Under federal law schools can be held liable for teacher-on-student and student-on-student sexual harassment if the student reports the harassment to a school official and that official refuses to take action against the harasser. [1] This includes harassment on the basis of sexual orientation. [2]  Similarly, schools may not act with deliberate indifference to complaints of harassment on the basis of race, color, national origin, or religion. [3]  In general, a school will only be held responsible where they had a report of the harassment, did nothing or not enough to remedy the problem, and the harassment deprived the student of an educational opportunity.

[1] Failure to act on reports of harassment is a form of discrimination prohibited by Title IX of the Education Amendments of 1972, 20 U.S.C. § 1681; Davis v. Monroe County Bd. of Educ, 526 U.S. 629 (1999) (a student and parents may sue the school board where it was deliberately indifferent and failed to act on severe sexual harassment in the form of sexual advances by another student reported by several parents over a period of months); Gebser v. Lago Vista Indep. Sch. Dist., 524 U.S. 274 (1998) (for parents to sue a school district under Title IX for a teacher’s sexual harassment of a student, school officials had to know of the problem and do nothing about it).
[2] Nabozny v. Podlesky, 92 F.3d 446 (7th Cir. 1996) (finding gender discrimination and thus 14th Amendment constitutional violation by school officials who ignored years of horrific violent attacks on gay male student, reasoning that action would have been taken if a female student were similarly victimized). For the kinds of actions a school should take, see Doe v. Bellefonte Area Sch.Dist.,106 Fed. Appx. 798 (3rd Cir. 2004) (district was not liable for repeated harassment of gay student by classmates because school officials took reasonable measures to respond to each action of harassment).
[3] Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d; Davidson v. Santa Barbara High Sch. Dist., 48 F. Supp. 2d 1225 (C.D. Cal. 1998) (student-on-student racial harassment).