. Adding in such behavioral
design elements would thus further
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complicate the evaluation and is not
recommended.
Changes: None.
Financial Counseling and Behavioral
Interventions
Comment: One commenter
recommended that the Financial
Counseling component be given ‘‘the
same weight’’ as the Student Savings
Account component. We understand the
commenter to be asking that the
Department require grantees to
implement both the Financial
Counseling and Savings Account
components of Priority 2.
Discussion: The Department agrees
with this comment and notes that, as
proposed, Priority 2 requires grantees to
implement both the Financial
Counseling component and the Student
Savings Account component. The
College Savings Accounts Research
Demonstration Project has two main
parts: (1) establishing, operating, and
having students participate in college
savings accounts and financial
counseling, and; (2) assessing the effect
of providing the college savings
accounts and related financial
counseling to students and their
parents. Both of these parts are in the
absolute priority published in this
notice of final priorities and
incorporated by reference in the notice
inviting applications for the College
Savings Account Research
Demonstration Project published
elsewhere in this issue of the Federal
Register. Therefore, successful
applicants will need to address both the
Financial Counseling and Student
Savings Account components.
Changes: None.
Comment: One commenter expressed
concern that students may be penalized
when parents are unable or unwilling to
attend required parent financial
counseling sessions. The commenter
recommended that counseling for
parents be optional and that we provide
incentives to parents who participate.
Discussion: Grantees will be expected
to find and utilize the most effective
methods at participating schools for
reaching out to and counseling parents.
While grantees are required to provide
‘‘at least biannual counseling meetings
for parents,’’ they are not required under
Priority 2 to meet specific attendance
figures. Therefore, students whose
parents do not attend the session will
not be penalized.
Changes: None.
Comment: One commenter expressed
concern that individually targeted
financial counseling may be too
burdensome for projects to implement
successfully with existing resources.
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This commenter recommended
partnering with outside organizations,
such as Consumer Credit Counseling
Services, to help provide such
counseling.
Discussion: We agree that grantees
should make use of existing resources,
both theirs and those of outside
organizations, to provide financial
counseling, and we encourage grantees
to seek partners that can help them in
this effort. However, we do not feel that
it is necessary to include a statement to
this effect in the final priority as
applicants will no doubt craft a
counseling plan that best meets their
needs.
The comment prompted us to
examine paragraph (g) in Section I of
Priority 2, which, as proposed, did not
clarify whether all students in the
treatment group need to participate in
the required financial counseling. We
have revised the provision to clarify that
all students must be included.
Changes: Paragraph (g) of Priority 2
has been revised to clarify that all
students in the treatment group must
receive the required financial
counseling.
Comment: A commenter
recommended adding a requirement
that financial counseling, particularly
for parents, be conducted in languages
other than English, while another
recommended that the Department
encourage applicants to work with
experienced partners in the delivery of
culturally and linguistically appropriate
financial education and counseling for
parents and families.
Another commenter, noting the
importance of financial counseling,
recommended that each State grantee
implement financial counseling using
curricula that are consistent and
standardized across sites and that are
focused on helping GEAR UP students
to increase their savings. The
commenter indicated that evaluation
results with respect to the measure and
impact of financial counseling would
thereby be as valid and reliable as
possible. In order to promote
efficiencies and appropriate evaluation
results, the commenter also emphasized
the need of grantees, in States that
mandate a financial education
curriculum, to coordinate with that
curriculum in the design phase of their
projects.
Discussion: While we recognize the
need to provide linguistically and
culturally appropriate financial
counseling, we do not feel that it is
necessary to require this for all
participating projects. Grantees are
expected to use their professional
judgment and conduct teaching and
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counseling that best meets the needs of
parents and students, including those
who need financial counseling in
languages other than English. We have
no doubt that in States that mandate a
financial education curriculum, grantees
will want to have participating schools
and LEAs coordinate their financial
counseling with this curriculum.
However, we do not think it is
appropriate to mandate that each
grantee under this demonstration
project use a particular curriculum that
is consistent and standardized across
school sites.
Changes: None.
Comment: One commenter
recommended a change to Proposed
Priority 2 to allow States to obtain
technical assistance on the design of
behavioral interventions that would
help to encourage regular and greater
savings for college, such as social
support groups or the disbursement of
matching funds through prizes that suit
the particular implementation of the
college savings accounts research
demonstration project.
Discussion: We agree with this
recommendation but do not believe a
change to Priority 2 is needed to
accomplish the goal. The Department
realizes there is an array of behavioral
design interventions that may encourage
regular deposits into savings accounts;
we, therefore, encourage States to design
their college savings account
demonstration projects to include viable
interventions that are likely to maximize
college savings for students.
Changes: None.
Comment: One commenter
recommended that, in order to better
encourage parents to add deposits to
their children’s college savings
accounts, grantees should consider
activities such as sending reminder
letters and emails, preferably early in
the month rather than at the end of the
month; providing reminder magnets;
and communicating to them what other
families are doing or saying, e.g., the
number of families that provided regular
contributions in the preceding year or
months.
Discussion: We agree with the
commenter that grantees should reach
out to parents to provide them with
reminders about saving. We believe,
however, that States should be given
flexibility to determine how this should
be carried out. Therefore, we are not
adding a specific requirement.
Changes: None.
Financial Education
Comment: One commenter suggested
that the Department encourage grantees
to conduct financial education in
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multiple formats to ensure that the most
effective method is used. The
commenter also suggested that one of
the required formats include classroom
lessons during the school day, allowing
GEAR UP to leverage the work of States
that already mandate financial
education in the schools.
Another commenter emphasized that
financial literacy and college savings
accounts are not enough to overcome
barriers, particularly for first-generation
college students, in areas such as
preparing for college academically and
financially, how to apply to college, and
how to choose the right college and
career path. The commenter urged the
Department to pursue high-impact
mentoring, information about academic
and career preparedness, and the
engagement of parents, counselors,
teachers, and other stakeholders as
important interventions in addition to
college savings accounts. The
commenter urged the Department to
address these interventions—including
through use of the Internet and online
tools—as well as college savings
accounts in order to provide a more
robust set of outcomes.
Discussion: While we agree with the
commenter that multiple educational
formats may be more effective than a
single format in reaching varied
audiences with differing learning styles,
we do not feel it necessary to mandate
this practice. We believe that grantees
will want to use educational formats
that work best for their particular
audience, relying on current and proven
educational research. We also agree that
the availability of savings accounts for
GEAR UP students and promotion of
financial literacy are likely insufficient
by themselves to overcome all barriers.
However, we note that all students
participating in this program will also
be receiving all regular GEAR UP
services. By statute, GEAR UP grantees
are required to provide participating
students with a variety of mentoring,
outreach, and supportive services (as
referenced in the last sentence of
paragraph (g) in Section I of Priority 2).
These services will give students some
of the mentoring and information
assistance mentioned by the commenter,
but we think much of what the
commenter seeks requires a vehicle
broader than this demonstration project.
Changes: None.
Comment: One commenter
recommended that the Department help
to prepare grantees to meet the financial
education requirement by offering
ongoing training to grantees, including
one-on-one advising as needed;
providing help to grantees to identify
and select quality educational financial
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curricula; and monitoring financial
education delivery over time. The
commenter also recommended that the
Department require financial education
to be delivered in the classroom rather
than after school and urged that it be
coordinated with any financial
education already required in grantees’
States.
Noting the proposed requirement for
individually targeted financially
counseling, another commenter stated
that many grantees would not have
existing capacity to provide this higher
intensity service and that this
counseling would be very costly. The
commenter urged the Department to
invest additional resources in providing
needed grantee training and to permit
grantees to provide this counseling in
partnership with outside organizations
with the capacity to assist.
Discussion: The Department agrees
that extensive and ongoing technical
assistance on important aspects of
project implementation is crucial to
helping grantees establish and manage
savings accounts and that support is
particularly important for those with no
experience in this area. To address these
concerns, the Department plans, among
other things, to provide technical
assistance training at national GEAR UP
conferences on important aspects of
project implementation. These aspects
include general considerations that
should be taken into account when
implementing these types of savings
accounts. The Department is also
working with partners at the Treasury
Department, the NCUA, and the FDIC to
develop materials that will give
applicants key information about the
implementation of college savings
accounts.
While we appreciate the suggestion
that the Department require grantees to
provide financial counseling in the
classroom rather than after school, we
do not think it is appropriate to require
this. Some schools may not be able to
incorporate it into classroom time, and
such a requirement could create
problems with finding appropriate
instructors. Likewise, we do not believe
that an explicit requirement is necessary
for coordinating with any financial
education already required in grantees’
States. The Department notes that, in
their applications under this
demonstration project, potential
grantees will describe project services
that are most appropriate to the needs
of the target population and that
maximize the effectiveness of project
services through the collaboration of
appropriate partners.
Changes: None.
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Catch-Up Options
Comment: A number of commenters
recommended that the Department
eliminate or reduce the catch-up period.
One commenter stated that the proposed
catch-up provision would add costs and
complexity to the project and encourage
delays in making deposits. Instead, the
Department should consider requiring
small regular deposits, which makes
saving for college more manageable and
ritualized.
Another commenter recommended
that we make this provision more
flexible, both to reduce project
complexity and to give students the
greatest chance to acquire the maximum
amount of Federal deposits.
Discussion: The Department
understands that lower- and moderateincome families sometimes have to
make tough financial decisions that can
seriously impede their ability to save for
college regularly. We want to provide
these families the flexibility to continue
to receive matching funds by affording
parents a two-week catch-up period. We
think two weeks is an appropriate
amount of time because it gives students
and families ample opportunity to make
catch-up contributions but does not
provide so long a time period as to
create a disincentive to make regular
contributions to their children’s college
savings accounts.
Changes: None.
Comment: One commenter
recommended offering additional
annual or four-year opportunities to
catch up on required deposits. Another
commenter recommended that we
clarify the amount of catch-up that is
needed when families have overmatched in certain months but undermatched in others.
Discussion: The monthly savings
component of the project is intended to
instill a habit of consistent saving and
methodical planning for education
expenses. While we understand that
family incomes may at times be
inconsistent, this project aims to help
encourage participants to regularly save
money towards the costs of a college
education. We are concerned that
offering additional annual or four-year
opportunities to catch-up will deter
families from saving habitually.
With regard to the request for
clarification about a family that overmatched in any month, as we have
expressed in response to a prior
comment, we believe that given the
project’s focus on promoting regular
savings the amount of a family’s
overmatch should not be available as a
credit for a month in which the family
did not meet its match amount. Thus,
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we also believe that the family should
still need to provide catch-up
contributions for any months in which
it did not provide any contributions and
that this should be the result regardless
of how much a family over-matched in
a given month. We have clarified
Priority 2 in this regard.
One of the goals of the demonstration
project is to encourage students and
families to regularly save for college.
Allowing over-matching in one month
to count in subsequent months would
discourage regular saving and make the
program more complex and costly to
administer.
Changes: Paragraph (p) in Section I of
Priority 2 has been added to clarify that
a family that over-matches the Federal
account in any month may not receive
credit for the amount of the over-match
in any future month, including a catchup period, for purposes of meeting that
month’s GEAR UP program matching
contribution.
Account Administrator
Comment: One commenter sought
clarity on the role of the account
administrator.
Discussion: Under Priority 2, each
successful applicant must designate a
savings account administrator to hold
the account funds, accept deposits, and
issue qualified withdrawals. The
account administrator must be a
federally regulated or State-regulated
financial institution, such as an
investment firm that manages a State’s
529 plan or a federally insured bank or
credit union that partners with the State
to administer GEAR UP savings
accounts.
Changes: None.
Comment: One commenter requested
that we explain the difference between
the account administrator and savings
account trustee over the duration of the
project and beyond the five-year grant
period. The commenter also noted that
students may hold their accounts for up
to six years following high school
graduation, meaning that the account
administrators and trustees would need
to serve the accounts (and presumably
report data about them) for up to 11
years. The commenter expressed
concern that few potential account
administrators and trustees will be
willing to provide these services for this
length of time, and that the
administrative fees they are paid will
last only five years.
Discussion: Under Priority 2, each
successful applicant must designate a
savings account administrator and a
savings account trustee. The savings
account administrator is responsible for
holding the account funds, accepting
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deposits, and issuing qualified
withdrawals. The savings account
trustee is responsible for managing the
account funds and approving
withdrawals and other account
activities.
The Department appreciates that
accounts will have to be administered
for a longer period of time than the
grantee’s project period. But this
extended timeframe is necessary to
ensure that students are able to access
their accounts throughout their time in
postsecondary education. While we
appreciate that this extended timeframe
does place some burden on trustees and
creates some uncertainty about how
applicants and grantees would budget
for these trustee costs, we think that the
management of such accounts may
become easier as families stop making
contributions and instead begin
withdrawing funds. In their applications
under the program, potential grantees
should budget up-front for all years for
which the services of the account
administrator and trustee will be
needed. Moreover, grantees may budget
for, and charge GEAR UP funds for, the
reasonable and necessary costs of
managing the savings accounts. Thus
GEAR UP program funds will be
available to pay the reasonable and
necessary costs that the trustees can be
expected to incur.
Changes: None.
Savings Account Ownership
Comment: One commenter sought
clarity on the ownership structure of the
student savings accounts. The
commenter stated that whether the
account is owned by the trustee, the
student, or the student’s family will
affect account administration and
families’ funding decisions. The
commenter recommended that the
trustee own both the student account
and the match account.
Discussion: The Department agrees
with the commenter’s recommendation.
Both the students’ account containing
Federal funds and match account with
non-Federal contributions will be
owned by the account trustee.
Participating GEAR UP students will be
named as beneficiaries. This is the same
structure banks use for minors’ savings
accounts.
Changes: None.
Account Withdrawals
Comment: One commenter sought
clarification on what constitutes a
‘‘qualified withdrawal.’’ The commenter
asked, for example, whether the cost of
an enrollment in preparatory course for
a college entrance exam or the purchase
of a computer would be a qualified
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withdrawal, or whether grantees may
develop their own rules that align with
the specific requirements of the account
types they select.
Another commenter recommended
that the program follow the guidelines
established by 529 programs for what
constitutes a qualified withdrawal. Yet
another commenter recommended that,
to reduce administrative complexity, we
eliminate provisions for reducing the
prior match of GEAR UP funds for
unqualified withdrawals from the
student’s account.
Another commenter urged the
Department to consider reasonable
restrictions on the purposes of
withdrawals, perhaps with exceptions
for emergencies, or limiting withdrawals
to only a certain number of times per
year. According to this commenter,
surveys and focus groups of low-income
individuals have suggested that these
approaches may help encourage college
savings.
Discussion: Under Priority 2, students
or their parents may withdraw Federal
GEAR UP funds from the student
savings accounts in which grantees have
deposited them upon approval of the
savings account trustee. Under
paragraph (d) in Section I of Priority 2,
withdrawals of GEAR UP funds may
only be for qualified purposes, which
are (1) funds provided to an institution
of higher education on behalf of a
student upon that student’s enrollment
in an HEA title IV-eligible institution of
higher education (which includes
colleges and universities as defined by
the HEA) for the purposes of paying for
tuition, fees, course materials, living
expenses, and other covered educational
expenses as defined in the HEA, or (2)
funds the student or parent need for
such costs that would not be provided
directly to the IHE. In addition, we have
added to paragraph (d) permission to
use funds in the Federal account for
other costs related to postsecondary
education that the account trustee,
based on instructions from the grantee,
determines to be appropriate. At the
grantee’s discretion, these additional
qualified purposes costs could include
such items as the cost of enrollment in
a preparatory course for a college
entrance examination or the purchase of
a computer required for college.
Successful applicants also will
establish rules for the withdrawal and
transfer of non-Federal funds, which
must include a requirement that the
account trustee oversees any withdrawal
or transfer of non-Federal funds. In
terms of requests for additional
restrictions on withdrawals or limiting
the number of withdrawals allowed per
year, the Department thinks that the
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restrictions placed on withdrawals of
the Federal funds are appropriate. For
the non-Federal matching funds,
however, the Department does not think
we need to establish additional
restrictions since the loss of previously
matched Federal funds that would
accompany an unqualified withdrawal
should be sufficient to dissuade this
from often occurring. If, however, States
wish to provide additional restrictions
on withdrawing funds from the
student’s non-Federal college savings
account, that is their purview.
Changes: None.
Comment: One commenter noted that
the Department had proposed that the
college savings accounts be held for the
GEAR UP students in trust pending
their graduation from high school and
enrollment ‘‘in a college or university,’’
and asked what we mean by a ‘‘college
or university.’’ The commenter asked
whether the phrase is limited to
accredited institutions, and whether
technical schools such as culinary
institutes, automotive schools, or
cosmetology schools would qualify.
Discussion: By ‘‘college or
university,’’ the Department means an
institution of higher education that
participates in the Title IV Student
Financial Assistance programs and is
described in section 102 of the HEA.
This interpretation is necessary because
GEAR UP funds may only be used for
college savings accounts as a
supplement to financial assistance that
GEAR UP grantees are already provided
as scholarships and student financial
assistance under section 404E of the
HEA. Section 404E provides that to
receive this assistance students must be
enrolled in such an institution of higher
education.
Changes: We have added language to
paragraph (d) in Section I of Priority 2
to clarify that GEAR UP funds deposited
into the college savings account and
used for the costs associated with
postsecondary education must be used
for costs associated with enrollment at
an institution of higher education, as the
term is defined in section 102 of the
HEA.
Data Collection and Evaluation
Comment: A commenter agreed with
the Department’s proposal to avoid
collecting Social Security Numbers
(SSNs) and taxpayer identification
numbers (TINs). The commenter noted
that many schools are not allowed to
collect or disclose such personally
identifiable information about their
students, and yet many institutions,
including 529 plans, require all account
holders to provide this information. The
commenter also identified locations that
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it stated were able to implement college
savings accounts without SSNs or TINs.
