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A Federal Legal and Policy Primer on Scholarships:Key Non-Discrimination Principles and Actionable Strategies for Institutions of
Higher Education and Private Scholarship Providers
NSPA Annual ConferenceKansas City, MO
October 11, 2016
Session overview
2
Note: This session is provided for informational policy planning purposes only. It does not constitute legal advice. Please discuss any provider- or institution-specific issues with your own counsel.
Part 1: Information
The big picture
Legal overview
Hot legal topics: race, gender, religion
Part 2: Application
Practical action steps and examples
Group discussion
Resources
3
Available at educationcounsel.com
A Policy and Legal "Syllabus"
for Diversity Programs at Colleges
and Universities (ACE, College Board,
EducationCounsel 2015)
Bridging the Research to Practice Gap:
Achieving Mission-Driven Diversity and
Inclusion Goals(College Board,
EducationCounsel 2016)
A Federal Legal and Policy Primer on Scholarships(NSPA, College
Board, EducationCounsel
2016)
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1. THE BIG PICTURE: WHY DO SCHOLARSHIPS MATTER?
Why do scholarships matter?
5
Scholarships and grants make up the largest portion of how families paid for college last year.
34%
12%13%
29%
7%5%
How families paid for college in 2015-16
Scholarships &grants
Student income &savings
Student borrowing
Parent income &savings
Parent borrowingSource: Sallie Mae, How America Pays for College 2016
70% of families accessed grants or scholarships
Why do scholarships matter?
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Many types of grants exist from many actors.
Private/employer grants added up to $11.3B in 2014-15– 6% of total undergraduate student aid.
Institutional grants totaled $39.8B – 22% of total undergraduate aid.
Source: College Board, Trends in Federal Aid 2016
Why do scholarships matter?
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$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
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Growth in Institutional and Private/Employer Grants 1990-2015 (in millions)
Institutional grants Private & employer grantsSource: College Board, Trends in Federal Aid 2016
Institutional and private/employer grants have more than quadrupled over 15 years
Why do scholarships matter?
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Disparities based on income matter a great deal for college access and completion.
Source: Pell Institute, Indicators of Higher Education Equity in the United States (2016)
0
20
40
60
80
100
Bottomquartile
Secondquartile
Thirdquartile
Topquartile
College enrollment*
College graduation byage 24
# US Children (in millions)
In extreme poverty(50%)
In poverty (100%)
Below 150% povertyline
Below 200% poverty
Below 250% poverty
Above 250%
Source: Kids Count Data Center, Poverty Indicators
Why do scholarships matter?
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America is diversifying in many ways – raising important policy and legal questions.
By 2025, the US will not have a
racial/ethnic majority.
Asia has replaced Latin America as
the biggest source of new immigrants.
Millennials are now the largest
generation (and the most diverse).
The middle class is shrinking.
Religious diversity is increasing globally
and in the US.
Population growth is slowing and
people are living longer.
Source: Pew Research, 10 demographic trends that are shaping the U.S. and the world
Why do scholarships matter?
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So what have we reviewed?
• College is expensive. Families cobble together many to pay for it.
• Scholarships and grants count for an increasing slice of the pie.
• Institutional and private/employer grants have grown significantly over the past 15 years.
• Our postsecondary access and attainment rates still have significant gaps based on income (among other factors).
• More than half of the future college students are part of a family that's roughly within the bottom two income quartiles.
• Major demographic shifts are underway in the U.S. and abroad.
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2. LEGAL OVERVIEW
Sources of Federal Law
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Our focus today (POTUS matters, too, but not our concentration for this workshop)
Judicial
Legislative
Constitution•Foundation for non-discrimination law•Applies to everyone
Congress / Federal statute•Adds specific protections on top of Constitutional guarantees•Applies to different groups
Supreme Court / Case law•Interprets reach of Constitution and appropriateness of Congressional action for everyone•Governs how other courts will review different kinds of claims for different groups
IRS•Awards tax-exempt status to non-profits•Determines taxability of scholarship grants and receipts
The "sliding scale" of standards of review
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Based on federal non-discrimination law and relevant SCOTUS precedent
Mo
re s
ear
chin
g co
urt
re
view
Le
ss search
ing co
urt
review
Race
Ethnicity
National Origin
Disability
Age
Gender
Sex
Sexual orientation and gender
identity
Religion
Income or class
All other student characteristics (e.g., athletes,
legacies)Residence
The "sliding scale" of standards of review
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Based on federal non-discrimination law and relevant SCOTUS precedent
• Just because a characteristic associated with a scholarship may trigger strict scrutiny review (the most rigorous level of review) does not mean that it will be invalidated by a reviewing court.
