16 universities sued for anti-trust violations in FA determination

This is interesting, and brings to light some little known facts.

Sixteen major U.S. universities, including Yale University, Georgetown University and Northwestern University, are being sued for alleged antitrust violations because of the way they work together to determine financial-aid awards for students. (Mwfan: Other 13: Brown, CalTech, University of Chicago, Columbia, Cornell University, Dartmouth, Duke, Emory, MIT, Notre Dame, Penn, Rice, and Vanderbilt.)

According to a lawsuit filed in Illinois federal court late Sunday by law firms representing five former students who attended some of the schools, the universities engaged in price fixing and unfairly limited aid by using a shared methodology to calculate applicants’ financial need. Schools are allowed under federal law to collaborate on their formulas, but only if they don’t consider applicants’ financial need in admissions decisions.

The suit alleges these schools do weigh candidates’ ability to pay in certain circumstances, and therefore shouldn’t be eligible for the antitrust exemption. (Mwfan: the article mentions legacy and waitlist as areas where these schools may weigh ability to pay in the admissions decision. We also know that most of these 16 schools are need aware for internationals. Often times schools know the need of athletic recruits too, although I am not sure that info routinely makes it to admissions.)

In 1994, Congress passed legislation exempting from antitrust violations schools that practice need-blind admissions, allowing them to create common guidelines for how to assess an applicant’s financial need when putting together aid packages. They still couldn’t discuss aid offers for individual applicants. (Mwfan: I did not know this)

In response, 28 schools created what is known as the 568 Presidents Group—named for the section of that law allowing for collaboration on aid formulas. The group typically meets a few times a year to discuss its calculations. (Mwfan: :open_mouth:)

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I had always assumed (perhaps incorrectly) that there are a certain % of slots allocated for FA with rest going to full pay. Otherwise, why is this % roughly the same each year? Is that statistically likely?

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Have to read the lawsuit & any response before forming an opinion.

First impression is that this is not a true restraint of trade or price fixing matter.

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I also found this interesting:

"The law benefited schools by allowing them to bypass bidding wars for low-income applicants, but in exchange the schools were barred from favoring wealthy applicants to minimize how much money they gave away in scholarships."

Is this why Ivy League and other top schools (Stanford, Northwestern, etc.) don’t offer merit-based scholarships?

Wouldn’t it be considered price fixing and/or collusion if they are collaborating on their FA formulas in these bi-annual meetings? We do know some of these 16 schools are not need-blind in all of their admission practices, which seems a requirement to be exempt form anti-trust violations (as the 1994 legislation states).

I didn’t really understand that either, I assumed it primarily meant the govt didn’t want the schools to favor full pay families in order to minimize need based aid.

Some of these schools do award merit aid including Northwestern, Duke, Rice, Vandy, U Chicago…but relatively they do give out much more need based aid. FA and college costs have changed dramatically since 1994, that’s for sure!

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I had no clue about any of this. Was this common knowledge to those dealing with college admissions? Parents in the 90s? (I wasn’t a parent then, or a student.)
This leaves such an incredibly bad taste in my mouth.

Any price fixing must cause an unreasonable restraint of trade to be in potential violation of the Sherman Act (I am assuming that the lawsuit alleges a violation of the Sherman Act).

Does the lawsuit uses the word “may” weigh ability to pay ? If so, under what circumstances ?

Without reading the lawsuit & any responses, it is difficult to speculate. My speculation is that eliminating wait-lists might have a significant effect on the viability of this lawsuit. Or require wait-listed students to “reapply” via a “letter of continued interest” for an admissions process that does consider one’s ability to pay.

P.S. After reading the articles posted below which are not behind a pay-wall, it seems that the students receiving financial aid might benefit from the enrollment of more full-pay students. Dividing financial aid funds into fewer portions gives each recipient a larger share assuming that all of these schools do have a budget limit for financial aid each admissions cycle.

Anti-trust suits are dependent upon facts–just like any other lawsuit–and damages must be proven and cannot be speculative.

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You’d have to look at the percent of applicants from the different income/FA need bands, some objective academic measures (GPA/rigor/test scores) to prove a “need blind” school really is need aware. So if you take Yale, for the Class of 2025, 51% received FA (2024/59%; 2023 53%), I would not be surprised if each year there were more full pay applicants than those requiring FA which tends to support Yale being truly need blind. If the academic qualifications of the full pay vs FA groups were the same, the number of accepted students in each group should roughly be in the proportion to each group’s applicants. If the proportions of high, low SES applicants were relatively consistent each year, the FA percentages would also likely be consistent. If low SES is a hook, then the proportion of FA admitees should over index. On a superficial read, looks like another plaintiffs’ firm(s) grab at “unpopular” deep pockets.

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The article is behind a paywall that I can’t access. For others encountering the same issue, here are some possible alternatives:

Off to do some reading.

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My take

From The Hill’s article, “The universities named “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,” according to the lawsuit.”

