Trustees of the California State University v. Richard W. Riley, Secretary of the Department of Education

The Secretary of Education appeals the district court’s grant of summary judgment to the Trustees of the California State University System (“CSU”). The district court determined that CSU was not accountable for any interest earned on undisbursed Pell Grant funds during the audit period, and enjoined the Secretary from attempting to collect such money.

We AFFIRM in part, REVERSE in part, and REMAND.

FACTS AND PROCEDURAL HISTORY

A. Background

The Pell Grant Program, 20 U.S.C. § 1070a (Supp.1983), provides financial assistance to eligible, financially needy students attending eligible institutions of higher education to help them pay for their post-secondary education costs. The amount of financial assistance given to eligible students is determined by statute and regulations. Eligible students receive their Pell Grant awards either through the educational institution under the Regular Disbursement System, or directly from the Secretary under the Alternate Disbursement System. 34 C.F.R. Part 690, Subpart H (1985).

An eligible institution participating in the Pell Grant Program receives Pell Grant funds from the Department of Education (“Department”) under a letter of credit…