(4) The Commissioner will evaluate whether the methods used by a correspondence school in preparing the information required by § 176.5(c) were soundly conceived and the source materials used were appropriate and sufficiently reliable to support its claims. Based on this evaluation the Commissioner will either approve the institution's request or reduce it accordingly.

(d) Institutions with base-year funds, base amounts. If an institution had funds available to it in the base year, its request for funds will be evaluated in the following manner:

(1) The institution establishes a base amount by choosing its first or second formula limit or an amount less than the lower of those figures.

(2) The institution's first formula limit is the product of its enrollment factor times

(i) An inflation factor of 1.12 times (ii) The sum of its expenditures for the campus-based programs during the base year.

(3) The institution's second formula limit is the product of its enrollment factor times

(i) An inflation factor of 1.06 times (ii) The sum of the products ob

tained by multiplying the amount of funds available to the institution in each of the campus-based programs during the current year by the projection rate for that program.

(4) The projection rate referred to in paragraph (d)(3) of this section is the rate obtained by dividing the institution's expenditures in the base year in each of the campus-based programs by the total funds available to it in each program for that year. (For the CWS and SEOG programs this is the utilization rate reported on the annual fiscal-operations report for those pro

grams.)

(5) After the institution establishes its base amount, it may distribute that amount among the campus-based programs as it chooses. However, if it allocates to any program an amount greater than 110 percent of that program's share of the base amount, the amount in excess of 110 percent will be evaluated as an augmentation request in accordance with paragraph (e) of this section.

(6) The procedures described in paragraphs (d) (1) through (5) of this section are represented in the following table.

To be completed by all institutions which participated in one or more of the programs in the 12 months ending June 30, 1977. Enter "NA" for any program in which you did not participate. COMPLETE ALL COLUMNS.

Entries in column (A), "Base Year," must be derived from your Award Period 1976-77 Fiscal Operations Report.
Entries in column (B), "Current Year," are derived from your Award Letters for the 12 months ending June 30, 1978.
In Column (D), Authorization X Projection Rate Projection. For CWS and SEOG, "projection rate" means the utilization rate
reported on the annual fiscal-operations report.

Select Either 68 (A) or 68 (D) as your Formula Limit request and indicate the selection in the following boxes:

(CHECK ONE)

68 (A)

68 (D)

Distribute the Amount selected in the following boxes. The sum of lines 69 through 72 may not exceed the selected Formula Limit. CWS Federal Funds SEOG Initial Year

69.

70

71 SEOG Continuing Year

72 NDSL Level of Lending

(7) If (i) the institution chooses its first formula limit as its base amount, or (ii) it chooses its second formula limit as its base amount and that amount is not more than 130 percent of its first formula limit, the Commissioner will approve that base amount. However, the Commissioner will not approve that amount if there is evidence in program reviews, audits, fiscal-operations reports, or applications filed by the institution, that the institution has not complied with the requirements of the programs for which it is applying. The institution's failure to file required reports in an acceptable form and in a timely manner may be viewed as a failure to comply with program requirements.

(8) (i) If the institution's base amount exceeds 130 percent of its first formula limit, the Commissioner will review the institution's expenditure and commitment of funds during the current year to determine whether it is reasonable to expect that the institution will spend the amount projected under paragraph (d)(3)(ii) of this section for each program, (ii) If the Commissioner determines that the projected expeditures are unreasonably large, an appropriate downward adjustment will be made.

(e) Institutions with base year funds; augmentation requests. (1) If the institution's aggregate request exceeds its base amount, or if its request in any program exceeds 110 percent of that program's share of its base amount, the amount in excess of that limit will be considered to be an "augmentation request” and will be evaluated by the Commissioner separately from the institution's base amount. For each program, the Commissioner will approve or disapprove any augmentation request in its entirety.

(2) The Commissioner will approve an augmentation request only if it is based on exceptional circumstances which make an institution's need for additional funding greater than and different from that of other institutions in its State. In deciding whether this condition has been met, the Commissioner will review the request to determine whether (i) the procedures used by the institution to calculate the

aggregate amount of funds needed by its students were soundly conceived, (ii) the data used are verifiable, and (iii) the procedure and data justify the request.

(3) The Commissioner will not approve an augmentation request for any program if the projection rate described in paragraph (d)(4) of this section is less than 90 percent, unless the institution can justify the low rate.

(4) The Commissioner will not approve an augmentation request for any program if the institution requests, as part of its base amount, an amount which is less than that program's share of the base amount.

(20 U.S.C. 1070b-3)

§ 176.7 Application review and approval of request.

(a)(1) The Commissioner will convene panels of qualified persons in each of the regions served by regional offices of the Office of Education, to review applications submitted under this part by institutions situated in those regions. The review panel will evaluate each institution's request for funds in accordance with the criteria set forth in § 176.6 and recommend an amount which it considers appropriate.

(2) No panelist may review an application from the panelist's own institution or from any other institution which he or she has prepared or assisted in preparing or in which he or she has any personal or financial interest.

(b) Institutions which file applications for funding under this part will be notified of the amount recommended by the review panel. If the amount recommended is less than the institution's request, the reasons for the reduction will be forwarded to the institution. The regional office staff will adjust the recommendation to correct arithmetic or technical errors that are brought to their attention.

(c)(1) If an institution wishes to request a review of the panel's recommendation for other than arithmetic and technical errors, it must submit a written request for review to the regional office within the time specified by the Commissioner. The request for review may include additional infor

mation relevant to the recommendation. The regional office will review the request and will notify the institution in writing of its decision and the reasons therefor.

