In order to receive a grant under this division, an eligible entity described in section 1070a–21(c)(1) of this title shall establish or maintain a financial assistance program that awards scholarships to students in accordance with the requirements of this section. The Secretary shall encourage the eligible entity to ensure that a scholarship provided pursuant to this section is available to an eligible student for use at any institution of higher education.

(1) States In order to receive a grant under this division, an eligible entity described in section 1070a–21(c)(1) of this title shall establish or maintain a financial assistance program that awards scholarships to students in accordance with the requirements of this section. The Secretary shall encourage the eligible entity to ensure that a scholarship provided pursuant to this section is available to an eligible student for use at any institution of higher education.

(2) Partnerships An eligible entity described in section 1070a–21(c)(2) of this title may award scholarships to eligible students in accordance with the requirements of this section.

Subject to paragraph (2), each eligible entity described in section 1070a–21(c)(1) of this title that receives a grant under this division shall use not less than 25 percent and not more than 50 percent of the grant funds for activities described in section 1070a–24 of this title (except for the activity described in subsection (a)(4) of such section), with the remainder of such funds to be used for a scholarship program under this section in accordance with such subsection.

(1) In general Subject to paragraph (2), each eligible entity described in section 1070a–21(c)(1) of this title that receives a grant under this division shall use not less than 25 percent and not more than 50 percent of the grant funds for activities described in section 1070a–24 of this title (except for the activity described in subsection (a)(4) of such section), with the remainder of such funds to be used for a scholarship program under this section in accordance with such subsection.

(2) Exception Notwithstanding paragraph (1), the Secretary may allow an eligible entity to use more than 50 percent of grant funds received under this division for such activities, if the eligible entity demonstrates that the eligible entity has another means of providing the students with the financial assistance described in this section and describes such means in the application submitted under section 1070a–23 of this title.

Each eligible entity providing scholarships under this section shall provide information on the eligibility requirements for the scholarships to all participating students upon the students’ entry into the programs assisted under this division.

The maximum amount of a scholarship that an eligible student shall be eligible to receive under this section shall be established by the eligible entity. The minimum amount of the scholarship for each fiscal year shall not be less than the minimum Federal Pell Grant award under section 1070a of this title for such award year.

Funds held in reserve under paragraph (1) shall be made available to an eligible student when the eligible student has—

(1) In general Each eligible entity described in section 1070a–21(c)(1) of this title that receives a grant under this division shall hold in reserve, for the students served by such grant as described in section 1070a–22(d)(1)(A) or 1070a–24(d) of this title, an amount that is not less than the minimum scholarship amount described in subsection (d), multiplied by the number of students the eligible entity estimates will meet the requirements of paragraph (2).

Funds held in reserve under paragraph (1) shall be made available to an eligible student when the eligible student has—

(A) completed a secondary school diploma, its recognized equivalent, or another recognized alternative standard for individuals with disabilities; and

(B) enrolled in an institution of higher education.

Funds available to an eligible student under this subsection may be used for—

(A) tuition, fees, books, supplies, and equipment required for the enrollment or attendance of the eligible student at an institution of higher education; and

(B) in the case of an eligible student with special needs, expenses for special needs services that are incurred in connection with such enrollment or attendance.

Funds held in reserve under paragraph (1) that are not used by an eligible student within six years of the student’s scheduled completion of secondary school may be redistributed by the eligible entity to other eligible students.

(A) Redistribution (i) In general Funds held in reserve under paragraph (1) that are not used by an eligible student within six years of the student’s scheduled completion of secondary school may be redistributed by the eligible entity to other eligible students. (ii) Return of excess to the Secretary If, after meeting the requirements of paragraph (1) and, if applicable, redistributing excess funds in accordance with clause (i) of this subparagraph, an eligible entity has funds held in reserve under paragraph (1) that remain available, the eligible entity shall return such remaining reserved funds to the Secretary for distribution to other grantees under this division in accordance with the funding rules described in section 1070a–22(a) of this title.

(B) Nonparticipating entity Notwithstanding subparagraph (A), in the case of an eligible entity that does not receive assistance under this subpart for six fiscal years, the eligible entity shall return any funds held in reserve under paragraph (1) that are not awarded or obligated to eligible students to the Secretary for distribution to other grantees under this division.

Scholarships provided under this section shall not be considered for the purpose of awarding Federal grant assistance under this subchapter, except that in no case shall the total amount of student financial assistance awarded to a student under this subchapter exceed such student’s total cost of attendance.

A student eligible for assistance under this section is a student who—

(1) is less than 22 years old at time of first scholarship award under this section;

(2) receives a secondary school diploma or its recognized equivalent on or after January 1, 1993;

(3) is enrolled or accepted for enrollment in a program of undergraduate instruction at an institution of higher education that is located within the State’s boundaries, except that, at the State’s option, an eligible entity may offer scholarship program portability for recipients who attend institutions of higher education outside such State; and

(4) who participated in the activities required under section 1070a–24(a) of this title.

(Pub. L. 89–329, title IV, § 404E, as added Pub. L. 105–244, title IV, § 403, Oct. 7, 1998, 112 Stat. 1661; amended Pub. L. 110–315, title IV, § 404(e), Aug. 14, 2008, 122 Stat. 3213.)