• By the same token, the fact that a characteristic associated with a scholarship may trigger a lower standard of review does not mean that the practice in question is automatically lawful.
"Strict scrutiny must not be strict in theory, but fatal in fact . . . But the opposite is also true. Strict scrutiny must not be strict in theory but feeble in fact."
- Justice Kennedy in Fisher I
Federal non-discrimination statutes for educational institutions
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Race*
Ethnicity*
National Origin*
Disability*
Age*Gender*
Sex*
Sexual orientation and gender identity**
Religion***
Income or class
All other student characteristics
(e.g., athletes,* legacies)Residence
Title VI of Civil Rights Act of 1964
Title IX (1974)
Section 504
Age Discrimination
Act (1975)
Federal statutory laws for private actors
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Race*
Ethnicity*
National Origin*
Disability*
Age*Gender*
Sex*
Sexual orientation and gender identity**
Religion***
Income or class
All other student characteristics
(e.g., athletes,* legacies)Residence
Section 1981, 1983, 1985
Federal tax law
Responsibility for legal compliance
17
Who bears the burden?
Institution receives and administers
funds alone
Institution and provider work
together
Private provider receives and
administers funds alone
Institution
Provider Institution
Provider
Institution Provider
Academic
s
Extra
curriculars
Background
Interest
Responsibility for legal compliance
18
When the provider and institution are working together…
The extent to which the institution is involved in
administering or providing significant assistance to the
privately funded program
Whether the institution sets criteria for or selects
recipients of the privately funded aid
Whether the institution provides resources or
information to the private program not generally make
available to other outside providers of financial aid
Pooling as a key strategy for institutions
19
Especially those with an array of awards (particularly race-conscious or gender-conscious programs )
Individual donor gifts
Pool of all donated funds
20
3. HOT LEGAL TOPICS:RACE, GENDER, AND RELIGION
Race, ethnicity, and national origin
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Constitutional starting point
"No state shall make or enforce any law which shall . . . deny to any person within its jurisdiction the equal protection of the laws."
- XIV Amendment to the U.S. Constitution
Race, ethnicity, and national origin
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The Strict Scrutiny Framework
Strict scrutiny
Compelling interest
Educational benefits of
diversity
Narrow tailoring
Necessity
Flexibility
Minimal adverse impact on non-beneficiaries
Periodic review / limited in time
Impact
Race, ethnicity, and national origin
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Federal tax law guidelines
IRS guidance specifically allows private foundations to provide scholarships that are "specifically geared toward racial or ethnic minorities" as long as they satisfy certain conditions:
is consistent with the existence of the private
foundation’s exempt status under IRC 501(c)(3);
utilizes objective and nondiscriminatory criteria
in selecting scholarship recipients from among the
applicants; and
utilizes a selection committee which appears
likely to make objective and nondiscriminatory selections of grantees.
Race, ethnicity, and national origin
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State law considerations
Sex, gender, sexual orientation, and gender identity
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Constitutional starting point
"No state shall make or enforce any law which shall . . . deny to any person within its jurisdiction the equal protection of the laws."
- XIV Amendment to the U.S. Constitution
Sex, gender, sexual orientation, and gender identity
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Federal non-discrimination law evolution
1971-72: SCOTUS finds sex and gender discrimination
unconstitutional. Congress passes Title IX
.
1989: SCOTUS finds that discrimination based on
sex stereotypes is unconstitutional
1995: SCOTUS invalidates VMI's all-
male admission policy
2012-16: Federal agencies and courts
start to conclude that discrimination based on
gender identity or sexual orientation falls
under Title IX and other sex/gender non-
discrimination laws.
Sex and gender
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State law considerations
Religion
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Constitutional starting point
"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof."
- I Amendment to the U.S. Constitution
Religion
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Federal case law
SCOTUS
States can prohibit state scholarship $$ from supporting religious study. (Locke)
Institutions cannot use religion as a basis for racial discrimination. (Bob Jones)
Some federal courts
Classifications based on religious affiliation can
trigger heightened scrutiny
Religion
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State law considerations
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Q&A (THEN A BREAK!)
