EducationJudicialRice University Named in Lawsuit Alleging Price-Fixing ‘Cartel’ of Elite Universities

“A university’s promise to disregard financial need is meaningless if the institution privileges wealth,” the complaint reads.
January 12, 2022
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Rice University has been named in a lawsuit accusing several elite universities of conspiring to favor wealthy applicants, reported first by The Wall Street Journal.

Five graduates of these universities filed the lawsuit in Illinois, accusing the top schools of participating in a “price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition,” resulting in price hikes.

“A university’s promise to disregard financial need is meaningless if the institution privileges wealth,” the complaint reads.

Rice, meanwhile, says its financial aid policy helps students that wouldn’t otherwise be able to afford attendance.

The group of universities includes Brown, the California Institute of Technology, the University of Chicago, Columbia, Cornell, Dartmouth, Duke, Emory, Georgetown, MIT, Northwestern University, Notre Dame, the University of Pennsylvania, Rice, Vanderbilt, and Yale. These schools together constitute an organization called the 568 Presidents Group, an affiliation of colleges that are required by law to admit students without respect to the applicants’ financial needs.

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The name “568” refers to a section of the Improving America’s Schools Act, a law passed by Congress in 1994. Section 568 carves out an exemption in American antitrust law, which generally outlaws price-fixing and collusion among businesses, to let colleges agree on standards for need-based financial aid if those colleges admit all students on a need-blind basis.

The plaintiffs claim that members of the 568 Group take students’ financial situations into account when considering whether or not to admit them, thereby violating the conditions of this exemption in the law.

“Under a true need-blind admissions system, all students would be admitted without regard to the financial circumstances of the student or student’s family. Far from following this practice, at least nine Defendants for many years have favored wealthy applicants in the admissions process,” the complaint reads.

“This conspiracy, which has existed (with slightly varying membership) for many years, thus falls outside the exemption from the antitrust laws.”

Although the plaintiffs claim that only nine of the 16 defendant schools actually take students’ wealth into account when admitting them, the lawsuit lumps in the other seven members of the 568 Group under the accusation that they are nonetheless part of the “conspiracy.” Rice, the only Texas college in the group, is one of the seven that does not allegedly admit applicants with consideration of their wealth.

Universities in the 568 Group agree to comply with the group’s guidelines for deciding students’ financial aid. The 568 guidelines are based on the College Board’s methodology, meant to “ensure limited financial aid funds are targeted to the most deserving students.”

However, the actual effect of the agreement has been to raise the net price of attendance, the plaintiffs argue.

“The result of the 568 Cartel is thus 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,” they claim.

Among other evidence, they cite an article that says Harvard refused to join the 568 Group since membership would have required Harvard to award smaller, less generous financial aid packages. Yale left the group for the same reason but later rejoined.

In addition, plaintiffs claim that consideration of students’ wealth in the admissions process is an open secret among elite institutions on the lookout for potential donors.

According to a New York Times analysis included in the lawsuit, less than 5 percent of the student body at Rice comes from the bottom 20 percent of the economic population.

The defendant schools have not yet filed a response in court.

Rice defended its financial aid practices in a statement to The Houston Business Journal.

“After reviewing this lawsuit, we believe it is without merit,” the university said. “Rice University is proud of its financial aid practices and we are prepared to vigorously defend them in court.”

In December, Rice announced that all students who qualify for need-based financial aid would be able to pay for attendance without taking out loans.

The case has been assigned to Judge Matthew Kennelly, a Clinton appointee.

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Isaiah Mitchell

Isaiah Mitchell is a reporter for The Texan, a Texas native, and a huge Allman Brothers fan. He graduated cum laude from Trinity University in 2020 with a degree in English. Isaiah loves playing music and football with his family.