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Lawsuit alleges Notre Dame, Georgetown among universities rigging financial aid

The Golden Dome at the University of Notre Dame, one of the 16 colleges named in a lawsuit accusing them of illegally conspiring to reduce financial aid. / Matthew Rice (CC 4.0)

Denver Newsroom, Jan 12, 2022 / 13:00 pm (CNA).

The University of Notre Dame and Georgetown University are among 16 elite private universities and colleges facing a federal lawsuit that alleges they illegally conspired to reduce financial aid awards to students, in effect a form of price-fixing.

The lawsuit, filed in federal court in Chicago Jan. 9, depicted these schools as a “cartel” that fixes prices and acts “not only to reduce the amount of total aid offered by each school, but also to reduce the total amount of aid offered to each prospective student at each defendant school.”

Current federal law requires financial aid decisions by colleges and universities to be need-blind as a condition for their antitrust law exemptions.

Peter McDonough, vice president and general counsel of the higher education public policy advocacy group American Council on Education, told the New York Times he would be “very surprised” if the lawsuit is found to have merit.

He said the defendants are “very antitrust aware and particularly sophisticated.”

“They have good advice provided to them,” he said, comparing the lawsuit to a 1990s Justice Department case filed against Ivy League schools and the Massachusetts Institute of Technology. That case ended in a favorable ruling for the universities.

The lawsuit charges that the 16 schools still give preference in admission to the children of wealthy donors, make waitlist decisions on the basis of a prospective student’s finances and family wealth, or decide whether to admit applicants for particular programs based on student or family finances.

Five former undergraduates of Vanderbilt, Northwestern and Duke are the first plaintiffs in the case. The firms Roche Freedman, Gilbert Litigators & Counselors, Berger Montague and FeganScott filed the lawsuit in the Northern District of Illinois on their behalf late on Sunday.

The defendants in the lawsuit are some of the most elite schools in the country: Brown, the California Institute of Technology, the University of Chicago, Columbia, Cornell, Dartmouth, Duke, Emory, Massachusetts Institute of Technology, Northwestern, the University of Pennsylvania, Rice, Vanderbilt, Yale, Notre Dame, and Georgetown.

The two Catholic universities on the list of defendants are the Congregation of Holy Cross-run Notre Dame and the Jesuit-run Georgetown University. They and seven other defendant institutions led the alleged conspiracy by ignoring need-blind admission policies. Instead, they took into account the financial circumstances of prospective students and their families “through policies and practices that favored the wealthy.”

Georgetown declined to comment on the case. CNA sought comment from Notre Dame but did not receive a response by deadline. A Yale spokesperson told the New York Times that the university is compliant with all applicable law.

Brown University spokesperson Brian E. Clark told NBC News 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.”

The lawsuit claims that perhaps 170,000 students could be eligible plaintiffs, as well as those who helped pay for their college. The alleged financial overcharging totals into the hundreds of millions of dollars. Eligible plaintiffs to join the class action would have attended the schools, or paid for a student’s attendance, in the time period of 2003 in cases where the student would have received some form of financial aid short of full coverage of tuition, room and board.

Under Section 568 of the relevant 1994 federal law, colleges and universities that are need-blind in admission may collaborate with their competitors. This is an exemption from antitrust laws.

The lawsuit contended that the schools’ participation in the 568 Presidents Group, a collective of colleges and universities which stresses the requirement for need-blind college admissions, has instead resulted in collusion that prevents the institutions from competing on the price of tuition.

“While conspiring together on a method for awarding financial aid, which raises net tuition prices, defendants also consider the wealth of applicants and their families in making admissions decisions,” said the lawsuit.

The lawsuit faulted Notre Dame admissions for allegedly following a form of enrollment management model that is legally problematic. It also faulted the school’s partnership with a software company to use data analysis to “shape need-aware admissions decisions.”

In addition, the lawsuit cited various institutions’ admissions staff and executives who discussed the giving potential of prospective students and their families. These leaders also noted the favoritism shown toward the children of high potential donors.

“Georgetown admits a range of students based on their families’ wealth, prestige, and influence,” said the lawsuit. “Some of these students are given ‘extra consideration’ based on their parents’ influence or political power, without any expectation of a financial contribution. On the other hand, some are given “extra consideration” on the basis of their ‘development potential’—namely, the ability of the family to make a financial contribution to the institution, and the likelihood that it will do so.”