More than a dozen of the nation’s top universities—including Ivy League universities Yale, Brown, Columbia, Dartmouth, Cornell, and the University of Pennsylvania—allegedly used their financial aid policies to rip off more than 170,000 students for hundreds of millions of dollars, according to a lawsuit filed in Illinois Sunday.
The lawsuit, filed on behalf of five former students, alleges that for two decades, the universities “have participated in a price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition, and that in fact has artificially inflated the net price of attendance for students receiving financial aid.”
This “cartel” refers to the 568 Presidents’ Group, a committee of private colleges and universities formed in the late 1990s to create a “consensus methodology” for “determining the family's ability to pay for college,” or a formula for financial aid, according to the group’s website.
The group was formed after high-profile Justice Department antitrust lawsuits against the Massachusetts Institute of Technology and several Ivy League universities for engaging in fixing the price of tuition and faculty salaries. Federal antitrust legislation passed in 1994 further regulated the process, saying that colleges can work together to share some financial aid information, including a common application for financial aid.
That regulation, under Section 568 of the Improving America’s Schools Act of 1994, offers exemptions to antitrust lawsuits such as the ones faced by MIT and the Ivy League schools if universities don’t factor students’ financial needs into their admission decisions. But the lawsuit alleges that by coordinating through the group, the universities have “explicitly aimed to reduce or eliminate price competition among its members,” and thus do not qualify for the exemption.
A Yale spokesperson told the Wall Street Journal, which first reported the lawsuit, that the university’s financial aid policy is “100% compliant with all applicable laws.”
Eric Rosen, a former assistant U.S. attorney in Pittsburgh and Boston who served as the lead prosecutor in the Varsity Blues college admissions scandal trials, is one of the lawyers working on behalf of the plaintiffs.
“While conspiring together on a method for awarding financial aid, which raises net tuition prices, defendants also consider the wealth of applicants and their families in making admissions decisions,” Rosen told the Wall Street Journal.
Ten other top universities that are or have been part of the 568 Presidents’ Group over the past two decades are named as defendants in the lawsuit including MIT, Duke, Emory, Rice, Georgetown, Northwestern, Notre Dame, and more. The other schools named in the lawsuit either declined to comment or did not respond to requests for comment, according to the Wall Street Journal.
The lawsuit says that the more than 170,000 students who received need-based financial aid since 2003—as well as anyone who helped them pay their tuition, such as parents and guardians—are potential plaintiffs in a class action against the colleges.
“In critical respects, elite, private universities like Defendants are gatekeepers to the American Dream,” the lawsuit says. “Defendants’ misconduct is therefore particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents.”
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