This bill prohibits institutions of higher education from establishing scholarship funds or student assistance programs that are exclusively available to students who are citizens or permanent residents of countries or territories controlled by foreign terrorist organizations, as designated by the United States Secretary of State. Institutions that violate this provision will face significant penalties, including the loss of state operating aid, proceeds from state-supported revenue bonds issued by the New Jersey Educational Facilities Authority, proceeds from state general obligation bonds, and any funds awarded to students through state-administered scholarship programs.

The legislation is a response to recent student protests at Rutgers University-New Brunswick, where students demanded the acceptance of displaced Gazan students for scholarship opportunities amid the Israel-Hamas conflict. The university had previously agreed to meet several demands from the student group, including the acceptance of Gazan students, which prompted the introduction of this bill to prevent similar scholarship programs in the future.