After the Supreme Court declined to hear the Hopwood case in 1996, Texas became one of the first states forced to consider how to promote diversity in higher education without giving preferences by race and ethnicity in student aid and admissions. The situation in Texas may change as the Hopwood decision is reviewed by several entities, though currently, Hopwood and its interpretation by the Attorney General remain the law, and similar restrictions are being implemented nationwide. Promoting diversity in higher education poses challenges for Texas, and although the Hopwood decision concerned students denied admission to the University of Texas Law School, it has been applied to all public undergraduate and graduate higher education statewide. This report highlights undergraduate admissions and aid as follows: "Hopwood Developments"; "Past Legislative Action in Texas Re: Hopwood and Financial Aid"; "Results and Recommendations of Studies Conducted in Texas" (shift to socioeconomic factors and need for improved K-12 capacity, higher education outreach, and additional financial aid); "Federal Financial Aid"; "Other States' Financial Aid Programs"; "Federal Outreach Programs"; "Other States' Outreach Programs"; "Post-Hopwood UT and A&M Aid and Outreach"; "Pending Texas Legislation"; and "Challenges of Retention, K-12 Preparation, and Financing." (Contains 65 references.) (SM)