Recent litigation under section 504 of the Rehabilitation Act of 1973 and unresolved issues in the application of section 504 to colleges and universities are examined. Section 504 is a federal statute expressing a national commitment to end discrimination against individuals on the basis of handicap. Three issues that currently confound efficient implementation of section 504 are as follows: (1) the meaning of "otherwise qualified" in the statutory text; (2) whether and to what extent affirmative steps must be taken by recipients of federal financial assistance to permit handicapped persons to participate in programs; and (3) whether section 504 applies only to those individual programs or activities that benefit directly from federal financial assistance, or to all programs and activities of an institution that receives federal financial assistance for any of its programs or activities. "Qualified handicapped person" is defined by the implementing regulations for section 504 as "a handicapped person who meets the academic and technical standards requisite to admission or participation in the recipients' education program or activity." The courts have not reached agreement on a standard for institutions to follow regarding accommodations for the handicapped. For the most part, institutions must rely on their own good-faith interpretations of the regulation in deciding whether an accommodation is required. Procedural issues regarding section 504 and the courts include: the students' private right of action against the university under the statute; whether damages are available under section 504; and whether section 504 forbids use of procedures or criteria that may unintentionally discriminate against handicapped persons. (SW)