Every public school district in America is receiving a letter from the Obama administration Friday directing them to allow transgender students to use school restrooms that match their gender identity or be in violation of federal law.

The letter, described as “guidance” by the administration, is not legally binding, but suggests that if schools deny transgender students the right to use the restroom of their choice, they would be non-compliant with the federal law known as Title IX. If they are in violation of Title IX, they could lose federal funding or face a federal lawsuit.

The letter is being seen by some as adding to the debate over transgender rights that was sparked by recent legislation in North Carolina concerning which public restroom a transgender person is allowed to use. Both North Carolina officials and the federal government has filed suit over the new law.

Here’s a quick look at what Title IX is and how it applies to the use of restrooms by transgender students.

What is Title IX?

Title IX, or, officially, Title IX of the Education Amendments of 1972, reads: “No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any educational program or activity receiving Federal financial assistance."

The law covers elementary and secondary schools, colleges and universities, plus any education or training program that receives federal financial assistance.

It’s aim is to prevent the use of federal monies in support  of sex discrimination in educational programs or activities. If an institution is not compliant with Title IX, the institution risks losing federal funds.

What does it have  to do with where people go to the restroom?

The letter sent today is “guidance”  from the federal government – or a gentle reminder that transgender students are included under the “sex discrimination” aspect of Title IX.

The letter offers suggestions on ways to make sure transgender students are treated fairly and included in all federally-funded programs the schools offer.

What kind of funding could schools lose if they are non-compliant?

This is where the rubber could meet the road as far as what it could cost  a school district to be “non-compliant” under Title IX.

Take, for example North Carolina.

The new law in North Carolina, House Bill 2 – or HB2 – reads in part,  "public agencies shall require every multiple occupancy bathroom or changing facility to be designated for and only used by persons based on their biological sex." In this case, “public agencies” include the public school system. What that means is a student born a female may only use the women’s restroom at public schools, even if she identifies with and looks and acts as a male.

North Carolina receives $4.58 billion a year from the federal government to help run its public schools. That money, a substantial portion of the state's budget for public schools, could be in jeopardy if HB2 stands.

On average, the federal government provides 12 percent direct funding for elementary and secondary schools in  the United States.

While the threat of losing funding has been implied in today’s letter,  an estimated 80 percent of public  schools are not compliant with some aspect of Title IX, and, as of today, no school has lost  funding for being non-compliant.

They have, however, lost money fighting lawsuits brought by the U.S. government over discrimination in school programs.

Who would file a lawsuit?

The Justice Department could file a suit against any federally-funded public agency.

Can I read the letter?

Click here to see the letter sent to schools today. Attached to the letter is a 25-page document describing "emerging practices" that are in place in many schools and describing some of the solutions to questions schools may have on how to become compliant with Title IX when it comes to transgender students.

Sources: The  United States Justice Department; The New York Times; Atlas.com; Politicofact;