Aid-setting exemption ends for top US universities

As legal challenge gains, Congress avoids renewing provision seen letting elite campuses tie financial offers to student ability to pay

October 4, 2022
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The US Congress has let expire a decades-old provision allowing elite universities to jointly set their financial aid formulas, as the practice faces a sustained legal challenge of its fairness to students.

The refusal of lawmakers to renew the so-called 568 Antitrust Exemption is an affirmation that institutions were abusing the authority it gave them, lawyers for student litigants said.

“For decades,” attorney Robert Gilbert said of the participating universities, “they exploited the exemption to favour wealthy applicants and families, and to disfavour applicants from middle-class and working-class families.”

The provision in federal law, created in 1994, had been permitting a select group of 17 top-ranked universities, including most of the Ivy League, work together on writing their aid formulas – usually a violation of antitrust law – if all of the participating institutions admit all their students without considering their ability to pay.

But a lawsuit brought by Mr Gilbert and other lawyers on behalf of nine former students has produced evidence showing that the institutions clearly and repeatedly did not meet that condition.

Instead, the plaintiffs argue, the universities used the joint meetings allowed by the antitrust exemption to coordinate the aid offers they made to their accepted students to minimise the amounts each university would probably need to offer to secure a particular student’s enrolment. That practice cost an estimated 200,000 former students between $10,000 (£9,000) and $20,000 apiece in aid, the plaintiffs have said.

The end of the 568 antitrust provision – which had required its renewal by Congress by the start of this month – means that aid offers to students at the affected institutions will no longer be “limited artificially by the so-called maximum price they and their families can afford”, said another of the plaintiffs’ attorneys, Ted Normand.

Lawyers for the institutions did not respond to questions of how their aid-setting collaborative, known as the 568 Presidents Group, would respond to the expiration of its enabling law.

The plaintiffs’ lawyers said they nevertheless would persist with their legal action, both to win restitution for the 200,000-plus affected students and to ensure that an association such as the 568 Presidents Group does not get revived.

The students have been making progress in the case, which they filed early this year in a federal court in Illinois. The judge handling the case denied a request by the universities to dismiss it, and the Biden administration’s Justice Department intervened in the case on the side of the students.

That success, according to the plaintiffs’ lawyers, probably helped eliminate much chance that the Democrat-led Congress might renew the 568 Antitrust Exemption.

Some leading conservatives have also sided with the students. Two Republican senators wrote to the Justice Department complaining that the 568 exemption raises both student debt levels and overall costs of higher education, while creating additional competitive advantages for wealthier families.

The court case is on a long timeline, with participants not expecting a trial before late 2025.

paul.basken@timeshighereducation.com

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