A bill to amend title IX of the Higher Education Act of 1965 to create a program of graduate assistance in areas of national need, and for other purposes.

Amends title IX (Graduate Programs) of the Higher Education Act of 1965 (the Act) to create a new part D program of graduate assistance in areas of national need.

Directs the Secretary of Education to make grants to academic departments and programs and other academic units of institutions of higher education for graduate fellowships in selected areas of study for graduate students who: (1) demonstrate financial need and academic ability; (2) plan teaching or research careers; and (3) pursue the highest degree available in their area of study.

Makes the principal criterion for the allocation of such grant awards the relative quality of the graduate programs in competing applications. Directs the Secretary, consistent with such principal criterion for allocation, to promote an equitable distribution of such awards among geographic areas and among eligible public and private institutions.

Directs the Secretary to approve such a grant recipient for a three-year period. Limits the amount per fiscal year of such a grant to any academic department or program of an institution of higher education to a minimum of $100,000 and a maximum of $500,000.

Provides for reallotment of grant funds. Provides for new awards under this Act only to the extent that each previous grant recipient has received the required continued funding. Provides for ratable reductions of amounts required to be awarded to the extent that appropriations are insufficient.

Sets forth institutional eligibility provisions. Permits grant applications by any academic department or program of an institution of higher education which offers a program of post-baccalaureate study leading to a graduate degree in an area of national need (as designated through procedures set forth in this Act). Requires a department or program to be in existence for at least four years, in order to be eligible for such a grant.

Directs the Secretary, after consulting with specified agencies and organizations, to designate areas of national need. (Lists, as examples of areas which might receive such designation, physical or life sciences, mathematics, engineering, computer science, foreign languages, or area studies.) Directs the Secretary, in making such designations, to take into account the extent to which the interest is compelling and the extent to which other Federal programs support post-baccalaureate study in the area concerned.

Sets forth criteria for grant applications, including a requirement of at least 25 percent non-Federal matching funds, for purposes of the fellowship program under this Act. Requires that the institution make such fellowship awards to individuals having financial need who: (1) plan teaching or research careers; (2) plan to pursue the highest possible degree available in their course of study; (3) are from traditionally underrepresented groups undertaking graduate study, as determined by the Secretary; and (4) have compiled excellent academic records in their previous programs of study.

Sets forth requirements relating to awards to graduate students. Provides that at least 80 percent of the grant to the academic department or program shall be used for such awards. Limits the period of such award to no longer than five years for any individual. Provides that such fellowships shall consist of payment of tuition and fees and a stipend. Limits the maximum individual annual stipend to $10,000 or the demonstrated level of need, whichever is less. Sets forth other conditions for receipt of such award.

Sets forth provisions for assistance to the graduate program. Provides that up to 20 percent of the grant to the institution may be used to conduct activities to improve the quality of the academic program offered at the department, including improvement of library resources and of laboratory and instructional equipment, and support for research projects and academic papers. Prohibits such funds from being used for the general operational overhead of the institution.

Authorizes appropriations for FY 1986 through 1990.