Judge allows price-fixing lawsuit to proceed against Northwestern, University of Chicago, 14 other prominent universities

CHICAGO (CBS) — A class action lawsuit is moving forward against 16 prominent universities, including Northwestern University and the University of Chicago, accusing them of holding back financial aid to students who qualified.

A federal judge on Monday denied several motions from the schools’ defense attorneys, seeking to dismiss the case.

The lawsuit, filed in February, accuses the schools of taking part in a price-fixing formula that reduced or eliminated financial aid.

The suit names 16 defendants: Ivy League schools Brown University, Columbia University, Cornell University, Dartmouth College, University of Pennsylvania and Yale University, as well as California Institute of Technology, Duke University, Emory University, Georgetown University, Massachusetts Institute of Technology, Northwestern University, Rice University, University of Chicago, University of Notre Dame and Vanderbilt University.

The lawsuit claims the schools colluded to set financial aid packages, while some colleges are also accused of discriminating against low-income applicants. At least 170,000 alumni overpaid by “hundreds of millions of dollars,” claims the suit, which was filed by five alumni of Duke, Northwestern and Vanderbilt who attended the schools between 2003 and 2019. They are seeking class-action status, which would let others join the suit.

All 16 institutions are, or have been, members of the 568 Presidents Group, a consortium that uses a common methodology to determine students’ financial aid. An exception to federal antitrust law allows members of the group to work together to set financial aid policies.

With Monday’s court ruling, the plaintiffs can now request information from the admission offices.

History of price-fixing

Back in the 1990s, the Justice Department charged several elite colleges with price-fixing, including many current members of the 568 Presidents Group. Those colleges regularly communicated and gave “essentially the same financial aid award” to any student who was admitted to multiple schools, according to congressional research. The suit ended with a settlement, and a 1994 law allowed colleges to keep working together on financial aid packages. 

Yet while the schools are authorized to collaborate in setting aid rules, they remain barred from discriminating against low-income students in their admissions. In writing the law, Congress specified that its goal was to spread the benefits of financial aid as broadly as possible.

“The need-based financial aid system serves social goals that the antitrust laws do not adequately address — namely, making financial aid available to the broadest number of students solely on the basis of demonstrated need,” Congress wrote, adding,  “No student who is otherwise qualified ought to be denied the opportunity to go to one of the nation’s most prestigious schools because of the financial situation of his or her family.”

According to the suit, nine colleges of the 568 Presidents Group explicitly break that law by courting the children of ultra-wealthy families, declining to admit lower-income students off wait lists or otherwise considering applicants’ financial circumstances. The other seven defendants “conspired” with the nine, the complaint alleges. 

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

The 568 Presidents Group did not reply to a message seeking comment on the suit.

Wait lists and “enrollment management” 

Three universities — Columbia, Penn and Vanderbilt — explicitly consider financial need in handling admissions, the suit contends. 

Columbia’s School of General Studies, which has about 2,500 undergraduates who are nontraditional students or in dual-degree programs, is not need-blind as required under the law, according to media reports. 

Admissions officials for Penn, where annual attendance costs $83,000, have said they consider the financial needs of waitlisted students when deciding whether to admit them, the complaint states. Vanderbilt, which costs nearly $80,000 for one year, says on its website that it is “need aware” when deciding whether to admit waitlisted students.

Other colleges, including Dartmouth and Notre Dame, use an “enrollment management” system that establishes a formula for how many students on financial aid can be admitted to meet the schools’ budget goals, according to the suit. Because these formulas effectively restrict the total number of low-income students who can attend, the colleges using them aren’t really need-blind, the suit alleges. 

Wooing the wealthy

Other schools explicitly seek to recruit students from wealthy families or give special consideration to donors’ kids, the suit claims. 

At Duke, a “couple of hundred” students per year get special attention as the children of potential donors, the suit states. The dean of admissions at Georgetown has said that “special consideration” is given to “children of Supreme Court justices, senators and so on… because of the opportunities that may bring,” according to the complaint. At Northwestern, the president has been known to personally review about 550 applications, “including applications associated with wealthy donors,” the suit claims. 

Because elite colleges enroll only a limited number of students, favoring the wealthy or well-connected disadvantages others and is tantamount to discrimination, the suit claims. And while schools can decide as a matter of policy that they will favor the children of the rich at the expense of everyone else, “they cannot lawfully conspire on financial aid policies,” the complaint states. 

“No one can reasonably dispute whether universities have colluded, or whether they maintain policies favoring potential donors,” Matt Stoller, research director of the American Economic Liberties Project, an anti-monopoly group, wrote in a newsletter. He added: “Elite universities want to imagine themselves as meritocratic, though in fact they cater to the wealthy professional class and the billionaires who employ them.”