We have an update in a long-running legal battle over allegations that elite colleges have run afoul of antitrust law by colluding on financial aid. A 2022 class-action lawsuit against 17 schools accuses them of working together to limit how much money they give out for financial aid, which plaintiffs say disadvantages lower-income students in the admissions process.
The plaintiffs are seeking $685 million in damages, according to a new court filing. The colleges accused have denied wrongdoing.
For more, “Marketplace Morning Report” David Brancaccio spoke with Ron Lieber, the “Your Money” columnist for the New York Times. The following is an edited transcript of their conversation.
David Brancaccio: Broad brush: If colleges don’t consider the need of the student, there’s a kind of exemption that can let them coordinate amongst each other without violating antitrust law?
Ron Lieber: Yes. So as we know, in business, you can’t get together with your competitors to set prices — that’s what we have those antitrust rules for. But over in college land, sometimes in the past, they were able to. There used to be this exemption to law that doesn’t actually exist anymore, but it allowed a group of universities that includes many of the most alluring ones — the ones that you know reject the highest percentage of students — to collaborate on financial-aid formulas when students are applying for need-based aid. So they could come to an agreement about how they were going to assess those applicants’ ability to pay and therefore what to charge them.
Brancaccio: All right. But somehow, the suit alleges that colleges and universities are not living up to the spirit of all that?
Lieber: Right. So what the suit says is that these institutions are not, in fact, need blind. They do pay attention to people’s ability to pay. How do they do that? Well, if it turns out that you have a whole big, giant pile of money, and you might donate some of it to the university at some point, you will get special consideration.
Brancaccio: I see. Now, I mean, University of Pennsylvania — among others — says, if you look at the facts of this, that’s not what’s going on, that people of means who might be donors or could become donors aren’t getting special preferences. Do you still worry that that is happening?
Lieber: It is absolutely the case that many — if not most — people of means do not get a special edge according to their ability to donate. But if you look at the evidence that these lawyers in the lawsuit have sort of smoked out during depositions, you see some stuff that seems fairly damning. Cornell itself recognized that admissions readers were, in effect, deputized in the fundraising process. [At] Notre Dame, 86 donor-influenced applicants were enrolled in 2020. That was 4% of the incoming class. And at one point, an administrator at Notre Dame says, “Sure hope the wealthy next year raise a few more smart kids.”
Brancaccio: Oof. So the presumption there being that some not-so-swift students are getting in perhaps because their parents have a high net-worth balance sheet there. So, Ron, this is about “Is the system fair? Is it based on merit?”
Lieber: Well, that’s one part of it. I mean, it is an antitrust suit that’s rooted in all sorts of technical arguments about those laws. But one of the things that comes loose here is the fact that the system is not meritocratic, right? Not completely, at least. Every new generation of teenagers from families who are approaching it for the first time have to relearn this fact, right? There are ways to gain advantage that are based on how much money that you have, and it is an unfortunate truth of the way things work.
