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Lawsuit Alleges Over a Dozen U.S. Universities Illegally Collaborated to Limit Financial Aid

By Owen Daugherty, NASFAA Staff Reporter

A group of 16 colleges and universities are being sued, as five former students allege the schools colluded to determine financial aid offers for students, unfairly limiting financial aid offers by utilizing a shared methodology to calculate financial need, according to a lawsuit filed in federal court in Illinois this week.

The Wall Street Journal first reported that the schools allegedly weighed candidates’ ability to pay in some circumstances, and therefore shouldn’t be eligible for an antitrust exemption under federal law that allows schools to collaborate on their formulas so long as they don’t consider applicants’ financial need in their admissions decisions.

The lawsuit, which reportedly could have 170,000 former undergraduate students who received partial financial aid at those schools dating back over the past 18 years be eligible to join as additional plaintiffs, seeks damages and an end to the schools’ collaboration in calculating financial need and distributing aid.

The schools named as defendants in the lawsuit 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, the University of Pennsylvania, Rice University, Vanderbilt University, and Yale University. 

The lawsuit was filed in the Northern District of Illinois by law firms representing the five former students. 

The plaintiffs are alleging that institutions are violating federal law because they aren’t entirely need-blind and at least some of the schools maintain admissions systems that favor the children of wealthy past or potential future donors. Additionally, the suit alleges some schools take applicants’ finances into account when admitting them off the waiting list and/or look at finances in admission decisions for specific programs.

The antitrust exemption  — known as Section 568 — allows colleges and universities that are need-blind in their admissions decisions to establish common principles for assessing financial need with the justification that it is in the continued public interest for colleges and universities to work together to develop financial aid policies that enhance access to higher education.

Congress in 1994 passed legislation including a provision with an antitrust exemption authorizing efforts by need-blind institutions to develop and maintain common principles of how need should be determined when awarding non-federal, institutional student aid. However, schools were still prohibited from discussing aid offers for individual applicants with other schools.

Congress has extended this provision several times, including most recently in 2015. Section 568 is currently set to expire at the end of September this year absent another extension from Congress.

 

Publication Date: 1/11/2022


Peter G | 1/11/2022 9:20:41 PM

While not a lawyer and I have no direct stake here, a few aspects of this seem a bit optimistic or perhaps exploratory. The challenge around whether these colleges qualify under the law as 'need blind' I think is the most intriguing part, but even if it fails it could have ramifications.

The first big question would seem to be whether the courts will certify this AS a class action. The Supreme Court at least in TransUnion ruled that plaintiffs needed to show concrete injury, and could not join a class action just because of assumed or potential harm. At least from the initial reporting this suit seems to be trying to operate on the assumption that that recent ruling is somehow not a hurdle here, but it would certainly seem to be.

Kim F | 1/11/2022 8:54:45 AM

I formerly worked in the MIT financial aid office during that time frame, and this actually really surprises me that they are named here. MIT has always been need-blind in their admissions policy, and to my knowledge they have never ever participated in these sort of shenanigans. I will be following this with interest.

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