According to this list compiled a few years ago, there are 18 colleges—including Hillsdale and Grove City—that do not accept federal grants or participate in any federal student-loan programs. These colleges have decided to make these huge financial sacrifices in order to avoid being entangled in the strings that accompany federal aid. These strings include elaborate regulations that implement the nondiscrimination requirements of Title VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments Act of 1972, as well as the intrusive government oversight in enforcing these regulations.
A district-court opinion two weeks ago will come as a huge surprise to these colleges—and, I would think, to everyone else. In that opinion, federal district judge Richard D. Bennett (a Bush 43 appointee) held that a school’s federal 501(c)(3) tax-exempt status qualifies as federal financial assistance under Title IX. In other words, under Judge Bennett’s ruling, it does not matter that Hillsdale and Grove City do not accept federal grants or participate in any federal student-loan programs. The fact that they have 501(c)(3) status suffices to subject them to Title IX and (as his reasoning makes clear) to Title VI.
Fortunately for Hillsdale and Grove City, Judge Bennett’s reasoning is feeble.
Bennett correctly observes that the Supreme Court held in Grove City College v. Bell (1984) that “Title IX coverage is not foreclosed because federal funds are granted to Grove City’s students [via federal student loans] rather than directly to one of the College’s educational programs.” But he badly misreads Justice Ginsburg’s unanimous opinion in the follow-on case of NCAA v. Smith (1999). That case held that “[d]ues payments from recipients of federal funds … do not suffice to render the dues recipient subject to Title IX.” Ginsburg explains that the NCAA’s dues-paying members did not pay their dues “with federal funds earmarked for that purpose”:
At most, the Association’s receipt of dues demonstrates that it indirectly benefits from the federal assistance afforded its members. This showing, without more, is insufficient to trigger Title IX coverage.
What Bennett completely misses is that the NCAA ruling would call for him to determine whether a school’s tax-exempt status is more like the dues payments from recipients of federal funds at issue in that case or more like the receipt of “earmarked” federal funds from student borrowers in the Grove City case. The answer to that question would seem clear: Those who make charitable contributions to tax-exempt schools are not providing “federal funds earmarked for that purpose.” They are not providing federal funds at all. There is no reason, indeed, to presume that any contributors are even “recipients of federal funds.” Thus, the “indirect benefits” that a school receives from its tax-exempt status are even more remote than the benefits that the Court in the NCAA case found “insufficient to trigger Title IX coverage.”
Bennett’s reliance on a couple of long-ago Title VI rulings by district courts is likewise unsound for the simple reason that those rulings preceded NCAA v. Smith.
What’s more, a threshold problem with Bennett’s analysis is that the Department of Education’s regulations implementing Title IX (see 102.6(g)) define “Federal financial assistance” as “any of the following [types of assistance], when authorized or extended under a law administered by the Department.” (Emphasis added.) The Department of Education does not administer tax-exempt status, so the definition clearly does not apply. Bennett dismisses the first problem on the ground that the school did not raise it. But surely it falls within the school’s broader argument that Title IX does not apply.
Nor (as one district-court ruling Bennett cites correctly observes) is tax-exempt status included in the definition’s list of types of assistance. Bennett tries to escape this problem by invoking his misreading of NCAA v. Smith.