(Reuters) - McDonald's said it will revise a program that awards scholarships to Latino and Hispanic students to eliminate any eligibility criteria based on applicants' race or ethnicity, to settle a lawsuit by a group opposed to affirmative action.

American Alliance for Equal Rights, founded by affirmative action foe Edward Blum, filed in federal court in Nashville on Friday to say it had agreed to withdraw a Jan. 12 lawsuit after the fast-food chain said it would alter its program.

Since its launch in 1985, McDonald's says the HACER National Scholarships Program has awarded more than $33 million in college scholarships to more than 17,000 students. Up to 30 students annually receive up to $100,000 each.

Republican President Donald Trump has made clear that he strongly opposes workforce diversity, equity and inclusion measures and has issued executive orders seeking to dismantle them in the federal government and the private sector.

Blum's group had accused McDonald's of not going far enough when it rolled back other diversity initiatives in January but retained the scholarship program.

Blum's group alleged that, by restricting eligibility to students with at least one parent of Hispanic or Latino heritage, the program unlawfully discriminated against other ethnic groups.

McDonald's in a statement said it disagreed but "reached the conclusion that settling this lawsuit and evolving the program is the right thing to do for its recipients".

McDonald's said it will remove the parent-related criteria and instead require applicants to demonstrate their impact and contribution to the Hispanic and Latino community through their activities and leadership.

Blum said in a statement: "It is a shame that over many years thousands of students were shut out of this program because they were not the preferred ethnicity."

The Chicago-based company on Jan. 6 retired its goal for diversity in corporate leadership and shifted away from some diversity practices, citing a "shifting legal landscape".

It referred to a 2023 ruling by the conservative-majority U.S. Supreme Court that barred the consideration of race as a factor in college admissions, a result of lawsuits successfully pursued by another group founded by Blum.

Other companies have similarly backed away from diversity practises following pressure from conservative activists.