plicable to all students enrolled in that student's program.

Institution of higher education has the same meaning under this part as the same term defined in 34 CFR 668.3 of the Student Assistance General Provisions regulations.

and will select the scholars as required by §§ 653.31 and 653.32;

(3) Describes a program of activities for carrying out the purposes set forth in § 653.1 in such detail that the Secretary may determine the degree to which the State's program will accom

ent.

Scholarship means an award made to an individual under this part for one academic year.

(Authority: 20 U.S.C. 1111-1111h)

Subpart B-What Assistance Does the Secretary Provide Under This Program?

§ 653.10 For what purposes may a State use its payments under this program? A State may use its payments under the Paul Douglas Teacher Scholarship Program, including principal and interest payments it receives from scholars under § 653.42, only for making payments to scholars.

(Authority: 20 U.S.C. 1111)

Subpart C-How Does a State Apply for Grants?

§ 653.20 What must a State do to receive grants under this program?

(a) To receive grants under the Paul Douglas Teacher Scholarship Program, a State shall submit an application to the Secretary for review and approval.

(b) The Secretary approves an application that

(1) Designates as the State agency for the administration of the Paul Douglas Teacher Scholarship Program, either

(i) The State agency which administers the State Student Incentive Grants Program under Title IV, Part A, Subpart 3 of the Act; or

(ii) The State agency which administers the Guaranteed Student Loan Program and with which the Secretary has an agreement under section 428(b) of the Act;

(2) Identifies the panel or agency which has established criteria and procedures for the selection of scholars

must include

(i) The selection criteria and procedures to be used by the State, in the selection of scholars, which satisfy the provisions of this part; and

(ii) The procedures by which the designated State agency intends to publicize the availability of Paul Douglas Teacher Scholarships to secondary school students in the State;

(4) Explains how the criteria and procedures for the selection of scholars were developed and in what ways they reflect the State's present and projected needs for preschool, elementary, and secondary teachers in general and for those with training in specific academic disciplines;

(5) Provides assurances that

(i) No changes will be made in the designations of an agency to administer the Paul Douglas Teacher Scholarship Program, in the selection criteria and procedures to be used in the selection of scholars, or any other aspect of the program of activities described in its application without the prior written approval of the Secretary;

(ii) No one will receive a Paul Douglas Teacher Scholarship without entering into an agreement with the designated State agency under which he or she agrees to the terms specified in § 653.40;

(iii) The terms and conditions of the agreement which the State agency will enter into with scholars under § 653.40 will be fully disclosed in the scholarship application form;

(iv) The State agency will monitor scholars' compliance with the provisions of §§ 653.40, 653.41(b), and 653.42;

(v) The State agency will make particular efforts to attract students from low-income backgrounds or who express a willingness or desire to teach in schools having less than average academic results or serving large numbers of economically disadvantaged students; and

(vi) Scholarships will be awarded without regard to sex, race, handicapping condition, creed, or economic background; and

(6) Contains a copy of the agreement referred to in paragraph (b)(5)(ii) of this section.

(c) Upon the Secretary's approval of its application, a State need not submit additional applications in order to continue to be considered for funding under this program.

(Approved by the Office of Management and Budget under control number 18400578)

(Authority: 20 U.S.C. 1111b)

§ 653.21 What requirements must be met by States in the administration of the program?

(a) To continue to receive payments under this part, a State shall

(1) Provide scholarship assistance only to student, who meet the requirements of § 653.30, 653.40, and 653.041;

(2) Limit scholarship assistance to no more than four academic years for each scholar;

(3) Make reports to the Secretary that are necessary to carry out the Secretary's functions under this part;

(4) Establish and implement policies and procedures which are necessary to administer the repayment provisions of § 653.42 and, in cases of noncompliance with these provisions, implement collection and litigation procedures consistent with 34 CFR Part 682; and (5) Except as otherwise provided in paragraph (d) of this section

(i) Expend all funds received from the Secretary for scholarships during the award year specified by the Secretary with regard to those funds; and

(ii) Expend in that award year, for scholarships, all funds received by the State prior to that award year from principal and interest payments made under the provisions of § 653.42.

(b) A State shall award a scholarship in the amount of $5,000 for an academic year, except as otherwise provided in paragraph (c) of this section.

(c) A State shall not award a scholarship which exceeds the scholar's cost of attendance. If a scholarship, when added to the amount the scholar is to receive for the same academic year under Title IV of the Act, would

otherwise exceed the scholar's cost of attendance, as defined for the Perkins Loan Program in 34 CFR 674.11, the State shall reduce the scholarship by the amount in which the combined awards would be in excess of the scholar's cost of attendance.

(d) After awarding all scholarships for payment during an award year, as required by paragraph (a)(5) of this section, a State may reserve for expenditures in the following award year a remaining amount of funds which is less than the amount required for a scholarship as well as any funds that were awarded but were returned or not expended.

