US Code

Public Law 119-87 (04/30/2026)

20 U.S.C. § 1065

Endowment challenge grants

(a)

Purpose; definitions

(1)
The purpose of this section is to establish a program to provide matching grants to eligible institutions in order to establish or increase endowment funds at such institutions, to provide additional incentives to promote fund raising activities by such institutions, and to foster increased independence and self-sufficiency at such institutions.
(2)
For the purpose of this section:
(A)
The term “endowment fund” means a fund established by State law, by an institution of higher education, or by a foundation 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.
(D)
(i)
The term “eligible institution” means an institution that is an—
(I)
section 1058(b)(1)(C) of this title eligible institution under part A or would be considered to be such an institution if referred to a postgraduate degree rather than a bachelor’s degree;
(II)
section 1063 of this title institution eligible for assistance under part B or would be considered to be such an institution if referred to a postgraduate degree rather than a baccalaureate degree; or
(III)
institution of higher education that makes a substantial contribution to postgraduate medical educational opportunities for minorities and the economically disadvantaged.
(ii)
The Secretary may waive the requirements of subclauses (I) and (II) of clause (i) with respect to a postgraduate degree in the case of any institution otherwise eligible under clause (i) for an endowment challenge grant upon determining that the institution makes a substantial contribution to medical education opportunities for minorities and the economically disadvantaged.
(b)

Grants authorized

(1)
section 1068h of this title From sums available for this section under , the Secretary is authorized to award endowment challenge grants to eligible institutions to establish or increase an endowment 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).
(2)
(A)
Except as provided in subparagraph (B), no institution shall receive a grant under this section, unless such 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.
(B)
The Secretary may make a grant under this part to an eligible institution in any fiscal year if the institution—
(i)
applies for a grant in an amount not exceeding $1,000,000; and
(ii)
has deposited in the eligible institution’s endowment fund established under this section an amount which is equal to ½ of the amount of such grant.
(C)
An eligible institution of higher education that is awarded a grant under subparagraph (B) shall not be eligible to receive an additional grant under subparagraph (B) until 10 years after the date on which the grant period terminates.
(3)
The period of a grant under this section shall be not more than 20 years. During the grant period, an institution may not withdraw or expend any of the endowment fund corpus. After the termination of the grant period, an institution may use the endowment fund corpus plus any endowment fund income for any educational purpose.
(4)
(A)
An institution of higher education is eligible to receive a grant under this section if it is an eligible institution as described in subsection (a)(2)(D) of this section.
(B)
No institution shall be ineligible for an endowment challenge grant under this section 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 2 fiscal years out of any period of 5 consecutive fiscal years.
(5)
An endowment challenge grant awarded under this section to an eligible institution shall be in an amount which is not less than $100,000 in any fiscal year.
(6)
(A)
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 regulation;
(ii)
the foundation agrees to administer the fund in accordance with the requirements of this section and any implementing regulation; and
(iii)
the institution agrees to be liable for any violation by the foundation of the provisions of this section and any implementing regulation, including any monetary liability that may arise as a result of such violation.
(c)

Grant agreement; endowment fund provisions

(1)
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 (b)(2), (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.
(2)
(A)
An institution shall invest the endowment fund corpus and endowment fund income in low-risk securities in which a regulated 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 deposit, 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, discretion, and intelligence would exercise in the management of such person’s own affairs.
(3)
(A)
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 maintenance, administration, academic and support personnel, construction and renovation, community and student services programs, and technical assistance.
(B)
(i)
Except as provided in clause (ii), an institution may not spend more than 50 percent of the total aggregate endowment fund income earned prior to the time of expenditure.
(ii)
The Secretary may permit an institution to spend more than 50 percent 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) any other unusual occurrence or exigent circumstance.
(d)

