Trump has been criticized - including by many Republicans - for a series of statements after an anti-racist counterprotester was killed by an alleged Nazi sympathizer who drove his vehicle into the crowd.
The following prominent Republican leaders have denounced Trump by name: Sen. Two police on duty also died when their helicopter crashed.
"He has inside information I don't have", Falwell Jr. said.
The group intends to mail the diplomas to Falwell's office on September 5, and it also seeks his removal as the school's president.
Those actions, the letter says, "have filled us with shame and anger as alums".
"My support for the president is his bold and truthful willingness" to name names, Falwell said, joining a chorus of Trump defenders who criticize former President Obama's response to similar national crises.
"He's substance over form".
"It doesn't really get too much more important than this", he said of standing up against the hate groups. "I just know that it's totally true what you just said, there's no good KKK, there's no good white supremacist". And I admire him for that'.
Some Liberty graduates see Falwell's association with Trump as both a personal liability and a moral embarrassment.
Trump initially responded by blaming "many sides" for the violence, and then made a statement condemning white supremacists, before eventually giving an off-the-cuff statement in which he claimed that there were "very fine people on both sides". "I don't know if there were historical purists there who were trying to preserve some statutes".
"I'm sending my diploma back because the president of the United States is defending Nazis and white supremacists", 2006 graduate Chris Gaumer told NPR.
Trump alienated fellow Republicans, corporate leaders and US allies with his comments about the violence that broke out at a white nationalist protest against the removal of a Confederate statue in Charlottesville. "So yes, I think he could be more polished and more politically correct, but that's the reason I supported him, is because he's not".
Falwell Jr. insisted that the president was not a racist, but no one should see the Evangelical leader as an authority figure on racism.