The Trump administration’s Treasury Department and IRS have proposed new regulations barring tax-exempt private schools from discriminating based on race, color, national origin or ethnicity in admissions, scholarships, athletics and other school programs.

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According to a report in the Michigan Daily, the new proposal could affect approximately 18,000 private educational institutions nationwide. According to the report, Michigan has 401 private universities, 894 private elementary and secondary schools and 58 private trade schools that could fall within the broader category of institutions affected.

No DEI Exception to the Rule

Current IRS guidance permits certain policies favoring racial minorities when designed to promote nondiscrimination. The proposed rule would eliminate that exception, making race-based treatment potentially disqualifying regardless of whether administrators call it remedial, equitable or diversity- enhancing.

Treasury Secretary Scott Bessent said, “Schools rebranding race-based preferences as equitable, inclusive, or diversity-enhancing does not change their discriminatory nature.”

Schools could still target assistance based on race-neutral factors including income, geography, first- generation status, individual hardship, military-family status or academic achievement.

Schools Have Time to Get Their Policies in Order

The new regulations concerning private schools aren’t final yet. Public comments are due Nov. 3, and if finalized as proposed, the new requirements would apply to taxable years beginning after May 31, 2027. So the schools have some time to review their policies – and perhaps discover that financial need can be measured without checking a student’s race first.