The lawsuit, filed Thursday in the U.S. District Court for the Eastern District of California, alleges the practice harms U.S. citizens and encourages illegal immigration. Among the defendants are the state, top state officials, and the state's two public university systems, the University of California and California State.
In June, after the administration sued, Texas ended its decades-old law. And Florida last year scrapped its law that allowed in-state tuition for high school graduates who weren't in the country legally.
Many of the students were brought to the U.S. by their parents when they were children, and supporters of the laws say they are as much a part of their communities as U.S. citizens.
"California is illegally discriminating against American students and families by offering exclusive tuition benefits for non-citizens," Attorney General Pamela Bondi said in a statement. "This marks our third lawsuit against California in one week — we will continue bringing litigation against California until the state ceases its flagrant disregard for federal law."
Gov. Gavin Newsom's office said in a statement: "The DOJ has now filed three meritless, politically motivated lawsuits against California in a single week. Good luck, Trump. We'll see you in court."
"While we will, of course, comply with the law as determined by the courts, we believe our policies and practices are consistent with current legal standards," it said in a statement.
University system officials had warned that the decision would put them in a precarious position as they negotiate with the Trump administration after the withdrawal of federal research funds.
The California State University system is the nation's largest and among its most diverse, with more than 460,000 students. More than a quarter of undergraduates are first-generation college students, according to the university system.
The University of California serves about 300,000 students.
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