Applicability of Section 514 of the 1997 Education Appropriations Act to Post-Secondary Student Aid Programs ( 1997 )

Applicability of Section 514 of the 1997 Education
Appropriations Act to Post-Secondary Student Aid Programs
Section 5 14 o f the D epartm ents o f Labor, H ealth and H um an Services, and Education, and R elated
A gencies A ppropriations Act o f 1997, w hich bars the provision o f appropriated funds, by contract
or grant, to any institution o f higher education that denies cam pus access to m ilitary recruiters
or R eserve O fficer Training Corps representatives, applies to so-called “ cam pus-based” student
aid program s, w hich involve grants to educational entities, but does not apply to direct aid pro­
gram s, w hich involve grants to students rather than to educational entities.
August 6, 1997
M em o r a n d u m O p in io n fo r t h e G e n e r a l C o u n s e l
D e p a r tm e n t of E d u c a tio n
You have requested our advice as to whether certain post-secondary student
financial assistance programs administered by the Department of Education (“ the
Department” ) are covered by section 514 of the Departments of Labor, Health
and Human Services, and Education, and Related Agencies Appropriations Act
of 1997, which bars the provision of appropriated funds, by contract or grant,
to any institution of higher education that denies campus access to military
recruiters or Reserve Officer Training Corps ( “ ROTC” ) representatives. Letter
for Dawn E. Johnsen, Acting Assistant Attorney General, Office of Legal Counsel,
from Judith A. Winston, General Counsel, Department of Education (Mar. 18,
1997) ( “ Education Letter” ).
As explained more fully below, we believe that section 514 applies to some,
though not all, of the post-secondary student aid programs you have inquired
about. More specifically, it is our conclusion that section 514 reaches so-called
“ campus-based” student aid programs — the Federal Perkins Loan program, the
Federal Work-Study program, and the Federal Supplemental Educational Oppor­
tunity Grant program — but that it does not affect direct aid programs — the Fed­
eral Pell Grant program, the William D. Ford Federal Direct Loan program, and
the Federal Family Education Loan program.
BACKGROUND
Section 514 of the Departments of Labor, Health and Human Services, and
Education, and Related Agencies Appropriations Act of 1997, as enacted by sec­
tion 101(e) of the Omnibus Consolidated Appropriations Act of 1997, Pub. L.
No. 104—208, 110 Stat. 3009 (1996) (“ the 1997 Appropriations Act” ), prohibits
federal departments and agencies from using funds appropriated under that legisla­
tion to provide grants or contracts to universities or colleges that do not permit
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ROTC or military recruiting activities on campus. In pertinent part, section 514(a)
provides:
None of the funds made available in this or any other Departments
of Labor, Health and Human Services, and Education, and Related
Agencies Appropriations Act for any fiscal year may be provided
by contract or by grant (including a grant of funds to be available
for student aid) to a covered educational entity if the Secretary of
Defense determines that the covered educational entity has a policy
or practice (regardless of when implemented) that either prohibits,
or in effect prevents —
(1) the maintaining, establishing, or operation of a unit of
the Senior Reserve Officer Training Corps . . . at the cov­
ered educational entity; or
(2) a student at the covered educational entity from enrolling
in a unit of the Senior Reserve Officer Training Corps at
another institution o f higher education.
110 Stat. 3009-270. Section 514(b) contains a similar funding prohibition for a
“ covered educational entity” (defined at subsection (f) as an institution of higher
education) that refuses to permit federal military recruiters to conduct recruiting
activities on campus or that refuses to give such recruiters access to student
information.
Section 514 was offered as an amendment on the floor of the House, during
consideration of the 1997 Appropriations Act for the Department of Education.
The intent of its sponsors was to ensure equal college campus access to ROTC
and military recruiters. See 142 Cong. Rec. 16,860 (1996) (statement of Rep. Sol­
omon). As a legislative initiative, the proposed amendment was not new in con­
cept; similar ROTC equal access amendments had been incorporated into other
appropriations bills. See, e.g., § 508(a) of H.R. 3816, Energy and Water Develop­
ment Appropriations Act of 1997, Pub. L. No. 104—206, 110 Stat. 2984, 3003
(1996); § 541 of H.R. 1530, the National Defense Authorization Act for FY 1996,
Pub. L. No. 104-106, 110 Stat. 186, 315-16 (1996); §904 of H.R. 3322, the
Omnibus Civilian Science Authorization Act of 1996. However, section 514 rep­
resented the first time that such a proposal had been attached to the appropriations
bill for the Department of Education.
