Elite colleges are accused of price-fixing. Experts say they have a different wealth problem.

·6 min read

A broad federal lawsuit filed this week claims 16 of the most selective universities in the country conspired to raise their prices on students from poor or middle-class backgrounds.

It’s a charge well-positioned to tap into the anger and confusion Americans feel toward the selectivity and cost of some of the nation’s top colleges. It summons recollections of the Varsity Blues scandal, in which the rich and famous paid millions to bribe or cheat their kids' way into highly selective and prestigious universities.

"Elite, private universities," the lawsuit reads, "are gatekeepers to the American Dream. Defendants’ misconduct is therefore particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents."

The attorneys who filed the lawsuit seek to represent up to 170,000 students who attended 16 named universities and potentially lost out on "at least hundreds of millions of dollars." They seek an unspecified amount of financial damages and asked the court to stop the universities' collaboration.

Higher education experts question the lawsuit's chances of success, arguing that this specific group of elite universities – Brown, Duke and Yale among them – isn't as unaffordable to students as they may appear. The colleges have a reputation in higher education for providing some of the most robust financial aid packages to the low and middle-income students who break through the application process.

Why, asked Peter McDonough, general counsel for the American Council on Education trade group, would these colleges collude to raise the price on their students if they all compete for the same applicants?

They don't compete just among themselves, he said. They’re up against other highly selective institutions, such as Harvard University or Princeton University, who aren’t part of the group named in the lawsuit.

“They want these applicants to choose them,” said McDonough, who served as Princeton's general counsel. “They actually have an incentive to offer more aid, not less.”

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In 1991, the Justice Department investigated price-fixing claims at the eight Ivy League colleges and the Massachusetts Institute of Technology. The Ivy League schools signed a consent decree agreeing to stop setting prices, and MIT settled separately.

In 1994, Congress granted an exemption for “need-blind” universities, or those that say they’ll accept qualified students regardless of their ability to pay, to discuss how they awarded aid to their students. The members of this group are known as the 568 Presidents Group, named for the section of the law that allows the exemption.

The 16 schools named in the suit, which was filed in the Northern District of Illinois, were or currently are part of the 568 Presidents Group.

The plaintiff’s lawyers said nine of the colleges “were not need-blind and thus were not covered by the exemption.” They said the remaining colleges “may or may not have followed a need-blind admissions policy, but nonetheless conspired with the other Defendants (and knew or should have known that the other Defendants were not following need-blind admissions policies).”

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The attorneys behind the suit argued that the schools failed to practice true-need blind admissions. Students from wealthy families were given an edge in the admissions process, they said.

To back their point, the lawsuit includes a laundry list of former and current admissions staffers who had told journalists finances could influence whom they accepted. Wealthy students were more likely to make it off wait lists, according to former employees at the University of Pennsylvania and Vanderbilt.

Present and past administrators from Dartmouth College, Georgetown University and MIT said students whose families can donate significant amounts of money could get boosts during the admissions process.

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Because the universities fail to offer need-blind admissions, the attorneys said they should have been barred from working together to arrive at similar methods for awarding their financial aid. The lawsuit contends that some universities, such as Harvard and at one point Yale, declined to participate in the group’s approach to financial aid because they wanted to give students more money than the group’s approach would allow.

Colleges say their group isn't about price-fixing

The antitrust policy, McDonough countered, is not about colleges sharing their financial formulas. It’s designed to prevent colleges from sharing individual applicants’ information and fixing the price for individual students. The attorneys in this lawsuit haven’t suggested that applicants' information was shared to determine their acceptance or financial aid package, he said.

Few of the sued colleges have commented publicly on the case, and most contacted by USA TODAY declined to comment or didn't respond. Rice University in Texas offered a rebuttal and said it believed the suit was without merit.

"Rice University is proud of its financial aid practices, and we are prepared to vigorously defend them in court," the university said in a statement.

Brown University, California Tech and Yale University told The Wall Street Journal, which first reported on the lawsuit, their methods of awarding financial aid are sound.

Wealth shapes elite colleges' students

Students from low- and middle-income families pay less at these institutions compared with what they might expect to pay at other private institutions with fewer resources, said James Murphy, a senior policy analyst at the think tank Education Reform Now. Murphy is a frequent critic of colleges, particularly around the admissions practices of private institutions, but he said he was skeptical of the lawsuit. He said affordability is a major issue for the majority of students at most other colleges.

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The issue, Murphy argued, isn’t necessarily that this group of colleges is too expensive to attend but that they offer so few slots to low- and middle-income students in the first place. The lawsuit notes that many of the institutions have high percentages of students from wealthy families compared with those from lower-income backgrounds.

The students who are accepted, he said, generally have attended private high schools or wealthy public schools and have the time and resources to spend on their applications. In that way, he said, “wealth is ultimately what is shaping the really strong applicants for these places.”

“The real value in this case is that it once again highlights that while these prestigious colleges may be need-blind, they’re also incredibly wealth aware,” Murphy said.

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This article originally appeared on USA TODAY: Elite colleges accused of price-fixing, stingy financial aid in suit

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