Jan 10, 2022 - Politics & Policy

Lawsuit alleges top colleges illegally collude to limit financial aid

Harkness Tower stands on the Yale University campus

Harkness Tower stands on the Yale University campus. Photo: Craig Warga/Bloomberg via Getty Images

A lawsuit filed Sunday alleges that 16 major U.S. universities and colleges, including a number of Ivy League schools, have violated antitrust laws by working together to determine students' financial aid packages.

Driving the news: According to the lawsuit, the schools "participated in a price-fixing cartel that is designed to reduce or eliminate financial aid...and that in fact has artificially inflated the net price of attendance for students receiving financial aid."

  • Lawyers believe that more than 170,000 students who received financial aid packages from the schools over the past 18 years could be eligible to become plaintiffs in the case, which is seeking damages on students' behalf, according to the Wall Street Journal, which first reported the lawsuit.

Among the schools named in the suit are Yale, Georgetown, Northwestern, Columbia, Brown and Duke universities.

  • Also named are the California Institute of Technology, Massachusetts Institute of Technology, the Universities of Chicago, Notre Dame, and Pennsylvania, as well as Dartmouth College, and Cornell, Emory, Rice, and Vanderbilt universities.

The big picture: The lawsuit was filed in Illinois federal court by representatives of five students who went to several of the colleges named in the suit.

  • It alleges that the schools used a shared formula for determining students' financial needs and then unfairly limited aid by price fixing.
  • It also alleges that all the schools named have conspired to reduce the amount of financial aid they give to admitted students, and that "at least nine" of them made admissions decisions with regard to students financial circumstances, thereby favoring wealthy students.

Colleges are permitted under federal law to collaborate on their financial aid formulas only if they don't consider financial need as a factor in admissions decisions, according to the Journal.

  • The lawsuit alleges, however, that these schools did in certain instances consider students' financial need when making admissions decisions.

What they're saying: Duke and and Georgetown declined to comment, while representatives from Northwestern, Emory, Dartmouth and Notre Dame said they would not comment on pending litigation.

  • A spokesperson for Yale said that the school's "financial aid policy is 100% compliant with all applicable laws."
  • A spokesperson for Brown said the university had not yet been served with the lawsuit, adding that "based on a preliminary review, the complaint against Brown has no merit and Brown is prepared to mount a strong effort to make this clear."
  • An M.I.T. spokesperson told Axios that the university is reviewing the filing and "will respond in court in due time."
  • A spokesperson from Caltech told Axios that the school is "currently reviewing the lawsuit and cannot comment on the specific allegations. We have confidence, however, in our financial aid practices."
  • A Rice spokesperson said that "after reviewing this lawsuit, we believe it is without merit. Rice University is proud of its financial aid practices and we are prepared to vigorously defend them in court.”
  • The other schools did not immediately respond to Axios' request for comment.

Editor's note: This story has been updated with additional statements from the universities and colleges named in the lawsuit.

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