The Department of Education's ability to create a high-performance education system is directly linked to the public's understanding of how to apply for and make proper use of federal grant funds. This booklet is intended for individuals who are interested in applying to the U.S. Department of Education (ED) for discretionary grants and cooperative agreements, those who have received an award, or persons who are interested in knowing more about the discretionary grant-making process. A discretionary grant is an award of financial assistance in the form of money, or property in lieu of money, usually made on the basis of a competitive review process. A cooperative agreement is a variation on the discretionary grant. Following the introductory chapter, chapter 2 describes how discretionary grant programs are administered. The third chapter explains the forms in the application package that must be completed. Chapter 4 describes what happens to the application after ED receives it, and chapter 5 explains how a funding recommendation becomes a grant award, the negotiation procedure, and how the award is transformed into dollars. The recipient's responsibilities for compliance with federal regulations are outlined in the sixth chapter. Chapters 7 through 9 provide guidelines for communicating with the department, completing the required final reports, and complying with auditing requirements. A glossary, a list of other information sources, and a sample grant-award notification are included. (LMI)