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4. RECOMMENDED STRATEGIES AND ACTION STEPS
Recommendations for scholarship providers and institutions
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A few starting ideas – all of which should be translated for your specific context
Start with well-
articulated goals
Design eligibility
criteria and selection
process to meet the goals
Consider how to
communicate with schools and students
Consider whether and
how to coordinate
with partners
Plan for regular
evaluation
Start with well-articulated goals
34
• Why does your institution or organization exist?
• What motivated its establishment?
• What goals does it seek to reach today?
• What role does the award of scholarships play in achieving that mission and goals?
• Where has your institution or organization explained its mission and goals?
• In legal incorporation and/or tax documents?
• On your website?
• In internal materials?
• In donor materials?
Design eligibility criteria and selection process to meet the goals
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• Who determined your eligibility and selection criteria? When?
• Your institution or organization?
• Your donors?
• How closely tied are your criteria to the purpose of the scholarship program(s)?
• Are eligibility criteria objective and flexible enough to meet possible legal concerns AND to allow for an appropriate applicant pool to be formed?
• Overly narrow criteria may mean that scholarships go unawarded at times
• Overly broad criteria may make the process overly cumbersome, difficult to manage, and/or subject to undue reviewer sway
• Do you use a selection committee with unbiased members?
• Are procedures in place to prevent conflicts of interest?
• Have selection committee members been trained? Are they monitored?
Consider how to communicate with stakeholders
36
• How do you advertise the scholarship(s)? Are messages consistent across target audiences?
• To possible applicants?
• To possible institutional partners?
• To possible donors?
• How does your scholarship demand compare with supply?
• Who might serve as ambassadors for your program?
• Recipients?
• Donors?
• Staff?
• Do your scholarship recipients understand the implications of accepting an award?
• Do they know about possible tax implications?
• Do they understand how to coordinate with their financial aid office?
Consider whether and how to coordinate with partners
37
• Who is involved in your award process?
• Is there any joint decisionmaking between an institution and a private provider?
• How (if at all) are donors involved?
• Who helps you find applicants?
• K-12 schools?
• CBOs?
• Institutions?
• For providers:
• Have you established agreements with receiving institutions about how funds should be applied (e.g., to minimized displacement)?
• For institutions:
• What might private scholarship providers be able to do that you can't, for financial, legal, or other reasons?
Plan for regular evaluation
38
• What specifically do you need to evaluate and why? Different questions may apply.
• Legal compliance?
• Program efficiency?
• Program effectiveness at meeting goals?• Who needs to be involved in the evaluation?
• Internal staff only? • Legal counsel?• Data scientists or researchers?• Other third party facilitator?
• What types of information do you need to conduct an appropriate evaluation?
• Data on applications, awards, and outcomes?
• Interviews of stakeholders?
• Surveys of students?
• What decisions do you want the results to inform?
Plan for regular evaluation: Legal review for institutions
39
University of Missouri's OCR Resolution
Diversity is a "central component of the University's educational
mission."
Diversity is broadly defined and not simply in terms of race or national
origin.
Mizzou's goal ("compelling interest") for its race-conscious scholarship program
Plan for regular evaluation: Legal review for institutions
40
University of Missouri's OCR Resolution
Legal question for OCR:1. Did Mizzou's race-exclusive scholarship programs
discriminate on the basis of race?
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60%
33%
7%
Grants Awarded at Mizzou in 2009-10
Other
Need /SES-based
Race-related
• Less than half of minority students received race-related scholarships.
• Applicants evaluated holistically.• Some minority students received
aid intended to increase diversity in others ways (e.g., veterans).
• History of segregation, surveys showing unwelcome climate, scholarship has important impact on minority students' enrollment and associated with improved retention.
• Program regularly evaluated.
University of Missouri's OCR Resolution
Plan for regular evaluation: Legal review for institutions
Flexible
Subject to Periodic Review
Necessary
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IRS Guidance
Plan for regular evaluation: IRS review for providers
Company A
Private Foundation B
• Sole activity = award scholarships
43
IRS Guidance
Plan for regular evaluation: IRS review for providers
IRS question:1. Does the Private Foundation B comply with IRS guidelines
on the use of race/ethnicity in scholarship award decisions?
44
IRS Guidance
Plan for regular evaluation: IRS review for providers
83%
17%
Total Scholarships Awarded by Private Foundation B by Eligibility Category
Companyemployees
Racialminority inState Z
• At least 400 eligible applicants for 120 total awards annually
• Selection criteria:• Prior academic
performance• Performance on certain
test designed to measure ability and aptitude for college
• Financial need
Consistent with foundation's
purpose
Objective selection
committee
Objective, non-discriminatory
criteria
46
2016 Study of Dell Scholars Program
Plan for regular evaluation: External researcher review
Research questions guiding the evaluation:1. What is the impact of being selected as a Dell Scholar
on college enrollment, persistence, and degree completion?
