Financial aid suit likely to accuse Yale of practicing need-aware admissions
After a lawsuit alleged Yale and 15 other top universities colluded to keep down financial aid, an updated complaint to be filed next week is likely to allege that all 16 schools in the 568 Presidents Group considered applicants’ financial standing in their admissions processes.
Jessie Cheung, Staff Photographer
Plaintiffs in an ongoing suit alleging that 16 major universities colluded to limit financial aid are likely to argue in an updated complaint set to be filed on Feb. 15 that Yale has considered applicants’ financial status in the admissions process, according to sources with knowledge of the situation.
The 568 Presidents Group is a consortium of 16 elite universities, including Yale, that works together to determine formulas used to calculate need-based financial aid packages for students. On Jan. 9, five alumni of the universities filed a lawsuit accusing the group of violating antitrust law by breaching Section 1 of the Sherman Antitrust Act, which prohibits activity that constrains competition.
“Under a true need-blind admissions system, all students would be admitted without regard to the financial circumstances of the student or student’s family,” the suit alleges. “Far from following this practice, at least nine Defendants for many years have favored wealthy applicants in the admissions process.”
Section 568 of the 1994 Improving America’s Schools Act provides an exemption to the standard antitrust law by allowing universities to share principles for assessing financial need, so long as it is not considered during the admission process.
The lawsuit alleges that the Group violated Section 568, and therefore the Sherman Act, by sharing financial aid methodology despite nine of the universities considering students’ ability to pay in the admissions process. The schools in question were specifically accused of considering financial need in their admissions process by favoring children of wealthy donors for admission. The lawsuit also alleges that the subset of schools considers applicants’ finances when admitting them off the waitlist.
The nine schools include 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.
Brown University, the California Institute of Technology, the University of Chicago, Cornell University, Emory University, Rice University and Yale were implicated in the suit as members of the Group, but were not originally accused of violating need-blind requirements. This may change next week when the plaintiffs file their updated complaint.
When the lawsuit was initially filed on Jan. 10, University spokesperson Karen Peart told the News that “Yale’s financial aid policy is 100% compliant with all applicable laws.”
This is not the first time Yale has been accused of violating antitrust law in its financial aid practices.
The Department of Justice brought a lawsuit against the Ivy Overlap Group — a partnership composed of the eight Ivy League schools and the Massachusetts Institute of Technology — in 1991 for fixing financial aid offers. The Ivies all settled. MIT agreed to a settlement after the district court of Philadelphia ruled in the government’s favor.
Gregory Day, assistant professor of legal studies at the University of Georgia and visiting fellow at Yale Law School’s Information Society Project, explained that in a competitive world, universities would attract students by lowering tuition and increasing quality. But the lawsuit alleges the 568 Presidents Group colluded to maintain artificially high prices, meaning students ostensibly pay more than they would in a competitive setting.
Experts agreed that deciding the case will be difficult, describing it as “technical,” “problematic” and “impossible to predict.”
“If suppliers collude to raise the price of peanut butter, all actual and potential peanut butter purchasers are injured – some pay more, and some don’t buy,” John Lopatka, professor of law at Penn State Law School in University Park, wrote in an email. “If universities agree to restrain competition in the provision of financial aid, not all students are injured. That should at least be a relevant difference in analyzing the financial aid agreement.”
To win the case, the plaintiffs must demonstrate that the schools in question considered need in admissions decisions. Day said that there are “perhaps no prior antitrust cases on 568,” meaning there is no precedent that will guide the court in this decision.
Daniel Rubinfeld, professor emeritus of law and economics at the University of California, Berkeley, said the courts will need more information — about the Presidents Group’s agreement, about their exchange and about the schools’ specific admissions policies — before making a decision.
The case will hinge on technical aspects of the law, rather than on moral beliefs about financial aid, Georgetown Law School professor Howard Shelanski explained. Shelanski has worked as an antitrust lawyer, economist, a faculty member at the Yale School of Management, the Director of the Bureau of Economics at the Federal Trade Commission and senior regulatory official in the Obama White House.
“This is going to be a challenging case for the plaintiffs to win, especially because they’re dealing with universities who are giving a lot of financial aid and trying to make it easier for a lot of students to attend,” Shelanski said. “They’re sympathetic defendants.”
If the 568 Presidents Group wins the case, its members may continue to collaborate while the Section 568 antitrust exemption remains in effect. If they lose, the universities face the potential of paying damages and returning to a more competitive financial aid model, which could also incur large costs. It is likely they will settle if the case seems like it will end in the plaintiffs’ favor, Carstensen said.
In fact, collusion can work in consumers’ — in this case, students’ — favors, Shelanski and Rubinfeld explained. Shelanski said that sharing a common financial aid system enables financial aid packages to be “more readily compared and predicted, and it allows universities to more evenly share their financial aid.”
The case was filed in the Northern District of Illinois federal court, and further scheduling for the trial has not yet been publicly released.
Section 568, which grants an exemption to antitrust law, is set to expire on Sept. 30, 2022.