A federal appeals court has kept in place a ruling that stops Texas from handing illegal aliens discounted in-state college tuition while charging out-of-state American citizens far more.

In its July 9 opinion, the 5th U.S. Circuit Court of Appeals affirmed a lower court’s refusal to let outside groups enter the case and defend the tuition break. Judge Jerry Smith wrote that a federal statute preempts the Texas provisions, because a state cannot grant illegal aliens a residency-based tuition benefit unless every U.S. citizen qualifies for it regardless of where they live. The panel found the groups offered no viable defense and, as nonparties, could not appeal the judgment itself.

The Justice Department sued Texas in June 2025, and the state agreed to a consent judgment blocking the law that same day. (RELATED: Federal Appeals Court Allows Red State To Enforce Migrant Arrest Law)

Then-Attorney General Pam Bondi praised the agreement.

“The Justice Department commends Texas leadership and AG Ken Paxton for swiftly working with us to halt a program that was treating Americans like second-class citizens in their own country,” Bondi said in a statement released by the Justice Department. “Other states should take note that we will continue filing affirmative litigation to remedy unconstitutional state laws that discriminate against American citizens.”

The Fifth Circuit has held that federal law prevents states from providing in-state tuition benefits to illegal aliens. pic.twitter.com/zLwByj3Yup

— Brett Shumate (@AAGShumate) July 9, 2026

Texas started charging the reduced rate to those students in 2001, the first state to open the benefit to them, the Texas Tribune reported. The government built its case on a 2023 appeals court decision that flagged likely preemption trouble with the state’s policy.

Judge Irma Carrillo Ramirez dissented. She argued the relevant statute violates the Tenth Amendment by directing states rather than regulating individuals, pointing to the Supreme Court’s ruling in Murphy v. NCAA. Ramirez also expressed doubt that a genuine dispute existed, noting the district court approved the deal roughly six hours after the suit landed.

The would-be defenders had made the same argument, telling the panel the case amounted to a friendly suit because Texas and the Justice Department wanted identical results, Courthouse News Service reported.

The Texas case is one of several the Justice Department has brought against similar state laws, the Presidents’ Alliance litigation tracker shows. A federal court in Minnesota rejected the government’s reading of the relevant statute in March.