RALEIGH, N.C. — North Carolina’s prized public universities could be the biggest losers as state leaders defend a new law limiting the rights of LGBT people.

The 17-university system, which includes the University of North Carolina at Chapel Hill and North Carolina State University as well as several historically black colleges, risks losing more than $1.4 billion in federal funds if the Republicans who run the Legislature don’t reverse the law by the end of business Monday.

North Carolina Gov. Pat McCrory was among leaders warned by the U.S. Justice Department that the state is in danger of being sued and losing hundreds of millions of dollars in federal funding.

The U.S. Justice Department set that deadline in letters this week to University of North Carolina leaders, Gov. Pat McCrory and the state’s public safety agency, warning that the law violates civil rights protections against sex discrimination in education and employment.

If the Justice Department follows through on its enforcement threat, tens of thousands of students also could lose around $800 million in federally backed loans that cannot be borrowed to attend institutions that violate Title IX of the federal Civil Rights Act, UNC spokeswoman Joni Worthington said Thursday.

“It’s a very big stick,” said Katharine Bartlett, the former law school dean at nearby Duke University.

“The federal government is giving funds under certain conditions,” Bartlett said.

State legislative leaders vowed to resist what they describe as Washington’s bullying, but it remains to be seen how far they’ll go to defend a position compromised by a federal appellate ruling in Virginia last month.

The North Carolina law requires transgender people to use bathrooms and locker rooms conforming with their birth certificates, rather than their gender identity, and leaves LGBT people out of a statewide anti-discrimination code that also bars local governments from providing additional protections.

UNC President Margaret Spellings is two months into her new job, having succeeded Tom Ross, who was pushed out last year after the university system’s governing board was overhauled by the state’s ascendant Republican leaders. They have been eager to revamp a system that many consider the state’s leading bastion of liberal thinkers.

Now, the former Education Secretary to President George W. Bush has found her leadership tested as she steers the UNC system between the conservatives who just appointed her and the federal agency she once led.

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