Repayment provisions

(1)
If at any time an institution withdraws part of the endowment fund corpus, the institution shall repay to the Secretary an amount equal to 50 percent of the withdrawn amount, which represents the Federal share, plus income earned thereon. The Secretary may use such repaid funds to make additional challenge 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 institution shall repay the Secretary an amount equal to 50 percent of the amount improperly expended (representing the Federal share thereof). The Secretary may use such repaid fund to make additional challenge grants, or to increase existing challenge grants, to other eligible institutions.
(e)

Audit information

An institution receiving a grant under this section shall provide to the Secretary (or a designee thereof) 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)

Selection criteria

In selecting eligible institutions for grants under this section for any fiscal year, the Secretary shall—
(1)
give priority to an applicant that is receiving assistance under part A or part B or has received a grant under part A of this subchapter or part B of this subchapter within the 5 fiscal years preceding the fiscal year in which the applicant is applying for a grant under this section;
(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; and
(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)

Application

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 Secretary may prescribe, including a description of the long- and short-term plans for raising and using the funds under this part. Subject to the availability of appropriations to carry out this section and consistent with the requirement of subsection (f), 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)

Termination and recovery provisions

(1)
After notice and an opportunity for a hearing, the Secretary 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
(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 each original grant under this section plus income earned thereon. The Secretary may use such repaid funds to make additional endowment grants, or to increase existing challenge grants, to other eligible institutions under this part.
(i)

Technical assistance

The Secretary, directly or by grant or contract, may provide technical assistance to eligible institutions to prepare the institutions to qualify, apply for, and maintain a grant, under this section.

Pub. L. 89–329, title III, § 331Pub. L. 99–498, title III, § 301(a)100 Stat. 1299 Pub. L. 100–50, § 2(a)(12)101 Stat. 336 Pub. L. 102–325, title III, § 304(a)(3)106 Stat. 476 Pub. L. 103–208, § 2(a)(8)107 Stat. 2457 Pub. L. 105–244, title III, § 305112 Stat. 1646 Pub. L. 110–315, title III, § 313122 Stat. 3180 (, formerly § 332, as added , , ; amended , , ; renumbered § 331 and amended , (b), , ; , (10), (11), , , 2458; , , ; , , .)

Editorial Notes

Prior Provisions

section 331 of Pub. L. 89–329Pub. L. 99–498, title III, § 301(a)100 Stat. 1298 section 1064 of this titlePub. L. 102–325, § 304(a)(2)A prior , title III, as added , , , related to establishment of challenge grant program, was classified to prior to repeal by .

Pub. L. 89–329, title III, § 332Pub. L. 96–374, title III, § 30194 Stat. 1396 Pub. L. 99–498A prior section 1065, , as added , , , related to applications for challenge grants, prior to the general revision of this subchapter by .

Pub. L. 89–329, title IV, § 40579 Stat. 1234 Pub. L. 90–575, title I, § 101(b)(2)82 Stat. 1017 Pub. L. 92–318, title I, § 131(b)(1)86 Stat. 247 Another prior section 1065, , , ; , , , related to allotment and reallotment of funds among the States, prior to the general revision of part A of subchapter IV of this chapter by , , .

Pub. L. 89–329, title III, § 333Pub. L. 98–95, § 297 Stat. 708 Pub. L. 99–498A prior section 1065a, , as added , , , established program of matching grants to increase endowments at eligible institutions of higher education, prior to the general revision of this subchapter by .

Amendments

Pub. L. 110–315, § 313(a)(1)2008—Subsec. (b)(2)(B)(i). , substituted “$1,000,000” for “$500,000”.

Pub. L. 110–315, § 313(a)(2)Subsec. (b)(5). , substituted “$100,000” for “$50,000”.

Pub. L. 110–315, § 313(b)Subsec. (i). , added subsec. (i).

Pub. L. 105–244, § 305(1)1998—Subsec. (b)(1). , substituted “section 1068h” for “section 1069f”.

