Corporate Counsel Daily, Former students allege elite private universities conspired to raise cost of education through financial aid price-fixing scheme, (Oct 23, 2024)

By Wendy Biddle, J.D.

The schools allegedly conspired with the financial aid nonprofit to cause out-of-pocket costs for college to be higher, especially in single-parent households.

College students have filed suit alleging that 40 of the country’s top 50 private colleges and universities, including Harvard University, Carnegie Mellon University, and Georgetown University, conspired with the College Board in a concerted action to require a noncustodial parent of any applicant to provide financial information. That concerted action allegedly raised the prices that the plaintiffs and other members of the class would pay to attend college. The suit alleges that without this agreement, the schools would compete in offering financial aid to enroll top candidates. The judge initially assigned, Judge Sharon Johnson Coleman, has, on October 18, 2024, recused herself and also requested the case be reassigned due to a conflict of interest (Hansen v. Northwestern University, No. 1:24-cv-09667 (N.D. Ill. Oct. 7, 2024)).

College Board is a nonprofit that sets certain standards related to financial aid and the college admission process. The university defendants are member institutions of the College Board. The lawsuit accuses the College Board of working with university defendants in 2006 to develop a pricing strategy to consider the income and assets of noncustodial parents when making financial aid determinations, regardless of the parent’s actual involvement or financial assistance. The College Board sent letters to colleges urging them to follow the NonCustodial Parent Agreed Pricing Strategy and including consideration of financial assets of noncustodial parents in financial aid decisions. According to the complaint, at least 75 schools immediately adopted the NCP Agreed Pricing Strategy and for those students from single-parent families, that change essentially at least doubled their available parental assets/income practically overnight. The mere need to provide noncustodial parent information can result in disadvantaged students being unable to provide such information.

The rules require all applicants seeking financial aid to submit a CSS Profile, which is an online application used by colleges and scholarship programs to award non-federal institutional aid, and includes the requirement that all noncustodial parents provide information related to income and assets, which each school must take into consideration. A CSS Profile is only required at 250 private schools. While FAFSA pertains to federal financial aid and does not require the financial information of noncustodial parents, CSS requires noncustodial parent financial information.

The lawsuit alleges that the concerted action has unlawfully caused the net price of education to rise. The average net price for the forty defendant schools who use the pricing strategy is about $6,200 more than for the ten remaining top 50 private universities who do not use the pricing strategy. According to the complaint, this constitutes anticompetitive behavior by forming an agreement between horizontal competitors—the universities—related to price. Defendants’ illegal conduct has allegedly injured the plaintiffs and class members by artificially reducing the financial aid they were offered and received.

The lawsuit alleges that the university defendants participate in, implement, and facilitate the conspiracy in at least three ways: (1) university defendant employees attend College Board meetings, supervise College Board operations, and participate in the development of College Board aid methodologies and related standards; (2) university defendants implement the NCP Agreed Pricing Strategy related to noncustodial parent financial assets; and (3) university defendants require students to submit aid information related to noncustodial parents and include that information in their determination of need-based financial aid. The lawsuit also highlights that College Board’s effort was led and organized by individuals from the involved universities including College Board’s current chair of Financial Assistance Assembly Council from Columbia University, and Harvard’s Director of Financial Aid who was a chair at College Board.

Prior to 2006, when the alleged scheme began, schools took various approaches to considering the assets of parents, including numerous schools focusing on the assets of only the custodial parents.

The lawsuit also highlights the high cost of post-secondary education. From 1980 to 2020, the average price of tuition, fees, room, and board for an undergraduate degree increased by 169% in constant 2019 dollars. But over the same 40-year period, earnings for workers ages 22 to 27 only increased by 19% in constant 2019 dollars. Approximately 45 million Americans have debt from student loans totaling more than $1.7 trillion. The total student debt is greater than debt from auto loans and credit cards combined, according to the complaint.

Other case against elite universities. In another action against elite universities, the federal district court in Chicago on July 20, 2024, entered final judgment giving final approval to a $284 million settlement between a class of students and ten Defendant universities in a suit that alleged Defendants illegally fixed tuition prices. The settling Defendants were Brown University, University of Chicago, Trustees of Columbia University in the City of New York, Trustees of Dartmouth College, Duke University, Emory University, Northwestern University, William Marsh Rice University, Vanderbilt University, and Yale University (collectively, “Settling Defendants”). An additional seven Defendant universities have not settled: California Institute of Technology, Cornell University, Georgetown University, The Johns Hopkins University, Massachusetts Institute of Technology, University of Notre Dame du Lac, and University of Pennsylvania. Each of the Settling Defendants will contribute anywhere from $13 million to $55 million. Settling Defendants also agreed to complete certain limited discovery, as detailed in their respective Settlement Agreements (Corzo v. Brown University, No. 1:22-cv-00125 (N.D. Ill. July 20, 2024)).

The Case is No. 1:24-cv-09667.

Judge: Ellis, S.

Attorneys: Daniel J. Kurowski (Hagens Berman Sobol Shapiro LLP) for Maxwell Hansen.

Companies: Northwestern University; College Board; American University; Baylor University; Boston College; Boston University; Brandeis University; Brown University; California Institute of Technology, Carnegie Mellon University; Case Western Reserve University; The Trustees of Columbia University in the City of New York; Cornell University; Trustees of Dartmouth College; Duke University; Emory University; Fordham University; George Washington University; Georgetown University; Harvard University; The Johns Hopkins University; Lehigh University; Massachusetts Institute of Technology; University of Miami; New York University; Northeastern University; University of Notre Dame du Lac; The Trustees of the University of Pennsylvania; William Marsh Rice University; University of Rochester; University of Southern California; Southern Methodist University; Stanford University; Syracuse University; Tufts University; Tulane University; Villanova University; Wake Forest University; Washington University in Saint Louis; Worcester Polytechnic Institute; Yale University

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