Finally, because of what the commenter
viewed as ‘‘Know Your Customer’’
provisions of the Patriot Act and Bank
Secrecy Act, the commenter urged the
Department, perhaps together with other
entities or experts in this area, to advise
on the propriety of opening accounts
without SSNs and TINs.
Discussion: The Department
encourages grantees to avoid collecting
SSNs or TINs when it is feasible to do
so. For example, we note that some
financial institutions may accommodate
the use of unique identifiers for students
in lieu of SSNs or TINs. However, we
acknowledge that some financial
institutions may require personally
identifiable information for the
purposes of managing accounts. The
Department does not prohibit grantees
from collecting this information in the
event that doing so is necessary in a
given State. We expect to provide
technical assistance to grantees on this
topic, including any implications that
collecting this personal identifiable
information may have under Federal
privacy laws.
Changes: None.
Comment: One commenter urged the
Department to design, write code, and
implement common account monitoring
standards across the full demonstration
project since, according to the
commenter, without such a
comprehensive design plan, there is a
substantial risk of substantial data
failure on savings patterns and
performance. We read the comment to
be concerned, in part, with the quality
of data that grantees would need to
provide for the project evaluation.
Discussion: While those preparing the
Department’s evaluation of this
demonstration project will review
comments on the account monitoring
standards, the specific data items and
data collection structure to be used in
the Department’s evaluation were not
part of the notice of proposed priorities
and are not subject to public comment.
Changes: None.
Comment: A number of commenters
recommended approaches for the design
of the Department’s evaluation of this
demonstration project. Among other
things, commenters recommended that
the evaluation collect and analyze
differences in GEAR UP services across
schools, family financial stability data
and the different types of financial
counseling provided by grantees and
their relationship to impacts. The
commenters also recommended that the
evaluation use statistical techniques to
account for school-level clustering of
students in the analysis.
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Discussion: While those preparing the
Department’s evaluation of this
demonstration project will review
comments on the research design, the
specific data items and statistical
analyses to be used in the Department’s
evaluation were not part of the notice of
proposed priorities and are not subject
to public comment.
We note, however, that the
Department intends that the evaluation
will address, to the extent possible, the
ways in which both regular and
demonstration GEAR UP services are
implemented across schools. We also
intend to collect some information
about income and assets through parent
surveys conducted in spring 2014 and
2016. However, we do not believe that
we can adequately address family
financial stability and how that might
relate to the timing and levels of
contributions to savings accounts
without more frequent and longer
surveys that would be burdensome to
parents and costly for the evaluation to
implement. Finally, the Department
plans for the evaluation to appropriately
adjust for clustering of students within
schools in performing the statistical
analysis of impacts.
Changes: None.
Grantee Attendance at Project Meetings
Comment: None.
Discussion: Paragraph (h) in Section I
of Proposed Priority 2 required the
grantee’s project director to attend one
particular meeting held by the
Department. We have revised this
paragraph to provide more details and
require attendance at multiple
Department meetings, likely held in
conjunction with the annual meetings of
the National Council for Community
and Education Partnerships (NCCEP),
where technical assistance will be
provided. We made these changes to
ensure that we provide sufficient
technical assistance to grantees and to
allow grantees to be better prepared to
attend these meetings.
Changes: Paragraph (h) in Section I of
Priority 2 has been revised to state that
project directors, site coordinators, and
other appropriate project staff are
required to participate in meetings of
GEAR UP grantees that the Department
will convene to provide professional
development and technical assistance to
grantees participating in the
demonstration project.
Final Priorities: The Assistant
Secretary for Postsecondary Education
establishes these priorities to determine
the effectiveness of implementing
college savings accounts and providing
financial counseling in conjunction
with other GEAR UP activities as part of
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an overall college access and success
strategy.
Priority 1: Funding Eligibility.
To meet this priority, an applicant
must—
(a) Have received a new GEAR UP
State grant in FY 2011 or FY 2012 that
supports activities in at least six high
schools, each of which must serve a
cohort of at least 30 GEAR UP
participants who will be in ninth grade
during the 2013–2014 academic year
(for recipients of FY 2011 grants) or
2014–2015 academic year (for recipients
of FY 2012 grants);
For the purposes of this priority,
‘‘high school’’ means a school that
serves students in grades 9–12.
(b) Use the cohort approach (see
Section 404B(d)(1) of the Higher
Education Act (HEA)) to select
participating GEAR UP students; and
(c) Identify in its application the
names, locations, and National Center
for Education Statistics (NCES)
identification numbers of the GEAR UP
high schools expected to participate in
the demonstration and the number of
GEAR UP participants expected to be in
ninth grade during the 2013–2014 or
2014–2015 academic year at each GEAR
UP school identified. (NCES school
identification numbers can be found at:
https://nces.ed.gov/ccd/schoolsearch/).
Priority 2: College Savings Accounts
and Financial Counseling.
To meet this priority, an applicant
must submit in its application a
comprehensive plan for providing (1)
students in half of the GEAR UP high
schools identified by the applicant with
safe and affordable deposit accounts at
federally insured banks, credit unions,
or other institutions that offer safe and
affordable financial services consistent
with provisions of this Priority, and (2)
financial incentives to encourage saving
and related financial counseling to
students and parents.
An applicant also must agree in its
application to participate in an
evaluation of this college savings
account demonstration project that will
examine the effect of college savings
accounts and counseling on student and
family behaviors and attitudes
associated with college enrollment, as
described in the Research Evaluation
section of this priority. The
Department’s Institute of Education
Sciences (IES) in partnership with the
Office of Postsecondary Education
(OPE) will oversee the evaluation,
which will be conducted by an IES
evaluation contractor.
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I. College Savings Accounts and
Financial Counseling
The applicant must describe in its
application its plan for implementing
college savings accounts and financial
counseling, including how, preferably at
the time of application but no later in
time than to have all savings accounts
operational before the start of the
cohort’s ninth grade in the 2013–2014 or
2014–2015 school years, it will—
(a) Student Savings Accounts.
(1) In partnership with a financial
institution, provide students with an
account that allows saving in an
interest-bearing, federally insured
deposit account, U.S. Government
Treasury securities, or a fully
guaranteed savings option within a 529
college savings plan. Accounts may also
present students and families with
investment options that present risks in
exchange for the potential for larger
returns but that are in no way
guaranteed.
(2) Ensure that Federal funds are
maintained in a single ‘‘notional’’
account that is in fact separate from any
non-Federal funds, tracks the amount of
Federal GEAR UP seed and matching
funds and accrued interest earned by
each student, permits each student to
see both the Federal funds and
associated interest earned as well as any
non-Federal funds in a single account
statement, and is invested only in
federally insured vehicles or U.S.
Treasury securities;
(3) Ensure that the non-Federal
investments are in U.S. Government
Treasury securities or a low- or no-fee
age-based fund unless the parents or
student chooses otherwise;
(4) Open savings accounts for
students in automatic or nearly
automatic fashion and describe how the
savings account enrollment approach
entails or approximates an automatic
enrollment framework. Automatic
enrollment means parents and students
are not required to opt into the account,
but may opt out of it. If parents and
students take no action, the account is
opened. Action is required to decline
participation.
Note: Applicants are also encouraged to
propose automatic savings options, such as
automatic payroll deductions by parents of
participating students.
(5) Ensure that individual deposits
could be made easily and at no cost by
the student, the student’s parents, or
others on the student’s behalf; that
deposits would be able to be made
online, including on mobile devices, in
person at convenient locations, or by
mail; and that account information
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would be viewable online, including on
mobile devices; and
(6) Ensure that funds are held in the
name of the account trustee described in
paragraph (k) of part I of this priority
with the participating students named
as beneficiaries.
(b) Federal Seed and Matching.
Provide for Federal seed and matching
of Federal funds in student savings
accounts for students in participating
treatment high schools as follows:
(1) Within two weeks of the beginning
of students’ ninth grade school year in
the fall of 2013 or the fall of 2014, seed
each student’s account with $200 in
Federal GEAR UP funding.
(2) Each month, for every contribution
up to $25 beyond the initial seed
amount that the student or family
deposits into the student’s account,
deposit an additional equal size
contribution up to $25 of Federal GEAR
UP funding into the account, for a
maximum of $300 in Federal matching
funds each year for a maximum of four
years.
(3) Notwithstanding the monthly cap
on contributions referenced in
paragraph two above, once per quarter
during each calendar year during the
project period, on a date approved by
the Department, offer students and
parents a two-week catch-up period if
the student has not earned the
maximum monthly match for that year
and encourage students and families to
make contributions at least sufficient to
earn up to the maximum Federal match.
(4) Ensure that if, at the end of each
calendar year, the student has not
exhausted the Federal match, any
unearned matching funds would no
longer be available to that student or to
the applicant and would be returned to
the Department.
(c) Non-Federal Seed and Matching.
Not provide additional seed or matching
funding from GEAR UP or non-GEAR
UP resources to participating students
beyond the funds described in (b), or
solicit or raise money from non-Federal
sources as additional contributions to
the student’s non-Federal college
savings account.
(d) Withdrawal and Transfer of
Federal Funds. Provide for the
withdrawal and transfer of Federal
GEAR UP funds as follows:
(1) The applicant must ensure that
withdrawals of Federal GEAR UP funds
are made only upon approval of the
savings account trustee and are only
made from the account to eligible
students, or to an institution of higher
education, as the term is defined in
section 102 of the HEA, on behalf of a
student upon that student’s enrollment
in an HEA Title IV-eligible institution of
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higher education, as the term is defined
in section 102 of the HEA, for the
purposes of paying for tuition, fees,
course materials, living expenses, and
other covered educational expenses as
defined in the HEA, and other costs
related to postsecondary education that
the account trustee, based on
instructions from the grantee,
determines to be appropriate.
(2) An account trustee may not
withdraw Federal GEAR UP funds for
non-qualified purposes and may not
transfer them to other individuals. If
this rule is broken, the Department may
require the applicant to terminate its
relationship with the trustee and select
a different entity to serve as savings
account trustee. The initial trustee may
be subject to penalties for misuse of
Federal funds.
(e) Withdrawal and Transfer of NonFederal Funds. Establish rules for the
withdrawal and transfer of non-Federal
funds, which must include a
requirement that any withdrawal or
transfer of non-Federal funds must be
overseen by the account trustee. A
withdrawal of non-Federal funds from
the savings account for non-qualified
purposes will result in a removal of
Federal matching funds that have been
contributed on behalf of the student if
the amount of non-Federal funds
remaining in the account after the nonqualified withdrawal is less than the
total amount of Federal matching funds
contributed (not including the $200
Federal seed).
For example, if student and parent
contributions total $140, Federal GEAR
UP matches total $120, and the student
withdraws $50 in non-Federal funds for
non-qualified purposes, then $30 in
Federal GEAR UP matching funds
earned up until that point would be
removed from the account because the
amount of non-Federal funds remaining
in the account after the non-qualified
withdrawal—$90—is $30 less than the
amount of Federal matching funds
contributed. The Federal matching
funds could be earned back in catch-up
periods during that same year. The $200
seed money provided with Federal
GEAR UP funds will not be removed
from the account.
(f) Student Eligibility. Establish
student eligibility to receive Federal
GEAR UP funds as a seed and match for
GEAR UP student savings accounts as
follows:
(1) Students must be enrolled in the
ninth grade in one of the randomly
selected treatment high schools (as
described in the Research Evaluation
section of this priority) in the fall of
2013 or the fall of 2014.
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(2) If a student does not use funds in
the student’s account within six years of
his or her scheduled completion of
secondary school, the undisbursed
Federal GEAR UP funds must be
returned to the Department.
(3) Students who transfer from a
GEAR UP high school to a non-GEAR
UP high school during the project
period will continue to remain eligible
for the matching funds from the grantee.
(4) At the discretion of the grantee,
students who during the project period
become members of the GEAR UP
cohort by transferring from a nontreatment high school into a treatment
GEAR UP high school after ninth grade
may have an account with the $200 seed
money and availability of matching
funds, provided that the grantee has
sufficient funds to first make the
matches it is required to make for
students in the treatment high schools.
(g) Financial Counseling. Provide
general and targeted (that is, specific to
each individual’s account and financial
circumstances) savings account and
financial counseling to all students in
the treatment group and to their parents.
Counseling should encourage regular
saving and prepare students and their
families to make informed financial
decisions about college and other
matters. Counseling must include at
least 12 hours per year of counseling for
students and at least biannual
counseling meetings for parents, which
must include a review of the
contributions to the account and any
interest accrued. The counseling must
be in addition to, and may not serve as,
the financial aid, financial literacy, or
college savings counseling already
provided as part of regular GEAR UP
services.
(h) Staff Professional Development
and Coordination with the Department.
(1) Agree to participate in
Department-provided professional
development for the GEAR UP or school
staff who will deliver the financial
planning and counseling described in
paragraph (g) of part I of this priority.
(2) Ensure that the project director,
site coordinators, and appropriate
project staff participate in meetings of
GEAR UP grantees that the Department
will convene to provide professional
development and technical assistance to
GEAR UP grantees participating in the
demonstration.
Note: The meetings are likely to be held in
conjunction with the annual meetings of the
National Council for Community and
Education Partnerships (NCCEP), the
association of GEAR UP grantees. The
February 2013 meeting, held in conjunction
with the GEAR UP Capacity-Building
Workshop, will likely cover technical
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assistance to the State administrators of the
college savings plans, and the logistical and
administrative issues in setting up the college
savings accounts. The remainder of the
meetings during the project period will likely
focus on professional development for GEAR
UP staff providing the counseling to families.
(i) Site Coordination. Designate a site
coordinator for each GEAR UP high
school that participates in the
demonstration and describe the role of
the coordinator and to whom he or she
will be accountable. The site
coordinators in schools that are
randomly selected to provide college
savings accounts and financial
counseling (treatment schools) have
responsibility, exercised consistent with
the State’s plan and approved project
application, for ensuring that their
schools meet all requirements for
participating in the college savings
demonstration project. Coordinators
must, for example, ensure that college
savings accounts are opened and seeded
within two weeks of the start of ninth
grade; that related financial counseling
and coaching are provided to
participating students and parents; and
that schools cooperate with data
collection for the evaluation. (See the
Research Evaluation section of this
priority for further information on
selection of the treatment schools). Site
coordinators in schools that are not
participating in the college savings
account and counseling components
(control schools) must ensure that their
schools cooperate with the data
collection for the evaluation.
(j) Savings Account Administrator.
Select a savings account administrator
to hold the account funds, accept
deposits, and issue qualified
withdrawals. The applicant must
identify the account administrator in the
application or describe the process by
which the account administrator will be
selected.
The account administrator must be
able to fulfill its role until all Federal
funds have been disbursed or returned
to the Department. During the grant
project period, modest administrative
fees, not to exceed one percent of
account balances, could be paid to the
savings account administrator with
Federal GEAR UP funds to cover
expenses related to the GEAR UP
College Savings Account Demonstration
Project.
(k) Savings Account Trustee. Select a
savings account trustee to manage the
account funds and approve withdrawals
and other account activities. The
account trustee must have demonstrated
experience in successfully managing
financial services. The applicant must
identify the account trustee in the
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application or describe the process by
which the account trustee will be
selected.
The account trustee must be able to
fulfill its role until all Federal funds
have been disbursed or returned to the
Department. The account trustee may
not be a student’s parent or guardian,
and must be separate and distinct from
the account administrator. The trustee
must be a State agency, such as a State
Department of Treasury, Office of the
Governor, Lieutenant Governor, or
Comptroller, a tax-exempt non-profit
organization or foundation, or for-profit
organization or business with
demonstrated expertise and experience
in successfully managing financial
services. During the grant project
period, modest administrative fees, not
to exceed one percent of account
balances, could be paid to the savings
account trustee with Federal GEAR UP
funds to cover expenses related to the
GEAR UP College Savings Account
Demonstration Project.
(l) Grantee Coordinator. Specify a
person or persons at the State and local
educational agency (LEA) level who will
administer and coordinate all
components of the demonstration,
including provision of services provided
by the GEAR UP high schools,
monitoring the rules established for and
activities carried out by the savings
account administrators and trustees
including distribution of letters,
notifying parents or guardians about the
administration of the student survey by
the evaluator and about the release of
designated ‘‘directory information’’ from
the education records of the student to
the savings account administrator, the
savings account trustee, or both, as
needed to assist with establishing and
managing the college savings accounts,
and distributing forms enabling parents
or guardians to opt out of participation
in the college savings demonstration
project. (The Department will provide a
sample parent/guardian letter and opt
out form.) The grantee coordinator must
also include aggregate information about
the college savings account
demonstration project in the grantee’s
annual performance report to the
Department, including the number of
accounts opened and the total amount
of Federal GEAR UP matching funds
deposited on behalf of students. The
grantee coordinator must also respond
to the evaluators’ annual request for
information on individual student
accounts, including the timing and
amounts of disbursements of seed and
matching funds, and the student’s name,
address, and date of birth.
(m) Directory Information Policies.
Include only districts or schools that
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5051
will have directory information policies
in place prior to July 1, 2013, or July 1,
2014, that allow for student information
to be shared in compliance with Federal
law with the savings account
administrator, the savings account
trustee, or both, as needed to establish
and manage the college savings
accounts. Under the provisions of the
Family Educational Rights and Privacy
Act (FERPA) and its implementing
regulations (20 U.S.C. 1232g and 34 CFR
Part 99), each of the LEAs or schools in
the application must have provided
public notice that the district or schools
have designated as ‘‘directory
information’’ under FERPA the
student’s name, address, grade level,
and date of birth. In addition, in
accordance with FERPA, if any parent
or guardian of a student has opted out
of the disclosure of this ‘‘directory
information,’’ the school or LEA will not
provide the ‘‘directory information’’ for
that student to the savings account
administrator, the savings account
trustee, or both, as needed to assist with
establishing the college savings
accounts, and savings accounts with
GEAR UP seed money will not be
opened in his or her name, unless the
parent or guardian of that student
provides consent under 34 CFR 99.30.
