Lawsuit Accuses Elite Colleges of Price Fixing

The class action lawsuit alleges that some of these schools did not admit students on a fully need-blind basis, which was required by law.

January 12, 2022 · Updated on May 6, 2022

Lawsuit Accuses Elite Colleges of Price Fixing
Higher Ed Policy
Photo by Yana Paskova / Stringer / Getty Images News / Getty Images

  • The antitrust violation allegations come in the form of a class action lawsuit.
  • The schools named in the lawsuit are among the most prestigious institutions in the U.S.
  • The suit claims these schools increased net tuition prices paid by students.

Some of the country's most prestigious schools are being accused of illegally colluding to limit financial aid awards to students.

Four law firms filed a class action lawsuit on Jan. 10 against 16 universities on behalf of five former students. On Feb. 15 the lawsuit was expanded in an amended complaint to add another school.

According to a statement from the law firms representing these former students, more than 170,000 students may have been overcharged by these universities since 2003 due to the allegedly unlawful collusion.

The complaint alleges that 17 schools that belonged to the 568 Presidents Group at some point since 2003 violated antitrust laws by sharing a financial aid awardance formula, despite not being truly need-blind to students' financial situations during the admissions process as required by law.

Section 568 of the Improving America's Schools Act allows competing colleges and universities to join together to decide on a uniform financial aid awardance formula. However, in order to be eligible for this antitrust exemption, all schools must use a need-blind admissions policy.

The lawsuit alleges that this isn't the case for some of the institutions in the group, therefore making them ineligible for the exemption.

The schools listed as defendants in the suit include:

  • Brown University
  • California Institute of Technology (Caltech)
  • University of Chicago
  • Columbia University
  • Cornell University
  • Dartmouth College
  • Duke University
  • Emory University
  • Georgetown University
  • Johns Hopkins University
  • Massachusetts Institute of Technology (MIT)
  • Northwestern University
  • University of Notre Dame
  • University of Pennsylvania (Penn)
  • Rice University
  • Vanderbilt University
  • Yale University

Not all 17 schools, however, are being accused of failing to use need-blind admissions standards, according to the lawsuit. Only Columbia, Dartmouth, Duke, Georgetown, MIT, Northwestern, Notre Dame, Penn, and Vanderbilt allegedly failed to meet the need-blind standards.

The other eight universities are included in the lawsuit for participating in the 568 Group at various points since 2003. Although these institutions may have used fully need-blind admissions at the time of their involvement in the group, the suit claims that they still colluded with the other universities, making them liable.

According to the complaint, some schools — including Penn and Vanderbilt — give preference to full-paying students on the admissions waitlist. Other schools, the suit alleges, review things like a parent's occupation, family donation history, and the ZIP code a student applies from to determine their financial aid need and therefore discriminate against less wealthy applicants.

At the same time, 568 Presidents Group schools have developed a joint formula that lowers financial aid awards for students, the suit states. A standardized formula eliminates competition between these schools on the basis of financial aid, avoiding a potential bidding war. But, the complaint says, the formula that has been created has also resulted in students paying higher tuition prices out of pocket.

The lawsuit points to a 2008 statement from Harvard University's then-director of financial aid as evidence that these schools were purposefully trying to keep financial aid awards low. Then-director Sally Donahue said at the time Harvard would not join the Presidents Group because it would mean the school would award smaller financial aid packages than it wanted to.

Also in 2008, Yale left the Presidents Group and then-director of student financial services Caesar Storlazzi said doing so would allow the school to "give families more aid than they would have gotten under" the formula used by Presidents Group institutions.

The class action lawsuit is seeking reimbursement for undergraduate students that attended any university listed in the lawsuit since 2003 while the school was part of the 568 Presidents Group. In order to qualify, students must have received some form of need-based financial aid and have paid for tuition or other fees using non-financial aid funds.

Law firms Roche Freedman, Gilbert Litigators & Counselors, Berger Montague, and FeganScott filed this suit in the Northern District of Illinois.