A federal appeals fight in Texas has pushed state college aid for illegal immigrants back into national focus, nearly a year after a judge blocked the state’s 24-year-old in-state tuition policy for students without legal status.
The latest move came in June 2026, when student groups, immigrant-rights organizations, and Austin Community College asked the 5th U.S. Circuit Court of Appeals to let them defend the Texas Dream Act. The law had allowed certain undocumented students to pay in-state tuition at Texas public colleges if they met education and residency rules.
Texas Law Ends After DOJ Lawsuit
Texas adopted the policy in 2001, becoming the first state to offer in-state tuition to some students without legal status. The law applied to students who attended Texas schools, graduated from a Texas high school, or earned an equivalent diploma, and lived in the state for at least three years before graduation.
Students also had to sign an affidavit saying they would seek permanent legal status when eligible.
That changed in June 2025, when the Justice Department sued Texas. In its federal lawsuit against Texas, the department said the policy violated federal law by giving illegal immigrants a tuition benefit not available to some U.S. citizens from other states.
Texas Attorney General Ken Paxton agreed with the federal government and declined to defend the law. U.S. District Judge Reed O’Connor then blocked enforcement.
Appeals Court Asked to Reopen Fight
The case is now before the 5th Circuit after advocates argued that the affected students never had a full opportunity to defend the law.
Students for Affordable Tuition, La Unión del Pueblo Entero, Austin Community College, and a former beneficiary asked the appeals court to intervene. They say the ruling created sudden cost increases for students who had built college plans around in-state tuition.
According to a Texas Tribune court report, the groups argued that the state and federal government resolved the case too quickly. They said colleges and students were left confused and facing higher costs.
The Justice Department and Paxton’s office argue the blocked law conflicted with federal immigration restrictions and should not be revived.
State Aid Numbers Fuel Dispute
The legal fight has exposed a larger debate over public money and college affordability.
A 2025 Every Texan report said Texas colleges and universities distributed $635.2 million in state-funded gift aid to 133,989 students in 2023. Of that amount, 3,566 Texas Dream Act students received $17.5 million in state-supported grants.
That accounted for less than 3% of state gift aid distributed that year, according to the group’s Texas Dream Act data.
Supporters say the figures show that illegal immigrant students were not taking a large share of aid. They argue that many grew up in Texas and cannot receive most federal financial aid.
Critics say taxpayer-backed aid should go first to citizens and lawful residents, especially as American families face rising tuition and student debt.
Americans Face Higher College Costs
The fight has gained political force because college costs remain high nationwide. Many U.S. families face tuition bills, housing costs, fees, and loan payments. Out-of-state students often pay far more than in-state students at public universities.
That difference is central to the federal argument. Critics say it is unfair for an illegal immigrant who qualifies under a state residency rule to receive a lower tuition rate than an American citizen from another state.
Supporters reject that comparison. They say affected students are often longtime state residents who attended local schools and whose families pay taxes.
They also argue that denying college access can reduce future earnings and tax revenue. A college degree usually raises lifetime income.
State Policies Remain Divided
Texas is not the only state facing pressure over college benefits for students without legal status.
The Higher Ed Immigration Portal tracks state laws for undocumented and DACA students. Its state tuition aid tracker shows that several states and Washington, D.C., still offer in-state tuition, state financial aid, or both to eligible students.
California, New York, Illinois, New Jersey, Washington, Oregon, Maryland, and Massachusetts provide some form of access, depending on local rules.
Other states have moved in the opposite direction. Alabama, Georgia, and South Carolina have restrictive policies. Florida also repealed in-state tuition eligibility for undocumented students.
DACA Uncertainty Adds Pressure
DACA has not resolved the issue. It gives temporary deportation protection and work authorization to some immigrants brought to the United States as children, but not permanent legal status.
Many students covered by state tuition laws are DACA recipients or young people who arrived as children but never received DACA protection. They are generally barred from Pell Grants, federal loans, and federal work-study.
Texas Decision Could Reach Beyond Texas
The Texas case could shape how other states write or defend tuition laws. If courts accept the federal argument, similar policies may face legal challenges. Lawmakers could be forced to remove benefits or rewrite rules around residency and high school attendance.
If advocates are allowed to defend the Texas law and succeed, states may have more room to preserve tuition policies for students raised in local school systems.
For now, the Texas Dream Act remains blocked. The 5th Circuit has not issued a final ruling on whether student groups, immigrant-rights advocates, and Austin Community College can step in to defend it.