ANALYSIS
Section 514 applies to “ funds . . . provided by contract or by grant (including
a grant of funds to be available for student aid) to a covered educational entity.”
The question presented by your request is whether this language would include
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Applicability o f Section 514 o f the 1997 Education Appropriations A ct to P osuSecondary S tu d en t A id
Program s
funds provided to a college or university under the Department’s student aid pro­
grams. You have asked us to focus on six programs in particular: the Federal
Pell Grant program (“ Pell Grant” ), 20 U.S.C. § 1070a (1994 & Supp. Ill 1997);
the William D. Ford Federal Direct Loan program ( “ Direct Loan” ), 20 U.S.C.
§§ 1087a-1087h (1994 & Supp. Ill 1997); the Federal Family Education Loan
program (“ FFEL” ), 20 U.S.C. §§ 1071-1087-4 (1994 & Supp. Ill 1997); the Fed­
eral Perkins Loan program (“ Perkins Loan” ), 20 U.S.C. §§ 1087aa-1087ii (1994
& Supp. Ill 1997); the Federal Work-Study Program (“ Work-Study” ), 42 U.S.C.
§§2751-2756b (1994); and the Federal Supplemental Educational Opportunity
Grant program (“ SEOG” ), 20 U.S.C. §§ 1070b-1070b-3 (1994).
These programs can generally be grouped into two categories. In the first cat­
egory (which includes the Pell Grant, Direct Loan and FFEL programs), grants
or loans are made to students by the Department or third parties, and the edu­
cational entity acts as the disbursing or escrow agent or fiduciary for the funds.
In the case of Pell Grants or Direct Loans, the Department calculates the necessary
level of funding for each educational entity based upon the number of eligible
students attending the institution, and places the funds in an institutional account
targeted for these student aid programs. See 20 U.S.C. § 1070a(a); 20 U.S.C.
§ 1087b. The educational entity then either applies the funds directly to the stu­
dent’s tuition account, or issues a check to the student for living or other edu­
cational expenses. See generally 34 C.F.R. §§668.161-668.166 (1996) (describing
cash management in student assistance programs). Under the FFEL program, a
local bank or third party loans funds to the student, with the Department acting
as guarantor for the loan, and the educational entity acting in essentially the same
disbursing capacity as with Pell Grants or Direct Loans. 20 U.S.C. §§ 1071, 1077.
The second category (Perkins Loan, Work-Study, SEOG) includes programs
known collectively as “ campus-based programs.” See 34 C.F.R. §668.2. Under
the campus-based programs, it is the educational entity, not the student, that sub­
mits an application to the Department for federal funds. Each year, educational
entities seeking to participate submit one common application for all three pro­
grams, see 34 C.F.R. §§ 674.3, 675.3, 676.3; the Department then allocates funds
to eligible educational entities primarily on the basis of their allocations from the
previous year. See 20 U.S.C. §§ 1070b-3, 1087bb; 42 U.S.C. §2752. Upon
receiving a finite share of federal funds to provide financial aid to needy students
in the form of loans (Perkins Loan), paid employment (Work-Study), and grants
(SEOG), the educational entity has discretion, subject to certain restrictions, to
determine which students will receive financial aid. See 20 U.S.C. §§ 1070b-2,
1087dd; 42 U.S.C. §2753; 34 C.F.R. §§674.10, 675.10, 676.10. Thus, unlike the
first category of aid programs, the campus-based programs require more involve­
ment by the educational entities, in terms of applying for federal funds and deter­
mining how those funds will be distributed among needy students. In addition,
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the educational entities act as more than mere conduits or escrow agents for the
federal funds.
You have suggested that programs within the first category “ do not appear
to fall within the coverage of section 514 because they involve grants or loans
to students from the Department or third parties.” Education Letter at 3 (emphasis
added). We agree. The language of section 514 makes clear that its prohibition
applies only to funds “ provided by contract or by grant (including a grant of
funds to be available for student aid) to a covered educational entity” (emphasis
added). By its terms, section 514 requires a direct connection between the Depart­
ment as granting agency and the educational entity as recipient of the grant. In
the case of Pell Grants, Direct Loans, and FFEL, the actual grant recipient is
not the school but the student. It is the student who fills out the application for
aid, see, e.g., 20 U.S.C. § 1070a(d); 34 C.F.R. § 685.201(a); the school merely
disburses funds that are targeted for specific eligible students. See 20 U.S.C.
