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HAYES v. CITY UNIV. OF NEW YORK

November 7, 1980

Ms. Barbara HAYES, Ms. Cerise Jones, Ms. Marion Brown, Ms. Regina Campbell, on behalf of themselves and on behalf of all persons similarly situated, Plaintiffs,
v.
CITY UNIVERSITY OF NEW YORK, a body corporate; Robert J. Kibbee, Chancellor of the City University of New York; Leo A. Corbie, University Dean for Special Programs; Human Resource Administration of the City of New York; Stanley Brezenoff, Commissioner of the Human Resources Administration; Howard Miller, Jr., Budget Director of the State of New York; Arthur N. Gordon, Acting Director of the New York City Audit Bureau; New York State Department of Social Services; Barbara B. Blum, Commissioner of New York State Department of Social Services, Defendants. Ana VILLANUEVA, on her own behalf and on behalf of all others similarly situated, Plaintiff, v. Patricia Roberts HARRIS, as Secretary of the United States Department of Health and Human Services; Barbara Blum, as Commissioner of the New York State Department of Social Services; and Stanley Brezenoff, as Commissioner of the New York City Department of Social Services, Defendants. Carmen WARREN and Michelle Warren, Plaintiffs, v. Stanley BREZENOFF, Individually and as Commissioner of the New York City Department of Social Services; Barbara Blum, Individually and as Commissioner of the New York State Department of Social Services; Patricia Roberts Harris, Individually and as Secretary of the United States Department of Health and Human Services; Ernest L. Boyer, Individually and as Commissioner of the Office of Education; and Shirley Hufstedler, Individually and as Secretary of the Department of Education, Defendants



The opinion of the court was delivered by: SOFAER

These consolidated cases arise out of a complex array of statutes and regulations that regulate the level at which students on welfare, or from families on welfare, are to be supported by public funds. The New York State Department of Social Services ("DSS") contends that some welfare students and their families receive more than they need under relevant welfare standards. DSS therefore seeks to reduce the support given such students by the State of New York to the level of need established by DSS directives. Plaintiffs in these cases contend, however, that welfare students' benefits do not exceed their need, as defined by controlling educational standards. Plaintiffs request invalidation of DSS's regulations and practices to the extent that DSS seeks to reduce the level at which welfare students are supported. They are joined in their contentions by the former Department of Health, Education and Welfare ("HEW"), now known as the Department of Health and Human Services.

The issues posed in these cases are far more difficult to relate and comprehend than to resolve. The federal government's decision to support needy students has led to that awesome proliferation of programs, statutes, and regulations that we have come to expect when our nation tackles a social objective. New York's decision to assist needy students has added more programs and greater complexity. Describing these programs and rules is cumbersome, and comprehending their operation is difficult.

 Nevertheless, the essence of this dispute can be succinctly stated and readily understood. If left to operate without interference, the various federal and state educational programs available to needy students in New York would treat all such students identically, irrespective of whether they are supported by welfare. Federal and state educational programs treat all students-both welfare and non-welfare-alike by establishing a standard of need that includes both educational and some living costs, and by allocating grants and loans in accordance with that standard. One consequence of this equality of treatment is that federal and state educational grants place students on welfare in a somewhat more favorable position than welfare recipients who are not students. The DSS opposes this situation. It seeks here, in a variety of ways, to reduce its own allocations to welfare students or their families so that they are supported at a level no higher than that of non-student recipients-even if the consequence is to place welfare students at a disadvantage relative to non-welfare students.

 The Department's position must be rejected. Congress has clearly indicated it intention, first, that students be treated alike, whether or not on welfare, and, second, that the level of need for students be established by educational authorities, whose goal is to help students succeed, rather than by welfare authorities, who may tend to seek to support at the subsistence level as many recipients as possible. See Memorandum of Law in Support of State Defendants' Motion for Summary Judgment at 20, 22.

 Contrary to DSS's assertions, invalidation of its policy will not result in welfare students receiving more than they "need." Federal law provides ample means for preventing students from obtaining more support than educational authorities determine they need to succeed as students. What this decision does mean is that welfare students must be allowed to keep those funds determined by educational authorities to be educationally necessary; these students may not be deprived of any part of that support by welfare authorities concerned primarily with what they need to subsist as recipients.