(n) Grantee Non-Federal Match
Requirement. Meet the statutory nonFederal match requirement (see Section
404C(b) of the HEA and 34 CFR 694.7.)
Note: A State grantee would meet the
statutory match requirement tied to these
additional research demonstration project
funds through any ‘‘over-matched’’ nonFederal funds it already is committed to
providing under its regular GEAR UP
application. A State that would need to
provide other non-Federal funds in order to
meet the statutory match requirement tied to
GEAR UP funds provided for the research
demonstration project would need to include
with its application a budget of how it
proposed to do so. Contributions of students,
families, parents’ employers, communitybased organizations, religious organizations,
and others to student savings account could
be treated as a matching contribution, but, if
during any project year these private
contributions to savings account were less
than anticipated, a State would have to
ensure by the end of each project year that
it had met the annual matching requirement
through other non-Federal contributions to
this project or the regular GEAR UP
activities.
(o) Budget. Provide a budget and
budget narrative with projected charges
of Federal GEAR UP funds and any nonFederal matching contributions, that
describes the expected costs of
implementing the proposed project,
including provision of payment to the
account administrator, the account
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trustee, or both of reasonable costs for
managing the savings accounts
according to requirements of this
section.
(p) Over-matching. A family that overmatches the Federal account in any
month may not receive credit for the
amount of over-match in any future
month, including a catch-up period, for
purposes of meeting that month’s GEAR
UP program matching contribution.
II. Research Evaluation
The applicant must describe in its
application its agreement to the
following:
(a) Random Assignment of Schools.
An applicant must—
(1) Agree to a random assignment by
the evaluation contractor of one-half of
the GEAR UP high schools identified in
its application for their students to
receive demonstration services
(treatment schools). In addition to the
regular GEAR UP services offered at
these treatment schools, GEAR UP
projects must also offer the college
savings account and financial
counseling intervention in accordance
with Priority 1 (Funding Eligibility).
The students in the remainder of the
high schools (control schools) will not
receive the college savings account and
financial counseling components but
will continue to receive regular GEAR
UP services.
(2) Agree not to offer a program that
provides seed or matching funds for
college savings accounts in the control
schools for the duration of the GEAR UP
grant.
(b) Data Collection. The applicant and
the LEA(s) and GEAR UP high schools
that would like to implement college
savings accounts (some of which will
become control schools) must agree to
participate and cooperate in the data
collection conducted by the
Department’s evaluator, which will
include the following:
(1) Two surveys of GEAR UP project
directors at the State education agency
(SEA) or LEA level and site coordinators
for each school about the
implementation of the college savings
account and counseling components,
including the extent to which the
college savings account counseling was
provided in the treatment schools and
counseling and other services were
provided under the GEAR UP grant in
both treatment and control schools;
(2) Two surveys of GEAR UP students
about their participation in GEAR UP
program activities and other college
access programs; their expectations
about college enrollment and costs; their
knowledge about college savings and
financial aid; their financial literacy;
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their plans for enrollment in collegepreparatory courses; and their financial
behaviors, including the extent to which
they are saving for college;
(3) Two surveys of parents of students
participating in the GEAR UP program,
in a form that will be comprehensible to
parents of English language learners,
about their participation in GEAR UP
program activities and other college
access programs; their expectations
about their child’s college enrollment
and costs; their knowledge about college
savings and financial aid; their financial
literacy; and their financial decisions,
including the extent to which they are
saving for college;
(4) For treatment schools, data on the
extent to which their staff attend the
required professional development;
(5) For both treatment and control
schools, rosters of all GEAR UP
participants who are in the ninth grade
in fall 2013 or fall 2014, including the
names of the students, and other
identifying information (such as their
dates of birth, zip codes, parent contact
information, or district or school
identification numbers) that will enable
the Department’s evaluator to request
school administrative records from the
State or LEA for the appropriate
students;
(6) Access to the appropriate State or
LEA school administrative records,
which will be used to measure student
characteristics and achievement prior to
the ninth grade, student attendance,
course taking patterns, and credits in
grades 9–12 for students in the
treatment and control schools;
(7) From the grantee, annual
information on the accounts of
individual students, including the
timing and amounts of disbursements of
seed and matching funds, and the
student’s name, address, and date of
birth.
(c) Letters of Support. Each applicant
must include in its application the
following:
(1) Letters of support from the
relevant LEAs. Unless the SEA agrees in
the application to provide this same
data on its own, these letters of support
also must contain the LEA’s agreement
to provide the relevant school records
data to the evaluation contractor,
including the following school records
data for GEAR UP participants who are
enrolled in the ninth grade in the
treatment schools and control schools in
the fall 2013 or fall 2014, regardless of
whether the student has continued to be
enrolled in his or her original high
school:
(i) Scores on State or districtadministrated assessments of reading
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and math for the seventh and eighth
grades and high school years;
(ii) High school attendance;
(iii) High school courses in which the
student was enrolled and grades and
credits received for those courses;
(iv) Demographic information such as
gender, race/ethnicity, parents’
educational attainment, English
proficiency, and the extent to which a
language other than English is spoken at
home;
(v) Whether the student is certified as
eligible for free or reduced price lunch
through the National School Lunch
Program; and
(vi) Whether the student has an
individualized education program.
(2) A letter from the principal of each
high school identified in the application
agreeing to participate in all aspects of
the evaluation and grant, including:
(i) Random assignment of the high
school;
(ii) If randomly selected to implement
the demonstration services, allowing the
GEAR UP program to offer the college
savings account and counseling
components to eligible GEAR UP
participants at the principal’s high
school; and
(iii) Regardless of whether a school is
in the treatment or control group,
provision to the evaluation contractor of
rosters of GEAR UP participants who are
in the ninth grade in fall 2013 or fall
2014, including identifying information
(such as student names, dates of birth,
zip codes, parent contact information, or
district or school identification
numbers) that will enable the contractor
to request the administrative records
from the State or LEA about the
appropriate students.
(3) Letter from the superintendent of
each LEA overseeing the schools in the
evaluation, agreeing to all aspects of the
evaluation and grant, including—
(i) Random assignment of their GEAR
UP high schools listed in the
application;
(ii) If randomly selected to implement
the demonstration services, an
agreement allowing the State GEAR UP
program to offer the college savings
account and financial counseling to
eligible GEAR UP participants
consistent with the priorities and
requirements in this notice of final
priorities; and
(iii) Regardless of whether the schools
are in the treatment or control group, an
agreement to provide to the evaluation
contractor rosters of GEAR UP
participants who are in the ninth grade
in fall 2013 or fall 2014, including
identifying information (such as student
names, dates of birth, zip codes, parent
contact information, or district or school
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identification numbers) that will enable
the contractor to request the
administrative records from the State or
LEA about the appropriate students.
(iv) An agreement to have district or
school directory information policies in
place prior to July 1, 2013, or July 1,
2014, that allow for student information
to be shared in compliance with Federal
law with the savings account
administrator, the savings account
trustee, or both, as needed to establish
and manage the college savings
accounts. Under the provisions of the
FERPA and its implementing
regulations, each of the LEAs in the
application or schools therein must
have provided public notice that the
district or school has designated as
‘‘directory information’’ under FERPA
the student’s name, grade level, address,
and date of birth. In addition, in
accordance with FERPA, if any parents
or guardians of a student has opted out
of the disclosure of this student
directory information, the school or LEA
will not provide ‘‘directory
information’’ on that student to the
savings account administrator or the
savings account trustee, and savings
accounts with GEAR UP seed money
will not be opened in his or her name,
unless the parent or guardian of that
student provides consent under 34 CFR
99.30.
Types of Priorities: When inviting
applications for a competition using one
or more priorities, we designate the type
of each priority as absolute, competitive
preference, or invitational through a
notice in the Federal Register. The
effect of each type of priority follows:
Absolute priority: Under an absolute
priority, we consider only applications
that meet the priority (34 CFR
75.105(c)(3)).
Competitive preference priority:
Under a competitive preference priority,
we give competitive preference to an
application by (1) awarding additional
points, depending on the extent to
which the application meets the priority
(34 CFR 75.105(c)(2)(i)); or (2) selecting
an application that meets the priority
over an application of comparable merit
that does not meet the priority (34 CFR
75.105(c)(2)(ii)).
Invitational priority: Under an
invitational priority, we are particularly
interested in applications that meet the
priority. However, we do not give an
application that meets the priority a
preference over other applications (34
CFR 75.105(c)(1)).
This notice of final priorities does not
preclude us from proposing additional
priorities, requirements, definitions, or
selection criteria, subject to meeting
applicable rulemaking requirements.
VerDate Mar<15>2010
17:44 Jan 22, 2013
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Note: This notice of final priorities does
not solicit applications. In any year in which
we choose to implement this priority, we
invite applications through a notice in the
Federal Register.
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.
This final regulatory action is not a
significant regulatory action subject to
review by OMB under section 3(f) of
Executive Order 12866.
We have also reviewed this final
regulatory action 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
upon 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,
and other advantages; distributive
impacts; and equity);
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5053
(4) To the extent feasible, specify
performance objectives, rather than the
behavior or manner of compliance a
regulated entity must adopt; and
(5) Identify and assess available
alternatives to direct regulation,
including economic incentives—such as
user fees or marketable permits—to
encourage the desired behavior, or
provide information that enables the
public to make choices.
Executive Order 13563 also requires
an agency ‘‘to use the best available
techniques to quantify anticipated
present and future benefits and costs as
accurately as possible.’’ The Office of
Information and Regulatory Affairs of
OMB has emphasized that these
techniques may include ‘‘identifying
changing future compliance costs that
might result from technological
innovation or anticipated behavioral
changes.’’
We are issuing these final priorities
only on a reasoned determination that
their benefits justify their costs. In
choosing among alternative regulatory
approaches, we selected those
approaches that maximize net benefits.
Based on the analysis that follows, the
Department believes that this regulatory
action is consistent with the principles
in Executive Order 13563.
We also have determined that this
regulatory action does not unduly
interfere with State, local, and tribal
governments in the exercise of their
governmental functions.
In accordance with both Executive
orders, the Department has assessed the
potential costs and benefits, both
quantitative and qualitative, of this
regulatory action. The potential costs
are those resulting from statutory
requirements and those we have
determined as necessary for
administering the Department’s
programs and activities.
Intergovernmental Review: This
program is subject to Executive Order
12372 and the regulations in 34 CFR
part 79. One of the objectives of the
Executive order is to foster an
intergovernmental partnership and a
strengthened federalism. The Executive
order relies on processes developed by
State and local governments for
coordination and review of proposed
Federal financial assistance.
This document provides early
notification of our specific plans and
actions for this program.
Accessible Format: Individuals with
disabilities can obtain this document in
an accessible format (e.g., braille, large
print, audiotape, or compact disc) on
request to the program contact person
listed under FOR FURTHER INFORMATION
CONTACT.
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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
VerDate Mar<15>2010
17:44 Jan 22, 2013
Jkt 229001
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
PO 00000
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search feature at this site, you can limit
your search to documents published by
the Department.
Dated: January 16, 2013.
David A. Bergeron,
Acting Assistant Secretary for Postsecondary
Education.
[FR Doc. 2013–01125 Filed 1–22–13; 8:45 am]
BILLING CODE 4000–01–P
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Agencies
[Federal Register Volume 78, Number 15 (Wednesday, January 23, 2013)]
[Rules and Regulations]
[Pages 5035-5054]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01125]
[[Page 5035]]
Vol. 78
Wednesday,
No. 15
January 23, 2013
Part III
Department of Education
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34 CFR Chapter VI
Final Priorities; Gaining Early Awareness and Readiness for
Undergraduate Programs (GEAR UP)--College Savings Account Research
Demonstration Project; Final Rule
Federal Register / Vol. 78 , No. 15 / Wednesday, January 23, 2013 /
Rules and Regulations
[[Page 5036]]
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DEPARTMENT OF EDUCATION
34 CFR Chapter VI
[CFDA Number: 84.334D.]
Final Priorities; Gaining Early Awareness and Readiness for
Undergraduate Programs (GEAR UP)--College Savings Account Research
Demonstration Project
AGENCY: Office of Postsecondary Education, Department of Education.
ACTION: Final priorities.
-----------------------------------------------------------------------
SUMMARY: The Assistant Secretary for Postsecondary Education announces
priorities under the GEAR UP College Savings Account Research
Demonstration Project. The Assistant Secretary may use these priorities
for competitions in fiscal year (FY) 2013 and later years. We take this
action to determine the effectiveness of implementing college savings
accounts and providing financial counseling in conjunction with other
GEAR UP activities as part of an overall college access and success
strategy.
DATES: Effective Date: These priorities are effective February 22,
2013.
FOR FURTHER INFORMATION CONTACT: Catherine St. Clair, U.S. Department
of Education, 1990 K Street NW., room 7056, Washington, DC 20006-8524.
Telephone: (202) 502-7579 or by email: Catherine.StClair@ed.gov.
If you use a telecommunications device for the deaf (TDD) or a text
telephone, call the Federal Relay Service, toll free, at 1-800-877-
8339.
SUPPLEMENTARY INFORMATION:
Purpose of Program: The GEAR UP Program is a discretionary grant
program that provides financial support for academic and related
support services that eligible low-income students, including students
with disabilities, need to enable them to obtain a secondary school
diploma and prepare for and succeed in postsecondary education.
Program Authority: 20 U.S.C. 1070a-21 to 1070a-28.
We published a notice of proposed priorities (NPP) for this program
in the Federal Register on June 1, 2012 (77 FR 32612). That notice
contained background information and our reasons for proposing the
priorities.
There are differences between the NPP and this notice of final
priorities (NFP) as discussed in the Analysis of Comments and Changes
section elsewhere in this notice.
A summary of the major changes follows.
GEAR UP State grantees that received a new State grant in
FY 2012 and will have ninth grade students in the 2014-2015 academic
year are eligible to apply for funding.
The Federal matching contribution has been changed from up
to $10 per month to up to $25 per month for a maximum of $300 in
Federal matching funds each year for a maximum of four years.
The funding eligibility criteria have been changed so
that, to be eligible, a GEAR UP State grant funded in FY 2011 or FY
2012 must support activities under this demonstration project in at
least six high schools, each of which must serve a cohort of at least
30 ninth grade GEAR UP students. For the purposes of these priorities,
a high school must serve students in grades 9-12.
Applicants must identify the names, locations, and
National Center for Education Statistics (NCES) identification numbers
of the GEAR UP high schools that the applicant proposes to participate
in the demonstration project.
Project directors and appropriate project staff are
required to participate in meetings that the Department will convene,
likely in conjunction with the annual meetings of the National Council
for Community and Education Partnerships (NCCEP), to provide
professional development and technical assistance to grantees
participating in the demonstration project.
In order to protect the integrity of the project
evaluation, grantees may not solicit, or raise money from, non-Federal
sources as additional contributions to the student's non-Federal
college savings account.
Public Comment: In response to our invitation in the notice of
proposed priorities, 19 parties submitted comments.
Generally, we do not address technical and other minor changes, or
suggested changes the law does not authorize us to make. In addition,
we do not address general comments that raised concerns not directly
related to the proposed priorities.
Analysis of Comments and Changes: An analysis of the comments and
of any changes in the priorities since publication of the notice of
proposed priorities follows.
Comment: Commenters were generally very supportive of the
Department's proposal. They offered various suggestions for improving
the demonstration program, keeping in mind the Department's desire to
provide and promote incentives for greater college savings by families
of GEAR UP students, keep administrative costs and effort manageable,
provide flexibility where possible, and develop and implement a study
design that would answer important questions about the usefulness of
college savings accounts as a way to promote increased high school
graduation rates and rates of enrollment in postsecondary education.
Discussion: The Department appreciates these comments and is
gratified that the commenters were generally very supportive of our
proposal and the desirability of this special GEAR UP project. We
address our responses to areas of specific commenter recommendations,
by topic heading, in the following discussion.
Changes: None.
Costs, Training, and Support
Comment: One commenter asked for clarification about whether, given
the GEAR UP program's match requirement, grantees would need to raise
additional matching funds on top of the funds they must already raise
to support their regular GEAR UP projects. The commenter stated that
applicants need to know the extent of their financial commitment before
they apply, and that unless these funds are needed to carry out the
demonstration project, the Department should consider waiving the
additional matching fund requirement.
Another commenter also sought clarification about the requirement
that grantees provide a matching contribution to the amount of the GEAR
UP award for this demonstration project.
Discussion: Under section 404C(b) of the HEA, successful GEAR UP
applicants must provide from State, local, institutional, or private
funds, not less than 50 percent of the cost of the program. The
regulations at 34 CFR Sec. 694.7(a) and (b) further require that
applicants must include in their budgets the percentage of costs of the
GEAR UP project to be provided annually from non-Federal funds, and
grantees must make substantial progress toward meeting the matching
percentage stated in the approved application for each year of the
project period.
