Beginning of the end for 568 Group oligopoly

There is nothing I love more than a good old-fashioned oligopoly in academia. Trouble is, not everyone knows how to communicate with the wink of an eye or a chummy old pat on the back over whiskeys in your “drawing rooms.” Damn literalists may look at you like you have a third eyeball just above your nose when you propose a little “arrangement” or a small “exchange.” They just can’t seem to get the hushed message unless you spell it out word for word.

And without warning, they drop an extra $20 million into their financial-aid program, leaving you in the dust. Then, you have a choice to make: stay true to your oligopoly buddies or scramble to compete with Harvard and Princeton so you don’t take a windfall loss on your market share come April when all the incoming students decide where to attend school.

Thus, the fate of the so-called Presidents’ 568 Group hangs in the balance after Yale’s blockbuster announcement of a new financial-aid policy that seems to match Harvard’s in all but wording. The 568 Group is a union of 28 of the nation’s top private universities (which notably does not include Yale’s three closest competitors: Harvard, Princeton and Stanford) which meets to develop a standard set of guidelines for the determination of a family’s financial need. The federal government’s exemption from antitrust prosecution requires that group members not be bound to the standards that they agree upon, but may rather use them as “guidelines” for the determination of need. Yet, surprise, surprise: Financial aid packages from 568 Group schools all used to look similar.

It is this “guidelines” stipulation that allows the group to fly underneath the government’s radar, and it is this same stipulation that allowed Yale to break so radically from the group in essentially matching Harvard’s policy. Now that the group’s most venerable member has broken the implicit pact of not rocking the boat, what will become of it as the market tends toward freer competition?

The 568 Group has always justified itself by arguing that the government should prevent a free market from emerging among private universities for financial-aid students. In the case of a free market for financial aid, it would be rational to give the most aid to the most qualified students — and not necessarily the ones who need it most financially — to recruit the strongest class possible (otherwise known as merit-based aid). This system would, of course, withhold precious financial-aid dollars from those who most needed it. Or supposing that the schools dedicated themselves to need-based aid but nonetheless entered into free-market competition with each other, this market would rationally tend toward eliminating tuition altogether for families that cannot pay the full bill — which just seems ridiculous.

I will not say these arguments are entirely without merit — they are not — but I will say that, with a de facto oligopoly in place for the financial-aid market, it falls on the shoulders of the universities themselves to determine what is fair and unfair. Since the universities themselves have the most immediate financial stake in the matter, this system seems, to me at least, to entail a serious conflict of interests. Moreover, it’s utterly devoid of checks and balances or further recourse outside of the university for students who have been shorted. I doubt many will find it hard to believe that, in such a situation, there are many Yale students who have felt helpless in the face of the financial-aid administration and frightened that they could no longer afford to pay tuition after exhausting all avenues of appeal.

So the question becomes: At what point is enough enough? Will financial-aid activists at Yale never back down until the University completely eliminates tuition? Will we stop pressuring the market before it reaches its irrational maximum? The answer is yes, absolutely. In fact, I believe Yale and Harvard’s new policies come remarkably close to the ideal that I held in my head before this whole explosion.

In the future, I hope Yale and Harvard amend their policies so their ceiling of eligibility for financial aid (now hovering around $200,000 in yearly income) reaches slightly higher, perhaps to around $250,000, considering today’s dollars and tuition rates. More importantly, I hope to see the institutionalization of a more formal, independent appeals process that students may resort to in extenuating circumstances or when they feel their award unfair. Otherwise, the reforms at least appear spectacular. We will watch patiently to see how they work in practice.

So what will come of the 568 Group now that the market has just leapt rashly toward freedom? It certainly will not dissolve overnight; most of the schools just do not have enough money on hand to enter into an all-out free market. But time will necessitate this money — so the universities can save face and meet the recruiting threat of Harvard, Princeton and Yale. As this happens, the market will tend even more toward freedom, until it reaches the point at which students and administrations agree that the system is fair. Hopefully, within ten years’ time, the financial-aid oligopoly will have disbanded once and for all, with the presidential drawing rooms entirely cleared.

Andrew Williamson is a junior in Ezra Stiles college.

Comments

  • Anonymous

    Glad you like the Yale reforms, Andrew. I know you have thought about this much, and fought much for change. I believe these reforms are very wise as well. Thank you for all your work on this.

  • Anonymous

    Pretty turgid stuff; hard to figure out what his point is, actually.