Challenge Grant Amendments of 1983
PL 98-95 (S.1872), enacted 09/26/1983

97 STAT. 708 
PUBLIC LAW 98-95—SEPT. 26, 1983 
Public Law 98-95 
98th Congress 
An Act 
Sept. 26, 1983 
[S. 1872] 
Challenge Grant 
Amendments of 
1983 
20 use 1001 
note. 
To increase endowment funds for eligible individuals under part C of title m of the 
Higher Education Act of 1965. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That this Act may 
be cited as the "Challenge Grant Amendments of 1983". 
SEC. 2. Part C of title III of the Higher Education Act of 1965 
(hereinafter in this Act referred to as "the Act") is amended by 
adding after section 332 the following new section: 
ENDOWMENT GRANTS 
20 use 1065a. 
"SEC. 333. (aXD The purpose of this section is to establish a 
program to provide matching grants to eligible institutions of higher 
education in order to establish or increase endowment funds at such 
institutions, to provide additional incentives to promote fundraising 
activities by such institutions, and to foster increased independence 
and self-sufficiency at such institutions. 
Definitions. 
"(2) For purposes of this section: 
"(A) The term 'endowment fund' means a fund established by 
State law, by an institution of higher education, or by a founda-
tion which is exempt from taxation and is maintained for the 
purpose of generating income for the support of the institution, 
but which shall not include real estate. 
"(B) The term 'endowment fund corpus' means an amount 
equal to the grant or grants awarded under this section plus an 
amount equal to such grant or grants provided by the 
institution. 
"(C) The term 'endowment fund income* means an amount 
equal to the total value of the endowment fund established 
under this section minus the endowment fund corpus. 
Post, p. 711. 
"(b)(1) From sums available for this section under section 347, the 
Secretary is authorized to award endowment grants to eligible 
institutions of higher education to establish or increase an endow-
ment fund at such institution. Such grants shall be made only to 
eligible institutions described in paragraph (4) whose applications 
have been approved pursuant to subsection (g). 
Matching funds 
"(2) No institution shall receive a grant under this section, unless 
requirement. 
guch institution has deposited in its endowment fund established 
under this section an amount equal to the amount of such grant. 
The source of funds for this institutional match shall not include 
Federal funds or funds from an existing endowment fund. 
Grant period. 
"(3XA) The period of a grant under this section shall be not more 
than twenty years. 
"(B) During the grant period, an institution may not withdraw or 
expend any of the endowment fund corpus. 
(C) After the termination of the grant period, an institution may 
use the endowment fund corpus plus any endowment fund income 
for any educational purpose. 
PUBLIC LAW 98-95—SEPT. 26, 1983 
97 STAT. 709 
"(4XA) An institution of higher education is eUgible to receive a Eligibility. 
grant under this section if it is an eligible institution as described in 
section 331(aXl). 
20 use 1064. 
"(B) No institution shall be ineligible for an endowment grant for 
a fiscal year by reason of the previous receipt of such a grant, but no 
institution shall be eligible to receive such a grant for more than 
two fiscal years out of any period of five consecutive fiscal years. 
"(5) An endowment grant under this section to an eligible institu-
tion year shall— 
"(A) not be less than $50,000 for any fiscal year; and 
"(B) not be more than (i) $250,000 for fiscal year 1984; or (ii) 
$500,000 for fiscal year 1985 or any succeeding fiscal year. 
"(6XA) An eligible institution may designate a foundation, which 
was established for the purpose of raising money for the institution, 
as the recipient of the grant awarded under this section. 
"(B) The Secretary shall not award a grant to a foundation on 
behalf of an institution unless— 
"(i) the institution assures the Secretary that the foundation 
is legally authorized to receive the endowment fund corpus and 
is legally authorized to administer the fund in accordance with 
this section and any implementing regulations; 
"(ii) the foundation agrees to administer the fund in accord-
ance with the requirements of this section and any implement-
ing regulation; and 
"(iii) the institution agrees to be liable for any violation by the 
foundation of the provisions of this section and any implement-
ing regulations, including any monetary liability that may arise 
as a result of such violation. 
