Institutional Aid Act of 1985

Institutional Aid Act of 1985 - Amends title III (Institutional Aid) of the Higher Education Act of 1965 (HEA) to revise institutional aid programs, especially in relation to the development needs of historically black colleges and universities and other institutions with large concentrations of minority, low-income students.

Includes as eligible institutions, for purposes of the title III part A (Strengthening Institutions) grants program, any institution of higher education which meets specified requirements and which has an enrollment of which at least: (1) 20 percent are Mexican American, Puerto Rican, Cuban, or other Hispanic students, or combination thereof; (2) 60 percent American Indian, Alaska Native, or Aleut, or combination thereof; or (3) five percent Native Hawaiian, American Samoan, Micronesian, Guamian (Chamorro), or Northern Marianan, or any combination thereof.

Establishes under title III part B, "Strengthening Historically Black Colleges and Universities" (which replaces the current part B, Aid to Institutions with Special Needs).

Defines a "part B institution" as any historically black college or university that was established prior to 1964 and whose principal mission was, and is, the education of black Americans.

Sets forth authorized uses for grants allotted to institutions under the part B program.

Directs the Secretary of Education (the Secretary) to make allotments to part B institutions according to formulas based on number of: (1) Pell grant recipients; (2) graduates; and (3) graduates in attendance at graduate or professional schools in degree programs in disciplines in which blacks are underrepresented. Sets forth a special rule regarding allotments to Howard University or the University of the District of Columbia.

Sets forth provisions for applications for part B grant allotments.

Sets forth provisions for part B program grants to professional and graduate institutions. Directs the Secretary, subject to the availability of appropriations for such purpose, to award such grants to each of listed postgraduate institutions that the Secretary determines to be making a substantial contribution to the legal, medical, dental, veterinary, or other graduate education opportunities for black Americans. Prohibits any such grant in excess of $500,000 unless the postgraduate institution assures that 50 percent of the cost of the purposes for which the grant is made will be paid from non-Federal sources. Limits the duration of any such grant to five years. Provides that any one undergraduate or postgraduate institution may receive no more than two such five-year grants. Allows use of such grants for: (1) any of the authorized uses of part B allotment grants; (2) contribution development offices; and (3) institutional endowments. Sets forth application requirements. Provides that independent professional or graduate institutions eligible for such grants include: (1) Morehouse School of Medicine; (2) Meharry Medical School; (3) Charles R. Drew Postgraduate Medical School; (4) Atlanta University; and (5) Tuskegee Institute School of Veterinary Medicine.

Sets forth reporting and audit requirements and penalties for misuse of funds.

Revises title III part C (Challenge Grants for Institutions Eligible for Assistance Under Part A or Part B) to rename the "endowment grants" under such part "challenge grants." Makes technical and conforming amendments to eligibility requirements under such part.

Reduces the maximum amount of any such part C challenge grant for FY 1985 through 1987. (Retains the current maximum for FY 1988 and succeeding fiscal years.)

Establishes under title III a new part D, "Reservation for Hispanic, Native American, and Pacific Basin Institutions." (Redesignates the current part D as part E.)

Directs the Secretary, from part A appropriations, to make available for use for the purpose of such part the greater of specified amounts or the following portions of such funds: (1) 20 percent for Hispanic institutions; (2) five percent for Native American, Native Alaskan, or Aleut institutions; and (3) five percent for institutions serving Native American Pacific Islanders, including Native Hawaiians residing in the Pacific Basin, including the State of Hawaii.

Sets forth authorized uses of such part A funds which are reserved under the new part C.

Revises the redesignated part E (General Provisions) under title III.

Directs the Secretary to publish in the Federal Register all policies and procedures required to exercise the authority to approve applications for title III assistance. Prohibits any other criteria, policies, or procedure from being applicable for such purpose.

Directs the Secretary to: (1) use the most recent and relevant data concerning the number and percentage of students receiving need-based assistance under title IV (Student Assistance) of HEA in making eligibility determinations under part A of title III; and (2) advance the base-year forward following each annual grant cycle.

Requires the Secretary to waive specified part A institutional eligibility requirements (involving an institution's having a relatively high percentage of students receiving need-based assistance under title IV of HEA) in the case of an institution which is: (1) extensively subsidized by the State in which it is located and charges low or no tuition; (2) serving a substantial number of low- and middle-income students as a percentage of its total student population; (3) contributing substantially to increasing higher education opportunities for black Americans, Hispanic Americans, Native Americans, Native American Pacific Islanders, including Native Hawaiians, who are low-income individuals; or (4) substantially increasing higher educational opportunities for individuals in rural or other isolated areas unserved by postsecondary institutions.

Includes Hispanic, Native American, or Pacific Basin institutions which have been determined eligible under part D, although not satisfying a specified eligibility criterion (involving an institution's having relatively low and general expenditures), among those institutions which must be included in an annual report of the Secretary to the Congress.

Includes among those reasons for which the Secretary may grant a waiver of specified eligibility requirements (involving an institution's being accredited by a nationally recognized accrediting agency and its being authorized to offer bachelor's or junior or community college degrees) a determination that such waiver will substantially increase higher education opportunities appropriate to the needs of Hispanic Americans or Native American Pacific Islanders, including Native Hawaiians.

Directs the Secretary to take care to assure that representatives of historically black colleges, Hispanic institutions, Native American institutions, and Native American Pacific Islanders, including Native Hawaiians, are included as readers on title III application review panels.

Revises provisions for grants to encourage cooperative arrangements to include such arrangements between title III aid recipients and institutions not receiving such assistance. Includes benefit to the applicant institutions as a priority criterion in making such grants.

Authorizes appropriations for FY 1987 through 1991 for the following title III programs: (1) part A, Strengthening Institutions; (2) part B, Strengthening Historically Black Colleges and Universities (with a separate authorization for part B provisions for Professional and Graduate Institutions); and (3) part C, Challenge Grants for Institutions Eligible for Assistance Under Part A or Part B.

Directs the Secretary to make available part A funds for any fiscal year to eligible institutions as follows: (1) at least 30 percent to junior or community colleges; (2) at least 20 percent (or a specified minimum amount, if that is greater) for Hispanic institutions; (3) at least five percent (or a specified minimum amount if that is greater) for Native American, Alaskan, or Aleut institutions; (4) at least five percent (or a specified minimum amount if that is greater) for Pacific Basin institutions; and (5) the remainder to institutions that plan to award a bachelor's degree during that year.