(MENAFN- Live Mint) California governor Gavin Newsom has warned that any university in the state which signs President Donald Trump's proposed“Compact for Academic Excellence in Higher Education” will“instantly” lose state funding, including billions allocated for student grants.

The Trump administration unveiled the controversial plan on Wednesday, offering substantial federal grants to nine prominent universities - including the University of Southern California (USC) - in exchange for sweeping changes to campus policies and academic structures.

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The proposed compact calls for universities to:

• Eliminate academic departments deemed hostile to conservative views.
• Limit international undergraduate enrolment to 15%, with no more than 5% from any single country.
• Accept the administration's definition of gender.
• Ban consideration of race or sex in admissions and hiring.
• Restrict political speech by employees.
• Freeze tuition fees for five years.
• Crack down on“grade inflation”.

According to the Wall Street Journal, the White House framed the compact as an initiative to support“reformer” university leaders committed to delivering what it described as“higher-quality education.”

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Governor Newsom's office denounced the plan as an attack on academic independence.

“It would impose strict government-mandated definitions of academic terms, erase diversity, and rip control away from campus leaders to install government-mandated conservative ideology in its place,” the governor's office said.“It even dictates how schools must spend their own endowments. Any institution that resists could be hit with crushing fines or stripped of federal research funding.”

In his own statement, Newsom warned of financial consequences for any institution in California that agrees to the deal.

“If any California university signs this radical agreement, they'll lose billions in state funding – including Cal Grants – instantly. California will not bankroll schools that sell out their students, professors, researchers, and surrender academic freedom.”

Cal Grants represent a $2.8 billion student aid programme, which supports tens of thousands of California students every year.

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The University of Southern California - one of the institutions approached - has an $8.2 billion endowment but also a high proportion of international students. More than 25% of its 2025 freshman class are international students, with the majority coming from China and India, according to the Los Angeles Times.

That would put USC in direct conflict with the compact's limits on foreign enrolment. USC said in a statement:“We are reviewing the Administration's letter.”

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While most American universities fall within the 15% international cap, federal data shows that around 120 institutions exceed it, including USC, Columbia University, Emory University and Boston University.

This means Donald Trump's compact could have nationwide implications, particularly for private research universities with global student communities and significant reliance on international tuition revenue.

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It remains unclear whether any university will sign Trump's 'compact'. But with Governor Newsom drawing a clear red line, California's leading institutions - many of which depend on state-backed student funding - now face a stark choice between federal incentives and state penalties.

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