§§ 1070a(b)(5), 1070a(i) (Pell Grant is “ awarded to a student” ; institution of
higher education “ disburse[s] to students” the amounts students are eligible to
receive under program); 20 U.S.C. § 1087a(a) (authorizing such funds for Direct
Loan program “ as may be necessary to make loans to all eligible students” ).
The statute’s parenthetical reference to “ a grant of funds to be available for stu­
dent aid,” cannot alone bring these programs within the scope of section 514
because they lack the prerequisite grantor-grantee relationship between the Depart­
ment and the educational entity.
By contrast, the campus-based programs appear to fall well within the scope
of section 514. Under the campus-based programs, educational entities themselves
apply for federal funds and receive those funds from the Department. Grant money
thus flows directly from the Department to the educational entity, to be disbursed
to needy students at the entity’s discretion. See 20 U.S.C. §§ 1087bb(a), 1087cc-
1 (under Perkins Loan program, ‘‘the Secretary shall first allocate [funds] to each
eligible institution;” each institution then “ makes a loan to a student borrower” );
42 U.S.C. § 2753(a) (under Work-Study program, Secretary of Education is
authorized “ to enter into agreements with institutions of higher education under
which the Secretary will make grants to such institutions to assist in the operation
of work-study programs” ); 20 U.S.C. § 1070b(b)(l) (SEOG program enables “ the
Secretary to make payments to institutions of higher education . . . for use by
such institutions for payments to undergraduate students” ); see also Riggsbee v.
Bell, 787 F.2d 1564, 1565-66 (Fed. Cir. 1986) (distinguishing campus-based pro­
grams, under which “ the federal government gives each participating institution
a specific amount . . . [and the] individual institution ha[s] broad discretion to
select the students to receive such aid,” from Pell Grant program, under which
“ Secretary of Education makes direct payments to qualified students” ).
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A p plicability o f Section 514 o f the 1997 Education A ppropriations A ct to P ost-Secondary Student A id
P rogram s
The distinction we make between the first category of aid programs and campus-
based programs is one that Congress itself has made in describing the student
aid programs under the Higher Education Act:
The largest title of the Higher Education Act is Title IV, which
involves the major student financial aid programs, including Pell
Grants, Federal Family Education Loans, and Direct Loans. These
three programs provide financial aid directly to the students. In
addition, there are three programs that are campus-based financial
aid initiatives which provide Federal assistance to postsecondary
institutions. The institutions then allocate these funds to qualifying
students.
S. Rep. No. 105-5, at 27 (1997) (discussing need to reauthorize Higher Education
Act during 105th Congress). In light of the structure of the campus-based pro­
grams and Congress’s own description of their funding mechanisms, it is difficult
to describe such programs as anything other than a ‘‘grant of funds to be available
for student aid” by the Department to an educational entity; thus, we conclude
that they fall squarely within the terms of section 514.'
Our conclusion that student aid funds under the Pell Grant, Direct Loan, and
FFEL programs are exempt from the prohibition in section 514 is not inconsistent
with the Supreme Court’s decision in Grove City College v. Bell, 465 U.S. 555(1984). In Grove City, the Supreme Court held that, for purposes of the prohibition
in title IX against sex discrimination in “ any education program or activity
receiving Federal financial assistance,” student aid in the form of Basic Edu­
cational Opportunity Grants (“ BEOG” s, predecessors of the current Pell Grants)
constituted “ Federal financial assistance” to the school. 465 U.S. at 569-70.
Grove City College had chosen to use the Alternative Disbursement System
(“ ADS” ) of the BEOG program to administer its student loans. Under ADS, the
school was required to certify which students were eligible for grants; once the
Department of Education received this certification, it issued checks directly to
the eligible students, without any further school involvement. Notwithstanding this
relatively minimal involvement by the school, the Supreme Court found that the
receipt of federal BEOG funds by some of Grove City’s students was sufficient
1 The fact that some courts have described some of the programs at issue here in terms o f a trust arrangement,
see California Trade Technical Schools, Inc v United States, 923 F.2d 641 (9th Cir 1991) (title IV student assistance
funds were express trust funds and thus not property of educational institution debtor, for purposes of bankruptcy
preferential transfer analysis). United States v. Maxwell, 588 F.2d 568 (7th Cir 1978) (because U.S retained “ rever­
sionary interest” in SEOG funds, such funds constituted “ money, or thing of value o f the United States” for purposes
of federal criminal statute prohibiting theft or conversion), cert, denied, 441 U S 910, cert, denied, 444 U S. 877
(J979), does not resolve the question o f whether these programs are covered by section 514 The language of section
514 is fully consistent with an interpretation that includes arrangements under which grants are made to institutions
serving as trustees for the benefit o f third parties
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to bring Grove City’s financial aid program within the ambit of Title IX. Id. at
573-74.
