Late last year the Bush administration wisely repudiated a dubious legal ruling by the Department of Education that would have prevented any college receiving any federal money from administering a scholarship limited to minority recipients. In its haste to limit the political damage, the administration relied on a legal theory that is even more dubious. Fortunately, Secretary of Education-designate Lamar Alexander has now informed his confirmation hearing that he intends to rethink the entire problem.

The legality of scholarships limited to minorities has been a sleeping dog for many years. It was awakened when the sponsors of the Fiesta Bowl football game in Phoenix were criticized for holding the game in a state where the voters had recently defeated a ballot proposal for a holiday honoring Martin Luther King Jr. The sponsors offered an additional $100,000 to each college invited to participate in the game -- the money to be earmarked for scholarships limited to minority students. The colleges, which receive some federal financial assistance, asked the Department of Education whether they could accept the funds. The department, apparently without White House consultation, ruled that administration of these restricted scholarships by a college receiving any federal aid would violate the anti-discrimination provisions of Title VI of the Civil Rights Act, as amended by the Civil Rights Restoration Act of 1988.

There is a real irony in all this. In its 1987 Grove City decision, the Supreme Court had construed Title VI to cover only those college or university programs and activities that receive federal aid, and not those programs and activities that the college or university funds without federal aid. In the 1988 amendment, however, Congress, over a presidential veto, effectively reversed the Grove City decision by specifying that Title VI applied to all the operations of any college or university that received federal funds for any of its programs or activities, an amendment obviously designed to help minorities rather than harm them.

When the department interpreted the amendment to bar colleges from administering funds restricted to helping minorities, the White House immediately recognized that this surprise ruling went well beyond the administration's well-known stand against quotas. So it made the department reverse itself and issue a new ruling that while a college or university receiving federal aid may not use its "own" funds (whatever they may be) to award scholarships limited to minorities, it may accept gifts of funds from outside private sources on condition they be used for such scholarships. But under the 1988 amendment, if a college receives any federal funds, it cannot conduct any "operation" that discriminates in admissions or benefits. It seems plain that "operation" covers the administering of minority scholarships, even when the college receives the funds from somebody else.

The flaw in the department's original ruling was not that the funds came to the college from someone else, but that it focused on the terms of a single gift to each college, not on the entire scholarship program of that college. Most institutions maintain a broad spectrum of student aid with a wide menu of loans, grants and work opportunities. This menu usually includes a variety of programs with particular rules and conditions established by the institution or the donor of the funds, based on such factors as the applicant's other earnings or sources of aid, the income of the applicant's family, the applicant's field of study, alumni relationship, gender, marital status, religion or even race, color or national origin.

Within such broad programs of financial aid, the fact that some scholarships are limited to minorities should not automatically make them discriminatory against other students. The test of a minority scholarship program should be whether other needy, nonminority students have a reasonable prospect of receiving financial aid from other programs administered by the college. At any institution where minority scholarships are a minor fraction of all the aid available, and where most needy students do in fact receive aid under one or more of the many programs the institution maintains, there may be no undue discrimination in benefits based on race, color, national origin or other forbidden grounds.

In the Bakke case, the Supreme Court through Justice Powell held that consideration of race as one factor in admission to a state university is constitutionally permissible, while rigid quotas are not. Just last term, the court upheld a Federal Communications Commission policy, mandated by Congress, that permits a broadcast licensee in regulatory difficulties to avoid a hearing and possible loss of license by selling, at a discount, to a qualified minority applicant (Metro Broadcasting v FCC). The court, through Justice Brennan (in his last opinion), said:

"We disagree that the distress sale policy imposes an undue burden on nonminorities. . . . The distress sale policy is not a quota or fixed quantity set-aside. . . . In practice, distress sales have represented a tiny fraction -- less than four tenths of one percent -- of all broadcast sales since 1979."

Thus the distress sale policy met the constitutional test laid down by the court:

"{W}e similarly find that a congressionally mandated benign race-conscious program that is substantially related to the achievement of an important governmental interests is consistent with equal protection principles so long as it does not impose undue burdens on nonminorities."

The test to be applied to minority scholarships should be similar to the one adopted in Metro Broadcasting. A single scholarship fund restricted to minority students should not be held legally discriminatory if the entire student aid program of the college, taken as a whole, does not, in the language of Metro, "impose undue burdens on nonminorities" or anyone else. It is a test that some minority scholarships in some institutions may conceivably fail, but that the great majority should readily pass. Just as nonminority firms in Metro were "free to compete for the vast remainder of license opportunities," nonminority students are free to compete for the vast remainder of scholarship opportunities that most colleges and universities offer.

The writer, a Washington lawyer, was White House counsel to President Jimmy Carter.