SOUTH ROYALTON, Vt.  A renewed fight over the military’s “don’t ask, don’t tell” policy is being watched closely here on the campus of the Vermont Law School, a 600-student institution on the banks of the White River.

The Vermont Law School is one of two law schools in the nation that bar military recruiters, as a protest against the 15-year-old rule that prevents openly gay men and lesbians from serving in the military. As a result, the school is denied some federal research money  $300,000 to $500,000 a year by one outside analyst’s estimate.

“Every once in a while an issue comes to a community and, despite a cost, it comes to the conclusion that it has to stand up for its principles,” said Jeff Shields, president and dean of the law school. “It has to do with speaking truth to power, and it’s one of those roles that those of us lucky enough to be trained as lawyers hopefully take from time to time.”

Last week, an advocacy group urging the repeal of the policy released a report saying the Army and Air Force had discharged a disproportionate number of women in 2007 because of the rule. And in May, a California appeals court reinstated a lawsuit challenging the policy, while a federal appeals court in Boston upheld it a month later.