Pub. L. 105–244, § 305(2)Subsec. (b)(2)(B), (C). , added subpars. (B) and (C) and struck out former subpars. (B) and (C) which authorized Secretary to make grants under this part to eligible institutions in amounts which varied depending on amount appropriated in each fiscal year to carry out this part and limited rights of institutions to reapply for grants when amount appropriated was below specified amounts.

Pub. L. 103–2081993—Subsecs. (a)(2)(D), (b)(2)(B), (C), (5). realigned margins and in subsec. (b)(5) substituted “An endowment” for “an endowment”.

Pub. L. 102–325, § 304(b)(1)(A)1992—Subsec. (a)(1). , struck out “of higher education” after “eligible institutions”.

Pub. L. 102–325, § 304(b)(1)(B)Subsec. (a)(2)(D). , added subpar. (D).

Pub. L. 102–325, § 304(b)(2)Subsec. (b)(1). , inserted “endowment” before “challenge grants” and struck out “of higher education” after “eligible institutions”.

Pub. L. 102–325, § 304(b)(3)Subsec. (b)(2)(B), (C). , amended subpars. (B) and (C) generally. Prior to amendment, subpars. (B) and (C) read as follows:

“(B) In any fiscal year in which the appropriations for this part exceeds $10,000,000, the Secretary may make a grant under this part to an eligible institution of higher education if such institution—

“(i) has deposited in its endowment fund established under this section an amount which is equal to one-half of the amount of such grant; and

“(ii) applies for a grant in an amount exceeding $1,000,000.

“(C) An eligible institution of higher education that is awarded a grant under this section shall not be eligible to reapply for a grant under this section during the 10 years immediately following the period that it received such grant.”

Pub. L. 102–325, § 304(b)(4)section 1064(a)(1) of this titleSubsec. (b)(4)(A). , substituted “subsection (a)(2)(D) of this section” for “”.

Pub. L. 102–325, § 304(b)(5)Subsec. (b)(4)(B). , substituted “an endowment challenge grant” for “a challenge grant”.

Pub. L. 102–325, § 304(b)(6)Subsec. (b)(5). , amended par. (5) generally. Prior to amendment, par. (5) read as follows: “Except as provided in paragraph (2)(B), a challenge grant under this section to an eligible institution 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 1987; or (ii) $500,000 for fiscal year 1988 or any succeeding fiscal year.”

Pub. L. 102–325, § 304(b)(7)section 1069a of this titleSubsec. (f)(1). , amended par. (1) generally. Prior to amendment, par. (1) read as follows: “give priority to an applicant which is a recipient of a grant made under part A or B of this subchapter (or ) during the academic year in which the applicant is applying for a grant under this section;”.

Pub. L. 102–325, § 304(b)(8)Subsec. (g). , inserted “, including a description of the long- and short-term plans for raising and using the funds under this part” before period at end of first sentence.

Pub. L. 100–50section 1069a of this title1987—Subsec. (f)(1). inserted “(or )”.

Statutory Notes and Related Subsidiaries

Effective Date of 1998 Amendment

Pub. L. 105–244Pub. L. 105–244section 3 of Pub. L. 105–244section 1001 of this titleAmendment by effective , except as otherwise provided in , see , set out as a note under .

Effective Date of 1993 Amendment

Pub. L. 103–208Pub. L. 102–325section 5(a) of Pub. L. 103–208section 1051 of this titleAmendment by effective as if included in the Higher Education Amendments of 1992, , except as otherwise provided, see , set out as a note under .

Effective Date of 1992 Amendment

Pub. L. 102–325section 2 of Pub. L. 102–325section 1001 of this titleAmendment by effective , see , set out as a note under .

Effective Date of 1987 Amendment

Pub. L. 100–50Pub. L. 99–498section 27 of Pub. L. 100–50section 1001 of this titleAmendment by effective as if enacted as part of the Higher Education Amendments of 1986, , see , set out as a note under .