A critical distinction in the relevant language of section 514 leads us to a
conclusion different from that reached by the Court in Grove City. In contrast
to the language of title IX at issue in Grove City — “ any education program or
activity receiving Federal financial assistance” — section 514 refers to funds
“ provided by contract or by grant” to an educational entity by the Department.
Any educational program that is receiving a benefit, direct or indirect, from stu­
dent financial aid could be said to be receiving federal financial assistance. The
restrictive language of section 514 is less susceptible to such an inclusive reading.
Moreover, the line we have drawn — between programs that provide direct federal
financial aid to individual eligible students, regardless of where they attend col­
lege, and programs that grant federal funds to individual eligible schools for cam-
pus-based student aid — is consistent with another line of jurisprudence that exam­
ines the nature and effect of student financial aid programs. Recent Establishment
Clause decisions by the Supreme Court dispel the proposition that direct govern­
ment financial aid to individual students necessarily constitutes an impermissible
benefit that inures to the school the student chooses to attend. See Agostini v.
Felton, 521 U.S. 203 (1997); see also Witters v. Washington D ep’t of Servs. for
the Blind, 474 U.S. 481 (1986).
Finally, of critical importance to the Supreme Court’s conclusion in Grove City
was the legislative history of title IX, which made clear that Congress intended
the prohibition of section 901 to reach student aid funds. 465 U.S. at 565-69.
The Court also drew upon the fact that title IX was patterned after title VI of
the Civil Rights Act of 1964, and that the drafters of title VI contemplated the
inclusion of student aid funds in identical language. Id. at 566. Other cases have
refused to extend the holding of Grove City beyond title IX, based on the unique
legislative history of that statute and the Court’s reliance upon that history. Cf.
United States v. Wyncoop, 11 F.3d 119, 122 (9th Cir. 1993) (criminal statute
conferring federal jurisdiction over thefts from an entity that “ receives benefits”
in excess of $10,000 annually under a federal program involving “ federal assist­
ance” does not apply to thefts from college participating in Stafford Loan pro­
gram).
The legislative history of section 514, as opposed to title IX, dictates a narrow
rather than an expansive interpretation. As already noted, section 514 was added
as an amendment to H.R. 3755, the appropriations bill for the Departments of
Labor, Health and Human Services, Education, and related agencies, during floor
debate in the House. See 142 Cong. Rec. 16,860. In proposing the amendment,
Representative Solomon argued that the amendment had already “ passed the
House several times” and that “ this amendment has always received such strong
bipartisan support and become law for Defense Department funds.” Id. Solomon’s
statements indicate an intention not to expand the scope of section 514 beyond
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P rogram s
existing boundaries for similar provisions in other statutes. Those boundaries did
not encompass student aid funds. For example, during floor debate six weeks
before the debate on section 514, on an almost identical amendment to the Omni­
bus Civilian Science Authorization Act of 1996,2 Representative Lofgren asked
Representative Solomon, “ [W]ill this include student loans?” 142 Cong. Rec.
12,713. Solomon responded, “ It has nothing to do with student loans.” Id.Lofgren pressed, “ Would the prohibition of funds going to a university include
Pell grants or student loans for students in universities where ROTC is not
offered?” Solomon assured her, “ No, it would not. These deal only with research
grants.” Id. While it is true that, because these other bills did not provide appro­
priations for the Department of Education, they necessarily did not reach general
appropriations for the Department’s student aid programs, Solomon’s statements
on the scope of the amendment, together with his assurances that section 514
was no different from pnor proposals, suggest a narrow reading of the language
of section 514.
CONCLUSION
We conclude, based upon the language and legislative history of section 514,
that student aid funds under the Pell Grant, Direct Loan, and FFEL programs
fall outside its prohibition because these programs involve grants from the Depart­
ment to students rather than to educational entities. However, because the Depart­
ment provides grants to educational entities under the campus-based programs
(Perkins Loan, Work-Study, SEOG), section 514 is applicable to the latter cat­
egory of programs.
RICHARD L. SHIFFRIN
Deputy Assistant Attorney General
Office o f Legal Counsel
2 That proposed amendment, incorporated as section 904 o f the Omnibus Civilian Science Authorization Act of
1996, provided*
No funds appropnated for civilian science activities o f the Federal Government may be provided by contract
or by grant (including a grant o f funds to be available for student aid) to any institution of higher education
that has an anti-ROTC policy
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