Successful applicants for the College Savings Account Research
Demonstration Project must already be GEAR UP program State grantees,
and the Department expects that most recipients of these demonstration
grants will not have to provide additional matching funds beyond what
they are already providing to meet the match for their initial GEAR UP
award. This is because a grantee may count any ``over-matched'' non-
Federal funds it has already committed to its regular GEAR UP project
toward its match for the
[[Page 5037]]
demonstration project. Moreover, a grantee under this demonstration
project may treat contributions of students, families, or others to a
student savings account as a matching contribution in its project
budget. If, however, during any project year these private
contributions to savings accounts are less than anticipated, a State
would have to ensure by the end of each project year that it had met
the annual matching requirement through other non-Federal contributions
to this project or to the regular GEAR UP activities. Thus, we
anticipate that only those grantees that have not ``over-matched'' non-
Federal funds in their regular GEAR UP projects or that do not secure
sufficient non-Federal deposits in the students' savings accounts will
need to contribute non-Federal matching contributions to their College
Savings Account Research Demonstration projects.
Changes: We have added a clarifying citation to 34 CFR Sec. 694.7
in Priority 2, section I, paragraph (n).
Comment: One commenter recommended the use of online resources to
facilitate the project.
Discussion: The Department agrees that online resources are
important for helping students and families manage their accounts.
Under Priority 2, successful applicants must ensure that students,
students' parents, or others on the students' behalf are able to make
online deposits to accounts. In addition, students also must be able to
view account balances online. While the Department believes that online
resources could also be a very useful source of support for the
required financial counseling or technical assistance and professional
development for staff, we do not think it is appropriate to require
online access for these purposes. Rather, grantees should have
flexibility to take advantage of the resources that they believe are
best suited for their projects.
Changes: None.
Comment: A commenter was concerned that the Background section of
the notice of proposed priorities provided conflicting information
about the amount of seed money that grantees will make available from
GEAR UP funds for GEAR UP students.
Discussion: We agree with this commenter that the Background
section of the NPP should not have referred to an approximate amount of
seed money.
Changes: This notice of final priorities clarifies that the amount
of seed money for a GEAR UP-funded account for each participating GEAR
UP student is $200. The seed amount is set out in Priority 2, Section
I, paragraph (b)(1).
Comment: A commenter suggested that the Department consider
establishing basic design requirements--for both program management and
evaluation purposes--for data and account management as most grantees
will not have experience in the administration of these kinds of
college savings accounts. The commenter also suggested that we provide
grantees with data collection software and training on how to use it.
Other commenters noted that it will be critical for grantees to receive
guidance, technical assistance, and access to experts on establishing
and maintaining these savings accounts, and on the responsibilities of
trustees and custodians.
Another commenter stated that the Department should be prepared to
assist grantees in negotiating account features and contract terms with
financial institution partners, and may even need to solicit financial
institution partners for grantees.
Another commenter stated that based on its experience with schools,
local governments, and others in the design and development of college
savings accounts, grantees will likely need significant technical
support from the Department in various areas of their projects,
particularly in the selection of savings accounts, program design, and
program administration.
Finally, noting that the Department had proposed that money
families deposit into students' college savings accounts would not
count against their children for purposes of determining eligibility
for Federal student financial assistance, one commenter recommended
that we likewise ensure that these savings be excluded from other
means-tested Federal programs, such as Medicaid and Temporary Aid to
Needy Families. The commenter stated that if both the Federal-funds
account and the student's account are held in trust, the fact that the
family does not have direct ownership of either should resolve the
issue, but the commenter also noted that any hint of worry about this
issue might create a chilling effect on deposit activity. The commenter
recommended that the Department provide guidance to account
administrators on how to address this issue of asset test at the
Federal, State, and local levels and how to communicate the answers to
students and families.
Discussion: The Department agrees that extensive and ongoing
technical assistance on important aspects of project implementation is
crucial to helping grantees establish and manage savings accounts, and
that this kind of support is particularly important for those with no
experience in this area. To address these concerns, the Department
plans to provide presentations and other technical assistance on
important aspects of project implementation at national GEAR UP
conferences. These activities would include general considerations that
should be taken into account when implementing these types of savings
accounts. The Department is also working with the Treasury Department,
the National Credit Union Administration (NCUA), and the Federal
Deposit Insurance Corporation (FDIC) to develop materials that will
give applicants key information about implementing college savings
accounts, including tax and asset test implications, such as those
pertaining to Medicaid and Temporary Aid to Needy Families. However,
grantees would tailor account characteristics to best meet their needs
and the needs of their GEAR UP students, and would select their own
financial partners, provided the requirements of Priority 2 are met.
The Department would not participate in grantee (or applicant)
discussions with financial institutions that would (or might) implement
these savings accounts. With regard to the comment that the Department
provide data collection software and training in its use, the
Department may not endorse any specific data-collection software
programs. Grantees should use their professional judgment in selecting
appropriate software that meets their needs and the needs of the
financial institutions with which they would partner. Grant funds may
be used to purchase software and any needed training in its use for the
purpose of providing and tracking demonstration project services and
outcomes.
Changes: None.
Comment: One commenter wanted clarity on whether grantees may use
grant funds for costs of programmatic support, given that certain
supportive project activities, such as outreach and account
administration, are labor intensive and particularly necessary at the
local level.
Discussion: The Department understands that college savings account
programs can be labor intensive and require a significant investment in
outreach and administration to be successful. In the proposed budgets
they include in their project applications, applicants should include
all expected costs of implementing the proposed projects, including
provision of payment to the account administrator, the account trustee,
and costs for managing and administering the project
[[Page 5038]]
over the course of the project period (and later if the grantee expects
the account administrator to be conducting activities after the end of
the project period).
Changes: None.
Comment: One commenter recommended that demonstration projects
partner with local organizations, such as public broadcasting stations,
to create high-quality digital content and services on financial
literacy.
Another commenter said that the success of State GEAR UP grantees
will require strong partnerships with local governments and school
districts.
One commenter recommended that the applications from State grantees
include plans for local partnerships. This commenter noted that local
partnerships can also help to tie this savings demonstration project to
other community-based programs, such as free tax preparation, financial
education resources, and help with the process of preparing a student's
FAFSA application.
Discussion: The Department is currently working with the Treasury
Department, the NCUA, the FDIC, and other Federal and non-Federal
partners to identify other opportunities to provide grantees with
technical assistance around financial literacy. Further, while we agree
that grantees partnering with local organizations to create high-
quality digital content can be very important for helping students and
their families better understand financial literacy, we do not believe
that requiring such a partnership is necessary. Grantees will be
working with local educational agencies that already are implementing
GEAR UP projects, and those GEAR UP grantees already engage in
community partnerships that are key to the successful implementation of
a GEAR UP project. We are confident that if a State GEAR UP grantee
believes that a local partnership to develop digital materials would
contribute to the success of this demonstration project, it will
include this activity in its application. However, because we believe
that applicants should design their applications using their best
judgment of how best to achieve the goal of having the largest number
of families of GEAR UP students make regular deposits in their
children's college savings accounts, we do not believe that requiring
all grantees to partner with local organizations that can help to
create high-quality digital content is either necessary or desirable.
Changes: None.
Comment: One commenter recommended the Department take specific
actions to promote financial literacy, such as providing support to
grantees to identify and select quality financial education curricula.
Discussion: The Department will offer ongoing trainings to grantees
that will include group format trainings (at annual GEAR UP conferences
or via Webinar) and one-on-one advising, as needed. The Department is
also holding discussions with Federal and non-Federal partners to
identify other opportunities to provide support for grantees. This
includes developing materials that will give applicants key information
about implementing college savings accounts. The Department will also
monitor financial education delivery over time to ensure quality.
Changes: None.
Funding Eligibility
Comment: A number of commenters recommended that the Department
expand eligibility so that the demonstration project may benefit
priority students served in a State GEAR UP project as well as students
who are in a cohort.
One commenter noted that by limiting eligibility to State GEAR UP
grantees that use the cohort approach, the Department is making
ineligible many valuable, experienced, and interested stakeholders,
including existing GEAR UP grantees, and it is limiting its ability to
identify crucial barriers to implementation on a broader scale.
A second commenter did not question our proposal that eligibility
not extend to schools in which members of a GEAR UP cohort already are
the beneficiaries of a matched college savings account program. Rather,
it urged the Department to permit schools to be eligible if these
college savings accounts were only made available in those schools to
GEAR UP priority students who would not participate in this
demonstration project. The commenter stated that one State would soon
be implementing this kind of hybrid program and did not believe
ineligible students under the State's program should also be ineligible
under this demonstration program.
Another commenter recommended that eligibility be expanded to
include both partnership and State GEAR UP grantees that meet all
requirements of this competition.
Discussion: We appreciate the broad interest in the project. While
the Department agrees that both State and partnership grantees using
the priority model for determining student eligibility are engaging in
important and high-quality work, we have limited the pool of eligible
grantees to State GEAR UP grantees that determine eligibility using the
cohort approach for two reasons.
First, permitting students who are selected for the regular GEAR UP
project on the basis of priority to participate in this college savings
account demonstration is incompatible with the project's research
design. In order to ensure that the potential effects of savings
accounts are properly evaluated, grantees will need to serve entire
cohorts (i.e., grades) of students in at least six GEAR UP high schools
that (1) can be randomly assigned, and (2) have a sufficient number of
GEAR UP participants in a ninth grade cohort whose progress and
outcomes can be tracked over the grant period. We think that being able
to evaluate the effects of savings accounts provided to all students in
a cohort is important, because serving all students may create peer
effects that indicate the importance of providing such accounts to
every student, as opposed to a few individuals in a given school. Such
a structure, however, necessitates that entire grades participate in
the GEAR UP program, which is the case for a State grant that selects
students using the cohort approach but not for grants that select
students using the priority approach.
Second, with regard to the comment that we extend eligibility to
apply for a grant under this demonstration project to GEAR UP
partnership grantees that select students using the cohort approach, we
first note that under section 404D(a) and (b) of the HEA, GEAR UP funds
may be used for scholarships and other financial assistance for
participating students only as provided in section 404E of the HEA;
therefore the use of GEAR UP funds for college savings accounts is
permissible only as a supplement to the GEAR UP funds that a grantee is
already reserving for financial assistance under section 404E in its
regular GEAR UP project. Few GEAR UP partnership grantees reserve GEAR
UP funds in their regular projects under requirements in section 404E.
Furthermore, we believe State GEAR UP grantees, unlike the few
partnership grantees that reserve GEAR UP funds for financial
assistance under section 404E, have the needed capacity and
infrastructure in place to manage this demonstration project.
Changes: None.
Comment: One commenter recommended maintaining the cohort approach,
believing that ``universality'' is critical to creating a college-going
culture. This commenter also expressed concern about precluding States
and
[[Page 5039]]
municipalities with strong knowledge and experience in establishing
student accounts from applying and recommended that the Department
extend eligibility to States that are not now current GEAR UP grantees
and to GEAR UP partnership grantees with strong municipal partners.
Discussion: While the Department appreciates that a number of
States and municipalities have been conducting some innovative and
promising experiments on college savings, the Department needs to limit
this competition to existing GEAR UP grantees. Under section 404C(a) of
the HEA, the Department may provide GEAR UP funds only to applicants
that submit an application to conduct the full panoply of GEAR UP
activities required by law, and the Department does not have program
funding available to support new GEAR UP grantees that would conduct
all of these program activities and also implement this demonstration
project.
In addition, an important part of evaluating the effectiveness of
college savings accounts is to do so in the context of wraparound
services--that is, supports that combine academic activities like
providing tutoring or encouragement to enroll in challenging coursework
with mentoring, information on student financial aid, building family
engagement, and other help that is not explicitly academic in nature.
By providing grants to existing programs that have been operating for
at least a year or two, we are ensuring that demonstration project
grantees have had the time needed to put those wraparound services into
place in a way that new grantees could not.
Finally, we are not extending eligibility to local GEAR UP projects
with strong municipal partners for the reasons expressed in response to
the prior comment.
Changes: None.
Comment: One commenter requested that we clarify whether the
demonstration project is open to all students in a cohort or only to
those who are low-income and, if the latter, how income requirements
would be set.
Discussion: The demonstration project is open to any students in a
GEAR UP cohort beginning in ninth grade, so long as they attend a
school that has been randomly selected to receive seed and match
funding for the college savings accounts. There are no additional tests
for income or poverty beyond those in section 404B(d) of the HEA that
apply to the schools in which the cohorts of students are enrolled and
in which State GEAR UP grantees are already providing GEAR UP services.
Changes: None.
Comment: Several commenters requested that the Department expand
grantee eligibility under Priority 1 to allow FY 2012 GEAR UP State
grantees with ninth graders in the fall of the 2014-2015 school year to
participate in the demonstration project. These commenters stated that
the Department's proposal unnecessarily limits the pool of potential
State GEAR UP grantees eligible to participate in this project.
Discussion: We agree with these comments. Under Proposed Priority
1, GEAR UP State grantees that received a new award in FY 2012 and that
select students on the basis of the cohort approach would not have been
eligible to receive funding under this demonstration project because
their students would predominantly be in the eighth grade during the
2013-2014 academic year. However, we think it is appropriate to revise
Priority 1 to permit GEAR UP State grantees that received new awards in
2012 and that are using the cohort approach to apply for funding under
this demonstration project. Doing so will help to ensure that more
State GEAR UP grantees are able to participate without undermining the
evaluation of the demonstration project.
Changes: Eligibility has been expanded to include 2012 GEAR UP
State grantees that select participating students using the cohort
approach and that provide GEAR UP services to ninth graders in the fall
of the 2014-2015 school year.
Comment: Several commenters requested that the Department revise
Priority 1 to lower the minimum class size of participating schools
from the proposed 50 students in order to avoid bias against applicants
serving rural schools.
Discussion: The Department had initially proposed a class size of
50 to ensure that services are provided in a cost-effective manner and
to provide a sufficient cushion so that even if some students and their
families chose not to agree to participate in the surveys needed for
the project evaluation, the evaluation would still have a sufficiently
large sample of students and families. However, we agree with these
comments that the proposed minimum class size of 50 students may have
been unnecessarily high and would have made it difficult for many rural
schools to participate even if their State is among the successful
applicants. Historical data from State grantees indicate that high
schools served by GEAR UP using the cohort approach have an average of
far more than 30 participants in the ninth grade cohorts. Using the
lower number alleviates any potential rural bias but still ensures a
sufficient number of GEAR UP students in each participating school both
to enable cost-efficient administration of the demonstration activities
and to sustain the integrity of the evaluation design.
Changes: We have revised paragraph (a) in Section I of Priority 1
to state that when the applicant begins providing college savings
accounts to its GEAR UP ninth grade students, each of the applicant's
participating schools must serve a cohort of a minimum of 30 ninth
graders.
Comment: One commenter noted the possibility that limiting
applications to projects that select eligible GEAR UP students using
the cohort approach could lead to overrepresentation of applications
from certain geographic parts of the country. The commenter suggested
that the Department consider having applicants identify their proposed
projects as urban, rural, or suburban, and in the selection process
give preference to applicants whose projects would serve urban and
rural schools.
Discussion: The Department agrees that the demonstration project
should not unnecessarily disadvantage projects based upon the
geographic location of their schools, particularly those serving
schools in rural areas. That is why we are revising paragraph (a) in
Section I of Priority 1 to specify that the applicant's high schools
must each serve a minimum ninth grade class-size of 30 GEAR UP
participants. Historical data from State GEAR UP grantees indicate that
high schools using the cohort approach have an average of far more than
30 participants in the ninth grade cohorts. Therefore, we believe that
reducing the minimum number of participants to 30 will be sufficient to
address any concerns about geographic distribution and that no other
actions are required. The Department believes that urban schools do not
need special priority. As applicants for grants under this
demonstration project are State GEAR UP grantees, the size of schools
that a State identifies for inclusion in the proposed project should
have no impact on the quality of the applications. Hence reducing the
required size of the ninth grade cohort to 30 will not negatively
impact larger urban schools. Moreover, these urban schools already make
up a large portion of existing GEAR UP projects. Finally, the
Department has found no correlation between a State GEAR UP grantee's
geographic location and its choice to
[[Page 5040]]
administer a cohort- or priority-based approach.
Changes: We have revised paragraph (a) of Priority 1 to state that
the schools that an applicant would serve must have at least 30 GEAR UP
participants who will be in ninth grade during the 2013-2014 or 2014-
2015 academic year (depending on whether they received their new GEAR
UP award in FY 2011 or FY 2012).
Comment: One commenter recommended that the Department expand
eligibility to include a GEAR UP State grantee initially funded in
2008, asserting that its State has had significant experience with
college savings accounts since 2003 and has the Nation's highest
proportion of disadvantaged students.
Another commenter recommended that the Department begin
establishing the savings accounts and availability of match well before
ninth grade for needy students whose parents are not college educated,
given that these students would benefit from starting to save earlier
in life.
Discussion: The College Savings Accounts Research Demonstration
Project is designed to study whether a combination of supported
personal savings accounts and associated financial incentives and
counseling provided during GEAR UP students' high school years will
have a positive effect on a variety of measures of college readiness,
financial well-being, high school graduation, and college enrollment.
GEAR UP students participating in a State grant funded in 2008 would be
in the twelfth grade at the start of the research study. Therefore, if
we extended eligibility to include a GEAR UP State grantee initially
funded in 2008, not only would GEAR UP funds provide these students
with a very small amount of funding to be used for college expenses,
but the research purpose of the demonstration project would not be
realized.
With respect to starting the demonstration project with students
not yet in ninth grade, the Department recognizes that there may be
some benefits to exploring the effectiveness of starting college
savings earlier than ninth grade. However, one of the goals of the
demonstration project is to look at the effects of college saving for a
multiyear period while students are in high school. By starting with
students in ninth grade cohorts, the Department can ensure that all
students receiving college savings accounts will be attending high
schools where they can receive the wraparound GEAR UP services that we
think may be important for success in preparing them for, and promoting
their enrollment in, college. By contrast, starting the demonstration
projects when students are in an earlier grade could result in some
students receiving valuable services while in middle school but then
moving to high schools where they may not receive wraparound GEAR UP
supports or the required financial counseling for the savings accounts.
