Deadlines looming in aid law

For 33 years, financial aid officials from the Ivy League schools and the Massachusetts Institute of Technology sat around a table and together decided how much aid to give each applicant who had applied to more than one of the nine schools. Members of the “Overlap” group, as they called themselves, said their meetings were for the good of the students, allowing applicants to pick schools based on factors besides costs.

Then in 1989, the U.S. Department of Justice burst in and accused the schools of conspiring against competing colleges by collaborating on individual applicants’ aid packages. Quoting the Sherman Antitrust Act of 1890, Justice Department officials in 1991 convinced all of the Overlap group except MIT to sign a consent decree limiting to what extent those schools could discuss aid.

But the consent decree will expire Sept. 17, and on Sept. 30, a provision of the Improving America’s Schools Act of 1994 that allows dozens of schools to talk on a limited basis will also expire.

The House of Representatives will vote Tuesday on a bill that proposes to make that provision, known as Section 568, permanent. Ivy League administrators say passage of the bill is crucial to holding dialogues on financial aid at private institutions, and they worry that a financial aid field without rules would be chaotic.

“An environment in which you don’t have guiding principles can resort in chaos,” said Richard Shaw, Yale’s dean of undergraduate admissions and financial aid. “I think it’s a dangerous place to go. This is a principle of just being able to communicate.”

In other words, if the September deadlines pass with no legislation, the legal concerns that the Justice Department raised in 1989 will resurface and schools will be left without any guidelines for their financial aid discussions.



The old era shattered

From 1958 to 1991, the Overlap group worked together to develop and apply a uniform formula for determining family contributions. Members met each April to compare awards granted to “overlap” students –students accepted at more than one school. Students received nearly identical aid packages from each Overlap school to which they were admitted.

Administrators said this arrangement had many benefits.

“Students could make decisions about where they wanted to attend college on other factors, such as ‘I love it there,'” said Shaw, who came to Yale after Overlap had ended and did not experience the round-table aid package discussions.

In 1989, the Justice Department began a large-scale investigation of schools, such as the Overlap group, that conferred on aid. The department made antitrust allegations against the schools, accusing them of fixing tuitions, fixing salaries and fixing aid packages.

“Consultation, collaboration, cooperation with regard to pricing is a violation of antitrust,” said a national expert in financial aid reflecting on Overlap, who requested to remain anonymous. “I don’t know of too many airlines that would get away with it.”

Two years later, when the Justice Department filed a suit against the Overlap schools, all of the Ivies signed the consent decree, saving them from years of litigation.

MIT did not sign the agreement, instead proceeding to court.



The MIT holdout

Feeling strongly that it was in the right, MIT went to trial in 1992.

“The public perceived it as good. We were very open about it,” said Betsy Hicks, MIT’s director of financial aid. “I believe when they did Overlap, I never saw a family complain.”

After several hearings over 18 months, MIT and the Justice Department settled the case. The agreements that resulted and a law that Congress later passed allowed need-based schools to discuss general formulas and principles of aid. Ivies like Yale could discuss methodology and philosophy but not individual students’ finances and impending aid policy decisions.

“I do not believe that the Justice Department would have agreed to the standards of Section 568 without the MIT litigation” Yale General Counsel Dorothy Robinson said. “The Court of Appeals in the MIT case recognized that although the antitrust laws did apply to MIT and the other universities, there was a special, charitable aim to what the schools were seeking to accomplish that was socially beneficial. The court viewed this as making an important difference in how the laws should apply.”

Ivy administrators said they appreciate MIT’s holdout.

“They went the distance and ended up giving us a compromise,” Shaw said.



Current decisions

H.R. 768, which will be voted on in the House of Representatives tomorrow, would make Section 568 permanent.

Reps. Barney Frank and Lamar Smith ’69, the bill’s sponsors, co-sponsored a similar bill in 1997, which the House passed but the Senate modified to allow general financial aid discussion on a temporary basis, instead of a permanent one. The 1997 bill expires in September 2001.

Brad Bennett, Smith’s communications director, said the bill has a good chance in the House, but he said he does not know how the Senate would vote on it.

Administrators said they are hopeful that the bill on 568 will pass easily.

“I’m optimistic,” said Sally Donahue, Harvard’s director of financial aid. “I think there are a number of people who are committed to this.”

Under 568, college administrators said they’ve had productive discussions over the past few years.

One key forum began two years ago, when Cornell University President Hunter R. Rawlings III organized the 568 Presidents’ Working Group — which includes presidents from 25 to 30 private institutions that offer need-blind admissions — to discuss aid issues.

Rawlings said he was concerned about “a serious erosion in need-blind decision making.”

The group continues to work on a common methodology that may remove home equity from the aid formula and may change the payment role of non-custodial parents. Rawlings said he expects the group will release the exact methodology this spring.

Each institution will make an independent decision whether to use the Rawlings group’s common formula, which is being offered as a possible substitution for the College Board methodology — one that financial aid officers say is not generous enough to middle-class families.



Joining the pack

As long as Congress renews Section 568 temporarily or makes it permanent, schools that offer need-blind admissions will continue to discuss aid like Rawlings’ group has done to produce a new aid formula.

Although Yale President Richard Levin has attended meetings, the University has not been among the leaders in the group. Rawlings said presidents from the University of Notre Dame, Cornell, Duke University, MIT and Haverford, Macalester and Wellesley colleges are the key leaders in the 568 Presidents’ Working Group.

Still, Yale is involved in the discussions, and Levin attends the meetings regularly.

“Whenever I go, I propose something specifically,” Levin said. “I try not to be a wallflower.”

Yale administrators said they will analyze the group’s formula to see if it improves upon the formula Yale now uses, which is already more generous than the formulas of some schools involved in the discussions.

“There are some areas [of the group’s formula] that have differences — some would result in Yale giving larger and smaller rewards,” Levin said. “That’s what we’re analyzing. We would not want to go with something that caused us to give less financial aid.”

Yale does not necessarily have to follow what the 568 group does.

Yale officials pointed out that Princeton, for example, is already striking an individual aid path. Princeton’s January aid announcement, which eliminated loans and reduced student savings, diverged from some of the 568 plans, administrators said.

Administrators said they fear that more and more schools will make radical decisions if a group like the 568 presidents group is not allowed to exist.

Princeton already has not shown much involvement in the 568 group talks, administrators at numerous schools said.

“Princeton really hasn’t been part of the discussion,” Rawlings said. “We’ve kept them informed.”

Don Betterton, Princeton’s director of financial aid, said his office has received the 568 group’s information and is discussing it.

Shaw said if schools are unable to confer, and they consequently take divergent routes in aid, they could end up presenting very different packages to applicants.

Harvard, Princeton, MIT and Yale all made sweeping financial aid changes in 1998 and 1999 that coincidentally produced similar cost benefits for families, Shaw said. But this year’s round of changes may not result in similar aid packages and may affect where students choose to matriculate this spring, Shaw said.

“Only time will tell,” Shaw said, “and the time is next month.”

Also in the next month, the House and Senate may chose to continue allowing schools to discuss aid — or they may not.

“Would financial aid at Yale have to come to a grinding halt?” said Caesar Storlazzi, Yale’s associate director of financial aid. “No.”

But Storlazzi added that he does not know what would happen. Administrators at the Overlap schools said that the only thing that is clear is that the Overlap will not return.

Beyond that, the extent to which schools may discuss financial aid faces an indefinite future, they said.

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