Judge blocks Trump's school funding threats over DEI programs, protecting $1.3B

U.S. District Judge Stephanie Gallagher ruled on Aug. 14, 2025, that the Trump Education Department violated the law when it threatened to strip federal funding from schools and universities that maintained diversity, equity, and inclusion programs. Her 76-page opinion in American Federation of Teachers v. U.S. Department of Education (D. Md., No. 1:25-cv-00628) vacated two agency actions: a February 14 "Dear Colleague" letter issued by Acting Assistant Secretary Craig Trainor and an April 3 certification requirement.

Gallagher found both directives violated the Administrative Procedure Act because the Education Department bypassed required notice-and-comment rulemaking. She also ruled the letter imposed unconstitutional viewpoint discrimination under the First Amendment. "The government did not merely remind educators that discrimination is illegal: it initiated a sea change in how the Department of Education regulates educational practices and classroom conduct," Gallagher wrote, finding that millions of educators reasonably feared their lawful speech could be punished.

Gallagher was appointed by Trump in 2017. She ruled against the administration on five of six counts. Her ruling turned on procedural violations under the APA and constitutional text, not policy preferences. Her opinion explicitly stated she took "no view on whether the policies were 'good or bad, prudent or foolish, fair or unfair.'"

The Education Department's April 3 certification requirement had given states 10 days to certify compliance or lose access to roughly $45 billion in annual federal K-12 funding. That sum covers Title I grants ($18.4 billion) serving 26 million students in high-poverty schools, IDEA special education funds ($14.2 billion), and child nutrition programs. The financial threat affected the most vulnerable student populations.

A separate case moved faster in New Hampshire. Judge Landya McCafferty granted a preliminary injunction on April 24, 2025, finding the February letter "textbook viewpoint discrimination" and noting it failed to define what a "DEI program" even was. Three federal courts — in Maryland, New Hampshire, and Washington, D.C. — all issued temporary stays on April 24, 2025, halting enforcement of both agency actions while the Maryland case proceeded to summary judgment.

The Trump administration appealed Gallagher's August ruling to the Fourth Circuit. On Jan. 21, 2026, the Justice Department dismissed that appeal, leaving the ruling intact and effectively ending enforcement of both the Dear Colleague letter and the certification requirement. Schools can maintain diversity programs without losing federal funding, and educators can discuss topics like systemic racism and the history of segregation without risk of federal retaliation.

The Dear Colleague letter directed federally funded educational institutions to stop using race or race-based proxies in all operations. Teachers in New Hampshire testified that the vague directive chilled classroom discussions of the Civil Rights Act, Jim Crow, and the 1921 Tulsa Race Massacre. Judge McCafferty found educators faced a credible threat of institutional funding loss for protected speech — a documented First Amendment chilling effect extending well beyond admissions decisions.

The Supreme Court's 2023 ruling in SFFA v. Harvard barred race-conscious college admissions only. Gallagher found the Education Department dramatically exceeded that ruling by declaring broad categories of classroom speech and voluntary diversity initiatives illegal. She cited 20 U.S.C. § 7906a, which explicitly forbids conditioning grants on a school adopting or dropping specific curriculum or programs of instruction — a statutory limit the department's actions violated directly.

Democracy Forward, a legal advocacy firm representing the plaintiffs alongside the American Federation of Teachers, called the ruling an important victory. "Threatening teachers and sowing chaos in schools throughout America is part of the administration's war on education, and today the people won," said Skye Perryman, the group's president and CEO. The APA's standard vacatur remedy, which the court applied here, renders unlawful agency actions void and nonexistent across the nation — not just for the specific plaintiffs.