Moreover, in view of limitations on the amount of GEAR UP funds the
Department has available to support this demonstration project, and our
interest in receiving robust evaluation results earlier rather than
later, we believe that beginning this demonstration project while
students are in middle school would seriously undermine project
results.
Changes: None.
Comment: One commenter recommended that any State-level project
demonstrate clear and strong support of State political leadership,
including the Governor, State treasurer, and school district
leadership. The commenter stated that the demonstration projects would
likely need cooperation among these offices for permissions and other
data. The commenter further noted that State leadership would be
particularly important if grantees used banks or credit unions rather
than 529 college savings plans because individual banks and credit
unions have their own account structures, unlike 529 plans.
Discussion: The Department notes that, consistent with our
proposal, paragraph (c) in Section II of Priority 2 requires a letter
of support from the LEAs that would participate in the project. The
Department agrees that a broad demonstration of support for the project
is important to help ensure its success. However, we think
demonstrations of support are most important from the districts and
schools that participate. They will have to work with grantees to give
students wraparound services, provide financial literacy information,
and help ensure that the account administrator and trustee have the
data they need for deposits, withdrawals, and distribution of GEAR UP
funds. By contrast, while we think that having the endorsements of a
State's political leadership could be helpful, projects can likely
succeed without these endorsements, and requiring them would add
additional, and we think unnecessary, burden to the application
process.
Changes: None.
Comment: One commenter strongly recommended that students who
enroll in GEAR UP schools in a grade whose cohort is served by a GEAR
UP grant after the beginning of the demonstration project be allowed to
participate and be given access to seeded savings accounts. The
commenter stated that while researchers could track these students
separately, the grantee should maintain a grade-level cohort.
Discussion: In order to properly evaluate the effectiveness of the
demonstration project, we need to start with a cohort of students in
the ninth grade and then follow them throughout high school. Adding
students who join the cohort after ninth grade would add costs to the
project. And while the evaluation could separately track these students
(with presumably smaller amounts of deposits in student accounts),
doing so will add complexity to the evaluation. Therefore, we are not
changing Priority 2 to require that grantees include in this project
students who enter a participating school and join the cohort of GEAR
UP students after the ninth grade.
That said, we understand that prohibiting these students from
receiving services and savings accounts provided through this project
could be difficult to explain and could create very undesirable
tensions in the school communities. For this reason, we believe that
grantees should, if they desire, be able to establish accounts for
students who join the grantees' ninth grade cohort by enrolling after
ninth grade in high schools in which cohort members have already
received accounts. However, if a grantee chooses to provide savings
accounts to these new members of the cohort, it must ensure that it has
sufficient GEAR UP program funds to first provide matching deposits for
students it is required to serve.
Changes: We have added a new paragraph (f)(4) in Section I of
Priority 2 that, at the discretion of the grantee, permits students who
become members of the GEAR UP cohort during the project period after
transferring from a non-treatment high school into a treatment GEAR UP
high school after ninth grade to have an account with the $200 seed
money and availability of matching funds, provided that the grantee
ensures that it has sufficient GEAR UP program funds to first provide
matching deposits for students it is required to serve.
Comment: None.
Discussion: In Proposed Priority 1, the funding eligibility
criteria would have required a GEAR UP State grant funded in FY 2011 or
FY 2012 to support activities in ``multiple'' high schools. Through
internal Department deliberation, we concluded that the term
``multiple'' was too vague and that the better approach is to specify a
[[Page 5041]]
precise minimum number. We chose to use six schools as the threshold
because it represents the minimum number of participating schools in
each SEA that will make the project cost-effective to implement and
evaluate.
Changes: We have revised paragraph (a) of Priority 1: Funding
Eligibility to provide that an applicant must implement a GEAR UP
project in ``at least six high schools'' rather than simply ``multiple
high schools.''
Comment: None.
Discussion: Proposed Priority 1 states that an applicant must have
received a GEAR UP project grant that supports activities in ``at least
six high schools,'' but does not define ``high school'' or what grade
span would be considered ``high school.'' Through internal Department
deliberation, we concluded that it is necessary to clarify that, for
the purposes of these priorities, a ``high school'' must be a school
that serves students in grades 9-12. This clarification is needed first
to ensure that grantees will be able to provide participating students
with GEAR UP services for the entirety of the project. In addition,
participating students in high schools that serve grades 9-12 will be
able to receive the required financial counseling for four years in
conjunction with their savings accounts. By serving students in the
ninth grade who then may transfer to a non-GEAR UP high school for
grades 10-12, many of these counseling benefits would be lost.
Change: We have revised paragraph (a) of Priority 1: Funding
Eligibility to provide a note clarifying that for the purposes of this
notice of final priorities, a high school must be a school that serves
students in grades 9-12.
Savings Account Matching Contributions
Comment: Several commenters requested that the Department revise
Priority 2 and increase the proposed Federal matching contribution of
$10 per month so as to provide greater incentives for GEAR UP students
to go on to college and for families to save for their children's
college expenses.
One commenter recommended that between the $200 per student seed
money and the GEAR UP matching funds, the total amount of possible
Federal funds deposited into each account be a number that is easy for
a family to remember, such as $1,500 or $2,000.
Another commenter recommended that the Department provide
flexibility in the amount of Federal matching funds that would be
provided based on grantee determination of the needed family
contribution. This commenter noted that having a variety of minimum
matching rates would impact the evaluation but believes that the size
of the treatment group should allow for such flexibility and help to
answer the question of what level of match optimizes families' savings
contributions. Another commenter recommended that the Department not
establish a monthly match based on a fixed amount of family savings but
instead focus on regular savings because, according to the commenter,
research suggests this approach would be more effective in promoting
accumulated savings.
Discussion: We agree with some of these comments.
Having examined the level of GEAR UP program funding that we expect
to be available for this demonstration project, we believe that we can
offer greater financial incentives for GEAR UP students or their
families to save money for postsecondary education than the $10 per
month Federal match that we had proposed. We therefore are revising the
priority to specify that grantees will be able to match up to $25 per
month. Thus, rather than the maximum of $120 of GEAR UP funds per year
(and up to $480 over the maximum four years of savings) that we had
proposed, grantees now will be able to provide each GEAR UP student a
contribution of up to $300 per year (and up to $1,200 over this four-
year period). The increase in the Federal matching contribution should
increase the incentive for families to save for college and result in
higher levels of family savings. We believe that $1,200 over four years
will also give students and families a clearer amount of total seed and
match funding available. While we appreciate one commenter's suggestion
that matching amounts vary based upon a determination of family need,
we do not think this approach is appropriate here. Varying the match
would increase complexity for administrators, who would have to develop
a needs-analysis formula and find ways to communicate these differences
to students and families clearly. Beyond having grantees make available
this fixed amount, the Department believes that providing other options
for families to receive further deposits of GEAR UP funds beyond those
specified in Priority 2 adds too much complexity to the administration
of the project.
Changes: We have revised paragraph (b)(2), of Section I of Priority
2: College Savings and Financial Counseling to increase the Federal
matching contribution from up to $10 per month to up to $25 per month,
for a maximum of $300 in Federal matching funds each year for four
years.
Comment: One commenter recommended the Department lower the match
rate and raise the Federal matching contribution cap to maximize
savings contributions. The commenter stated that families would be more
motivated to save if the Department raised the amount of GEAR UP funds
available for these savings accounts but lowered the match percentage
from the 50 percent that we had proposed. The commenter offered this
approach, stating that it would increase the amount of funds families
would have available for college savings without greatly increasing the
level of commitment of GEAR UP funds.
Discussion: The Department agrees with one of the recommendations
in the comment. The match cap has been raised to $25 per month for a
maximum of $300 in Federal matching funds each year for four years. The
Department is not lowering the match rate, one dollar of GEAR UP
contribution to the savings account for every dollar of student or
family contribution, because we do not believe that lowering the match
rate will result in increased non-Federal savings contributions.
Changes: The Federal matching contribution cap has been increased
to $25 per month.
Comment: One commenter recommended revising the proposed priorities
to allow grantees the option of matching family deposits in excess of
the Federal limit, thereby providing an opportunity to leverage other
incentive programs, such as savings match programs through a Section
529 plan.
Discussion: While we agree that offering more matching funds would
provide a greater incentive to save, the demonstration project is
designed to determine the impact of a fairly specific set of college-
savings-oriented services and the provision of a set amount of Federal
funds as a match for private savings accounts. Grantees actively
seeking to encourage additional family deposits in college savings
accounts by offering a match against other non-Federal contributions
will interfere with the project evaluation. Therefore, the amount of
matching must be kept consistent for all participating GEAR UP
grantees.
Changes: None.
Comment: One commenter recommended that the Department provide
greater funding to accounts of families with fewer resources. The
commenter noted that while this approach presents unique challenges,
such as asking for a child's Social Security number in order that the
child
[[Page 5042]]
participates in the demonstration, this effort is needed if the
demonstration is serious about policy influence.
Discussion: The Department does not agree with the commenter. We
believe that existing eligibility requirements of the GEAR UP program
ensure that large numbers of participating students will be low-income
and first-generation college students. Moreover, changing the amount of
matching funding based upon additional factors will call into question
the reliability of the results of the project, add complexity to
administering the program, and make it harder to communicate to
students and families about the level of available funding. Therefore,
we want to offer a consistent level of seed and match funding for all
participating students.
Changes: None.
Comment: One commenter asked that we clarify whether the family's
contribution to its college savings account must be made monthly in
order to receive the full Federal contribution. Specifically, the
commenter asked whether the project would contribute the full monthly
level of matching contributions if the family had over-matched in one
month and under-matched in another, but averaged at least $25 per
month. The commenter also asked the Department to consider other
savings models, such as permitting a family to receive the maximum
amount of the GEAR UP contribution to the federally funded college
savings account so long as it has made the required match at any point
over this period.
Discussion: A student or family that has over-matched its account
in one month and under-matched in another would not be able to have the
amount of its over-matches count for future monthly matches, including
any catch-up period contributions. One of the goals of the
demonstration project is to encourage students and families to
regularly save for college. Allowing the amount of over-matching in one
month to count toward the matching amount in subsequent months would
discourage regular saving and make the program more complex and costly
to administer.
The Department appreciates the comment that the match be available
to families so long as the required contribution is made at any point
over this period. While we think that families should have some
flexibility and opportunities to make up for lost contributions, those
opportunities should not be provided indefinitely. That is why we are
requiring grantees to provide families a quarterly catch-up period of
two weeks. We believe these frequent catch-up opportunities balance the
desire to give families the opportunity to make up for missed
contributions with a project goal of providing regular deadlines that
encourage savings.
Changes: Paragraph (p) in Section I of Priority 2 has been revised
to clarify that a family that over-matches the Federal account in any
month may not receive credit for the amount of over-match in any future
month, including a catch-up period, for purposes of meeting that
month's GEAR UP program matching contribution.
Comment: Rather than offer monthly matching contributions of GEAR
UP funds, a number of commenters recommended that the Department
instead add to accounts when certain levels of private savings are
achieved, provide bonuses when families have added to accounts for
perhaps six consecutive months, or, after making the initial deposit of
GEAR UP funds, provide periodic deposits of Federal funds when students
reach particular ages. One commenter said that these approaches would
both be much simpler to implement than our proposal and that the latter
option has proven successful in the United Kingdom. The commenter
further recommended that rather than contributing Federal funds through
matching, the Department should consider providing Federal funds for
student accounts as behavioral incentives at certain milestones for
financial or educational achievement. The commenter stated that this
approach might be a more effective way to motivate student behavior and
that research suggests that the approach also might better encourage
long-term savings compared to matching monthly deposits.
Discussion: While we appreciate the summary of research presented
by the commenter, the Department does not agree that the proposed
approaches are feasible for the purposes of this demonstration project.
We think matching savings account contributions when they occur
provides immediate positive feedback to students and families that will
encourage additional saving. Moreover, we think that additional
benefits, such as bonuses for repeatedly saving, will make accounts
more complicated and costly to administer and harder for students and
families to understand. As for providing matches based upon student age
or other milestones, we think that including these other benefits would
likewise make administering the accounts more complicated and make it
too burdensome for grantees to manage them. Therefore, we are not
including additional matches for meeting other milestones.
Changes: None.
Comment: One commenter recommended that grantees be able to raise
funds for savings accounts from community and philanthropic
organizations, but it cautioned that in this case there should be
restrictions on the use of these funds for activities that are related
to education or finance, and supported by adequate documentation.
Discussion: Proper evaluation of the demonstration project requires
that students served by all project grantees are subject to the same
maximum matching and seeding amounts. Proper evaluation also requires
that grantees not solicit or otherwise seek funds from sources other
than the student's family and friends to contribute to the student's
non-Federal account. Doing otherwise could compromise the demonstration
project evaluation.
Changes: Paragraph (c) in Section I of Priority 2 has been revised
to clarify that a grantee may not solicit or raise money from non-
Federal sources as additional contributions to the student's non-
Federal college savings account.
Requirements for Savings Accounts
Comment: Several commenters emphasized that, in order to meet the
needs of their communities, the Department should allow grantees
flexibility in the design of their programs and thus not require all
grantees to use the same type of savings account.
One commenter recommended that in providing such flexibility, the
Department should require that all accounts have certain minimum
qualities, such as making the accounts accessible, safe, and effective,
avoiding excessive fees to students, and being easy to use. The
commenter also stated that this approach allows for some uniformity
while also providing variation for research purposes, and added that if
the Department decides to require a single account type, it should not
use 529 savings plans. The commenter stated that despite their positive
features, these plans have more onerous data disclosure requirements
than alternative account models and thus would exclude more students
than necessary from participation.
Another commenter, urging the Department to maintain flexibility in
the type of account the applicant would select, noted that 529 plans
generally cannot be accessed by deposits into local bank branches and
may prove difficult to use by unbanked low-income households since in-
person deposits would be very difficult. The commenter
[[Page 5043]]
noted that 529 accounts often have minimum deposit requirements, often
in the $15 to $25 range, and require deposits to be made online or by
mail; the commenter stated that these considerations would obstruct the
use of these 529 accounts by many low-income families, particularly
since the commenter's experience is that the ability to make small cash
deposits is very important for this population.
On the other hand, a number of commenters recommended that we have
grantees use existing 529 savings plans. One commenter noted that these
plans provide a ready common infrastructure designed to support college
savings that is not readily available in the case of banks or credit
unions, that they would be available to students and parents after the
end of this demonstration project, and that experience in one State
demonstrates that use of a Section 529 account by all participating
students has made it possible to monitor savings patterns and
performance very accurately. The commenter also noted that, for this
demonstration project, these Section 529 savings plans would need to be
flexibly implemented, and urged the Department to clarify that States
may work with the 529 providers to craft special arrangements for
account opening, account-holder information requirements, and account
structure that are specific to the demonstration project.
Finally, two organizations that work with members to enhance 529
plans submitted joint comments that, among other things, stated that
the 2004 studies referenced in the NPP with regard to income bands and
typical 529 plan participation are outdated and do not reflect efforts
made in recent years to expand knowledge about and participation in 529
plans. In this regard, the commenters provided copies of two reports
provided to the United States Treasury in February 2010 about 529 plans
and efforts of those implementing the plans to broaden their reach.
The commenters also stated that 529 plans do encourage savings by
those with modest incomes and that virtually all of these plans have
required contributions of as little as $10 to $25 per month; have a
wide variety of savings instruments, including very conservative ones;
and low-fee options. The commenters said that they would defer to the
State applicants about the specifics of implementing the Department's
proposed study and the logistics of funding of the GEAR UP
supplementary college savings accounts with required criteria and
characteristics, particularly privacy aspects, but asked the Department
to remain open to allowing a variety of funding vehicles in the study.
The commenters emphasized that the greater the flexibility that is
available for implementation efforts, the greater the chances of
success. The commenters also said that the State educational agency
(SEA) in each State should work with the State's 529 plan wherever
possible, since by utilizing 529 plans for this purpose, it will take
advantage of an existing infrastructure that administers college
savings programs and in many instances administers a matching grant or
other type of program for law and moderate income families.
Discussion: We appreciate these comments, but we believe it is
important to provide appropriate flexibility to grantees to choose the
type of savings vehicle that works best for them and that they believe
will work best for participating students and their families. As we
proposed, the Department is providing each grantee flexibility to
determine which type of savings program administration they will use,
provided that the grantee ensures that:
(a) It has a partnership with a financial institution that will
provide GEAR UP students starting in ninth grade with an account that
allows saving in a federally insured deposit account that accumulates
interest, an account composed of U.S. Government Treasury securities,
or a fully guaranteed savings option within a Section 529 college
savings plan. Accounts may also provide students and families with
investment options that present risks in exchange for the potential for
larger returns but that are in no way guaranteed.
(b) Federal funds are maintained in a single ``notional'' account
that is in fact separate from any non-Federal funds. The amount of
Federal GEAR UP seed and matching funds and accrued interest earned by
each student is tracked, each student is permitted to see both the
Federal funds and associated interest earned as well as any non-Federal
funds and interest earned in a single account statement, and Federal
funds are invested only in federally insured vehicles or U.S. Treasury
securities.
Even with these conditions, grantees will have many different types
of accounts to choose from, such as 501(c)(3) plans and 529 plans.
With regard to the comment raising concerns about 529 plans, the
Department believes that the requirements outlined in the priority will
protect against those concerns such that plans that have the flaws the
commenter identified would not meet the requirements for selection.
Similarly, we are confident that these requirements do not preclude
grantees from using 529 plans but instead provide grantees with
sufficient flexibility to choose what works best for them.
Changes: None.
Comment: One commenter from an association of financial
institutions offered to leverage its member bank and banking contacts
to help identify institutions interested in participating in the
project, should the Department select savings accounts as an eligible
account type.
