This Massive Lawsuit About How Colleges Give Financial Aid Could Affect You

At this point, it’s no secret that higher education in America is devastatingly expensive. That’s why financial aid is so important: Grants and scholarships can be life-changing for students, especially those from low-income communities. However, a new lawsuit alleges colleges and universities may be short-changing the students who need the most help. As of January 2022, 16 prominent U.S. universities — Brown University, California Institute of Technology, University of Chicago, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, Massachusetts Institute of Technology, Northwestern University, University of Notre Dame, University of Pennsylvania, Rice University, Vanderbilt University, and Yale University — are being sued in federal court for alleged antitrust violations in an illegal price fixing scheme.

The lawsuit was filed late Jan. 9 on behalf of several former students who attended some of the schools accused of involvement in the alleged scheme. The lawsuit alleges the schools effectively eliminated competitive financial aid offers to students by working together to come up with a shared practice to determine students’ financial need. The lawsuit alleges 16 colleges and universities illegally considered their applicants’ abilities to pay tuition as a factor for their admission, and overcharged partial financial aid recipients in order to maintain net attendance costs and avoid “losing admitted students to competitor schools.”

Under section 568 of the Improving America’s Schools Act of 1994, it’s not illegal for colleges and universities to collaborate on their financial aid formulas — but only if they don’t factor in an applicants’ financial need in admission decisions. However, the lawsuit alleges that schools “have favored wealthy applicants in the admissions process” for years. “These [schools] have thus made admissions decisions with regard to the financial circumstances of students and their families, thereby disfavoring students who need financial aid,” the lawsuit claims. In short, the schools were allegedly looking at students’ ability to pay tuition when considering whether or not to accept them.

The lawsuit claims every school allegedly involved in the price fixing scheme has conspired to reduce the amount of financial aid they provide to admitted students — thus placing them in violation of the Improving America’s Schools Act of 1994.

A spokesperson from the California Institute of Technology responded: “Caltech is currently reviewing the lawsuit and cannot comment on the specific allegations. We have confidence, however, in our financial aid practices.” A spokesperson from Yale University responded as well, saying: “Yale’s financial aid policy is 100% compliant with all applicable laws.” Rice University replied: “After reviewing this lawsuit, we believe it is without merit. Rice University is proud of its financial aid practices and we are prepared to vigorously defend them in court.”

Cornell University, University of Chicago, Columbia University, Dartmouth College, Northwestern University, and the University of Pennsylvania, all declined Elite Daily’s request for comment on their school’s financial aid practices. Brown University, Duke University, Emory University, Georgetown University, Massachusetts Institute of Technology, University of Notre Dame, and Vanderbilt University did not respond to requests for comment.

The suit aims to put permanent end to the schools’ alleged illegal collaboration in calculating financial aid formulas — and to collect damages. While the suit was filed on behalf of five specific students, according to The Wall Street Journal it could expand, and up to 170,000 students who received financial aid at the named schools could be eligible to join. “Over almost two decades, [involved schools] have overcharged over 170,000 financial-aid recipients by at least hundreds of millions of dollars,” the suit claims.

The allegations are not the first time schools have been accused of discriminatory admissions practices. According to a 2020 study from The Education Trust, “at almost 60 percent of [highly selective] colleges and universities, the percentage of Black students has actually declined since 2000.” Meanwhile, “white college students often come from wealthier households, requiring less financial aid to pay for college,” per The Hechinger Report.

Although section 568 of the Improving America’s Schools Act of 1994 is set to expire in September 2022 if Congress doesn’t reinstate it, attorneys handling the case say the involved schools would remain responsible for overcharging partial financial aid recipients in past years. So — watch this space.