Finance

16 Ivy League and elite universities sued for alleged financial aid conspiracy

Sixteen Ivy League and American Elite University have been prosecuted in federal court for conspiring to illegally rescind competitive financial aid offers to students in a rate-fixing scheme.

The lawsuit alleges that the conspiracy artificially inflated the cost of attendance for all financial aid recipients, and led to “over 170,000 financial aid recipients” overcharging in the amount of at least hundreds of millions of dollars.

A request for a group jury trial, filed Sunday in Illinois federal court by five former students at Vanderbilt University, Northwestern and Duke University, seeks to compensate people who received financial aid packages that did not fully cover the cost of tuition, room and board. One of the 16 self-described “blindly needy” universities since 2003.

The substance of the lawsuit hinges on a portion of the 1994 Federal Education Act called “Section 568,” an exemption from antitrust laws for colleges and universities that ostensibly do not consider an applicant’s financial status during an admissions report, known as blind admission. This exemption allows colleges and universities that need to blindly ignore outdated antitrust laws and cooperate with their competitors.

Sayles Hall on the campus of Brown University in Providence, R.I. on April 25, 2019.Getty Images . file

Suit names: Brown University, Caltech, University of Chicago, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, Massachusetts Institute of Technology, Northwestern University, University of Notre Dame, University of Pennsylvania, Rice University and Vanderbilt University and Yale University as defendants.

Spokespeople for Dartmouth College and the Universities of Pennsylvania, Chicago, Cornell, Notre Dame, Emory, Northwestern, Duke and Rice declined to comment on the pending lawsuits.

Columbia, Georgetown, MIT and Vanderbilt did not immediately respond to NBC News’ requests for comment.

In an email, Yale spokeswoman Karen N. Burt, “Yale University’s financial aid policy is 100% compliant with all applicable laws.”

Caltech spokeswoman Kathy A. Svitel declined to comment on the pending lawsuit but said:[w]We have confidence, however, in our financial assistance practices.”

Brown University spokesperson Brian E. Clark wrote, “If we receive the complaint, we will conduct a full review and respond as appropriate through the legal process.”

“Based on a preliminary review, the complaint against Brown is baseless, and Brown is prepared to make a vigorous effort to make this clear,” Clark wrote.

The lawsuit alleges that a framework called the “consensus methodology,” used in admissions processes by a consortium of universities called the “568 Presidents Group,” “is expressly intended to reduce or eliminate price competition among its members” and says canceling the competition is “merely a way to stick around for uniforms.” and less level of assistance for all prospective students. “

The 568 chiefs group did not immediately respond to a request for comment. John J. DeGioya, Georgetown’s president and chair of the 568-Presidents’ Group Steering Committee, also did not immediately respond to a request for comment.

The group says on its website that the “consensus approach” or consensus methodology “consists of a set of common criteria for determining a family’s ability to pay for college” whose goal is to “reduce significant variability in the results of a need analysis that has been tried in recent years” .

They further specify that the methodology “deales exclusively with the family’s ability to pay for college.”

The lawsuit alleges that “the purpose of the 568 Cartel is to reduce or eliminate competition among cartel members over offers of financial assistance to potential students.”

Furthermore, the lawsuit states that “antitrust principles” dictate that “competitors will not reach such an agreement, because they will be incentivized to increase assistance and reduce net attendance rates to attract students.”

“In the absence of collusion, Defendants will compete on price for the students they decide to accept because those are the students the admissions department has determined will meet the goals of the admissions process,” the lawsuit says.

The lawsuit also alleges that many of these colleges and universities do not need to be completely blind, and therefore do not qualify for the antitrust exemption.

The lawsuit alleges that the 16 institutions consider the financial means of the many students and families who apply through three main ways: by prioritizing admission of children of wealthy “or potential future” donors, through a practice known as “registration management,” and by considering Routinely and extensively in the financial means of students accepted from waiting lists.

The lawsuit says that exemption 568 from antitrust laws, which prohibit conspiracies between competitors, applies only in colleges and universities where “All Accepted students are accepted on the basis of blind need”, i.e. “regardless of the financial circumstances of the concerned student or the student’s family”.

The lawsuit alleges that “the 568 cartel’s result is not only to reduce the total amount of aid provided by each school, but also to reduce the total amount of aid provided to each prospective student in each respondent school.”

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