 Congress, in short, has evidenced a desire to provide extra support to all needy students, including those on welfare, in the belief that the extra margin will enable many such students to break the cycle of poverty and despair, thereby saving public funds in the long run. See generally Senate Report No. 673, 89th Cong., 1st Sess., reprinted in (1965) U.S.Code Cong. & Ad.News, pp. 4027, 4053-62. State welfare officials may not interfere with this important national policy.

 I. Federal and State Educational Assistance Programs

 Congress has developed a multifaceted scheme of programs to assist financially needy students in obtaining post-secondary educations. See Higher Education Act of 1965, Title IV, Pub.L. 89-329, 20 U.S.C. §§ 1070-1089. It has vested overall responsibility for the various aid programs in the Commissioner (now the Secretary) of Education, but the individual educational institutions play the critical role in the federal educational assistance system. Acting pursuant to federal regulations, each participating institution administers the federal programs for its students by constructing individual aid packages. To participate in the federal programs, the institution must agree to comply with governing statutes and regulations.

 The financial aid package is built upon the so-called Basic Grant. Basic Educational Opportunity Grant program ("BEOG"), 20 U.S.C. § 1070a; 45 C.F.R. Part 190 (1979). Determining the amount of that grant entails two steps. First, the student applies for aid to the Commissioner of Education. The Commissioner calculates the applicant's expected family contribution *fn1" and issues a student eligibility report, which specifies the proportion of the maximum BEOG award that the applicant may receive. 45 C.F.R. §§ 190.11-190.16 (1979). The applicant then submits the student eligibility report to the financial aid office at the student's school for calculation of the actual grant. *fn2" Id. §§ 190.61-190.67. That office determines the student's cost of attendance pursuant to a formula promulgated by the Commissioner having three elements: tuition and fees, room and board, and a $ 400 allowance for books, supplies, and miscellaneous expenses. Id. §§ 190.51-190.55. The financial aid office then awards a grant of whichever of the following amounts is smallest: the difference between $ 1800 and the expected family contribution; 50 percent of the cost of attendance; or the difference between the cost of attendance and the expected family contribution. Id. §§ 190.62-190.63. The grant may never exceed one-half of the student's financial need, with an absolute maximum of $ 1800.

 If the Basic Grant fails to satisfy the student's educational costs, the financial aid office completes the student's package with additional federal and state grants and loans. Among the federal programs are the Supplemental Educational Opportunity Grant program ("SEOG"), 20 U.S.C. § 1070b; 45 C.F.R. Part 176 (1979), the Guaranteed Student Loan Program ("GSLP"), 20 U.S.C. § 1071; 45 C.F.R. Part 177 (1979), the National Direct Student Loan program ("NDSL"), 20 U.S.C. § 1087aa; 45 C.F.R. Part 174 (1979), and the College Work Study program ("CWS"), 42 U.S.C. § 2751; 45 C.F.R. Part 175, Subpart A (1979). The state programs include the Tuition Assistance Program ("TAP"), the Search for Education, Elevation and Knowledge program ("SEEK"), and the College Discovery program ("CD").

 Calculating need for purposes of these federal and state programs differs from calculating the BEOG. The cost of education includes tuition and fees, room and board, books and supplies, transportation, miscellaneous personal expenses, and expenses for the support of the student's dependents. Id. §§ 174.11, 175.11, 176.11. These expenses are based upon Bureau of Labor Statistics data on the cost of living at the low-moderate standard of living. The cost budget is submitted for approval by the Commissioner of Education. TAP awards are given to defray tuition for needy and able students. *fn3" SEEK and CD awards are for supplementary assistance, and are based on the same cost of living standard used in distributing federal funds. *fn4"

 The regulations also specify several sources of income that must be considered in calculating the student's available resources. Id. §§ 174.14, 175.14, 176.14. The student's financial need is the difference between his cost of education and his expected family contribution. In calculating that contribution, the office must apply either the figure used by the Commissioner in determining the BEOG or a method of analysis approved by the Commissioner. Id. §§ 174.12, 174.13, 175.12, 175.13, 176.12, 176.13.

 One feature of these assistance programs is especially relevant to this litigation: the safeguards against excessive awards. Every institution must appoint a coordinating official for its federal and nonfederal financial aid programs. Federal regulations forbid an institution from awarding NDSL, CSW, or SEOG if the award, in conjunction with all other resources, will exceed the student's need. Should the student's financial aid for any reason exceed his needs, the institution must adjust the financial aid to eliminate the excess. Id. §§ 174.14, 175.14, 176.14.

