Minority Scholarship Curbs Proposed : Education: Alexander unveils a plan limiting colleges’ use of their own money but generally allowing grants funded by private donations.

Secretary of Education Lamar Alexander, returning to the explosive issue of special aid to minorities, Wednesday unveiled a new policy that restricts the freedom of colleges and universities to use their own money for minority-only scholarships but places few limits on grants funded by private donations.

The new federal policy, scheduled to take effect after a three-month comment period, relaxes some of the restrictions on college scholarships for minorities that were proposed by the Bush Administration a year ago. Those earlier limits touched off a storm of controversy among educators and civil rights groups.

But the new policy’s limit on the use of a college’s or university’s own funds for minority-only scholarships immediately drew fresh expressions of concern from the education community.

The issue is politically sensitive for President Bush because of recurrent charges that his Administration is hostile toward affirmative action and civil rights.

The limitation on how schools can use their own funds is “extremely important” for the nation’s independent colleges, because most of the 16,000 minority scholarships they provide are funded by the institutions themselves rather than by outside donors, said Richard F. Rosser, president of the National Assn. of Independent Colleges and Universities.

“We had assumed that scholarships out of our own funds were one of the best kinds of voluntary affirmative action that an institution can provide,” Rosser said.

Alexander emphasized the positive aspects of the proposed policy, noting that it sought to end 10 years of inconsistent statements by the Education Department on the sensitive subject and that it sought to explain what can be done rather than list prohibitions.

“A college president with a warm heart, some common sense and a minimum amount of good legal advice can provide minority students with financial aid and can use financial aid to create campus diversity without violating federal laws,” Alexander said at a press conference.

While voicing reservations, officials of the major university and college associations briefed by Alexander said that the policy is complex and that they plan to conduct intensive legal analysis before drawing firm conclusions about its impact.

White House Press Secretary Marlin Fitzwater said that he does not think the new policy willl bar minorities from scholarships. “The President’s wish was that the minority scholarship programs be preserved and my understanding is that’s what Education has done,” he declared.

Youlonda Copeland-Morgan, financial aid director at Occidental College in Los Angeles, predicted that the school and many others would “take strong exception” to restrictions on how they award their own scholarship monies.

“We feel it’s our funds to use however we want to use them,” she said. “It’s not taxpayers’ dollars.” At Occidental, only about $4,000 a year is designated specifically for minority scholarships out of the annual $14 million in financial aid--about half of which is funded by the college, Copeland-Morgan said.

Rep. Solomon P. Ortiz (D-Tex.), chairman of the Congressional Hispanic Caucus, denounced the proposed policy, contending that it “sends all the wrong signals to Hispanic youth.”

Ortiz said that the policy “represents little improvement over the original minority scholarship interpretation announced last year,” adding that the 13-member caucus “pledges to work for complete reversal of the policy.”

Not all educators were critical. Robert P. Biller, USC’s vice president for external affairs, said that Alexander’s proposals are generally followed by many schools. “I don’t see it as any problem at all,” he said. “It’s largely been already accomplished.”

Alexander said that, while there are “millions of scholarships” available for disadvantaged minority Americans, relatively few of them are “race-exclusive--those for which only persons of designated races may apply.”

When a college decides to offer a financial aid package to a student that is permissible on a need basis, or under a program to create diversity, the school may use the private race-exclusive scholarship to fund that package, the department’s proposed policy states.

The controversy that led to the policy began a year ago after the Fiesta Bowl, based in Tempe, Ariz., planned to offer universities $100,000 minority scholarships to encourage them to participate in the event. The offer was made after Arizona voters refused to create a holiday honoring slain civil rights leader Dr. Martin Luther King Jr.

Staff writer Larry Gordon in Los Angeles contributed to this story.