Trump Administration Proposes Ending Tax-Exempt Status for Schools Offering Scholarships To Black Students

September 9, 2026 1

WASHINGTON — The Trump administration has proposed new regulations that could strip private schools and colleges of their federal tax-exempt status if they provide scholarships, admissions preferences or other educational benefits based on race.

The proposal, issued by the U.S. Treasury Department and Internal Revenue Service, would apply to private educational institutions that consider race, color, national origin or ethnicity when administering scholarships, admissions, loans, athletics or other school-supported programs.

The administration argues that providing benefits to students based specifically on race constitutes discrimination, including programs created to increase educational opportunities for Black and other minority students.

The proposed regulations could affect approximately 18,000 private educational institutions and an estimated 750,000 students who may qualify for scholarships allocated based on racial, ethnic or national identity.

Schools would still be permitted to provide scholarships and other assistance using race-neutral criteria, including family income, geographic location, first-generation college status, individual hardship, military family status and academic achievement.

The proposal would apply to tax-exempt private elementary and secondary schools, colleges, universities, professional schools and trade schools.

The regulations would also eliminate existing IRS provisions that allowed certain racial preferences in admissions, facilities, programs, scholarships and financial assistance.

Critics of the proposal argue that eliminating race-conscious scholarships and programs could reduce educational opportunities for Black and other minority students and undermine efforts designed to address longstanding disparities in education.

The proposal has not yet become final. Public comments are being accepted through Nov. 3.

If finalized, the regulations would apply to taxable years beginning after May 31, 2027.