Federal Funds Threat: New Bill Forces Colleges to End In-State Tuition for Unauthorized Immigrants

The “American Dream Protection Act of 2025” is straightforward: it aims to use the massive leverage of federal education funding to force states and public colleges to stop offering in-state tuition or state financial aid to students who are not lawfully present in the United States. If a public college or a state charges an unauthorized immigrant tuition at a rate equal to or less than the in-state rate for citizens, that college or state loses all federal financial assistance for higher education for that fiscal year (SEC. 3).

The Federal Funding Hammer

Think of this bill as a giant, nationwide policy lever. The core mechanism is the threat of cutting off federal financial assistance—which includes everything from Pell Grants to research funding and institutional support. For a large state university system, losing this funding could mean billions of dollars disappearing overnight. This isn't a small fine; it's a complete stop. The bill explicitly states that the Secretary of Education determines ineligibility, and if that determination is made, the institution or state is cut off (SEC. 3).

For states that currently allow unauthorized students to pay in-state tuition—a policy often justified by the idea that these students grew up locally and graduated from local high schools—this bill forces an immediate and expensive choice. They must either reverse their current tuition policies and start charging these students the higher, out-of-state rate, or risk losing all federal higher education dollars. The goal, according to the findings, is to ensure federal dollars prioritize U.S. citizens and lawful residents and to enforce a uniform federal immigration policy (SEC. 2).

Who Pays the Price?

The most immediate impact is on unauthorized students who rely on in-state tuition to afford college. If this bill passes, their tuition costs would jump dramatically, likely putting a four-year degree out of reach. But the financial fallout could hit everyone, including U.S. citizens.

Imagine a state decides to stick with its current policy, perhaps arguing that local high school graduates deserve the same tuition rate. That state would then lose all its federal education funding. When a state university loses billions, it doesn't just shrug it off. It has to make up the difference, and historically, that usually means a combination of massive budget cuts and sharp tuition increases for all students—including the U.S. citizens the bill aims to prioritize. So, a provision intended to protect citizens could ultimately lead to higher college costs for them if their state chooses non-compliance.

Policy vs. Practicality

This legislation also codifies Executive Order 14287, Section 4, giving it the full force of law (SEC. 4). While the bill's intent is clear—to enforce a strict interpretation of lawful presence in higher education benefits—the practical challenge lies in the sheer size of the penalty. The Secretary of Education is given the power to make a determination that triggers the loss of all federal financial assistance (SEC. 3). This is a nuclear option, and the lack of a tiered penalty system or a clearer process for compliance checks means the stakes are incredibly high for every state budget and every public college student across the country.