I think that this is where the biggest part of the anti-trust violations is coming into play. The institutions are deciding as a group how much a family with X finances is able to pay. For instance, a family earning $100,000/year and $50,000 in the bank is deemed able to pay $20,000 in 2020, but $22,000 in 2021, and $23,000 in 2022. Even if the family’s income and financial situation has not changed, the institutions have agreed to a formula to increase the value of the schooling (EFC) as a group. Whereas if they were not working together, one college might have said that the same finances can pay $20,000 in 2020, 2021, and 2022 but under the new model that family has paid an extra $5,000 over three years. That’s where the alleged price fixing is really happening.

And for the curious about which schools are considered fully responsible, according to the lawsuit:

From the Yale Daily News article:
The nine schools who allegedly consider applicants’ financial circumstances in admissions are Columbia University, Dartmouth College, Duke University, Georgetown University, the Massachusetts Institute of Technology, Northwestern University, Notre Dame University, the University of Pennsylvania and Vanderbilt University. Seven other schools — Brown University, the California Institute of Technology, the University of Chicago, Cornell University, Emory University, Rice University and Yale — are included in the lawsuit, although it states the schools themselves “may or may not have” considered applicants’ financial need.

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Good points. I believe these schools are need blind…meaning admissions doesn’t know how much aid a given applicant qualifies for/needs to attend.

I do think some schools know which applicants applied for financial aid (which of course doesn’t tell them whether or not that applicant does in fact have need, or how much need they would have). I also think some AOs may make a quick assessment of need based on HS, parental jobs, zip code index, etc. But the accuracy of those predictors can vary, sometimes by a lot.

We also know that all but H, Y, P, MIT, and Amherst are need aware for internationals. It may be true that some are need aware for waitlisted students too….some of these schools don’t directly state their policy on their websites.

From the WSJ article,

"According to a lawsuit filed in Illinois federal court late Sunday by law firms representing five former students who attended some of the schools, the universities engaged in price fixing and unfairly limited aid by using a shared methodology to calculate applicants’ financial need. Schools are allowed under federal law to collaborate on their formulas, but only if they don’t consider applicants’ financial need in admissions decisions. The suit alleges these schools do weigh candidates’ ability to pay in certain circumstances, and therefore shouldn’t be eligible for the antitrust exemption.

So I am reading this as the plaintiffs claiming that these schools collaborate on the methodology to determine need which they are only allowed to do if they are need blind, which they are actually not. The case is not about the collaboration (which I assume the schools will admit occurs) but whether the schools fit the need blind exemption. The plaintiffs are taking a very narrow interpretation of “need blind” and arguing a “donor hook” means the school is not need blind, among other alleged infractions:

“Rather, lawyers say, at least some of the schools consider financial need by giving an admission edge to children of wealthy donors. Some also weigh applicants’ finances when admitting them off the waiting list and look at finances in admission decisions for certain programs, the suit alleges.”

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I agree with all of that, and read it the same as you do. The collaboration on the FA formula is only OK if they are need blind.

And we are certain some colleges on the list aren’t completely need blind, at least with respect to international students (which was an area not mentioned in the WSJ article, maybe it’s in the lawsuit but I haven’t read that).

At the very least I would expect some websites to be updated to clarify waitlist treatment wrt need blind/aware.

Since many college admission characteristics are correlates of financial need (even if they may not match for some individual applicants):

  1. Colleges that want to shape the FA need for the entire class without considering individual applicants’ financial need can use statistical correlations of college admission characteristics to adjust weighting to meet the target FA need for the entire class (e.g. increase weight of legacy → lower FA need; increase weight of first generation to college → higher FA need).
  2. The lawsuit appears to be whether the practice described in 1 above is “need aware”. The plaintiffs seem to think so, while the colleges obviously want “need aware” to mean “looking at the applicant’s calculated FA need” (as opposed to correlates of such) when making admission decisions.

If the “donor hook” is their argument, then essential every college/university would not be need blind… They sound incredibly naive…

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It’s interesting that the plaintiffs don’t seem to be alleging that the colleges’ need-aware policies impacted their own individual applications, but merely that the colleges are not permitted to use a common FA formula, if any students at those colleges are subject to need-aware policies.

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Open admission community colleges are obviously need blind even in that case.

But then it can be argued that a college that does any selection at all is not need blind, since almost any college admission characteristic has some correlation to FA need. If the court buys that argument, then the likely result is that selective colleges will no longer find it to be negative marketing to be need aware (because all colleges that are not open admission will be need aware), so they may as well be more explicitly need aware and look at FA calculations while determining admission.

Could be, haven’t read the actual complaint to see if plaintiffs are making such a sophisticated argument. I just quoted what was in the WSJ article. If the courts agree that “need blind” extends to the flip side of a positive attribute given to those who pay extra ( i.e. admitting students bc of a donor hook makes the school need aware), plaintiffs will have a much easier case. The meaning of “need blind” is going to be the critical issue to be decided.

Yes, but isn’t their a laches argument here. The schools are quite open about taking alumni donations/etc, and have been for many years…