Will Race-Based Scholarships Survive?

The Iowa Supreme Court ruled this month that the University of Iowa can’t repurpose a private scholarship designated for Black students to serve first-generation students—but it might not be able to use the funding for its original purpose, either, shedding light on the murky legal waters facing race-based scholarships nationwide.

The University of Iowa argued giving the funds to Black students majoring in chemistry, as the donor intended, became a legal liability after the U.S. Supreme Court nixed considering race in college admissions in Students for Fair Admissions v. Harvard. The Trump administration has since interpreted that ruling to bar any race-based program or policy.

Against that backdrop, Iowa isn’t alone in rethinking scholarships with race-based criteria. Colleges, businesses and nonprofits across the country have been scrambling to cut or replace such programs, for fear of legal action or federal scrutiny.

The Iowa Supreme Court agreed with the University of Iowa that the scholarship is now “impracticable” as is, embracing a wider interpretation of the SFFA decision, and the university “would be subject to litigation risk with the federal government.” But ultimately, the judge concluded Black students and first-generation students aren’t interchangeable, so the move runs counter to the donor’s intent. She kicked the case back to district court, recommending an advocate for the donor’s intent be included in the proceedings.

The opinion is a mixed bag for proponents of race-based scholarships as programs designed to help minority students pay for college face challenges across the country as state and federal DEI bans spread. Some advocates fear these scholarships are going to fade away while others believe these programs have a future—or can morph to serve students with some of the same needs.

While the SFFA decision didn’t explicitly address scholarships, the Trump administration has issued guidance and memos declaring race-based scholarships and programs “unlawful practices.” At the same time, advocacy groups like the American Alliance for Equal Rights—run by Edward Blum, also the founder of Students for Fair Admissions—have also targeted these programs in recent years.

For example, AAER sued the Hispanic Scholarship Fund and the Congressional Black Caucus Foundation over their scholarships designated for minority students. The group Do No Harm has taken similar action against health-care student scholarships for underrepresented groups, filing a slew of lawsuits and federal civil rights complaints against such programs. An appeals court in Wisconsin ruled against the state’s Minority Undergraduate Retention Grant Program last year after parents sued the Higher Educational Aids Board, claiming their son was ineligible due to his race. The case is now being hashed out before the Wisconsin Supreme Court.

Trump’s second term has “certainly amplified and sped a lot of this up,” said Jeffrey Tenenbaum, managing partner at Tenenbaum Law Group PLLC, “but this was going on well before that.”

In some cases, universities are buckling under the threats. The University of Missouri system, for example, removed racial criteria from endowed scholarships shortly after the SFFA decision at the behest of the state’s attorney general. The University of Alabama discontinued its National Recognition Scholarship for minority students in 2024 and replaced it with the race-neutral UA Competitive Achievement Scholarship to offer “a more sustainable scholarship program for talented first-year students,” according to a university statement at the time.

“This decision was informed by a recent review of all scholarships to ensure The University of Alabama can continue offering robust financial support to as many students as possible,” the statement read.

A ‘Clear Shift’

These scholarships aren’t going away, but they are changing their scope, experts say.

Jackie Bright, president and CEO of National Scholarship Providers Association, said their data shows a “clear shift” away from race-based eligibility criteria for scholarships. Scholarships with diversity-related criteria made up 12 percent of NSPA’s database of more than 33,000 scholarships in 2023; the share has since dropped to about 8 percent.

But the total number of scholarships provided continues to grow, which suggests these scholarships aren’t “disappearing altogether” but more often undergoing changes to their eligibility criteria, Bright told Inside Higher Ed in an email. For example, some have shifted their programs to focus on low-income and first-generation students or students from specific geographic areas rather than specific racial or ethnic groups.

Bright said scholarship providers are being pulled in multiple directions. Some are re-evaluating their programs, concerned about legal and federal scrutiny, while others are relying on guidance from legal experts “that privately funded scholarships are distinct from federally funded programs and that donor intent remains an important consideration.”

“Much of the focus right now is on compliance: how to structure eligibility criteria appropriately, how to align program intent with evolving guidance, and how to communicate any changes clearly to applicants and stakeholders,” Bright wrote. “Overall, this appears to be more of a period of adjustment than a reduction in opportunity, as providers work to balance their mission with a rapidly evolving legal and policy landscape.”

It’s part of a piece-by-piece dismantling of our recognition that race matters on campus.”