(2) The institution may reply to the regional office's decision if it believes that the reasons used in arriving at that decision were wrong. The regional office will respond to the institution's reply indicating its agreement or disagreement with the institution's statements.

(d)(1) If an institution wishes a review of the regional office recommendation, it may request a review by a national review panel. The national review panel will consist of institutional student financial aid officers from each of the regions and personnel of the Office of Education.

(2) A request for national review must be submitted in writing by the institution to the regional office within the time specified by the Commissioner. However, no additional information beyond that given to the regional office by the institution will be considered.

(3) The national review panel will review the request and notify the institution and the Commissioner of its recommendation and the reasons

therefor.

(e) The Commissioner will establish an approved level of funding (approved request) for each applicant institution taking into consideration the recommendation of the relevant panel or regional office.

(20 U.S.C. 1070b-3)

§ 176.8 Institutional agreement.

To participate in the SEOG program, an institution of higher education must enter into an agreement with the Commissioner for that purpose. The agreement must include any provisions the Commissioner considers appropriate to carry out the SEOG program. Specifically, the agreement must:

(a) Provide that SEOG funds reIceived by the institution will be used solely for the purposes specified in, and in accordance with, the provisions of this part;

(b) Provide that, in determining whether a student meets the requirements of exceptional financial need, the institution will consider the source of the student's income and that of any individual or individuals upon whom the student relies primarily for support and will make an appropriate review of the assets of the student and of those individuals;

(c) Provide that the institution, in cooperation with other institutions of higher education where appropriate, will make vigorous efforts to identify qualified youths of exceptional financial need and encourage them to continue their education beyond secondary school through programs and activities such as (1) establishing or strengthening close working relationships with secondary school principals and guidance and counseling personnel, with a view toward motivating those students to complete secondary school and pursue postsecondary education and (2) making, to the extent feasible, conditional commitments for student financial aid to qualified secondary school students who, but for such grants, would be unable to obtain the benefits of higher education, with special emphasis on students enrolled in grades 11 or lower who show evidence of academic or creative promise;

(d) Specify that the institution must make Supplemental Grants reasonably available (to the extent of funds available) to all eligible students; and

(e) Specify that the institution will comply with the provisions of § 176.20 relating to maintenance of effort and § 176.18 relating to costs of administration.

(20 U.S.C. 1070b-2)

§ 176.9 Student eligibility.

(a) Eligibility. Except as provided in paragraphs (e) through (h) of this section, a student enrolled in an eligible program is eligible to receive a Supplemental Grant if the student

(1) Is a national of the United States, is in the United States for other than a temporary purpose and intends to become a permanent resident thereof, or is a permanent resident of the Trust Territories of the Pacific Islands;

(2) Has been accepted for enrollment as at least a half-time undergraduate student in an eligible program at an institution of higher education or, in the case of an undergraduate student already attending the institution, is enrolled and in good standing as at least a half-time student in an eligible program;

(3) Shows evidence of academic or creative promise and capability of maintaining good standing in his or her course of study;

(4) Is of exceptional financial need as determined in accordance with paragraph (b) of this section; and

(5) Would not, but for a Supplemental Grant, be financially able to pursue a course of study at the institution.

(b) Exceptional financial need. (1) A student has exceptional financial need if his or her expected family contribution does not exceed 50 percent of his or her cost of education.

(2) Notwithstanding paragraph (b)(1) of this section, an institution may determine that a student has exceptional financial need if the student financial aid officer believes it is impracticable for the student with financial need to meet that need from loans, employment, or grants other than a Supplemental Grant.

(3) If an institution determines that a student has exceptional financial need under paragraph (b)(2), it must include the rationale for that decision as part of its records.

(c) Member of religious community— financial need. A member of a religious community, society, or order who (1) by direction of the community, society, or order is pursuing a course of study in an institution of higher education or (2) receives support and maintenance from the community, society, or order is considered not to have financial need.

(d) Programs of study abroad. A student participating in a program of study abroad will be considered to be enrolled in his or her "home" institution if

(1) The program of study abroad is arranged or approved in advance by the home institution; and

(2) The student's academic performance during the program of study abroad becomes a part of the permanent academic record at the home institution in the same manner as if performed at that institution.

(e) No student may receive a supplemental grant under this part unless the institution determines that the student:

(1) Is maintaining satisfactory progress in the course of study the student is pursuing according to the standards and practices of the institution at which the student is in attendance;

(2) Is not in default on any national direct or defense student loan made by that institution or on a loan made, insured, or guaranteed under the guaranteed student loan program (title IVB, HEA) for attendance at that institution; and

(3) Does not owe a refund on grants previously received for attendance at that institution under the basic grant, supplemental grant, or State student incentive grant programs.

(f) If an institution determines at the beginning of a payment period that a student is not maintaining satisfactory progress, but reverses itself before the end of that payment period, it may pay that student a grant for the entire period; if the institution reverses itself after the end of that period, it may neither pay the grant to the student for that period, nor make adjustments in subsequent periods, to compensate for the loss of aid for that period.

(g) Students who receive overpayments on grants may continue to receive supplemental grant payments under the following conditions:

(1) Overpayment of a basic grant. If a student is overpaid on a basic grant at an institution, that institution may still pay a supplemental grant to that student if (i) the student is otherwise eligible, and (ii) the overpayment can be eliminated in the award year in which it occurred by adjusting subsequent basic grant payments for that award year.

(2) Overpayment of a basic grant due to institutional error. If the student is overpaid on a basic grant at an institution as a result of institutional