Discussion: The Department appreciates the commenter's interest in
partnering with grantees to administer accounts. However, the
Department thinks it is important that grantees have flexibility in
selecting the provider that is best for them, and so we cannot
recommend a specific type of account or provider. We do encourage the
commenter to work with applicants and grantees to determine if their
partnership would be appropriate.
Changes: None.
Comment: One commenter suggested that the Department allow for, and
even encourage, maximum flexibility and experimentation across many of
the dimensions of the accounts specified in Proposed Priority 2.
Another commenter offered recommendations about the way the savings
accounts should be set up, suggesting for example that (1) the basic
savings accounts be interest bearing with no minimum balance and no
fees, (2) parents be able to invest funds in a certificate of deposit
or investment product such as a mutual fund, (3) accounts be in the
student's name so that assets in the accounts not affect family
eligibility for Medicaid and Temporary Assistance for Needy Families
(TANF), and (4) withdrawals for unauthorized purposes result in loss of
GEAR UP matching funds.
Another commenter stated that while flexibility was important,
there are a number of advantages of structuring the saving accounts
using a custodial or trustee model and holding all funds under a single
tax identification number. These advantages include: accounts can be
opened automatically and universally and without the need for Social
Security number or parental consent, funds are protected from early or
non-qualified withdrawals, account earnings accrue tax free without the
need of parents to report these earnings, and assets are not held in a
family's name, thus avoiding asset tests for public benefits
eligibility.
[[Page 5044]]
Yet another commenter recommended that the Department have grantees
structure their accounts and projects so that (1) they are free of any
fees on the students or the custodians, (2) all funds are insured by
the FDIC, (3) there is no minimum balance or deposit amount, (4)
parents and students have a range of deposit options, (5) there is
strong competency in the management and exchange of data between the
projects and financial institutions, (6) while making available limited
withdrawals, families are provided access to their funds in the case of
an emergency, and (7) families have access to account balances through
an online system.
Discussion: The Department acknowledges the recommendations
received on the structure and implementation of the savings accounts.
We agree that allowing grantees to tailor account characteristics to
their preferred circumstances could have some benefits, and, as
discussed previously, the Department has proposed to provide
flexibility in choosing the type of savings account administration
program provided certain core requirements are met. At the same time,
we need to limit flexibility in other areas such as the amount of
seeding or matching funds to ensure that the demonstration project is
evaluating a specific set of college savings-oriented services. The
responsibility for designing and managing these accounts, within the
specified guidelines, rests with the State GEAR UP grantee. Successful
applicants will propose an implementation plan that is most effective
for their State and target population.
Changes: None.
Comment: A number of commenters recommended the elimination of the
requirement that savings account administrators establish and maintain
parallel accounts for each student, one for GEAR UP funds and the other
for family contributions.
One commenter stated that the family contributions should instead
be held in sub-accounts of the single master account, meaning that
there would be no need for parallel accounts since the Federal seed
deposit and match funds could be accurately and easily tracked using a
ledger system.
Another commenter stated that while some college savings account
programs use the dual-account approach the Department had proposed,
others use software to track and accrue savings matches virtually while
keeping the matching funds in a pooled account. Under this approach,
when it is time for qualified withdrawals, the appropriate amount is
withdrawn from the pool and paid to the institution of higher education
or other vendor. The reduction in the number of separate accounts
creates large decreases in administrative burden.
Similarly, another commenter stated that to decrease administrative
burden, the Department should make use of notional accounts in which
the Federal funds would be placed in an account that is parallel to the
account holding non-Federal funds. The commenter noted that while the
Department might be legally required to use this arrangement, given the
enormous number of potential savings accounts and the fact that it
could not be a viable method of account delivery in the long term, the
commenter urged the Department to use a single account design that
would use software to track and account for Federal and non-Federal
deposits.
Discussion: We appreciate these comments. While we agree that
eliminating the requirement for grantees to maintain parallel accounts
for students would reduce by half the number of accounts, we think the
provisions in Priority 2 that concern use of Federal dollars deposited
into these accounts make parallel accounts preferable. In order to make
sure Federal dollars are properly invested, they must be invested in
federally insured vehicles or U.S. Treasury securities. Were we to
require only a single account type, non-Federal matches would be
restricted to similar investments, which would restrict savings
options. Moreover, GEAR UP funds deposited into these accounts that are
unused will need to be returned to the Department, something that would
be very hard to manage with a single account for deposits of both
Federal GEAR UP funds and private savings. Therefore, we think it is
necessary that the two-fund structure be maintained.
Changes: None.
Comment: One commenter recommended establishing a process that
allows for quick and easy deposit of funds to a student's savings
accounts. Another commenter recommended that the Department give
priority to applicants that provide a convenient or automatic way for
families to make deposits into students' accounts, while another
commenter provided research findings that automatic enrollment in a
savings account yields much greater and sustained participation than
having individuals open accounts on their own.
However, another commenter stressed its concern that auto-
enrollment without parental consent would be less effective for
achieving both the needed parental buy-in to college savings and the
student enthusiasm for college that would come from requiring parental
engagement, such as a requirement that parents expressly ``opt-in'' to
the project. And another commenter stated that while 529 accounts offer
convenience and simplicity, requiring grantees to use these accounts
may (1) lead to the removal of other attractive features of accounts,
such as the need for families that already had savings accounts to open
and add deposits to another, and (2) create much greater administrative
burden that could dampen support by those administering the project.
Discussion: The Department believes that making it easier for
students to enroll in the savings accounts, particularly by doing so in
an automatic or near-automatic fashion, is important for encouraging
participation and savings. Therefore, we agree with commenters
recommending easy enrollment and note that proposed Priority 2 allows
quick and easy deposit of funds to a student's savings account. Each
successful applicant will be required to ensure that individual
deposits can be made easily and at no cost to the student, the
student's parents, or others who make deposits on the student's behalf.
Consistent with the proposal, a student or parent would be able to
deposit funds online, in person at convenient locations, or by mail.
While the Department agrees that more engaged parents may be more
likely to contribute to savings accounts and build enthusiasm for
college, we think that requiring an express ``opt-in'' would make it
more complicated to enroll and participate and could depress usage.
Instead, we encourage grantees to work with families to build their
interest and knowledge in the program, including through required
financial counseling.
Changes: None.
Comment: One commenter recommended that the Department provide a
strong preference for ensuring that grantees work with a single
financial institution that can provide accounts with uniform terms and
conditions, and at low cost, across the State. The commenter stated
that such an approach would promote a better test of a college savings
plan that included all students, would decrease administrative burden
throughout the project, limit variability in savings accounts for
administrative and evaluative purposes, and facilitate tracking and
submission of more complete and accurate data about the projects.
Discussion: We agree with much of this comment. With respect to
requiring a single financial institution, we recognize that for many
grantees a single
[[Page 5045]]
partner may be sufficient and indeed even preferable to using multiple
institutions. However, we also recognize that such a structure would
not necessarily work in a larger State or in other circumstances.
Therefore, we encourage grantees to use their professional judgment
when determining how many financial partnerships they need to set up
the college savings accounts for participating students in their
States.
Changes: None.
Comment: One commenter recommended that the Department have
grantees invite account personnel to attend regular meetings of parents
at which they offer envelopes for mailing deposits and other ways to
encourage savings.
Discussion: While the Department thinks it is important that
grantees have flexibility in deciding how counseling to parents should
be provided, this requirement would not preclude account personnel from
providing some or all of this assistance.
Changes: None.
Comment: While fully supporting the Department's proposal to
require that grantees provide families with automatic enrollment and
encouragement of automatic savings deposits as useful design elements
to encourage saving for a student's college education, a commenter
recommended that the Department also consider a number of other
behavioral design elements. While these recommendations are addressed
under the next topic headings, the commenter recommended that under
Priority 2, the Department require each State grantee to secure
technical assistance in designing behavioral interventions that suit
the particular implementation of this project and that are customized
to the operational constraints of the participating schools, account
administrators, and the financial situation of participating students
and their families.
Discussion: The Department does not agree with this comment.
Grantees may certainly design their projects to provide various
approaches that they believe will be effective in encouraging families
to focus on the importance of saving for college, and grantees may use
GEAR UP funds to secure any desired technical assistance. However,
while we appreciate that different behavioral designs may result in
interesting variations in savings accounts, proper evaluation of the
accounts requires consistent administration across grantees. Adding in
such behavioral design elements would thus further complicate the
evaluation and is not recommended.
Changes: None.
Financial Counseling and Behavioral Interventions
Comment: One commenter recommended that the Financial Counseling
component be given ``the same weight'' as the Student Savings Account
component. We understand the commenter to be asking that the Department
require grantees to implement both the Financial Counseling and Savings
Account components of Priority 2.
Discussion: The Department agrees with this comment and notes that,
as proposed, Priority 2 requires grantees to implement both the
Financial Counseling component and the Student Savings Account
component. The College Savings Accounts Research Demonstration Project
has two main parts: (1) establishing, operating, and having students
participate in college savings accounts and financial counseling, and;
(2) assessing the effect of providing the college savings accounts and
related financial counseling to students and their parents. Both of
these parts are in the absolute priority published in this notice of
final priorities and incorporated by reference in the notice inviting
applications for the College Savings Account Research Demonstration
Project published elsewhere in this issue of the Federal Register.
Therefore, successful applicants will need to address both the
Financial Counseling and Student Savings Account components.
Changes: None.
Comment: One commenter expressed concern that students may be
penalized when parents are unable or unwilling to attend required
parent financial counseling sessions. The commenter recommended that
counseling for parents be optional and that we provide incentives to
parents who participate.
Discussion: Grantees will be expected to find and utilize the most
effective methods at participating schools for reaching out to and
counseling parents. While grantees are required to provide ``at least
biannual counseling meetings for parents,'' they are not required under
Priority 2 to meet specific attendance figures. Therefore, students
whose parents do not attend the session will not be penalized.
Changes: None.
Comment: One commenter expressed concern that individually targeted
financial counseling may be too burdensome for projects to implement
successfully with existing resources. This commenter recommended
partnering with outside organizations, such as Consumer Credit
Counseling Services, to help provide such counseling.
Discussion: We agree that grantees should make use of existing
resources, both theirs and those of outside organizations, to provide
financial counseling, and we encourage grantees to seek partners that
can help them in this effort. However, we do not feel that it is
necessary to include a statement to this effect in the final priority
as applicants will no doubt craft a counseling plan that best meets
their needs.
The comment prompted us to examine paragraph (g) in Section I of
Priority 2, which, as proposed, did not clarify whether all students in
the treatment group need to participate in the required financial
counseling. We have revised the provision to clarify that all students
must be included.
Changes: Paragraph (g) of Priority 2 has been revised to clarify
that all students in the treatment group must receive the required
financial counseling.
Comment: A commenter recommended adding a requirement that
financial counseling, particularly for parents, be conducted in
languages other than English, while another recommended that the
Department encourage applicants to work with experienced partners in
the delivery of culturally and linguistically appropriate financial
education and counseling for parents and families.
Another commenter, noting the importance of financial counseling,
recommended that each State grantee implement financial counseling
using curricula that are consistent and standardized across sites and
that are focused on helping GEAR UP students to increase their savings.
The commenter indicated that evaluation results with respect to the
measure and impact of financial counseling would thereby be as valid
and reliable as possible. In order to promote efficiencies and
appropriate evaluation results, the commenter also emphasized the need
of grantees, in States that mandate a financial education curriculum,
to coordinate with that curriculum in the design phase of their
projects.
Discussion: While we recognize the need to provide linguistically
and culturally appropriate financial counseling, we do not feel that it
is necessary to require this for all participating projects. Grantees
are expected to use their professional judgment and conduct teaching
and
[[Page 5046]]
counseling that best meets the needs of parents and students, including
those who need financial counseling in languages other than English. We
have no doubt that in States that mandate a financial education
curriculum, grantees will want to have participating schools and LEAs
coordinate their financial counseling with this curriculum. However, we
do not think it is appropriate to mandate that each grantee under this
demonstration project use a particular curriculum that is consistent
and standardized across school sites.
Changes: None.
Comment: One commenter recommended a change to Proposed Priority 2
to allow States to obtain technical assistance on the design of
behavioral interventions that would help to encourage regular and
greater savings for college, such as social support groups or the
disbursement of matching funds through prizes that suit the particular
implementation of the college savings accounts research demonstration
project.
Discussion: We agree with this recommendation but do not believe a
change to Priority 2 is needed to accomplish the goal. The Department
realizes there is an array of behavioral design interventions that may
encourage regular deposits into savings accounts; we, therefore,
encourage States to design their college savings account demonstration
projects to include viable interventions that are likely to maximize
college savings for students.
Changes: None.
Comment: One commenter recommended that, in order to better
encourage parents to add deposits to their children's college savings
accounts, grantees should consider activities such as sending reminder
letters and emails, preferably early in the month rather than at the
end of the month; providing reminder magnets; and communicating to them
what other families are doing or saying, e.g., the number of families
that provided regular contributions in the preceding year or months.
Discussion: We agree with the commenter that grantees should reach
out to parents to provide them with reminders about saving. We believe,
however, that States should be given flexibility to determine how this
should be carried out. Therefore, we are not adding a specific
requirement.
Changes: None.
Financial Education
Comment: One commenter suggested that the Department encourage
grantees to conduct financial education in multiple formats to ensure
that the most effective method is used. The commenter also suggested
that one of the required formats include classroom lessons during the
school day, allowing GEAR UP to leverage the work of States that
already mandate financial education in the schools.
Another commenter emphasized that financial literacy and college
savings accounts are not enough to overcome barriers, particularly for
first-generation college students, in areas such as preparing for
college academically and financially, how to apply to college, and how
to choose the right college and career path. The commenter urged the
Department to pursue high-impact mentoring, information about academic
and career preparedness, and the engagement of parents, counselors,
teachers, and other stakeholders as important interventions in addition
to college savings accounts. The commenter urged the Department to
address these interventions--including through use of the Internet and
online tools--as well as college savings accounts in order to provide a
more robust set of outcomes.
Discussion: While we agree with the commenter that multiple
educational formats may be more effective than a single format in
reaching varied audiences with differing learning styles, we do not
feel it necessary to mandate this practice. We believe that grantees
will want to use educational formats that work best for their
particular audience, relying on current and proven educational
research. We also agree that the availability of savings accounts for
GEAR UP students and promotion of financial literacy are likely
insufficient by themselves to overcome all barriers. However, we note
that all students participating in this program will also be receiving
all regular GEAR UP services. By statute, GEAR UP grantees are required
to provide participating students with a variety of mentoring,
outreach, and supportive services (as referenced in the last sentence
of paragraph (g) in Section I of Priority 2). These services will give
students some of the mentoring and information assistance mentioned by
the commenter, but we think much of what the commenter seeks requires a
vehicle broader than this demonstration project.
Changes: None.
Comment: One commenter recommended that the Department help to
prepare grantees to meet the financial education requirement by
offering ongoing training to grantees, including one-on-one advising as
needed; providing help to grantees to identify and select quality
educational financial curricula; and monitoring financial education
delivery over time. The commenter also recommended that the Department
require financial education to be delivered in the classroom rather
than after school and urged that it be coordinated with any financial
education already required in grantees' States.
Noting the proposed requirement for individually targeted
financially counseling, another commenter stated that many grantees
would not have existing capacity to provide this higher intensity
service and that this counseling would be very costly. The commenter
urged the Department to invest additional resources in providing needed
grantee training and to permit grantees to provide this counseling in
partnership with outside organizations with the capacity to assist.
Discussion: The Department agrees that extensive and ongoing
technical assistance on important aspects of project implementation is
crucial to helping grantees establish and manage savings accounts and
that support is particularly important for those with no experience in
this area. To address these concerns, the Department plans, among other
things, to provide technical assistance training at national GEAR UP
conferences on important aspects of project implementation. These
aspects include general considerations that should be taken into
account when implementing these types of savings accounts. The
Department is also working with partners at the Treasury Department,
the NCUA, and the FDIC to develop materials that will give applicants
key information about the implementation of college savings accounts.
While we appreciate the suggestion that the Department require
grantees to provide financial counseling in the classroom rather than
after school, we do not think it is appropriate to require this. Some
schools may not be able to incorporate it into classroom time, and such
a requirement could create problems with finding appropriate
instructors. Likewise, we do not believe that an explicit requirement
is necessary for coordinating with any financial education already
required in grantees' States. The Department notes that, in their
applications under this demonstration project, potential grantees will
describe project services that are most appropriate to the needs of the
target population and that maximize the effectiveness of project
services through the collaboration of appropriate partners.
Changes: None.
[[Page 5047]]
Catch-Up Options
Comment: A number of commenters recommended that the Department
eliminate or reduce the catch-up period. One commenter stated that the
proposed catch-up provision would add costs and complexity to the
project and encourage delays in making deposits. Instead, the
Department should consider requiring small regular deposits, which
makes saving for college more manageable and ritualized.
Another commenter recommended that we make this provision more
flexible, both to reduce project complexity and to give students the
greatest chance to acquire the maximum amount of Federal deposits.
Discussion: The Department understands that lower- and moderate-
income families sometimes have to make tough financial decisions that
can seriously impede their ability to save for college regularly. We
want to provide these families the flexibility to continue to receive
matching funds by affording parents a two-week catch-up period. We
think two weeks is an appropriate amount of time because it gives
students and families ample opportunity to make catch-up contributions
but does not provide so long a time period as to create a disincentive
to make regular contributions to their children's college savings
accounts.
Changes: None.
Comment: One commenter recommended offering additional annual or
four-year opportunities to catch up on required deposits. Another
commenter recommended that we clarify the amount of catch-up that is
needed when families have over-matched in certain months but under-
matched in others.
