Higher Ed’s (Anti)Trust Problem

Last week a lawsuit accused 40 colleges and universities, as well as the nonprofit College Board, of participating in a price-fixing conspiracy to jack up tuition rates for certain students.

The complaint, filed by a current Boston University student and a Cornell University alumnus, alleges that the private institutions named in the suit all illegally agreed to require noncustodial parents of students applying for institutional aid to submit their financial information, even if that parent did not plan to contribute to the student’s education. The move served to artificially raise tuition and lower aid eligibility.

“Absent this agreement,” the lawsuit claims, “defendants would have competed in offering [more] financial aid in order to enroll their top candidates.”

It’s the second major price-fixing antitrust lawsuit filed against highly selective universities since 2022, when 17 institutions, many of which were also named in Monday’s suit, were accused of illegally colluding to set common financial aid formulas. So far, 10 of those institutions have settled for a combined $248 million.

The new lawsuit primarily affects children of divorced parents or those who have an estranged or absent parent. But the heart of the allegations—that defendants “engaged in concerted action” to reach an “agreed pricing strategy” at a higher rate—echoes that of the 2022 suit, which centered on the 568 Presidents Group, a coalition of institutions granted immunity from antitrust laws pertaining to federal aid in 1994. The 568 group disbanded shortly after that suit was filed.

So are these antitrust lawsuits based on sound evidence? Is there a cartel of selective colleges shaking hands behind closed doors to keep costs high, or is it simply a case of peer institutions coming to a consensus on a best practice for financial aid packaging?

Spencer Waller, director of the Institute for Consumer Antitrust Studies at Loyola University Chicago’s law school, said that in antitrust cases like these, plaintiffs have to prove not only that there was an explicit consumer pricing agreement, but also that it was made by actors with significant market-shaping power and substantially harmed competition. Waller said the complaint hadn’t progressed enough to ascertain its merits on those terms, but that if the judge agrees with the plaintiffs, it could have wide-ranging consequences for financial aid.

“It raises, in a new and difficult factual setting, very traditional antitrust issues,” he said. “It’s going to be quite a fight … There’s a lot at stake here.”

Whether or not the allegations put forth in such lawsuits are legitimate, they reflect growing public anger and disillusionment over the cost of private, selective institutions—and the lack of transparency around net price.

Steve Berman, managing partner of Hagens Berman, the law firm representing the plaintiffs, suggested the alleged conspiracy has broader implications for access to postsecondary education and ballooning student debt.

“The financial burden of college cannot be overstated in today’s world, and we believe our antitrust attorneys have uncovered a major influence on the rising cost of higher education,” Berman wrote in a statement. “Those affected could never have foreseen that this alleged scheme was in place, and students are left receiving less financial aid than they would in a fair market.”

Most universities named in the suit and contacted by Inside Higher Ed declined to comment on pending litigation. NYU spokesperson John Beckman wrote in an email that the lawsuit “has no merit” and the university “intends to vigorously defend itself and its financial aid policies and procedures.”

The College Board was named because it runs the College Scholarship Service Profile, a form required by roughly 250 institutions to help determine admitted students’ financial aid eligibility, on which noncustodial parents’ financial information is entered.

A College Board spokesperson wrote that officials were reviewing the lawsuit but were “confident that we will prevail in this action and we will continue to support our member colleges.” She declined to answer further questions about the organization’s alleged role in orchestrating the alleged collusion among the defendant colleges.

A Coming Wave of Litigation?

The lawsuit claims that for decades private colleges, including College Board members, “took differing approaches to the consideration of noncustodial parent assets” and would sometimes overlook them in order to offer a more competitive financial aid package.

Then, in 2006, the College Board allegedly urged its member colleges to adopt a requirement for noncustodial parents’ financial information; university defendants allegedly pushed for that provision in the profile through dozens of employees who also serve on the College Board’s policy advisory bodies.

“For a significant minority of students (those from single-parent families), that change essentially doubled their available parental assets/income practically overnight,” the lawsuit reads.

Waller said the case is the latest in a line of antitrust tuition lawsuits spanning back to the late 1980s, when the federal government investigated the Massachusetts Institute of Technology and all eight Ivy League colleges for similar collusion around scholarship money.

“The courts have been back and forth since on whether that constitutes per se unlawful price fixing,” he said.

That gives the new litigation the potential to set a legal precedent on preventing colleges from cooperating to set financial aid standards. The question, Waller said, is whether the case is strong enough to do so.

“It’s one thing to point at an agreement not to give any merit aid, like they did in the government’s case; that’s a pretty clear example of messing with the price mechanism,” he said. “This one is a little more complicated and even less direct than the 568 case.”

As for whether other colleges should prepare for a continuing wave of antitrust litigation, Waller is skeptical.

“These are long, expensive cases,” he said. “It may sound like higher ed is under siege, but two lawsuits isn’t a growth industry.”