(Approved by the Office of Management and Budget under control number 18400595)

(Authority: 20 U.S.C. 1111c, 1111d, 1111e) [52 FR 45285, Nov. 25, 1987, as amended at 53 FR 49147, Dec. 6, 1988]

Subpart D-How Does a State Select Scholars Under This Program?

§ 653.30 What are the eligibility requirements?

To be selected as a scholar, an individual shall

(a)(1) Be a United States citizen or National;

(2) Provide evidence from the U.S. Immigration and Naturalization Service that he or she—

(i) Is a permanent resident of the United States; or

(ii) Is in the United States for other than a temporary purpose with the intention of becoming a citzen or permanent resident; or

(3) Be a permanent resident of the Trust Territory of the Pacific Islands; (b)(1) Have graduated from high school;

(2) Be scheduled to graduate from high school within 3 months of the date of the award; or

(3) Have received a certificate of high school equivalency for successfully completing the Tests of General Educational Development (GED); and

(c)(1) Rank in the top ten percent of his or her graduating class; or

(2) Have received GED test scores recognized by the State to be equivalent to ranking in the top ten percent

of the high school graduates in the State, or nationally, in the academic year for which the eligibility determination is being made.

(Authority: 20 U.S.C. 1111d)

§ 653.31 Who selects the scholars?

(a) Scholars must be selected by(1) A seven-member statewide panel appointed by the chief State elected official, acting in consultation with the State educational agency;

(2) An existing grant agency designated by the chief State elected official and approved by the Secretary; or

(3) An existing panel designated by the chief State elected official and approved by the Secretary.

(b) A selection panel must be representative of school administrators,

teachers, and parents.

(Authority: 20 U.S.C. 1111d)

§ 653.32

What are the selection criteria and procedures?

(a) The panel or agency appointed or designated by the chief State elected official in accordance with § 653.31 shall establish criteria and procedures for the selection of scholars.

(b) The selection criteria and procedures must reflect the present and projected needs of the State for preschool, elementary, and secondary teachers as required by section 553(c) of the Act and must be developed after consideration of the views of the State and local educational agencies, private educational institutions, and other interested parties as required by section 553(d) of the Act.

(c) The State shall make applications available to high schools in the State and in other locations convenient to applicants, parents, and other interested parties.

(d) The panel or agency referred to in paragraph (a) of this section shall select scholars without regard to whether applicants plan to attend publicly or privately controlled institutions.

(Authority: 20 U.S.C. 1111b, 1111d)

Subpart E-What Are the Scholarship Conditions?

§ 653.40 What agreement must a scholar have with the State agency?

(a) To receive a scholarship, an individual shall enter into an agreement with the State agency under which he or she agrees, except as otherwise provided in paragraph (b) of this section(1) To teach on a full-time basis, determined by the institution agency in which he or she is teaching, for a period of not less than two years for each year for which scholarship assistance was received

as

or

(i) In a public or private nonprofit preschool, elementary school, or secondary school in any State; or

(ii) In a public or private nonprofit preschool, elementary, or secondary education program in any State;

(2) To fulfill the teaching obligation described in paragraph (a)(1) of this section within ten years after completing the postsecondary education degree program for which the scholarship was awarded;

(3) To provide the State agency evidence of compliance with paragraphs (a) (1) and (2) of this section and § 653.41 as required by the State agency; and

(4) To repay all or part of the scholarship plus interest and reasonable collection fees as specified in § 653.42 if the conditions of paragraphs (a) (1) and (2) of this section are not met or if the State agency determines that the individual is no longer pursuing a course of study leading to certification as a teacher at the preschool, elementary, or secondary level.

(b)(1) The requirement to teach two years for each year of scholarship assistance is reduced by one-half in the case of individuals who teach on a fulltime basis in a teacher shortage area that is designated by the Secretary as provided by 34 CFR 682.210(j) (5) through (7).

(2) To qualify for a reduction in the teaching obligation, a scholar teaching in the State from which he or she received scholarship assistance must

(i) Provide to the State agency a statement by the chief administrative officer of the public or nonprofit pri

vate elementary or secondary school in which the scholar is teaching, certifying that the scholar is employed as a full-time teacher; and

(ii) Be teaching in a teacher shortage area designated by the Secretary as provided by 34 CFR 682.210(j) (5) through (7), as determined by the State agency.

(3) To qualify for a reduction in his or her teaching obligation, a scholar teaching in a State other than the State from which he or she received scholarship assistance must provide to the State agency of the State from which he or she received that scholarship assistance

(i) A statement by the chief administrative officer of the public or nonprofit private elementary or secondary school in which the scholar is teaching, certifying that the scholar is employed as a full-time teacher; and

(ii) A certification that he or she is teaching in a teacher shortage area designated by the Secretary as provided by 34 CFR 682.210(j) (5) through (7), as described in § 653.40(b)(4).

(4) In order to satisfy the requirement for certification that a scholar is teaching in a teacher shortage area designated by the Secretary, a scholar teaching in a State other than that in which he or she obtained his or her scholarship must do one of the following:

(i) If the scholar is teaching in a State in which the Chief State School Officer has complied with

§ 653.40(b)(5) and provides an annual listing of designated teacher shortage areas to the State's chief administrative officers whose schools are affected by the Secretary's designations, the scholar may obtain a certification that he or she is teaching in a teacher shortage area from his or her school's chief administrative officer.

