The Education Department's partial reversal of position yesterday on the legality of scholarships reserved for minorities left supporters and opponents of such aid programs unhappy with the result and mystified by the legal basis for it.

The department announced that it would allow colleges and universities that receive federal funds to administer race-exclusive scholarships set up by private donors -- for example, the Fiesta Bowl funds that the department said last week would violate federal anti-discrimination law if used for such scholarships.

But, the department said, private universities that accept federal aid may not use their own funds to establish race-exclusive scholarships.

In addition, the department said, there would be a four-year "transition period" for colleges to figure out how to apply the new ruling.

Those who believe that reserving scholarships for minorities does not violate the federal civil rights law were unhappy with the part of the department's ruling barring universities from using their own funds to do so. Those who adhere to the opposite interpretation of anti-discrimination law were chagrined that the ruling allows colleges to accept private funds with racial restrictions.

"That's the dumbest thing I ever heard," Judith Lichtman of the Women's Legal Defense Fund said of the newly announced policy, terming it "gobbledygook which just proves they were attempting to deal with a political problem in a way that makes no sense. It doesn't make any sense to have affirmative action but not do it with your own money."

On the other side of the issue, conservative legal scholar Bruce Fein said the announcement was "about as crass a political judgment superimposed on the law as one can imagine." Referring to the four-year transition period, he said, "I'm surprised that they didn't choose 1992 after the first Tuesday in November. That perhaps would have been a little too conspicuous, but that's obviously what the game is."

Both sides said they could see basis in the law for making a distinction between private funds administered by a college, on the one hand, and the institution's own financial aid funds. Indeed, they said, the Civil Rights Restoration Act of 1987 made clear that an institution that receives federal funds is prohibited from discriminating -- if such scholarships are in fact illegal discrimination -- in "all" of its operations.

"What it appears that they've done here is attempted to amend the Civil Rights Restoration Act with a press release," said John Scully of the conservative Washington Legal Foundation, which has filed complaints with the Education Department about minority-only scholarships.

The Civil Rights Restoration Act overturned the Supreme Court's 1984 ruling in Grove City College v. Bell, in which the court said the federal law prohibiting sex discrimination in "any education program or activity receiving Federal financial assistance" applied only to the specific program, and not to the institution as a whole.

William Bradford Reynolds, who headed the Justice Department's civil rights division during the Reagan administration, said that in passing the Civil Rights Restoration Act, "it was quite clear that the understanding was that if the university received a dollar of federal funds it could not participate in a program" that discriminated, no matter where the money came from.

While civil rights groups do not view such scholarships as discrimination prohibited by federal law, they agreed that the distinction between outside and university funds makes no sense under the Civil Rights Restoration Act.

"The distinction is not one that I've seen recognized in the law anywhere," said Janell Byrd of the NAACP Legal Defense and Educational Fund.

Disagreement also emerged over the Education Department's apparent distinction between private and public institutions. Officials said they interpret Supreme Court decisions on the Constitution's equal protection clause to prohibit public colleges from spending state or local funds for such scholarship programs.

Civil rights organization activists rejected that constitutional analysis altogether.

While conservatives said they agreed with the department's reading of the cases, they said it did not go far enough.

Such an interpretation, conservatives said, would apply to private schools as well because of Supreme Court rulings placing nondiscrimination obligations on private institutions receiving federal funds.