By Nathalie Voit
A federal lawsuit filed in Chicago on Jan. 9 accused 16 of the nation’s top universities of participating in a price-fixing cartel designed to reduce or eliminate financial aid for prospective students.
The class-action lawsuit, filed on behalf of five former students who attended undergrad at some of the institutions named in the suit, accused the schools of unlawfully inflating tuition prices and favoring wealthy applicants in the admissions process by way of an antitrust exemption granted to the universities since 1994.
The schools enumerated in the suit are Brown, the University of Chicago, Columbia, Cornell, Dartmouth, Duke, Emory, Georgetown, the California Institute of Technology, the Massachusetts Institute of Technology, Northwestern, Notre Dame, the University of Pennsylvania, Rice, Vanderbilt, and Yale.
According to the suit, the schools manipulated a decades-old loophole in antitrust law known as the “568 Exemption,” which enables universities to conspire among competitors in the financial aid decisions process so long as all admissions are conducted on a “need-blind basis,” that is, “without regard to the financial circumstances of the student involved or the student’s family.”
However, while all defendants claimed protection under the “568 Exemption,” at least nine of the schools in question did base their admissions decisions on the financial circumstances of students and their families, the suit says, thereby disfavoring students in need of financial aid.
Georgetown, for example, “admits a range of students based on their families’ wealth, prestige, and influence.” “Some of these students are given “extra consideration” based on their “development potential”— namely, the ability of the family to make a financial contribution to the institution, and the likelihood that it will do so,” the suit said.
Similarly, Duke considers a family’s ability to donate a “plus factor” in enrollment decisions. According to a former director of undergraduate admissions, Jean Scott, several hundred applicants a year receive special attention due to their beneficial family financial circumstances.
Other colleges award “special treatment to the children of wealthy donors,” the suit said, which, given the limited number of spots, disadvantages less privileged applicants because of their lack of wealth.
Because nine of the schools are not need-blind – Columbia, Dartmouth, Duke, Georgetown, M.I.T., Northwestern, Notre Dame, the University of Pennsylvania, and Vanderbilt – the suit said all of the collaborators are immune from the 568 Exemption.
This is because the defendants have acted as willful accomplices in a conspiracy to “reduce or eliminate price competition” among their members in collectively adopting the “Consensus Approach,” which is the methodology for determining an applicant’s ability to pay, the suit said.
As a result of the conspiracy, the colleges have overcharged over 170,000 students who were eligible for financial aid “by at least hundreds of millions of dollars” for nearly two decades.
The actions of what the suit dubs the “568 Cartel” are in direct violation of Section 1 of the Sherman Act, and therefore constitute a major breach of federal antitrust law, the suit contended.
“In critical respects, elite, private universities like Defendants are gatekeepers to the American Dream,” the suit said. “Defendants’ misconduct is therefore particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents. The burden of the 568 Cartel’s overcharges falls in particular on low- and middle-income families struggling to afford the cost of a university education and to achieve success for their children. In addition, unlike prior admissions scandals, such as Varsity Blues, the 568 Cartel’s systematic suppression of financial aid is the official policy of its participants.”
Karen Peart, Yale’s director of media relations, said the school’s “financial aid policy is 100 percent compliant with all applicable laws,” according to Inside Higher Ed. Other institutions, including Duke, Rice, and Columbia, refused to comment on the pending litigation.