"(cXD An institution awarded a grant under this section shall 
enter into an agreement with the Secretary containing satisfactory 
assurances that it will (A) immediately comply with the matching 
requirements of subsection (bX2), (B) establish an endowment fund 
independent of any other such fund of the institution, (C) invest the 
endowment fund corpus, and (D) meet the other requirements of this 
section. 
"(2XA) An institution shall invest the endowment fund corpus and investment 
endowment fund income in low-risk securities in which a regulated requirements. 
insurance company may invest under the law of the State in which 
the institution is located such as a federally insured bank savings 
account or comparable interest bearing account, certificate of depos-
it, money market fund, mutual fund, or obligations of the United 
States. 
"(B) The institution, in investing the endowment fund established 
under this section, shall exercise the judgment and care, under the 
circumstances then prevailing, which a person of prudence, discre-
tion, and intelligence would exercise in the management of his own 
affairs. 
"(3XA) An institution may withdraw and expend the endowment 
fund income to defray any expenses necessary to the operation of 
such college, including expenses of operations and medntenance, 
administration, academic and support personnel, construction and 
renovation, community and student services programs, and techni-
cal assistance. 
"(BXi) Except as provided in clause (ii), an institution may not 
spend more than 50 per centum of the total aggregate endowment 
fund income earned prior to the time of expenditure. 
Agreement with 
Secretary. 
97 STAT. 710 
PUBLIC LAW 98-95—SEPT. 26, 1983 
Repajrment. 
Audit and 
examination. 
Priority 
consideration. 
20 u s e 1057, 
1060. 
Application. 
Grant 
termination and 
recovery. 
"(ii) The Secretary may permit an institution to spend more than 
50 per centum of the endowment fund income notwithstanding 
clause (i) if the institution demonstrates such an expenditure is 
necessary because of (I) a financial emergency, such as a pending 
insolvency or temporary liquidity problem; (II) a life-threatening 
situation occasioned by a natural disaster or arson; or (III) another 
unusual occurrence or exigent circumstance. 
"(d)(1) If at any time an institution withdraws part of the endow-
ment fund corpus, it shall repay to the Secretary an amount equal to 
50 per centum of the withdrawn amount, which represents the 
Federal share, plus income earned thereon. The Secretary may use 
such repaid funds to make additional endowment grants, or to 
increase existing endowment grants, to other eligible institutions. 
"(2) If an institution expends more of the endowment fund income 
than is permitted under subsection (c), the grantee shall repay the 
Secretary an amount equal to 50 per centum of the amount improp-
erly expended (representing the Federal share thereof). The Secre-
tary may use such repaid fund to make additional endowment 
grants, or to increase existing endowment grants, to other eligible 
institutions. 
"(e) An institution receiving a grant under this section shall 
provide to the Secretary (or his designee) such information (or access 
thereto) as may be necessary to audit or examine expenditures made 
from the endowment fund corpus or income in order to determine 
compliance with this-section. 
"(f) In selecting eligible institutions for grants under this section 
for any fiscal year, the Secretary shall— 
"(1) give priority to an applicant which is a recipient of a 
grant made under part A or B of this title during the academic 
year in which the applicant is applying for a grant under this 
section; and 
"(2) give priority to an applicant with a greater need for such 
a grant, based on the current market value of the applicant's 
existing endowment in relation to the number of full-time 
equivalent students enrolled at such institution; 
"(3) consider— 
"(A) the effort made by the applicant to build or maintain 
its existing endowment fund; and 
"(B) the degree to which an applicant proposes to match 
the grant with nongovernmental funds. 
"(g) Any institution which is eligible for assistance under this 
section may submit to the Secretary a grant application at such 
time, in such form, and containing such information as the Secre-
tary may prescribe. Subject to the availability of appropriations to 
carry out this section and consistent with the requirement of subsec-
tion (D, the Secretary may approve an application for a grant if an 
institution, in its application, provides adequate assurances that it 
will comply with the requirements of this section. 
