Yale, other elite universities settle ‘price-fixing’ financial aid lawsuit

Several elite universities accused in a federal lawsuit of conspiring to fix financial aid offers at the same low rates for students of humble means have settled out of court.

Brown, Columbia, Duke, Emory and Yale universities offered in court filings Tuesday to pay a collective $114.5 million. That is in addition to $13.5 million that the University of Chicago pledged last summer.

Vanderbilt University has agreed to pay an unspecified amount. The Houston Chronicle reported last week that internal documents show Rice University has set aside $33.75 million to settle the class action suit.

That’s eight of the 17 universities named in the complaint. Several former Duke, Northwestern and Vanderbilt students filed it in January 2022 on behalf of more than 100,000 people estimated to have paid tuition or room and board at the schools starting in 2003. 

“It is past time for the presidents and governing bodies of the remaining defendants to stand up and do the right thing for their students and alumni, and resolve the overcharges to middle-class and working-class students that stemmed from the 20 years of collusion on financial aid by elite universities,” Robert D. Gilbert, an attorney representing the former students, said Tuesday night.

According to the complaint filed in Illinois, the schools began meeting in a consortium called the 568 Presidents Group in 1998 to fix “a uniform and lower level of aid” for need-based students. 

The suit claims this arrangement violated their need-blind admissions policies, which the schools said qualified them for a legal exemption to federal antitrust laws.

According to the complaint, this “wealth favoritism” overcharged middle- and working-class families by hundreds of millions of dollars for tuition, room and board.

On Tuesday, Yale offered to pay $18.5 million and Emory $18.5 million. Brown offered $19.5 million, Columbia $24 million and Duke $24 million.

All 17 schools have rejected its claims, insisting they treated all students fairly. Several of them repeated those assertions on Tuesday and Wednesday.

“Duke denies all the allegations of wrongdoing and claims of liability in this case,” said Frank Tramble, vice president of communications, marketing and public affairs at the North Carolina campus. “We are settling this case to avoid the wasteful cost and inconvenience of prolonged litigation.”

Brown spokesman Brian E. Clark said that while the Ivy League school in Rhode Island had a “limited participation” in the 568 Presidents Group from 2003 to 2012, it “awarded its financial aid exclusively on the basis of student and family financial need” throughout that time. 

“We vehemently believe that the claims had no merit, but given the time and financial resources required to take this case to trial, we determined that our resources are better spent resolving this matter and supporting the education of our students,” Mr. Clark said Tuesday. “We’ll continue our commitment to meeting the full financial need of all our students and to continually building upon the generous financial aid and access initiatives in place already.”

In a statement that the student-run Yale Daily News published early Wednesday, Yale said its aid offers likewise “meet the full financial need of each student.”

“This settlement contains no admission that Yale did anything wrong but allows the university to avoid the cost and disruption of further litigation and to continue its work in making undergraduate education more affordable for more families,” the statement added.

“While Emory continues to believe the plaintiffs’ claims have no merit, we are pleased the litigation is behind us,” Laura Diamond, assistant vice president for communications, said Wednesday. “Our focus has been and always will be to make an Emory education accessible to all talented students, regardless of their financial resources, and we look forward to continuing that mission.”

The suit alleges that the remaining defendants in the case also belonged to the 568 Presidents Group at various times: the University of Pennsylvania, Georgetown, Cornell, Notre Dame, MIT, Caltech, Johns Hopkins, Dartmouth and Northwestern.

Most of these schools on Wednesday did not respond immediately to requests for comment.

Spokespeople for Caltech, Cornell and Rice, which has not confirmed its settlement offer, declined to comment.

In an August 2022 ruling, U.S. District Judge Matthew F. Kennelly rejected a motion by the universities to dismiss the suit.

The judge wrote that the former students “cited specific evidence” that the schools violated their “need-blind” admission policies by quietly basing financial aid awards on students’ ability to pay tuition.

Need-blind schools promise not to consider the ability to pay into their admissions decisions.

“The Court concludes that, regardless of which interpretation of ‘need-blind’ it adopts, the plaintiffs have plausibly alleged that the defendants do not admit all students on a need-blind basis,” wrote Judge Kennelly, a Clinton appointee.

The Biden Department of Justice has sided with the former students.

In a statement of interest filed in July 2022, the Justice Department rejected the universities’ claim to be exempt from higher education antitrust laws.

The universities had cited a 1994 federal education law known as Section 568, which allows need-blind private schools to collaborate with their competitors.

That legal exemption expired on Sept. 30, 2022. The 568 Presidents Group website disappeared from the internet shortly after.

Citing Supreme Court precedent, the DOJ statement argued that the universities’ use of a single “consensus methodology” to calculate need-based financial aid “eliminates an important dimension of price competition among schools.”