A federal class-action lawsuit accuses 16 top universities, including Georgetown and some Ivy League schools, of conspiring to fix tuition prices by eliminating competitive financial aid offers to students.
Five former Duke, Northwestern and Vanderbilt students filed the antitrust lawsuit late Sunday in Illinois. They say officials from the 16 schools have met regularly in a consortium called the 568 Presidents Group since 1998 to fix their financial aid offers at the same low levels. They say the arrangement has overcharged more than 170,000 middle- and working-class families by hundreds of millions of dollars for tuition, room and board.
The complaint says that by “their own admission” on a website that lists member schools, 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.”
The lawsuit seeks financial damages for students who paid tuition or room and board at the schools from 2003 to the present, plus an injunction to end the practice, which it says violates federal antitrust laws.
Richard Vedder, a former Ohio University professor who studies the economics of higher education, said he is “somewhat sympathetic” to the price-fixing claim even though he attended Northwestern, one of the schools singled out in the lawsuit.
“I question the propriety of these colleges meeting together to discuss their admissions policies because it has the appearance of price-fixing even if it’s not strictly that,” Mr. Vedder said. “What would the Justice Department do if all the auto manufacturers got together to discuss their prices and fuel economy standards?”
The lawsuit claims nine of the schools — Columbia, Dartmouth, Duke, Georgetown, Massachusetts Institute of Technology, Northwestern, Notre Dame, University of Pennsylvania and Vanderbilt — limited their financial aid as part of a broader strategy to prioritize wealthy applicants over need-based students in admission decisions.
The complaint quotes Karen Crowley, a former Penn admissions official, as saying in 2009 that the school unofficially gives preference to “full-paying student[s]” on its waitlist over those needing financial aid, especially when “endowments are down and cost-cutting is essential.”
Penn and Vanderbilt “evidently withdrew” from the price-fixing agreement in 2020, when their names disappeared from the 568 Presidents Group’s website, the complaint says.
The other seven universities — Brown, California Institute of Technology, Chicago, Cornell, Emory, Rice and Yale — “may or may not” have targeted wealthy applicants in violation of their need-blind policies, but the complaint says they agreed to the price-fixing.
Six of the schools — Brown, Columbia, Cornell, Dartmouth, Penn and Yale — belong to the Ivy League.
All 16 universities claim an exemption from higher education antitrust laws under a 1994 federal education law known as Section 568, which allows need-blind private schools to collaborate with their competitors.
Since all of the schools in the group identify themselves as need-blind, they can take advantage of the exemption, originally intended to benefit struggling institutions.
According to the lawsuit, the 568 Presidents Group uses a “consensus methodology” to fix a “uniform and lower level of aid” for all applicants under that exemption. The lawsuit claims the colleges quietly base their awards on the ability of students to pay, violating the need-blind requirement for the exemption.
Colleges have long set their tuition prices well above what they expect most students to pay, leaving financial aid to make up the difference. In addition, the early admission process discourages students from price-shopping by preventing them from considering other offers once a university has accepted them as an early admission student.
The lawsuit was filed in U.S. District Court for the Northern District of Illinois, the jurisdiction where the plaintiffs say university officials have met regularly to fix their prices.
The universities have belonged to the group at different times. The lawsuit says Yale withdrew in 2008 when it began offering “more generous” financial aid packages, only to return in 2018.
On Tuesday, most of the universities issued statements saying they could not comment on pending litigation.
Yale spokesperson Karen N. Peart said in an email that “Yale’s financial aid policy is 100% compliant with all applicable laws.”
Brown spokesperson Brian E. Clark said in an email that based on “a preliminary review,” the complaint “has no merit” and the school will “mount a strong effort to make this clear.”
Peter Wood, president of the National Association of Scholars higher education reform group, said the lawsuit reflects buyer’s remorse from alumni who have “come to regret” what they paid for the privilege of attending an elite school.
“The universities are engaged in a form of pricing that, even if it’s legal, is doubtful in the broader ethical sense of encouraging people to take on enormous debt for a service that’s increasingly of marginal value,” Mr. Wood said. “I can’t say which side has the better argument, but I’m sure the universities will fight this lawsuit tooth and nail to avoid coughing up their riches to compensate these students.”
Mr. Wood, a former university provost, said elite universities have long collaborated financially to “benefit the industry of higher education” at the expense of students, many of whom have struggled to find “gainful employment.”
Just 50% of the class of 2020 had full-time jobs six months after graduation, the National Association of Colleges and Employers reported in a recent analysis.
Inez Stepman, an education policy analyst at the Independent Women’s Forum, said universities conduct themselves like businesses despite their nonprofit status.
“Universities are a business, specifically a business heavily subsidized by taxpayer dollars,” Ms. Stepman said. “It is long past time for universities to stand on their own two feet.”
This isn’t the first time colleges have come under fire for admissions processes.
In 1991, the U.S. Department of Justice charged all eight members of the Ivy League and MIT with price-fixing, accusing them of meeting with applicants who had been accepted to more than one college to discuss their expected financial aid offers.
The Supreme Court is expected to soon decide whether to hear a case challenging the affirmative action admissions policies of Harvard and the University of North Carolina-Chapel Hill. Neither school belongs to the 568 Presidents Group.
In February last year, the Justice Department dropped a racial discrimination lawsuit that the Trump administration brought against Yale, accusing the school of discriminating against White and Asian-American students in its affirmative action policies.