"(h)(1) After notice and an opportunity for a hearing, the Secre-
tary may terminate and recover a grant awarded under this section 
if the grantee institution— 
"(A) expends portions of the endowment fund corpus or 
expends more than the permissible amount of the endowment 
funds income as prescribed in subsection (c)(3); 
"(B) fails to invest the endowment fund in accordance with 
the investment standards set forth in subsection (c)(2); or 
PUBLIC LAW 98-95—SEPT. 26, 1983 
97 STAT. 711 
"(C) fails to properly account to the Secretary concerning the 
investment and expenditures of the endowment funds. 
"(2) If the Secretary terminates a grant under paragraph (1), the 
grantee shall return to the Secretary an amount equal to the sum of 
the original grant or grants under this section plus income earned 
thereon. The Secretary may use such repaid funds to make addi-
tional endowment grants, or to increase existing endowment grants, 
to other eligible institutions.". 
SEC. 3. Section 347 of the Act is amended— 
(1) by inserting after the period at the end of subsection (a)(2) 
the following: "Of the amount appropriated for such part for 
fiscal year 1984, 20 per centum shall be available for grants 
under section 333 of such part, and of the amount appropriated 
for such part for fiscal year 1985, 100 per centum shall be 
available for grants under such section"; and 
(2) by adding at the end thereof the following new subsection: 
"(f) For each fiscal year, the Secretary may reserve from the 
appropriation for part B not more than an amount equal to the 
aggregate amount grantees receiving grants under part B would 
contribute under section 324 to the cost of the grants in that fiscal 
year, assuming the grant amounts remain the same as those 
received in the prior fiscal year, and may use those funds to award 
grants to eligible institutions under section 333. In reserving and 
awarding such funds, the Secretary shall assure that funds that 
would have been reserved under part B for the institutions described 
in subsection (c) or (e) shall continue to be set aside under section 
333 for those institutions.". 
SEC. 4. (a) Section 516(c) of the Omnibus Education Reconciliation 
Act of 1981 is amended by striking out paragraph (1) and inserting 
in lieu thereof the following: 
"(1) The total amount of appropriations to carry out title III of 
the Higher Education Act of 1965 shall not exceed $134,416,000 
for fiscal year 1984.". 
(b) Section 503 of such Act is amended by striking out "1982,1983, 
and 1984" and inserting in lieu thereof "1982 and 1983 and 
$159,700,000 for fiscal year 1984". 
(c) Notwithstanding section 516(g) of such Act, there are author-
ized to be appropriated such sums as may be necessary to carry out 
parts A and B of title VII of the Higher Education Act of 1965. 
(d) Subsections (a)(2), O
t
>
)
, and (c) of section 721 of the Higher 
Education Act of 1965 shall not apply to funds appropriated by 
Public Law 98-63 for part B of title VII of the Higher Education Act 
20 u s e 1069c. 
Ante, p. 708. 
Reserve funds. 
20 u s e 1060. 
20 u s e 1063. 
Ante, p. 708. 
20 u s e 1069c 
note. 
20 u s e 1051. 
20 u s e 123 note. 
20 u s e 1132a-l 
note. 
20 u s e 1132b, 
1132c. 
20 u s e 1132c. 
Ante, p. 301. 
97 STAT. 712 
PUBLIC LAW 98-95—SEPT. 26, 1983 
20 use 1132c. 
of 1965. Such funds shall be used in accordance with section 713(g) of 
20 use ii32b-2. such Act and distributed in accordance with the statement of the 
managers pertaining to the appropriation of such funds, as con-
tained in the conference report on Public Law 98-63 (H. Rep. 98-308, 
p. 53). 
Approved September 26, 1983, 
LEGISLATIVE HISTORY—S. 1872 (H.R. 2144): 
HOUSE REPORT No. 98-76 accompanying H.R. 2144 (Comm. on Education and 
Labor). 
CONGRESSIONAL REGORD, Vol. 129 (1983): 
Sept. 22, considered and passed Senate. 
Sept. 26, considered and passed House. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 19, No. 39 (1983): 
Sept. 26, Presidential statement.