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. If an institution violates this provision, it will be barred from receiving various forms of state financial support, including state operating aid, proceeds from state-supported revenue bonds issued by the New Jersey Educational Facilities Authority, proceeds from state general obligation bonds, and funds from state-administered student assistance or 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 scholarships amid the Israel-Hamas conflict. The university agreed to meet most of the students' demands, including the acceptance of Gazan students, which prompted the introduction of this bill to prevent institutions from prioritizing certain nationalities in their scholarship offerings.