Federal Decision Restricts Minority Scholarship Funds : Education: College officials express shock over announced curbs. They warn the action could harm efforts to enroll blacks and Latinos.

Colleges that receive federal funds cannot offer scholarships designated only for minority students unless there is evidence of past discrimination, a U.S. Department of Education official confirmed Wednesday.

The decision has shocked and confused many college financial aid experts around the nation who say it could harm efforts to raise enrollment of blacks and Latinos.

At a Washington press conference Wednesday, Michael L. Williams, assistant secretary of education for civil rights, confirmed reports that he had warned officials of the Fiesta Bowl that their offer of $100,000 in minority scholarships to the schools playing in that football game could violate federal civil rights law.

But Williams, who has been in his post only six months, also acknowledged that his advice to the Fiesta Bowl conflicts with a federal policy upheld just last year regarding similar minority scholarships at the University of Colorado. And, he said he had not cleared the matter with anyone at the White House.

The action by Williams was first reported by the Chronicle of Higher Education, a weekly journal, and also was reported in Wednesday editions of the New York Times.

Many colleges administer gifts from private donors who want to specifically help, for example, young black biologists or Asian musicians. In other cases, some schools earmark parts of their own aid funds for minority applicants. Both instances would be illegal under Williams’ opinion unless the aid is intended to overcome specific bias.

However, education experts cautioned colleges not to rush to drop any minority scholarship programs. There was added uncertainty because the department’s secretary, Lauro F. Cavazos, announced his resignation Wednesday.

“I think the debate is only begining on this. There will be an intense political debate about the appropriateness of this particular interpretation,” said Jon Fuller, president of the Washington-based Consortium for the Advancement of Private Education, a group that channels aid to small, private colleges.

Brian Fitzgerald, staff director of the congressionally established Advisory Committee on Student Financial Assistance, also predicted much controversy. He called Williams’ opinion “unsound” and said he feared it could foster dishonesty. “It suggests that institutions could have published policies that things are color blind and then wink at black students and say: ‘Don’t worry about it. We will help you.’ ”

Clearly, colleges and universities were worried, with some financial aid officers viewing the opinion as an attack on affirmative action.

“This comes as a really great shock to me that the (Department of Education’s) Office of Civil Rights is challenging widely accepted practices around the country,” said Claudia Mitchell-Kernan, UCLA’s vice chancellor and dean for graduate programs. She stressed that financial aid is one of the few ways to address the low numbers of women and minorities in certain fields.

Richard F. Rosser, president of the National Assn. of Independent Colleges and Universities, contended Williams’ statement could send financial aid programs “into chaos” and have “a devastating effect on the recruitment of minorities.”

“We thought what we were doing was exactly in the interests of this nation,” Rosser said, referring to the affirmative action aid.

In a telephone interview Wednesday, a Department of Education spokesman cautioned that the government is not going to investigate scholarship programs unless someone files a complaint. Five such complaints are now pending, although the Fiesta Bowl scholarship was not among those. According to the spokesman, Williams “just came forward and offered technical assistance” in that case.

The spokesman, who asked not to be identified, said he knew neither how many schools could be affected by a policy change nor what proportion of financial aid is designated for minorities. “It’s a big universe out there,” he said. “There are a lot of private donations coming in, so the numbers are almost incalculable.”

Fiesta Bowl officials in Tempe, Ariz., offered $100,000 in minority aid to the universities of Louisville and Alabama after Arizona voters rejected a holiday honoring assassinated civil rights leader Dr. Martin Luther King Jr. The King vote prompted the National Football League to threaten to pull the 1993 Super Bowl from Phoenix, and the annual Fiesta Bowl faced a similar protest from schools.

At his press conference, Williams said his office is working with Fiesta Bowl, Louisville and Alabama officials to devise an acceptable program, one that would include other criteria such as family income.

The United Negro College Fund in New York issued a statement Wednesday saying that its scholarships at historically black colleges are awarded on financial need. Although the underlying assumption is that black students will benefit, there is nothing race specific in the awards, the fund said.