By Naveen Athrappully
Four universities have agreed to settle a class-action lawsuit that accused them of engaging in price-fixing admission fees and reducing financial aid to poorer students.
The settlement came as part of a 2022 antitrust lawsuit filed by several former students and parents against 17 universities. The complaint (pdf) alleged that the universities violated U.S. antitrust laws by considering a student’s ability to pay tuition fees when they shouldn’t. It accused the institutions of reducing or eliminating financial aid provided to students from lower and middle income families. The universities are also charged with inflating tuition costs for students receiving financial aid.
The four universities—Dartmouth, Northwestern University, Rice, and Vanderbilt—agreed on Friday to a settlement collectively worth $166 million. Dartmouth and Rice will contribute $33.75 million each; Northwestern $43.5 million; and Vanderbilt $55 million.
This comes on top of a previous settlement collectively worth $118 million previously reached with six other universities: Brown, University of Chicago, Columbia, Duke University, Emory, and Yale.
Combined, the ten universities have agreed to a $284 million settlement.
The settlements must be approved by a judge before being finalized. Each student qualified in the class action lawsuit is estimated to receive around $750, according to Forbes.
“These new settlements will significantly increase the compensation to the class members for the harm we allege the defendants’ cartel caused,” Ted Normand, a lawyer for the plaintiffs, said in a statement, according to the outlet.
Seven out of the 17 universities in the lawsuit are yet to decide on a settlement. They are California Institute of Technology, Cornell, Georgetown, Johns Hopkins, the Massachusetts Institute of Technology, the University of Notre Dame, and the University of Pennsylvania.
No Admission of Liability
A spokesperson for Northwestern told CNN that the university “did not commit any wrongdoing and that the plaintiffs’ claims are baseless.” However, the university decided to settle the case without admitting liability so as to “put this matter behind us.”
Vanderbilt also refused to accept the allegations in the lawsuit.
A Dartmouth spokesperson claimed that the university is “unwavering” when it comes to offering financial aid to students and said it has spent more than a billion dollars since 2014 on such aid.
Robert Gilbert, one of the lead attorneys representing the former students, told the outlet that the 10 settlements “shine the spotlight on the seven remaining elite universities that have yet to do the right thing and rectify the overcharges to their alumni and students who came from working class and middle class backgrounds.”
The Lawsuit
Lawyers for the plaintiffs alleged that the 17 defendant universities participated in the “price-fixing cartel” while claiming protection under Section 568 of the Improving America’s Schools Act of 1994.
However, the exemption only provides antitrust immunity when two or more institutions of higher education ensure that “all students admitted are admitted on a need-blind basis.”
The “need-blind” policy on admissions requires universities not to take into account a potential student’s ability to pay tuition fees when determining their admission. This exemption expired on Sept. 30, 2022.
The lawsuit claimed that defendants “were not entitled to the 568 exemption” as they did not admit on a need-blind basis. Instead, the universities “have considered the financial circumstances of students or their families” to decide whether to admit them.
“Defendants have thus made admissions decisions with regard to the financial circumstances of students and their families, thereby disfavoring students who need financial aid,” the complaint said.
“All Defendants, in turn, have conspired to reduce the amount of financial aid they provide to admitted students. This conspiracy, which has existed for many years, thus falls outside any potentially applicable antitrust exemption.”
The 17 universities also agreed to set “common standards for determining the family’s ability to pay for college,” which they referred to as the “consensus approach.”
Under the consensus approach, a prospective student’s ability to pay tuition fees is a “substantial determinant” when calculating net tuition costs.
Net tuition cost is the combined total of the gross tuition fee plus expenses for room and board less institutional grant aid.
As part of the consensus approach, defendants shared confidential data with each other regarding admissions and financial aid. This worked to reduce price competition among the 17 universities. As a result, the net tuition costs “has been artificially inflated,” the lawsuit stated.
“In short, due to the conduct challenged herein, over almost two decades, Defendants have overcharged over 200,000 financial-aid recipients by billions of dollars collectively,” thus violating the Sherman Antitrust Act.
“Defendants have maintained admissions systems that favor the children of wealthy past or potential future donors … Defendant’s misconduct is particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents.”
The burden of such actions falls “especially on low- and middle-income families struggling to afford the cost of a university education and to achieve success for their children,” the lawsuit stated.