2. To what extent do these impacts vary by salient student-level characteristics?
3. Do the benefits of the Dell Scholars Program justify the costs?
47
Plan for regular evaluation: External researcher review
2.8 percentage point (pp) improvement in
timely enrollment rate
No major change in 1st to 2nd year
retention
15-19 pps more likely to earn a
bachelor's degree within 6 years
8-9 pps more likely to earn a bachelor's
degree on time
No significant differences by institution type* or by student sub-group.
Future work = which components have the biggest impact?
25+% greater increase in 4 and 6 year
bachelor's attainment
2016 Study of Dell Scholars Program
48
Plan for regular evaluation: External researcher review
Costs:
$30,000 per student (monetary and non-monetary supports) x 1,000
students close to the cutoff = $30M
* ~161 more students would graduate cost per extra graduating student =
$186,335
Benefits:
Students would earn ~$16,100 more annually with a bachelor's degree
than without.
Social and private monetary benefits would pay off after 12 years of earning from the new graduates
2016 Study of Dell Scholars Program
50
Plan for regular evaluation: Internal researcher review
Research question guiding the evaluation:
1. How can the scholarship program at the college work more efficiently toa. Increase the number of applicants and b. Streamline the selection and financial
resolution processes?
2011 Study of anonymous community college program
51
2011 Study of anonymous community college program
Plan for regular evaluation: External researcher review
Low rates of application
• Passive information from the college
• Lack of student confidence in qualifications
• Lack of student awareness of the differences in scholarship criteria
Increase selection efficiency
• Committee training and monitoring
• Use of multiple reviewers
• Use of consistently applied scoring rubrics
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LET'S DISCUSS
About EducationCounsel
53
EducationCounsel, LLC, in Washington, D.C., is a mission-based education consulting firm that combines significant experience in policy, strategy, law, and advocacy to make dramatic improvements in education outcomes throughout the United States. EducationCounsel develops and advances evidence-based ideas at the local, state, and national levels to strengthen educational systems and promote expanded opportunities and improved outcomes for all students in order to close achievement gaps and significantly improve education outcomes for all from early childhood through postsecondary education.
Much of EducationCounsel's higher education portfolio centers on issues of institutional diversity and inclusion. As a complement to their institution-focused strategy, legal, and policy support, members of the EducationCounsel team have helped lead the policy, practice and legal work of the College Board's Access and Diversity Collaborative since its inception in 2004. EducationCounsel has also provided legal and policy guidance to other national organizations on diversity and inclusion issues, including the Association of American Medical Colleges, the Law School Admission Council, the National Association for College Admission Counseling, and the National Scholarship Providers Association. Members of the EducationCounsel team have authored three amicus briefs in the U.S. Supreme Court in cases involving legal challenges to higher education diversity policies, as well as numerous policy, practice, legal and research papers and articles on diversity and inclusion issues.
EducationCounsel is affiliated with the law firm of Nelson Mullins Riley & Scarborough LLP. For more information, please visit http://www.educationcounsel.com.
About NSPA
54
National Scholarship Providers Association (NSPA) is a nonprofit, member association that advances the collective impact of scholarship providers and the scholarships they award. It was established in 1999 by Coca-Cola Scholars Foundation, Fastweb.com, Hispanic Scholarship Fund, and Scholarship America to facilitate the creation of scholarship effective practices, encourage professional development, and establish cooperative relationships among scholarship providers.
Today, NSPA is dedicated to supporting the needs of professionals administering scholarships in post-secondary institutions, private and community foundations, public charities, as well as corporate and government programs. NSPA's 370+ member organizations from the United States, Canada, and the Bahamas give over 350,000 scholarships amounting to over a billion dollars each year. Along with the 850+ scholarship professionals in its membership network, NSPA works to develop standards for scholarship administration, conduct research to understand the depth and breadth of the scholarship industry, create professional resources for its members, encourage the development of scholarship programs, and advocate changes in policy. These programs assist students in paying for college, as well as improve college access and completion rates. The NSPA Annual Conference is the convergence of the scholarship industry bringing over 375 diverse scholarship funders together for three days of networking and learning.
For more information, please visit http://www.scholarshipproviders.org/
