The Erosion of Race-Conscious Aid: Navigating the Legal Minefield of University Scholarships

In the wake of the U.S. Supreme Court’s landmark 2023 decision in Students for Fair Admissions (SFFA) v. Harvard, higher education institutions across the United States are grappling with a profound legal and ethical transformation. The ruling, which effectively dismantled race-conscious admissions, has triggered a ripple effect far beyond the registrar’s office. Today, the very existence of private, race-based scholarships—once considered a cornerstone of institutional diversity efforts—is being challenged by a tightening web of federal scrutiny, state-level DEI (Diversity, Equity, and Inclusion) bans, and a aggressive wave of litigation from conservative legal organizations.

The recent Iowa Supreme Court ruling regarding the University of Iowa’s Ezra L. Totton Scholarship serves as a stark microcosm of this national crisis. The university sought to repurpose the scholarship—originally designated for Black students majoring in chemistry—to serve first-generation students, arguing that maintaining the original criteria would expose the institution to significant legal liability. The court, however, rejected this pivot, ruling that while the original scholarship might be "impracticable" to administer, the university cannot unilaterally redefine the donor’s intent by swapping beneficiary groups. The case has been remanded to a lower court, leaving the funding in a state of suspended animation and underscoring the precarious, "murky" legal waters that now define race-based philanthropy.

A Chronology of Retrenchment

The shift toward race-neutrality did not happen in a vacuum. The trajectory of this movement can be traced through several key legal and political milestones:

• June 2023: The U.S. Supreme Court issues its ruling in SFFA v. Harvard, declaring that race-based admissions programs at Harvard and the University of North Carolina were unconstitutional. While the opinion did not explicitly address private scholarship endowments, it emboldened legal activists to challenge any institutional practice that considers race as a factor.
• Late 2023–2024: Conservative advocacy groups, most notably the American Alliance for Equal Rights (AAER) and Do No Harm, began a systematic campaign of litigation. They targeted the Hispanic Scholarship Fund, the Congressional Black Caucus Foundation, and various health-care scholarships for underrepresented groups, alleging illegal discrimination.
• February 2025: The Wisconsin Court of Appeals ruled against the state’s Minority Undergraduate Retention Grant Program. This decision—currently under review by the Wisconsin Supreme Court—provided a roadmap for how state-funded programs could be dismantled based on claims of racial exclusion.
• Mid-2025: The Trump administration issued formal guidance and Department of Justice memos, explicitly labeling race-based scholarships and DEI-linked financial aid programs as "unlawful practices." This federal pressure accelerated the timeline for universities to audit and purge their portfolios of race-conscious criteria.

The Shrinking Landscape: Supporting Data

Data from the National Scholarship Providers Association (NSPA) confirms that the landscape of American financial aid is undergoing a definitive, if not complete, transformation. In 2023, scholarships with diversity-related criteria accounted for approximately 12 percent of the NSPA’s database of over 33,000 programs. By early 2026, that figure had plummeted to roughly 8 percent.

However, experts caution against viewing this decline as an absolute reduction in available aid. Jackie Bright, president and CEO of the NSPA, notes that while the percentage of explicitly race-based scholarships is shrinking, the total volume of available funding continues to grow. Instead of vanishing, many scholarships are "morphing." Providers are increasingly pivoting toward race-neutral proxies, such as socioeconomic status, first-generation college status, or geographic residency, to achieve similar diversity goals without triggering the scrutiny of federal regulators or litigious advocacy groups.

The Case of the Ezra L. Totton Scholarship

The University of Iowa’s dilemma with the Ezra L. Totton Scholarship provides a human dimension to the legal cold war. Ezra L. Totton was a Black alum who earned his master’s degree in chemistry at Iowa after being denied admission to the University of Tennessee in 1939 due to his race. The scholarship was designed specifically to honor his legacy and address the systemic barriers he faced.

By attempting to shift the scholarship to "first-generation" students, the University of Iowa hoped to preserve the spirit of the gift while sanitizing it of racial criteria to satisfy modern legal standards. The Iowa Supreme Court’s refusal to allow this change highlights a fundamental conflict in trust law: the duty to uphold donor intent versus the institutional desire to remain compliant with evolving civil rights interpretations. The court’s recommendation that an advocate for the donor’s original intent be appointed in district court proceedings suggests that the legal battles over these funds will be long, expensive, and deeply personal.

Official Responses and Strategic Pivot

Institutions are responding to this environment with varying degrees of caution and pragmatism. The University of Missouri, for example, moved quickly to strip racial criteria from its endowed scholarships following a directive from the state’s attorney general. Similarly, the University of Alabama discontinued its National Recognition Scholarship for minority students in 2024, replacing it with the "UA Competitive Achievement Scholarship." The university framed this move as an effort to ensure a "more sustainable scholarship program," a common euphemism for shielding the institution from legal challenges.

Legal experts, such as Jeffrey Tenenbaum of the Tenenbaum Law Group, have been at the center of these transitions. Having conducted dozens of "DEI audits" for nonprofits, Tenenbaum advises clients that programs explicitly based on race are now "likely illegal." He argues that for organizations wishing to avoid the crosshairs of federal investigation, the only path forward is to abandon race-based criteria entirely in favor of metrics that are not proxies for race—a standard that remains, as of now, frustratingly undefined by the courts.

Implications: The "Pool-and-Match" Strategy

Despite the pressure to conform, some legal scholars argue that race-conscious support is not dead, provided it is structured with extreme care. Audrey Anderson, a former general counsel for Dartmouth and Vanderbilt, points to the "pool-and-match" methodology. Under this model, institutions select recipients based on entirely race-neutral metrics—such as high school GPA or demonstrated financial need. Once the recipients are selected, the university matches them to available scholarships that align with their background.

Because the selection process is race-blind, the university argues that the eventual distribution of funds is not discriminatory. However, Anderson warns that this is a "high-risk, high-reward" strategy. If a university is sued, plaintiffs may argue that the matching process is merely a "pretext" for the prohibited racial criteria. Consequently, institutions are being urged to document every decision-making process with meticulous detail, creating a paper trail that demonstrates a commitment to neutral selection.

The Future of Inclusion on Campus

The implications for higher education are profound. Julie J. Park, a professor at the University of Maryland’s College of Education, argues that the current trend represents a "piece-by-piece dismantling of our recognition that race matters on campus." She warns that by erasing the history and the specific justifications for these scholarships, institutions risk losing the ability to address the unique, historically rooted obstacles faced by minority students.

"The con is the erasure of the reason why these scholarships existed in the first place," Park noted. "You really need to be specific around race in certain contexts in order to expand opportunity in higher education."

For others, like Tiffany Gusbeth of the American Indian College Fund, the goal remains the same, even if the messaging must adapt. Her organization views tribal affiliation as a political classification rather than a racial one, allowing them to continue their work with minimal disruption. Nevertheless, they have observed donors seeking to "reframe" their support toward broader goals like "workforce pathways" or "student access."

As the dust settles on this new, more restrictive era, it is clear that the future of scholarships will be defined by a delicate balancing act. Universities must choose between their institutional missions and their risk tolerance. While some programs will inevitably disappear, the shift toward proxy-based criteria and more sophisticated administrative structures suggests that philanthropy for underserved students will persist—though it will operate within a legal framework that is increasingly hostile to the recognition of race as a distinct factor in educational opportunity. The era of explicit race-based support is ending, but the battle to define what "equity" means in a race-neutral legal regime is only just beginning.