(ii) If a scholar is teaching in a State in which the Chief State School Officer has not complied with § 653.40(b)(5) or does not provide an annual listing of designated teacher shortage areas to the State's chief administrative officers whose schools are affected by the Secretary's designations, the scholar must obtain certification that he or she is teaching in a teacher shortage area from the Chief

State School Officer for the State in which the scholar is teaching.

(5) In the case of a State in which scholars wish to obtain certifications as provided for in § 653.40(b)(4)(i), the State's Chief State School Officer must first have notified the Secretary, by means of a one-time written assurance, that he or she provides annually to the State's chief administrative officers whose schools are affected by the Secretary's designations, a listing of the teacher shortage areas designated by the Secretary as provided for in § 682.210(j) (5) through (7).

(6) If a scholar who receives a reduction in his or her teaching obligation continues to teach in the same area in which he or she was teaching when the teaching obligation was originally reduced, the scholar shall continue to qualify for the reduction in the teaching obligation even if the area ceases to be designated a teacher shortage area, provided that the scholar provides the State agency with a statement by the chief administrative officer of the school in which he or she is teaching, certifying that the scholar continues to be employed as a fulltime teacher in the same area in which he or she was teaching when the teaching obligation was originally reduced.

(c) The agreement referred to in paragraph (a) of this section must include

(1) A description of the procedures under which the provisions of § 653.42 (g) through (k) will be implemented; and

(2) A description of the procedures under which a scholar may appeal any determination of noncompliance with any provisions under this part.

(Approved by the Office of Management and Budget under control number 18400578)

(Collection requirements contained in paragraph (b)(2) were approved by the Office of Management and Budget under control number 1840-0617)

(Authority: 20 U.S.C. 1111b)

[52 FR 45285, Nov. 25, 1987, as amended at 55 FR 35006, Aug. 27, 1990]

§ 653.41 What are the requirements for a scholar to continue to receive payments under this program?

(a) A State agency shall continue to make payments to a scholar under this program only during the periods that the State agency finds that the scholar meets the conditions described in paragraph (b) of this section.

(b) To maintain eligibility for a scholarship, a scholar must be

(1) Enrolled as a full-time student in an institution of higher education that is currently accredited by a nationally recognized accrediting agency or association that the Secretary determines to be a reliable authority as to the quality of training offered, in accordance with section 1201(a) of the Act;

(2) Pursuing a course of study leading to certification as a teacher at the preschool, elementary, or secondary level, as determined by the State agency but not including graduate study that is not required for initial teacher certification; and

(3) Maintaining satisfactory progress as determined by the institution of higher education the student is attending, in accordance with the criteria established in 34 CFR 668.16(e) of the Student Assistance General Provisions regulations.

(Authority: 20 U.S.C. 1111e)

§ 653.42 What are the consquences of a scholar's noncompliance with the teaching requirement?

(a) A scholar found by a State to be in noncompliance with the agreement entered into under § 653.40, or to be no longer pursuing a course of study leading to certification as a teacher at the preschool, elementary, or secondary level, shall—

(1) Repay the amount of the scholarships received, prorated according to the fraction of the teaching obligation not completed, as determined by the State agency;

(2) Pay a simple, per annum interest charge on the outstanding principal; and

(3) Pay all reasonable collection costs as determined by the State agency.

(b) The interest charge referred to in paragraph (a)(2) of this section accrues from

(1) The date of the initial scholarship payment if the State agency has determined that the scholar is no longer pursuing a course of study leading to certification as a teacher at the preschool, elementary, or secondary level; or

(2) The day after that portion of the scholarship period for which the teaching obligation has been fulfilled. (c)(1) The interest charge referred to in paragraph (a)(2) of this section is calculated annually for the program for the twelve-month period extending from July 1 of each year through June 30 of the subsequent year, and is set at a rate that is the greater of the following rates established pursuant to section 427A of the Act for the same twelve-month period:

(i) The rate charged to new borrowers under the Guaranteed Student Loan Program (Title IV, Part B of the Act).

(ii) The rate charged to new borrowers under the Supplemental Loans for Students and PLUS Programs (sections 428A and 428B of the Act, respectively) as published annually in the FEDERAL REGISTER.

(2) For a scholar required to repay his or her scholarship—

(i) The interest charge applicable to the period extending from the date on which interest begins to accrue (determined in accordance with paragraph (b) of this section) until the date on which the scholar's repayment period begins (determined in accordance with paragraph (d) of this section) is adjusted annually and is set at the rate established for the program in accordance with paragraph (c)(1) of this section; and

(ii) The interest charge applicable during the repayment period is the rate established for the program in accordance with paragraph (c)(1) of this section that is in effect on the date on which the scholar's repayment period begins.

(d) A scholar required by paragraph (a) of this section to repay his or her scholarship shall