Sixteen Elite, Private Universities Conspired to Reduce Financial Aid, Class Action Alleges [UPDATE]

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Sixteen top private universities have been named in a proposed class action that accuses the schools of conspiring to reduce financial aid in a manner that stifled competition and caused some students to overpay for their education.  

The 61-page case claims the “price-fixing cartel” operated by the defendants, who include Brown, Duke and Yale, among others, has artificially inflated the price of attendance for students who receive financial aid. Moreover, the lawsuit alleges at least nine of the universities have favored wealthy students in the application process over applicants who needed financial aid while the rest knowingly conspired with them to reduce the amount of financial aid provided to admitted students.

“In short,” the complaint summarizes, “due to the conduct challenged herein, over almost two decades, Defendants have overcharged over 170,000 financial-aid recipients by at least hundreds of millions of dollars, in violation of Section 1 of the Sherman Act.”

The defendant universities include Brown University, the California Institute of Technology, the University of Chicago, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, the Massachusetts Institute of Technology, Northwestern University, the University of Notre Dame de Lac, the University of Pennsylvania, William Marsh Rice University, Vanderbilt University and Yale University.

According to the case, Section 568 of the Improving America’s Schools Act of 1994 allows two or more universities to work together to develop financial aid policies as long as the universities admit all students on a need-blind basis, meaning the student and their family’s financial circumstances are not factored into the decision. Per the suit, conspiratorial activity among competing schools would otherwise be prohibited under antitrust laws.

The lawsuit alleges the defendant universities have claimed their membership in the 568 Presidents Group, formed several years after Section 568 was enacted, has exempted their price-fixing activities from liability under antitrust laws. Per the suit, the 568 Presidents Group is an affiliation of colleges and universities who purport to admit students on a need-blind basis and work together to agree on “a set of common standards for determining the family’s ability to pay for college,” known as the consensus approach.

According to the suit, however, the defendants’ “longstanding conspiracy” would only be exempt from antitrust laws if they were truly admitting students on a need-blind basis. The lawsuit alleges that at least nine of the schools—namely, Columbia, Dartmouth, Duke, Georgetown, MIT, Northwestern, Notre Dame, Penn and Vanderbilt—have indeed considered applicants’ financial circumstances as a determining factor in accepting them. The case claims these schools have either admitted wealthier students on their waitlists over students who needed financial aid, favored the children of wealthy past or potential donors, or engaged in a “largely secretive” practice known as enrollment management that effectively limits the number of financial-aid-eligible students who are admitted to the schools in order to meet budgetary goals.

According to the case, a former Penn admissions officer admitted in 2009 that the university unofficially favored “full-paying” waitlisted students over those who needed financial aid, especially when “endowments are down and cost-cutting is essential.”

The lawsuit alleges that although the remaining defendant universities—Brown, CalTech, Chicago, Cornell, Emory, Rice and Yale—“may or may not have followed a need-blind admissions policy,” they knowingly conspired with the other schools as members of the 568 Presidents Group. Per the complaint, these universities “knew or should have known” that the other defendants were not admitting students on a need-blind basis.

The case claims the defendants’ conduct is “particularly egregious” because it has hampered students’ efforts to achieve upward mobility through enrollment in elite, private universities. According to the suit, the defendants, who the case describes as “gatekeepers to the American Dream,” have disproportionately burdened low- and middle-income families “struggling to afford the cost of a university education and to achieve success for their children.”

The lawsuit looks to represent U.S. citizens or permanent residents (and purchasers of tuition, room or board on their behalf) who have enrolled in one or more of the defendants’ full-time undergraduate programs; received need-based financial aid from one or more of the schools; paid tuition, room or board not fully covered by financial aid; and first enrolled during one of the following periods:

• Brown—from 2004 through 2012;
• CalTech—from 2019 to the present;
• Chicago—from 2003 through 2014;
• Columbia—from 2003 to the present;
• Cornell—from 2003 to the present;
• Duke—from 2003 to the present;
• Dartmouth—from 2004 to the present;
• Emory—from 2004 through 2012;
• Georgetown—from 2003 to the present;
• MIT—from 2003 to the present;
• Northwestern—from 2003 to the present;
• Notre Dame—from 2003 to the present;
• Penn—from 2003 to the present;
• Rice—from 2003 through 2009, and from 2017 to the present;
• Vanderbilt—from 2003 through 2019; and
• Yale—from 2003 through 2007, and from 2018 to the present.

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