Public school districts that have new policies establishing minimal competency programs that consequently deny some handicapped students a standard diploma have been subjected to litigation. Legal decisions are discussed, addressing, first, the question of fair standards and, second, the fairness of the procedures for administering new graduation standards. Fair standards are determined by the courts to require that handicapped students be given a reasonable opportunity to achieve the status represented by a standard diploma. The procedures for implementing new diploma standards have been challenged by handicapped students based on the Education for All Handicapped Children Act (EAHCA), Section 504 of the Rehabilitation Act, and due process. The courts have ruled that EAHCA does not require that handicapped students be granted a status that they cannot or have not earned. Section 504 requires that procedures for administering diploma tests must allow for such modifications as may be necessary to measure students' knowledge and not their handicapping conditions. Due process requires adequate notice of new diploma standards so that handicapped students have sufficient time to prepare. In summary, both handicapped and nonhandicapped students who fail to meet legally valid graduation requirements may be denied standard diplomas. (MLF)