Discussion: The monthly savings component of the project is
intended to instill a habit of consistent saving and methodical
planning for education expenses. While we understand that family
incomes may at times be inconsistent, this project aims to help
encourage participants to regularly save money towards the costs of a
college education. We are concerned that offering additional annual or
four-year opportunities to catch-up will deter families from saving
habitually.
With regard to the request for clarification about a family that
over-matched in any month, as we have expressed in response to a prior
comment, we believe that given the project's focus on promoting regular
savings the amount of a family's overmatch should not be available as a
credit for a month in which the family did not meet its match amount.
Thus, we also believe that the family should still need to provide
catch-up contributions for any months in which it did not provide any
contributions and that this should be the result regardless of how much
a family over-matched in a given month. We have clarified Priority 2 in
this regard.
One of the goals of the demonstration project is to encourage
students and families to regularly save for college. Allowing over-
matching in one month to count in subsequent months would discourage
regular saving and make the program more complex and costly to
administer.
Changes: Paragraph (p) in Section I of Priority 2 has been added to
clarify that a family that over-matches the Federal account in any
month may not receive credit for the amount of the over-match in any
future month, including a catch-up period, for purposes of meeting that
month's GEAR UP program matching contribution.
Account Administrator
Comment: One commenter sought clarity on the role of the account
administrator.
Discussion: Under Priority 2, each successful applicant must
designate a savings account administrator to hold the account funds,
accept deposits, and issue qualified withdrawals. The account
administrator must be a federally regulated or State-regulated
financial institution, such as an investment firm that manages a
State's 529 plan or a federally insured bank or credit union that
partners with the State to administer GEAR UP savings accounts.
Changes: None.
Comment: One commenter requested that we explain the difference
between the account administrator and savings account trustee over the
duration of the project and beyond the five-year grant period. The
commenter also noted that students may hold their accounts for up to
six years following high school graduation, meaning that the account
administrators and trustees would need to serve the accounts (and
presumably report data about them) for up to 11 years. The commenter
expressed concern that few potential account administrators and
trustees will be willing to provide these services for this length of
time, and that the administrative fees they are paid will last only
five years.
Discussion: Under Priority 2, each successful applicant must
designate a savings account administrator and a savings account
trustee. The savings account administrator is responsible for holding
the account funds, accepting deposits, and issuing qualified
withdrawals. The savings account trustee is responsible for managing
the account funds and approving withdrawals and other account
activities.
The Department appreciates that accounts will have to be
administered for a longer period of time than the grantee's project
period. But this extended timeframe is necessary to ensure that
students are able to access their accounts throughout their time in
postsecondary education. While we appreciate that this extended
timeframe does place some burden on trustees and creates some
uncertainty about how applicants and grantees would budget for these
trustee costs, we think that the management of such accounts may become
easier as families stop making contributions and instead begin
withdrawing funds. In their applications under the program, potential
grantees should budget up-front for all years for which the services of
the account administrator and trustee will be needed. Moreover,
grantees may budget for, and charge GEAR UP funds for, the reasonable
and necessary costs of managing the savings accounts. Thus GEAR UP
program funds will be available to pay the reasonable and necessary
costs that the trustees can be expected to incur.
Changes: None.
Savings Account Ownership
Comment: One commenter sought clarity on the ownership structure of
the student savings accounts. The commenter stated that whether the
account is owned by the trustee, the student, or the student's family
will affect account administration and families' funding decisions. The
commenter recommended that the trustee own both the student account and
the match account.
Discussion: The Department agrees with the commenter's
recommendation. Both the students' account containing Federal funds and
match account with non-Federal contributions will be owned by the
account trustee. Participating GEAR UP students will be named as
beneficiaries. This is the same structure banks use for minors' savings
accounts.
Changes: None.
Account Withdrawals
Comment: One commenter sought clarification on what constitutes a
``qualified withdrawal.'' The commenter asked, for example, whether the
cost of an enrollment in preparatory course for a college entrance exam
or the purchase of a computer would be a qualified
[[Page 5048]]
withdrawal, or whether grantees may develop their own rules that align
with the specific requirements of the account types they select.
Another commenter recommended that the program follow the
guidelines established by 529 programs for what constitutes a qualified
withdrawal. Yet another commenter recommended that, to reduce
administrative complexity, we eliminate provisions for reducing the
prior match of GEAR UP funds for unqualified withdrawals from the
student's account.
Another commenter urged the Department to consider reasonable
restrictions on the purposes of withdrawals, perhaps with exceptions
for emergencies, or limiting withdrawals to only a certain number of
times per year. According to this commenter, surveys and focus groups
of low-income individuals have suggested that these approaches may help
encourage college savings.
Discussion: Under Priority 2, students or their parents may
withdraw Federal GEAR UP funds from the student savings accounts in
which grantees have deposited them upon approval of the savings account
trustee. Under paragraph (d) in Section I of Priority 2, withdrawals of
GEAR UP funds may only be for qualified purposes, which are (1) funds
provided to an institution of higher education on behalf of a student
upon that student's enrollment in an HEA title IV-eligible institution
of higher education (which includes colleges and universities as
defined by the HEA) for the purposes of paying for tuition, fees,
course materials, living expenses, and other covered educational
expenses as defined in the HEA, or (2) funds the student or parent need
for such costs that would not be provided directly to the IHE. In
addition, we have added to paragraph (d) permission to use funds in the
Federal account for other costs related to postsecondary education that
the account trustee, based on instructions from the grantee, determines
to be appropriate. At the grantee's discretion, these additional
qualified purposes costs could include such items as the cost of
enrollment in a preparatory course for a college entrance examination
or the purchase of a computer required for college.
Successful applicants also will establish rules for the withdrawal
and transfer of non-Federal funds, which must include a requirement
that the account trustee oversees any withdrawal or transfer of non-
Federal funds. In terms of requests for additional restrictions on
withdrawals or limiting the number of withdrawals allowed per year, the
Department thinks that the restrictions placed on withdrawals of the
Federal funds are appropriate. For the non-Federal matching funds,
however, the Department does not think we need to establish additional
restrictions since the loss of previously matched Federal funds that
would accompany an unqualified withdrawal should be sufficient to
dissuade this from often occurring. If, however, States wish to provide
additional restrictions on withdrawing funds from the student's non-
Federal college savings account, that is their purview.
Changes: None.
Comment: One commenter noted that the Department had proposed that
the college savings accounts be held for the GEAR UP students in trust
pending their graduation from high school and enrollment ``in a college
or university,'' and asked what we mean by a ``college or university.''
The commenter asked whether the phrase is limited to accredited
institutions, and whether technical schools such as culinary
institutes, automotive schools, or cosmetology schools would qualify.
Discussion: By ``college or university,'' the Department means an
institution of higher education that participates in the Title IV
Student Financial Assistance programs and is described in section 102
of the HEA. This interpretation is necessary because GEAR UP funds may
only be used for college savings accounts as a supplement to financial
assistance that GEAR UP grantees are already provided as scholarships
and student financial assistance under section 404E of the HEA. Section
404E provides that to receive this assistance students must be enrolled
in such an institution of higher education.
Changes: We have added language to paragraph (d) in Section I of
Priority 2 to clarify that GEAR UP funds deposited into the college
savings account and used for the costs associated with postsecondary
education must be used for costs associated with enrollment at an
institution of higher education, as the term is defined in section 102
of the HEA.
Data Collection and Evaluation
Comment: A commenter agreed with the Department's proposal to avoid
collecting Social Security Numbers (SSNs) and taxpayer identification
numbers (TINs). The commenter noted that many schools are not allowed
to collect or disclose such personally identifiable information about
their students, and yet many institutions, including 529 plans, require
all account holders to provide this information. The commenter also
identified locations that it stated were able to implement college
savings accounts without SSNs or TINs. Finally, because of what the
commenter viewed as ``Know Your Customer'' provisions of the Patriot
Act and Bank Secrecy Act, the commenter urged the Department, perhaps
together with other entities or experts in this area, to advise on the
propriety of opening accounts without SSNs and TINs.
Discussion: The Department encourages grantees to avoid collecting
SSNs or TINs when it is feasible to do so. For example, we note that
some financial institutions may accommodate the use of unique
identifiers for students in lieu of SSNs or TINs. However, we
acknowledge that some financial institutions may require personally
identifiable information for the purposes of managing accounts. The
Department does not prohibit grantees from collecting this information
in the event that doing so is necessary in a given State. We expect to
provide technical assistance to grantees on this topic, including any
implications that collecting this personal identifiable information may
have under Federal privacy laws.
Changes: None.
Comment: One commenter urged the Department to design, write code,
and implement common account monitoring standards across the full
demonstration project since, according to the commenter, without such a
comprehensive design plan, there is a substantial risk of substantial
data failure on savings patterns and performance. We read the comment
to be concerned, in part, with the quality of data that grantees would
need to provide for the project evaluation.
Discussion: While those preparing the Department's evaluation of
this demonstration project will review comments on the account
monitoring standards, the specific data items and data collection
structure to be used in the Department's evaluation were not part of
the notice of proposed priorities and are not subject to public
comment.
Changes: None.
Comment: A number of commenters recommended approaches for the
design of the Department's evaluation of this demonstration project.
Among other things, commenters recommended that the evaluation collect
and analyze differences in GEAR UP services across schools, family
financial stability data and the different types of financial
counseling provided by grantees and their relationship to impacts. The
commenters also recommended that the evaluation use statistical
techniques to account for school-level clustering of students in the
analysis.
[[Page 5049]]
Discussion: While those preparing the Department's evaluation of
this demonstration project will review comments on the research design,
the specific data items and statistical analyses to be used in the
Department's evaluation were not part of the notice of proposed
priorities and are not subject to public comment.
We note, however, that the Department intends that the evaluation
will address, to the extent possible, the ways in which both regular
and demonstration GEAR UP services are implemented across schools. We
also intend to collect some information about income and assets through
parent surveys conducted in spring 2014 and 2016. However, we do not
believe that we can adequately address family financial stability and
how that might relate to the timing and levels of contributions to
savings accounts without more frequent and longer surveys that would be
burdensome to parents and costly for the evaluation to implement.
Finally, the Department plans for the evaluation to appropriately
adjust for clustering of students within schools in performing the
statistical analysis of impacts.
Changes: None.
Grantee Attendance at Project Meetings
Comment: None.
Discussion: Paragraph (h) in Section I of Proposed Priority 2
required the grantee's project director to attend one particular
meeting held by the Department. We have revised this paragraph to
provide more details and require attendance at multiple Department
meetings, likely held in conjunction with the annual meetings of the
National Council for Community and Education Partnerships (NCCEP),
where technical assistance will be provided. We made these changes to
ensure that we provide sufficient technical assistance to grantees and
to allow grantees to be better prepared to attend these meetings.
Changes: Paragraph (h) in Section I of Priority 2 has been revised
to state that project directors, site coordinators, and other
appropriate project staff are required to participate in meetings of
GEAR UP grantees that the Department will convene to provide
professional development and technical assistance to grantees
participating in the demonstration project.
Final Priorities: The Assistant Secretary for Postsecondary
Education establishes these priorities to determine the effectiveness
of implementing college savings accounts and providing financial
counseling in conjunction with other GEAR UP activities as part of an
overall college access and success strategy.
Priority 1: Funding Eligibility.
To meet this priority, an applicant must--
(a) Have received a new GEAR UP State grant in FY 2011 or FY 2012
that supports activities in at least six high schools, each of which
must serve a cohort of at least 30 GEAR UP participants who will be in
ninth grade during the 2013-2014 academic year (for recipients of FY
2011 grants) or 2014-2015 academic year (for recipients of FY 2012
grants);
For the purposes of this priority, ``high school'' means a school
that serves students in grades 9-12.
(b) Use the cohort approach (see Section 404B(d)(1) of the Higher
Education Act (HEA)) to select participating GEAR UP students; and
(c) Identify in its application the names, locations, and National
Center for Education Statistics (NCES) identification numbers of the
GEAR UP high schools expected to participate in the demonstration and
the number of GEAR UP participants expected to be in ninth grade during
the 2013-2014 or 2014-2015 academic year at each GEAR UP school
identified. (NCES school identification numbers can be found at: https://nces.ed.gov/ccd/schoolsearch/).
Priority 2: College Savings Accounts and Financial Counseling.
To meet this priority, an applicant must submit in its application
a comprehensive plan for providing (1) students in half of the GEAR UP
high schools identified by the applicant with safe and affordable
deposit accounts at federally insured banks, credit unions, or other
institutions that offer safe and affordable financial services
consistent with provisions of this Priority, and (2) financial
incentives to encourage saving and related financial counseling to
students and parents.
An applicant also must agree in its application to participate in
an evaluation of this college savings account demonstration project
that will examine the effect of college savings accounts and counseling
on student and family behaviors and attitudes associated with college
enrollment, as described in the Research Evaluation section of this
priority. The Department's Institute of Education Sciences (IES) in
partnership with the Office of Postsecondary Education (OPE) will
oversee the evaluation, which will be conducted by an IES evaluation
contractor.
I. College Savings Accounts and Financial Counseling
The applicant must describe in its application its plan for
implementing college savings accounts and financial counseling,
including how, preferably at the time of application but no later in
time than to have all savings accounts operational before the start of
the cohort's ninth grade in the 2013-2014 or 2014-2015 school years, it
will--
(a) Student Savings Accounts.
(1) In partnership with a financial institution, provide students
with an account that allows saving in an interest-bearing, federally
insured deposit account, U.S. Government Treasury securities, or a
fully guaranteed savings option within a 529 college savings plan.
Accounts may also present students and families with investment options
that present risks in exchange for the potential for larger returns but
that are in no way guaranteed.
(2) Ensure that Federal funds are maintained in a single
``notional'' account that is in fact separate from any non-Federal
funds, tracks the amount of Federal GEAR UP seed and matching funds and
accrued interest earned by each student, permits each student to see
both the Federal funds and associated interest earned as well as any
non-Federal funds in a single account statement, and is invested only
in federally insured vehicles or U.S. Treasury securities;
(3) Ensure that the non-Federal investments are in U.S. Government
Treasury securities or a low- or no-fee age-based fund unless the
parents or student chooses otherwise;
(4) Open savings accounts for students in automatic or nearly
automatic fashion and describe how the savings account enrollment
approach entails or approximates an automatic enrollment framework.
Automatic enrollment means parents and students are not required to opt
into the account, but may opt out of it. If parents and students take
no action, the account is opened. Action is required to decline
participation.
Note: Applicants are also encouraged to propose automatic
savings options, such as automatic payroll deductions by parents of
participating students.
(5) Ensure that individual deposits could be made easily and at no
cost by the student, the student's parents, or others on the student's
behalf; that deposits would be able to be made online, including on
mobile devices, in person at convenient locations, or by mail; and that
account information
[[Page 5050]]
would be viewable online, including on mobile devices; and
(6) Ensure that funds are held in the name of the account trustee
described in paragraph (k) of part I of this priority with the
participating students named as beneficiaries.
(b) Federal Seed and Matching. Provide for Federal seed and
matching of Federal funds in student savings accounts for students in
participating treatment high schools as follows:
(1) Within two weeks of the beginning of students' ninth grade
school year in the fall of 2013 or the fall of 2014, seed each
student's account with $200 in Federal GEAR UP funding.
(2) Each month, for every contribution up to $25 beyond the initial
seed amount that the student or family deposits into the student's
account, deposit an additional equal size contribution up to $25 of
Federal GEAR UP funding into the account, for a maximum of $300 in
Federal matching funds each year for a maximum of four years.
(3) Notwithstanding the monthly cap on contributions referenced in
paragraph two above, once per quarter during each calendar year during
the project period, on a date approved by the Department, offer
students and parents a two-week catch-up period if the student has not
earned the maximum monthly match for that year and encourage students
and families to make contributions at least sufficient to earn up to
the maximum Federal match.
(4) Ensure that if, at the end of each calendar year, the student
has not exhausted the Federal match, any unearned matching funds would
no longer be available to that student or to the applicant and would be
returned to the Department.
(c) Non-Federal Seed and Matching. Not provide additional seed or
matching funding from GEAR UP or non-GEAR UP resources to participating
students beyond the funds described in (b), or solicit or raise money
from non-Federal sources as additional contributions to the student's
non-Federal college savings account.
(d) Withdrawal and Transfer of Federal Funds. Provide for the
withdrawal and transfer of Federal GEAR UP funds as follows:
(1) The applicant must ensure that withdrawals of Federal GEAR UP
funds are made only upon approval of the savings account trustee and
are only made from the account to eligible students, or to an
institution of higher education, as the term is defined in section 102
of the HEA, on behalf of a student upon that student's enrollment in an
HEA Title IV-eligible institution of higher education, as the term is
defined in section 102 of the HEA, for the purposes of paying for
tuition, fees, course materials, living expenses, and other covered
educational expenses as defined in the HEA, and other costs related to
postsecondary education that the account trustee, based on instructions
from the grantee, determines to be appropriate.
(2) An account trustee may not withdraw Federal GEAR UP funds for
non-qualified purposes and may not transfer them to other individuals.
If this rule is broken, the Department may require the applicant to
terminate its relationship with the trustee and select a different
entity to serve as savings account trustee. The initial trustee may be
subject to penalties for misuse of Federal funds.
(e) Withdrawal and Transfer of Non-Federal Funds. Establish rules
for the withdrawal and transfer of non-Federal funds, which must
include a requirement that any withdrawal or transfer of non-Federal
funds must be overseen by the account trustee. A withdrawal of non-
Federal funds from the savings account for non-qualified purposes will
result in a removal of Federal matching funds that have been
contributed on behalf of the student if the amount of non-Federal funds
remaining in the account after the non-qualified withdrawal is less
than the total amount of Federal matching funds contributed (not
including the $200 Federal seed).
