Tue. Jan 25th, 2022

Sixteen private colleges have participated in a “price-fixing cartel,” a new lawsuit alleges.

As The Wall Street Journal first reported on Monday, Dartmouth College, the Massachusetts Institute of Technology, and Vanderbilt University are among the prominent institutions accused of violating antitrust laws. How? By collaborating to determine admitted students’ financial-aid awards, according to the lawsuit, which was filed in federal court on Sunday by lawyers representing five former students who attended some of the named colleges.

Here are three things to know about this latest challenge to the status quo in college admissions:

Whether the colleges are entirely “need blind” is a key question.

The lawsuit concerns the shared methodology that some colleges use to calculate applicants’ financial need. Federal law allows institutions to use a common set of standards for assessing families’ ability to pay — but only if those institutions bring in all of their admitted students on a “need blind” basis. That is, without considering their financial circumstances.

The plaintiffs contend that some of the colleges aren’t really need blind, because they do, in some instances, consider a student’s financial circumstances. Like, say, when they admit a super-wealthy donor’s kid for that reason alone. The colleges in question, the lawsuit alleges, work together in a way that’s “designed to reduce or eliminate financial aid as a locus of competition, and that in fact has artificially inflated the net price of attendance for students receiving financial aid.”

The plaintiffs seek damages — and to prevent the colleges from collaborating. More than 170,000 former students who received financial aid from the institutions could be eligible to join the plaintiffs, the lawsuit says.

There’s some important history here.

Decades ago, officials from dozens of highly selective colleges met regularly to discuss financial-aid policies. The stated goal of the so-called Overlap Group was to ensure that applicants admitted to more than one of the institutions received similar institutional aid awards, allowing them to choose colleges based on factors other than cost. The collaboration was also meant to prevent bidding wars for students.

But in 1991 the Justice Department filed a civil antitrust lawsuit against all eight Ivy League universities and M.I.T. alleging that officials at those institutions were violating federal laws by “conspiring to restrain price competition.” All the Ivies signed a consent decree that effectively ended the era of collaboration on financial-aid policies.

M.I.T., the lone university to fight the charges, negotiated a settlement that allowed for some cooperation among institutions that admit students without consideration of financial need.

Today, officials from a handful of colleges making up the 568 Presidents Group meet regularly to discuss their aid methodology. The group is named named for Section 568 of a federal law that permits need-blind colleges to share information about their aid formulas, but bars them from discussing aid awarded to individual applicants.

Questions about the role that wealth plays in admissions aren’t going away.

Maybe this lawsuit will prevail, and maybe it won’t. But either way, the scrutiny of admissions practices that disproportionately benefit affluent students isn’t about to subside.

The lawsuit alleges that nine of the institutions prioritize applicants who don’t need financial aid when deciding whom to admit from their waitlists. Notably, the plaintiffs also take aim at enrollment-management tactics, including econometric modeling, designed to maximize net-tuition revenue.

“One of the key purposes of enrollment management is to limit the number of financial-aid-eligible applicants who are admitted to the institution to achieve financial and budgetary objectives,” the lawsuit says. “The effect of these practices is to disadvantage applicants based on their need for institutional financial aid.”

Plenty of enrollment managers would call that an unfair characterization of their work. Still, the role that wealth plays in many admissions outcomes, and how much it shapes various institutional priorities, is undeniable. The extent to which institutional leaders can meaningfully reckon with that fact might well shape the next chapter of the profession. Either way, more lawsuits are coming.

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