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proportion of their allocations under section 442 to 
providing community service opportunities under 
this part. 
‘‘(2) MINIMUM GRANT; DURATION.—The min-
imum grant the Secretary shall award under this 
subsection shall be $500,000, except that the Sec-
retary may increase such amount based on the num-
ber of participants and the level of community serv-
ice. A grant awarded under this subsection shall be 
for a single academic year, but such grants may be 
continued in subsequent years to successful competi-
tors. 
‘‘(3) APPLICATIONS; AGREEMENTS.—Any insti-
tution of higher education desiring to obtain a grant 
under this subsection shall submit an application 
therefor to the Secretary at such time, in such form, 
and containing or accompanied by such information 
and agreements as the Secretary may require.’’. 
SEC. 117. B.J. STUPAK OLYMPIC SCHOLARSHIPS. 
Section 1543(d) of the Higher Education Amend-
ments of 1992 (20 U.S.C. 1070 note) is amended by strik-
ing ‘‘1999’’ and inserting ‘‘2006’’.
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SEC. 118. REDUCTION OF GUARANTY AGENCY PAYMENTS. 
(a) INSURANCE PERCENTAGES.—Subparagraph (G) 
of section 428(b)(1) (20 U.S.C. 1078(b)(1)(G)) is amend-
ed to read as follows: 
‘‘(G) insures 98 percent of the unpaid 
principal of loans insured under the program, 
except that—
‘‘(i) such program shall insure 100 
percent of the unpaid principal of loans 
made with funds advanced pursuant to sec-
tion 428(j) or 439(q); and 
‘‘(ii) with respect to any loan for 
which the first disbursement of principal is 
made on or after October 1, 2006, the pre-
ceding provisions of this subparagraph 
shall be applied—
‘‘(I) by substituting ‘95 percent’ 
for ‘98 percent’; and 
‘‘(II) by substituting ‘97 percent’ 
for ‘100 percent’;’’. 
(b) RETENTION
OF COLLECTIONS.—Subparagraph 
(B) of section 428(c)(6) (20 U.S.C. 1078(c)(6)(B)) is 
amended to read as follows: 
‘‘(B) an amount equal to the following per-
centage of such payments for use in accordance 
with section 422B—
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‘‘(i) from October 1, 2003, until Sep-
tember 30, 2006, inclusive, 23 percent; 
‘‘(ii) from October 1, 2006, until Sep-
tember 30, 2008, inclusive, 20 percent; 
‘‘(iii) from October 1, 2008, until Sep-
tember 30, 2010, inclusive, 18 percent; 
and 
‘‘(iv) after September 30, 2010, 16 
percent.’’. 
TITLE II—TEACHER QUALITY 
SEC. 201. TEACHER RECRUITING AND PREPARATION. 
(a) TEACH GRANTS.—Title II of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1021 et seq.) is amended 
by adding at the end the following new part: 
‘‘PART C—TEACH GRANTS 
‘‘SEC. 231. PURPOSES. 
‘‘The purposes of the part are—
‘‘(1) to improve student academic achievement; 
‘‘(2) to help recruit and prepare teachers to 
meet the national demand for a highly qualified 
teacher in every classroom; and 
‘‘(3) to increase opportunities for Americans of 
all educational, ethnic, class, and geographic back-
grounds to become highly qualified teachers.
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‘‘SEC. 232. PROGRAM ESTABLISHED. 
‘‘(a) PROGRAM AUTHORITY.—
‘‘(1) PAYMENTS REQUIRED.—For each of the 
fiscal years 2006 through 2013, the Secretary shall 
pay to each eligible institution such sums as may be 
necessary to pay to each eligible student (defined in 
accordance with section 484) who files an applica-
tion and agreement in accordance with section 233, 
and qualifies under subsection (a)(2) of such section, 
a TEACH Grant in the amount of $4,000 for each 
academic year during which that student is in at-
tendance at an institution of higher education. 
‘‘(2) REFERENCE.—Grants made under this 
part shall be known as ‘Teacher Education Assist-
ance for College and Higher Education Grants’ or 
‘TEACH Grants’. 
‘‘(b) PAYMENT METHODOLOGY.—
‘‘(1) PREPAYMENT.—Not less than 85 percent 
of such sums shall be advanced to eligible institu-
tions prior to the start of each payment period and 
shall be based upon an amount requested by the in-
stitution as needed to pay eligible students until 
such time as the Secretary determines and publishes 
in the Federal Register with an opportunity for com-
ment, an alternative payment system that provides 
payments to institutions in an accurate and timely
114
manner, except that this sentence shall not be con-
strued to limit the authority of the Secretary to 
place an institution on a reimbursement system of 
payment. 
‘‘(2) DIRECT PAYMENT.—Nothing in this sec-
tion shall be interpreted to prohibit the Secretary 
from paying directly to students, in advance of the 
beginning of the academic term, an amount for 
which they are eligible, in cases where the eligible in-
stitution elects not to participate in the disburse-
ment system required by paragraph (1). 