For example, if student and parent contributions total $140,
Federal GEAR UP matches total $120, and the student withdraws $50 in
non-Federal funds for non-qualified purposes, then $30 in Federal GEAR
UP matching funds earned up until that point would be removed from the
account because the amount of non-Federal funds remaining in the
account after the non-qualified withdrawal--$90--is $30 less than the
amount of Federal matching funds contributed. The Federal matching
funds could be earned back in catch-up periods during that same year.
The $200 seed money provided with Federal GEAR UP funds will not be
removed from the account.
(f) Student Eligibility. Establish student eligibility to receive
Federal GEAR UP funds as a seed and match for GEAR UP student savings
accounts as follows:
(1) Students must be enrolled in the ninth grade in one of the
randomly selected treatment high schools (as described in the Research
Evaluation section of this priority) in the fall of 2013 or the fall of
2014.
(2) If a student does not use funds in the student's account within
six years of his or her scheduled completion of secondary school, the
undisbursed Federal GEAR UP funds must be returned to the Department.
(3) Students who transfer from a GEAR UP high school to a non-GEAR
UP high school during the project period will continue to remain
eligible for the matching funds from the grantee.
(4) At the discretion of the grantee, students who during the
project period become members of the GEAR UP cohort by transferring
from a non-treatment high school into a treatment GEAR UP high school
after ninth grade may have an account with the $200 seed money and
availability of matching funds, provided that the grantee has
sufficient funds to first make the matches it is required to make for
students in the treatment high schools.
(g) Financial Counseling. Provide general and targeted (that is,
specific to each individual's account and financial circumstances)
savings account and financial counseling to all students in the
treatment group and to their parents. Counseling should encourage
regular saving and prepare students and their families to make informed
financial decisions about college and other matters. Counseling must
include at least 12 hours per year of counseling for students and at
least biannual counseling meetings for parents, which must include a
review of the contributions to the account and any interest accrued.
The counseling must be in addition to, and may not serve as, the
financial aid, financial literacy, or college savings counseling
already provided as part of regular GEAR UP services.
(h) Staff Professional Development and Coordination with the
Department.
(1) Agree to participate in Department-provided professional
development for the GEAR UP or school staff who will deliver the
financial planning and counseling described in paragraph (g) of part I
of this priority.
(2) Ensure that the project director, site coordinators, and
appropriate project staff participate in meetings of GEAR UP grantees
that the Department will convene to provide professional development
and technical assistance to GEAR UP grantees participating in the
demonstration.
Note: The meetings are likely to be held in conjunction with the
annual meetings of the National Council for Community and Education
Partnerships (NCCEP), the association of GEAR UP grantees. The
February 2013 meeting, held in conjunction with the GEAR UP
Capacity-Building Workshop, will likely cover technical
[[Page 5051]]
assistance to the State administrators of the college savings plans,
and the logistical and administrative issues in setting up the
college savings accounts. The remainder of the meetings during the
project period will likely focus on professional development for
GEAR UP staff providing the counseling to families.
(i) Site Coordination. Designate a site coordinator for each GEAR
UP high school that participates in the demonstration and describe the
role of the coordinator and to whom he or she will be accountable. The
site coordinators in schools that are randomly selected to provide
college savings accounts and financial counseling (treatment schools)
have responsibility, exercised consistent with the State's plan and
approved project application, for ensuring that their schools meet all
requirements for participating in the college savings demonstration
project. Coordinators must, for example, ensure that college savings
accounts are opened and seeded within two weeks of the start of ninth
grade; that related financial counseling and coaching are provided to
participating students and parents; and that schools cooperate with
data collection for the evaluation. (See the Research Evaluation
section of this priority for further information on selection of the
treatment schools). Site coordinators in schools that are not
participating in the college savings account and counseling components
(control schools) must ensure that their schools cooperate with the
data collection for the evaluation.
(j) Savings Account Administrator. Select a savings account
administrator to hold the account funds, accept deposits, and issue
qualified withdrawals. The applicant must identify the account
administrator in the application or describe the process by which the
account administrator will be selected.
The account administrator must be able to fulfill its role until
all Federal funds have been disbursed or returned to the Department.
During the grant project period, modest administrative fees, not to
exceed one percent of account balances, could be paid to the savings
account administrator with Federal GEAR UP funds to cover expenses
related to the GEAR UP College Savings Account Demonstration Project.
(k) Savings Account Trustee. Select a savings account trustee to
manage the account funds and approve withdrawals and other account
activities. The account trustee must have demonstrated experience in
successfully managing financial services. The applicant must identify
the account trustee in the application or describe the process by which
the account trustee will be selected.
The account trustee must be able to fulfill its role until all
Federal funds have been disbursed or returned to the Department. The
account trustee may not be a student's parent or guardian, and must be
separate and distinct from the account administrator. The trustee must
be a State agency, such as a State Department of Treasury, Office of
the Governor, Lieutenant Governor, or Comptroller, a tax-exempt non-
profit organization or foundation, or for-profit organization or
business with demonstrated expertise and experience in successfully
managing financial services. During the grant project period, modest
administrative fees, not to exceed one percent of account balances,
could be paid to the savings account trustee with Federal GEAR UP funds
to cover expenses related to the GEAR UP College Savings Account
Demonstration Project.
(l) Grantee Coordinator. Specify a person or persons at the State
and local educational agency (LEA) level who will administer and
coordinate all components of the demonstration, including provision of
services provided by the GEAR UP high schools, monitoring the rules
established for and activities carried out by the savings account
administrators and trustees including distribution of letters,
notifying parents or guardians about the administration of the student
survey by the evaluator and about the release of designated ``directory
information'' from the education records of the student to the savings
account administrator, the savings account trustee, or both, as needed
to assist with establishing and managing the college savings accounts,
and distributing forms enabling parents or guardians to opt out of
participation in the college savings demonstration project. (The
Department will provide a sample parent/guardian letter and opt out
form.) The grantee coordinator must also include aggregate information
about the college savings account demonstration project in the
grantee's annual performance report to the Department, including the
number of accounts opened and the total amount of Federal GEAR UP
matching funds deposited on behalf of students. The grantee coordinator
must also respond to the evaluators' annual request for information on
individual student accounts, including the timing and amounts of
disbursements of seed and matching funds, and the student's name,
address, and date of birth.
(m) Directory Information Policies. Include only districts or
schools that will have directory information policies in place prior to
July 1, 2013, or July 1, 2014, that allow for student information to be
shared in compliance with Federal law with the savings account
administrator, the savings account trustee, or both, as needed to
establish and manage the college savings accounts. Under the provisions
of the Family Educational Rights and Privacy Act (FERPA) and its
implementing regulations (20 U.S.C. 1232g and 34 CFR Part 99), each of
the LEAs or schools in the application must have provided public notice
that the district or schools have designated as ``directory
information'' under FERPA the student's name, address, grade level, and
date of birth. In addition, in accordance with FERPA, if any parent or
guardian of a student has opted out of the disclosure of this
``directory information,'' the school or LEA will not provide the
``directory information'' for that student to the savings account
administrator, the savings account trustee, or both, as needed to
assist with establishing the college savings accounts, and savings
accounts with GEAR UP seed money will not be opened in his or her name,
unless the parent or guardian of that student provides consent under 34
CFR 99.30.
(n) Grantee Non-Federal Match Requirement. Meet the statutory non-
Federal match requirement (see Section 404C(b) of the HEA and 34 CFR
694.7.)
Note: A State grantee would meet the statutory match requirement
tied to these additional research demonstration project funds
through any ``over-matched'' non-Federal funds it already is
committed to providing under its regular GEAR UP application. A
State that would need to provide other non-Federal funds in order to
meet the statutory match requirement tied to GEAR UP funds provided
for the research demonstration project would need to include with
its application a budget of how it proposed to do so. Contributions
of students, families, parents' employers, community-based
organizations, religious organizations, and others to student
savings account could be treated as a matching contribution, but, if
during any project year these private contributions to savings
account were less than anticipated, a State would have to ensure by
the end of each project year that it had met the annual matching
requirement through other non-Federal contributions to this project
or the regular GEAR UP activities.
(o) Budget. Provide a budget and budget narrative with projected
charges of Federal GEAR UP funds and any non-Federal matching
contributions, that describes the expected costs of implementing the
proposed project, including provision of payment to the account
administrator, the account
[[Page 5052]]
trustee, or both of reasonable costs for managing the savings accounts
according to requirements of this section.
(p) Over-matching. A family that over-matches the Federal account
in any month may not receive credit for the amount of over-match in any
future month, including a catch-up period, for purposes of meeting that
month's GEAR UP program matching contribution.
II. Research Evaluation
The applicant must describe in its application its agreement to the
following:
(a) Random Assignment of Schools. An applicant must--
(1) Agree to a random assignment by the evaluation contractor of
one-half of the GEAR UP high schools identified in its application for
their students to receive demonstration services (treatment schools).
In addition to the regular GEAR UP services offered at these treatment
schools, GEAR UP projects must also offer the college savings account
and financial counseling intervention in accordance with Priority 1
(Funding Eligibility). The students in the remainder of the high
schools (control schools) will not receive the college savings account
and financial counseling components but will continue to receive
regular GEAR UP services.
(2) Agree not to offer a program that provides seed or matching
funds for college savings accounts in the control schools for the
duration of the GEAR UP grant.
(b) Data Collection. The applicant and the LEA(s) and GEAR UP high
schools that would like to implement college savings accounts (some of
which will become control schools) must agree to participate and
cooperate in the data collection conducted by the Department's
evaluator, which will include the following:
(1) Two surveys of GEAR UP project directors at the State education
agency (SEA) or LEA level and site coordinators for each school about
the implementation of the college savings account and counseling
components, including the extent to which the college savings account
counseling was provided in the treatment schools and counseling and
other services were provided under the GEAR UP grant in both treatment
and control schools;
(2) Two surveys of GEAR UP students about their participation in
GEAR UP program activities and other college access programs; their
expectations about college enrollment and costs; their knowledge about
college savings and financial aid; their financial literacy; their
plans for enrollment in college-preparatory courses; and their
financial behaviors, including the extent to which they are saving for
college;
(3) Two surveys of parents of students participating in the GEAR UP
program, in a form that will be comprehensible to parents of English
language learners, about their participation in GEAR UP program
activities and other college access programs; their expectations about
their child's college enrollment and costs; their knowledge about
college savings and financial aid; their financial literacy; and their
financial decisions, including the extent to which they are saving for
college;
(4) For treatment schools, data on the extent to which their staff
attend the required professional development;
(5) For both treatment and control schools, rosters of all GEAR UP
participants who are in the ninth grade in fall 2013 or fall 2014,
including the names of the students, and other identifying information
(such as their dates of birth, zip codes, parent contact information,
or district or school identification numbers) that will enable the
Department's evaluator to request school administrative records from
the State or LEA for the appropriate students;
(6) Access to the appropriate State or LEA school administrative
records, which will be used to measure student characteristics and
achievement prior to the ninth grade, student attendance, course taking
patterns, and credits in grades 9-12 for students in the treatment and
control schools;
(7) From the grantee, annual information on the accounts of
individual students, including the timing and amounts of disbursements
of seed and matching funds, and the student's name, address, and date
of birth.
(c) Letters of Support. Each applicant must include in its
application the following:
(1) Letters of support from the relevant LEAs. Unless the SEA
agrees in the application to provide this same data on its own, these
letters of support also must contain the LEA's agreement to provide the
relevant school records data to the evaluation contractor, including
the following school records data for GEAR UP participants who are
enrolled in the ninth grade in the treatment schools and control
schools in the fall 2013 or fall 2014, regardless of whether the
student has continued to be enrolled in his or her original high
school:
(i) Scores on State or district-administrated assessments of
reading and math for the seventh and eighth grades and high school
years;
(ii) High school attendance;
(iii) High school courses in which the student was enrolled and
grades and credits received for those courses;
(iv) Demographic information such as gender, race/ethnicity,
parents' educational attainment, English proficiency, and the extent to
which a language other than English is spoken at home;
(v) Whether the student is certified as eligible for free or
reduced price lunch through the National School Lunch Program; and
(vi) Whether the student has an individualized education program.
(2) A letter from the principal of each high school identified in
the application agreeing to participate in all aspects of the
evaluation and grant, including:
(i) Random assignment of the high school;
(ii) If randomly selected to implement the demonstration services,
allowing the GEAR UP program to offer the college savings account and
counseling components to eligible GEAR UP participants at the
principal's high school; and
(iii) Regardless of whether a school is in the treatment or control
group, provision to the evaluation contractor of rosters of GEAR UP
participants who are in the ninth grade in fall 2013 or fall 2014,
including identifying information (such as student names, dates of
birth, zip codes, parent contact information, or district or school
identification numbers) that will enable the contractor to request the
administrative records from the State or LEA about the appropriate
students.
(3) Letter from the superintendent of each LEA overseeing the
schools in the evaluation, agreeing to all aspects of the evaluation
and grant, including--
(i) Random assignment of their GEAR UP high schools listed in the
application;
(ii) If randomly selected to implement the demonstration services,
an agreement allowing the State GEAR UP program to offer the college
savings account and financial counseling to eligible GEAR UP
participants consistent with the priorities and requirements in this
notice of final priorities; and
(iii) Regardless of whether the schools are in the treatment or
control group, an agreement to provide to the evaluation contractor
rosters of GEAR UP participants who are in the ninth grade in fall 2013
or fall 2014, including identifying information (such as student names,
dates of birth, zip codes, parent contact information, or district or
school
[[Page 5053]]
identification numbers) that will enable the contractor to request the
administrative records from the State or LEA about the appropriate
students.
(iv) An agreement to have district or school directory information
policies in place prior to July 1, 2013, or July 1, 2014, that allow
for student information to be shared in compliance with Federal law
with the savings account administrator, the savings account trustee, or
both, as needed to establish and manage the college savings accounts.
Under the provisions of the FERPA and its implementing regulations,
each of the LEAs in the application or schools therein must have
provided public notice that the district or school has designated as
``directory information'' under FERPA the student's name, grade level,
address, and date of birth. In addition, in accordance with FERPA, if
any parents or guardians of a student has opted out of the disclosure
of this student directory information, the school or LEA will not
provide ``directory information'' on that student to the savings
account administrator or the savings account trustee, and savings
accounts with GEAR UP seed money will not be opened in his or her name,
unless the parent or guardian of that student provides consent under 34
CFR 99.30.
Types of Priorities: When inviting applications for a competition
using one or more priorities, we designate the type of each priority as
absolute, competitive preference, or invitational through a notice in
the Federal Register. The effect of each type of priority follows:
Absolute priority: Under an absolute priority, we consider only
applications that meet the priority (34 CFR 75.105(c)(3)).
Competitive preference priority: Under a competitive preference
priority, we give competitive preference to an application by (1)
awarding additional points, depending on the extent to which the
application meets the priority (34 CFR 75.105(c)(2)(i)); or (2)
selecting an application that meets the priority over an application of
comparable merit that does not meet the priority (34 CFR
75.105(c)(2)(ii)).
Invitational priority: Under an invitational priority, we are
particularly interested in applications that meet the priority.
However, we do not give an application that meets the priority a
preference over other applications (34 CFR 75.105(c)(1)).
This notice of final priorities does not preclude us from proposing
additional priorities, requirements, definitions, or selection
criteria, subject to meeting applicable rulemaking requirements.
Note: This notice of final priorities does not solicit
applications. In any year in which we choose to implement this
priority, we invite applications through a notice in the Federal
Register.
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.
This final regulatory action is not a significant regulatory action
subject to review by OMB under section 3(f) of Executive Order 12866.
We have also reviewed this final regulatory action 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 upon 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, and other
advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather
than the behavior or manner of compliance a regulated entity must
adopt; and
(5) Identify and assess available alternatives to direct
regulation, including economic incentives--such as user fees or
marketable permits--to encourage the desired behavior, or provide
information that enables the public to make choices.
Executive Order 13563 also requires an agency ``to use the best
available techniques to quantify anticipated present and future
benefits and costs as accurately as possible.'' The Office of
Information and Regulatory Affairs of OMB has emphasized that these
techniques may include ``identifying changing future compliance costs
that might result from technological innovation or anticipated
behavioral changes.''
We are issuing these final priorities only on a reasoned
determination that their benefits justify their costs. In choosing
among alternative regulatory approaches, we selected those approaches
that maximize net benefits. Based on the analysis that follows, the
Department believes that this regulatory action is consistent with the
principles in Executive Order 13563.
We also have determined that this regulatory action does not unduly
interfere with State, local, and tribal governments in the exercise of
their governmental functions.
In accordance with both Executive orders, the Department has
assessed the potential costs and benefits, both quantitative and
qualitative, of this regulatory action. The potential costs are those
resulting from statutory requirements and those we have determined as
necessary for administering the Department's programs and activities.
Intergovernmental Review: This program is subject to Executive
Order 12372 and the regulations in 34 CFR part 79. One of the
objectives of the Executive order is to foster an intergovernmental
partnership and a strengthened federalism. The Executive order relies
on processes developed by State and local governments for coordination
and review of proposed Federal financial assistance.
This document provides early notification of our specific plans and
actions for this program.
Accessible Format: Individuals with disabilities can obtain this
document in an accessible format (e.g., braille, large print,
audiotape, or compact disc) on request to the program contact person
listed under FOR FURTHER INFORMATION CONTACT.
[[Page 5054]]
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.
Dated: January 16, 2013.
David A. Bergeron,
Acting Assistant Secretary for Postsecondary Education.
[FR Doc. 2013-01125 Filed 1-22-13; 8:45 am]
BILLING CODE 4000-01-P