 II. The Current Litigation

 These three consolidated cases center on the validity of an Administrative Letter of the Department of Social Services that governs the interplay between welfare provisions and federal and state educational assistance programs. Title IV of the Social Security Act, known as Aid to Families with Dependent Children, 42 U.S.C. §§ 601-644, provides financial assistance to needy dependent children and the parents or relatives who live with or care for them. The AFDC program is funded largely by the federal government, but is administered by the states. Participating states must submit plans that conform to the Act and regulations promulgated by HEW in order to receive federal funds; failure to comply may result in termination of federal funding. Id. § 604(a).

 In determining an applicant's eligibility for AFDC benefits and the level of his assistance, the state must take into account the income and resources available to him. Id. § 602(a)(7); 45 C.F.R. § 233.20(a)(1), (a)(3)(ii) (1979); see 18 N.Y.C.R.R. § 352.16(a) (1979). Not all income, however, is to be considered in determining need; several types of funds are excluded from the definition of income. 45 C.F.R. § 233.20(a)(3)(iv), (a)(4)(ii) (1979).

 Two of the exclusions are at the core of this litigation. The first will be referred to as the "restricted-aid exclusion." The applicable HEW regulation requires:

 
A State plan for ... AFDC ... must ... (iv) Provide that, in determining the availability of income and resources, the following will not be included as income: ... (b) loans and grants, such as scholarships, obtained and used under conditions that preclude their use for current living costs....

 Id. § 233.20(a)(3)(iv)(b). New York's DSS has adopted a corresponding regulation:

 
No part of a scholarship, grant or other such income that is necessary to cover the cost of necessary or essential school expenses (e.g., tuition, books, fees, equipment, special clothing needs, transportation to and from school, and childcare services necessary for school attendance), and is actually so used, shall be considered as income in determining need and amount of assistance.

 18 N.Y.C.R.R. § 352.16(d)(1) (1979).

 The second provision, referred to herein as the "federal-aid exclusion," states as follows:

 
A State plan for ... AFDC ... must ... (ii) Provide that, in determining eligibility for public assistance and the amount of the assistance payment, the following will be disregarded as income and resources: ... (d) Any grant or loan to any undergraduate student for educational purposes made or insured under any programs administered by the Commissioner of Education ....

 45 C.F.R. § 233.20(a)(4)(ii)(d) (1979). Promulgation of that regulation was required by Congress in section 507 of the Higher Education Amendments of 1968, Pub.L. 90-575, 82 Stat. 1063 (1968). DSS has adopted a virtually identical regulation. 18 N.Y.C.R.R. § 352.16(d)(2) (1979).

 Prior to December 30, 1977, interpretation of this DSS regulation was governed by DSS Administrative Letter 75 ADM-89 (Aug. 22, 1975). That letter provided that federal educational grants or loans (i. e., BEOG, SEOG, CWS, NDSL, GSLP) "should not be considered as income or resources in determining need and amount of assistance." Other grants (e.g., TAP, SEEK, and CD) were to be applied against the student's school expenses; any excess was to be treated as income. Welfare officials respected the CUNY standard student expense budget, treating the difference between the standard public assistance budget and the standard CUNY financial budget as educational expenses.

 On December 30, 1977, the Department modified its policy. It issued DSS Administrative Letter 77 ADM-134 (Dec. 30, 1977) to ensure that AFDC recipients' educational assistance "be properly treated." The directive required local departments of social services to determine whether any portion of a recipient's educational funds "is a resource available to reduce or eliminate the need for public assistance and care." It divided student AFDC recipients into three categories. If a student receives only federal assistance, the total amount is exempt irrespective of educational expenses. If a student receives only non-federal assistance, the amount by which that sum exceeds necessary and essential school expenses is treated as an available resource. Finally, if the student receives both federal and state resources-the category upon which these cases focus-the directive provides that any non-exempt educational aid not necessary to meet school expenses should be treated as available to reduce or eliminate the need for public assistance.

 
If the student receives monies from federally administered or insured programs as well as other sources, necessary and essential school expenses are applied against total amount of the monies received for educational purposes. When such monies are in excess of expenses, the expenses are applied first against the exempt monies (i. e. funds from federally administered program) and then against non-exempt monies. Any balance which represents funds from non-exempt programs or ...

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