‘‘(3) DISTRIBUTION
OF
GRANTS
TO
STU-
DENTS.—Payments under this part shall be made, in 
accordance with regulations promulgated by the Sec-
retary for such purpose, in such manner as will best 
accomplish the purpose of this part. Any disburse-
ment allowed to be made by crediting the student’s 
account shall be limited to tuition and fees and, in 
the case of institutionally owned housing, room and 
board. The student may elect to have the institution 
provide other such goods and services by crediting 
the student’s account. 
‘‘(c) REDUCTIONS IN AMOUNT.—
‘‘(1) PART
TIME
STUDENTS.—In any case 
where a student attends an institution of higher edu-
115
cation on less than a full-time basis (including a stu-
dent who attends an institution of higher education 
on less than a half-time basis) during any academic 
year, the amount of the TEACH Grant for which 
that student is eligible shall be reduced in proportion 
to the degree to which that student is not so attend-
ing on a full-time basis, in accordance with a sched-
ule of reductions established by the Secretary for the 
purposes of this part, computed in accordance with 
this part. Such schedule of reductions shall be estab-
lished by regulation and published in the Federal 
Register in accordance with section 482 of this Act. 
‘‘(2) NO EXCEEDING COST.—No TEACH Grant 
under this part shall exceed the the cost of attend-
ance (as defined in section 472) at the institution at 
which that student is in attendance. If, with respect 
to any student, it is determined that the amount of 
a TEACH Grant exceeds the cost of attendance for 
that year, the amount of the TEACH Grant shall be 
reduced until the TEACH Grant does not exceed the 
cost of attendance at such institution. 
‘‘(d) PERIOD OF ELIGIBILITY FOR GRANTS.—
‘‘(1) UNDERGRADUATE STUDENTS.—The period 
during which an undergraduate student may receive 
TEACH Grants shall be the period required for the
116
completion of the first undergraduate baccalaureate 
course of study being pursued by that student at the 
institution at which the student is in attendance ex-
cept that—
‘‘(A) any period during which the student 
is enrolled in a noncredit or remedial course of 
study as defined in paragraph (3) shall not be 
counted for the purpose of this paragraph; and 
‘‘(B) the total amount that a student may 
receive under this part for undergraduate study 
shall not exceed $16,000. 
‘‘(2) GRADUATE STUDENTS.—The period dur-
ing which a graduate student may receive TEACH 
Grants shall be the period required for the comple-
tion of a master’s degree course of study being pur-
sued by that student at the institution at which the 
student is in attendance, except that the total 
amount that a student may receive under this part 
for graduate study shall not exceed $8,000. 
‘‘(3) REMEDIAL
COURSE; STUDY
ABROAD.—
Nothing in this section shall exclude from eligibility 
courses of study which are noncredit or remedial in 
nature (including courses in English language acqui-
sition) which are determined by the institution to be 
necessary to help the student be prepared for the
117
pursuit of a first undergraduate baccalaureate de-
gree or certificate or, in the case of courses in 
English language instruction, to be necessary to en-
able the student to utilize already existing knowl-
edge, training, or skills. Nothing in this section shall 
exclude from eligibility programs of study abroad 
that are approved for credit by the home institution 
at which the student is enrolled. 
‘‘SEC. 233. ELIGIBILITY AND APPLICATIONS FOR GRANTS. 
‘‘(a) APPLICATIONS; DEMONSTRATION
OF ELIGI-
BILITY.—
‘‘(1) FILING REQUIRED.—The Secretary shall 
from time to time set dates by which students shall 
file applications for TEACH Grants under this part. 
Each student desiring a TEACH Grant for any year 
shall file an application therefore containing such in-
formation and assurances as the Secretary may 
deem necessary to enable the Secretary to carry out 
the functions and responsibilities of this part. 
‘‘(2) DEMONSTRATION OF ELIGIBILITY.—Each 
such application shall contain such information as is 
necessary to demonstrate that—
‘‘(A) if the applicant is an enrolled stu-
dent—
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‘‘(i) the student is an eligible student 
for purposes of section 484 (other than 
subsection (r) of such section); 
‘‘(ii) the student—
‘‘(I) has a grade point average 
that is determined, under standards 
prescribed by the Secretary, to be 
comparable to a 3.25 average on a 
zero to 4.0 scale, except that, if the 
student is in the first year of a pro-
gram of undergraduate education, 
such grade point average shall be de-
termined on the basis of the student’s 
cumulative high school grade point av-
erage; or 
‘‘(II) displayed high academic ap-
titude by receiving a score above the 
75th percentile on at least one of the 
batteries in a undergraduate or grad-
uate school admissions test; and 
‘‘(iii) 
the 
student 
is 
completing 
coursework and other requirements nec-
essary to begin a career in teaching, or 
plans to complete such coursework and re-
quirements prior to graduating; or