—Julie J. Park, a professor in the University of Maryland’s College of Education

Tiffany Gusbeth, vice president of student success services at the American Indian College Fund, a scholarship provider for Native American students, said her organization hasn’t shifted its criteria, given that tribal affiliation is a political classification, not a racial identity, and the fund provides scholarships to both tribal descendants and non-Native students at tribal colleges. But some of the organization’s donors have paused support or have sought to “reframe” their giving as focused on “student access” or “workforce pathways” rather than Native students specifically. The fund hasn’t changed its messaging.

“What I’m seeing more is that they’re adjusting how they’re communicating internally, about the ways they’re engaging in philanthropic efforts and partnering with the College Fund or organizations like ours,” Gusbeth said. “At the end of the day, it’s OK if it brings them to the table to support Native students.”

She said scholarship providers are “navigating really dynamic and sometimes challenging conversations, but they’re focused on strengthening systems and supports for students for the good of the communities where these students are from.”

For some, worries persist that the tide against race-based language and criteria will come at a cost to students historically underrepresented in higher ed.

Julie J. Park, a professor in the University of Maryland’s College of Education, said the good news is, these scholarships “will still be supporting students who have some sort of need” in cases where universities seek to replace race-based criteria with socioeconomic criteria.

But “the con is the erasure of the reason why these scholarships … existed in the first place,” she said. “It’s part of a piece-by-piece dismantling of our recognition that race matters on campus,” that race has been and still can be the basis for “exclusion,” and “that you really need to be specific around race in certain contexts in order to expand opportunity in higher education.”

Sometimes race-conscious scholarships are also “a way of keeping the donor’s story alive,” she added.

Don and Melinda Crawford/UCG/Universal Images Group/Getty Images

The University of Iowa’s Ezra L. Totton Scholarship, for example, is named for a Black alum who earned his master’s degree in chemistry at Iowa after the University of Tennessee denied him admission based on his race in 1939. He and other Black students sued the University of Tennessee, but the suit was dismissed.

The scholarship was Totton’s attempt to “give back” to the university that trained him, Park said. “There’s so much just rich, important history that is easy to forget or easy to overlook.”

A Thorny Legal Issue

As universities and scholarship providers navigate this rocky terrain, legal experts say they’ve been highly sought after for advice—and their guidance on race-based scholarships ranges.

Tenenbaum’s law firm has conducted at least three dozen “DEI audits” for nonprofits, often involving scholarships with race-based criteria.

And “we’ve advised them those are likely illegal,” he said. “If you don’t want to risk being sued or being subject of a federal investigation … you need to either abandon your program or change your eligibility criteria to something else, something that’s not race and that’s not a proxy for race.”

But there are “unanswered questions” about what a proxy for race is, he added. For example, if students discuss race in response to broader scholarship application essay questions, that’s arguably safe for a scholarship provider to consider, according to Chief Justice John Roberts, who wrote the majority opinion in SFFA.

Tenenbaum said his firm has come up with a “laundry list” of alternatives to race-based criteria for clients “that should pass muster under the law,” including income-based criteria.

Audrey Anderson, former general counsel for Dartmouth and Vanderbilt Universities and a higher education attorney at Bass, Berry and Sims, believes there are legal ways colleges can continue to give out scholarships that consider race, notably the “pool-and-match” approach.

Many colleges and universities choose which students will receive scholarships based on race-neutral criteria, such as financial need or high school GPA, then match students to available scholarships relevant to them. For example, a Latino student from Texas might receive a scholarship specifically designated for Latino Texans, but the university didn’t select the student to receive funding based on those criteria.

Anderson said the government hasn’t gone after pooling and matching yet. Still, she finds some higher ed institutions are shying away from the practice or asking donors not to create scholarships with race-based criteria in the first place.

These days, “most universities are going to talk to the person who wants to give the gift and say, ‘Can we meet your goal by structuring this in a way that does not have a racial component to it?’” she said.

But even those conversations come with some risk, she noted. If an institution is sued or faces a federal investigation, the opposition might argue “any other criteria you come up with is just a pretext for the race-based criteria that the donor really wanted,” so she urged institutions to go about those discussions carefully and to document them.

Anderson stressed that higher ed institutions ultimately need to make decisions based on their goals and risk tolerance.

“They have to think about their mission,” she said. “What is important to them? What is it that they are trying to accomplish? How tolerant of a state are they in? How likely is it that … they’re going to get a whole lot of negative feedback from legislators who might make their lives really difficult? How willing are they to put up with that distraction, or worse yet, legal activity?”

Institutions’ answers to those questions are going to vary, she said, but despite opposition, she believes some race-based scholarships will persist past the current anti-DEI moment.

“They’re going to continue to exist in some places and not in others,” she said. “I don’t think that the government is going to be able to get rid of all of them.”

This story was corrected to update that Jackie Bright is president of the National Scholarship Providers Association.