US universities sued over joint financial aid limits

Several top US universities are being sued in federal court on charges that they have been working together in an illegal cartel to limit the amount of financial aid they offer to their students.

The case was brought by five former students of the 16 top-ranked private universities, and their lawyers are seeking class action status, covering the situation more widely in higher education.

The institutions – which include most of the Ivy League and similarly elite universities – “occupy a place of privilege and importance in American society”, the students say in their court filing.

“And yet these same defendants, by their own admission, have participated in a price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition,” artificially inflating rates paid by students, they say.

The complaint centres on an element of a 1994 law, known as Section 568, that generally lets colleges and universities cooperate on their financial aid formulas – usually a violation of federal antitrust law – if all the participating institutions accept all of their students without regard to their financial need.

The case reaches into ongoing political challenges of affirmative action policies in the US by arguing that at least nine of the elite institutions violate that Section 568 exemption by favouring wealthier applicants in their admissions processes.

The lawsuit makes no claim about the need-blind status of the other seven universities, but argues that they are guilty either way of conspiring with the other nine institutions.

Altogether there are 28 institutions in an alliance known as the 568 Presidents Group, which meets several times a year to confer on their financial aid strategies.

The institutions named in the lawsuit are Brown, Columbia, Cornell, Duke, Emory, Georgetown, Northwestern, Rice, Vanderbilt and Yale universities, as well as the Massachusetts Institute of Technology and the California Institute of Technology, the University of Chicago, the University of Notre Dame, the University of Pennsylvania, and Dartmouth College.

The Section 568 exemption grew from a 1991 price-fixing complaint against MIT and the eight members of the Ivy League, opposing coordination meetings that the institutions acknowledged were an attempt to avoid bidding on students.

Questions of illegal coordination have been commonplace in higher education, given the tendency of academics and their institutions to work together. Just last year, some antitrust lawyers warned that US colleges may have committed legal violations by jointly cancelling some open houses for international students in response to the Covid pandemic.

The 568 carve-out never made sense, said one admissions expert, Jon Boeckenstedt, vice-provost of enrolment at Oregon State University, given that elite institutions do not need protection from market forces.

“I’ve been saying for years that need-blind admissions does not exist,” Mr Boeckenstedt said in a Twitter posting. “It’s not a luxury bestowed upon the vast majority of colleges, for one thing; and at the places that can afford it, well, you can see need in every line of an application.”

paul.basken@timeshighereducation.com