Two institutions, the University of Chicago and Vanderbilt University, have agreed to settle an ongoing class-action lawsuit against a dozen universities. Filed as early as 2022 in the Northern District of Illinois, the lawsuit alleges universities conspiring to price-fix financial aid packages and requests monetary relief to plaintiffs who were former students of respective universities. Last summer, UChicago became the first university to settle for 13.5 million dollars. Now, Vanderbilt University agreed to settle with no information disclosed about the exact monetary settlement.
The 2022 lawsuit, Henry v. Brown University et. al, accuses a collective of colleges named 568 Group has been price-fixing on the level of student tuition and financial aid. Among those colleges, many prominent colleges include the Massachusetts Institute of Technology, Johns Hopkins University, Yale University, and Cornell University. The plaintiffs’ lawyers allege that defendant universities have overcharged over 170,000 financial aid recipients by at least hundreds of millions of dollars.
This is not the first time an antitrust lawsuit has been filed against education institutions. In 1989, the Department of Justice launched a lawsuit against a similar group of colleges named the “Ivy Overlap Group”. Litigators alleged that the group of schools collectively skewed the amount of financial assistance to admitted students by “employing the same analysis to compute family contributions.” The lawsuit was successful which resulted in settlements and agreements from all alleged colleges. After United States v. Brown University et. al, Congress passed a statutory “568” exemption of Improving America’s Schools Act of 1994 to allow certain schools to form agreements in order “to use common principles of professional judgment for determining need.”
The 568 exception, however, requires that participating schools must admit students on a “need-blind” basis regardless of the type of admission such as transfers or waitlists. Historically, higher education institutions have been competing with one another in terms of financial aid packages, making it more appealing and affordable to prospective students. Henry v. Brown et. al argues that the schools in the 568 Group have not implemented need-blind admissions, used price-fixing, limiting financial aid, and therefore not entitled to the 568 exemption.
In 2003, schools formed the “568 Presidents Group'' which enabled participating schools to set a common standard – known as the Consensus Approach – for determining the family’s ability for college. The Consensus Methodology was created as a formula and the sole determinant of the net price of a student’s cost of attendance. The plaintiffs, who were former students of participating colleges, allege that admissions were made concerning the financial circumstances of a candidate’s ability to pay. The lawsuit confronts the college’s special preferences for legacy students and students connected to well-funded donor families. Additionally, plaintiffs’ lawyers allege schools such as the University of Pennsylvania and Vanderbilt University used a candidate’s ability to pay when choosing waitlist candidates.
In the filing, at least 3 of the alleged plaintiffs were former students at Vanderbilt University. The lawsuit also describes each of the defendant universities and its disproportionate economic distribution based on admitted students’ incomes.
In August 2022, the defendant universities failed to persuade the judge to dismiss the lawsuit. While the University of Chicago and Vanderbilt University offered to settle outside of court, other defendants are notably more skeptical to mediate. Back in August, a spokesperson for Johns Hopkins University said that the lawsuit is “wholly without merit” and said the university would continue to “vigorously defend” itself.
“The complaint against Brown has no merit and Brown is prepared to mount a strong effort to make this clear,” University spokesperson Brian Clark wrote in an email to Brown Daily Herald, a student-run newspaper at Brown University.
Other scholars are skeptical about the outcomes of the lawsuit. Phillip Levine, an economics professor at Wellesley College contends that colleges from the 568 Group lowers the cost of attendance for low-income students – lower than public flagship counterparts. Using information from the net calculator from 568 Group colleges, Levine contends that the net price of low-income admitted students tends to be less than other public universities. Therefore, Levine argues that 568 Group colleges should not be scrutinized when they provide greater access to college for lower-income students. The reason Levine argues is that those “colleges’ extensive endowment funds allow for additional opportunities to charge affordable prices to lower-income students.”
On the other hand, research has shown that elite universities that do have substantial financing leverage resulted in low-income students receiving only about 22 percent of the money the schools saved by giving less financial aid to rich students who didn’t need it. The rest of the savings is stored back into the university’s endowment funds to support other investments and initiatives.
Vanderbilt University joined the 568 Presidents Group in 1998 and implemented the Consensus Methodology in 2003. The original filing named a total of 17 university institutions as defendants in the lawsuit. As the lawsuit is ongoing, plaintiffs' lawyers hope to retain donor and university information during discovery.
