The Forum | Costs

New Higher Education Lawsuit Proves that Trustees Must Gain Back the Trust of Students

February 1, 2022 by Anna Sillers

When the Varsity Blues scandal broke in 2019, exposing a criminal conspiracy in which well-off families gamed the admissions process by inflating test scores and bribing college officials, Americans lost faith in a higher education system that caters to the wealthy. A new lawsuit threatens to erode this trust even further and provides a clear warning that trustees would be wise to be more aware of admissions activities happening under their watch.

In January, five former students filed an anti-trust violation lawsuit against a group of 16 schools. These schools, which include Ivy Leagues and other prestigious universities, have been accused of illegally operating a price-fixing scheme.

Price-fixing in higher education is not new. In 1991, a lawsuit brought against all Ivy League schools and the Massachusetts Institute of Technology (MIT) alleged that the schools were illegally collaborating on how much aid to offer potential students, limiting price competition. According to the Wall Street Journal, the institutions in question claimed that “the approach eliminated bidding wars and allowed students to choose schools based on fit rather than on price.” The schools later settled.

Congress passed legislation in 1994 that decided institutions with need-blind admissions policies (i.e., not considering an applicant’s financial situation when determining if they will be admitted) can legally create common standards with other universities when setting financial aid packages. Colleges that do not consider financial needs of an incoming class can, in exchange, use these common standards to  avoid costly bidding wars with other similar institutions. 

The January 2022 lawsuit alleges that the group of 16 schools, which share a common financial aid algorithm, are violating the 1994 legislation. The schools in question are or have been members of the 568 Presidents Group, a group of 28 need-blind colleges and universities that use a common algorithm to determine financial aid packages and was created as a result of the 1994 legislation. Students applying to multiple schools within this group often see only one price and, as the 2022 lawsuit alleges, usually a high one. The lawsuit suggests that the 16 schools are colluding on what price to offer admitted students while simultaneously seeking out and offering generous financial aid packages to attract wealthy students, called “development admits.”

In the lawsuit, an admissions officer at the University of Pennsylvania described how the school notes when applicants are “a high priority for the institution,” including “children of donors or potential donors,” and reserves spots for those whose parents have given “significant money to the institution.” A former admissions director for MIT even said that a development office would often reach out to the admissions department if a student’s family has been especially generous. One of the most telling quotes from the lawsuit comes from Charles Deacon, dean of Georgetown University, a supposed “need-blind” school: “On the fundraising side, we also have a small number of ‘development potential’ candidates. If Bill Gates wants his kid to come to Georgetown, we’d be more than happy to have him come and talk to us.”

Even with their billion-dollar endowments, schools in the 568 Presidents Group still want the best of both worlds: to be able to say they are a need-blind institution, while also having a base of wealthy students whose parents are ready to open their pocketbooks.

It is the duty of college trustees to ensure that their institutions operate within the law and provide all students with a reasonable—and transparent—price. With colleges and universities coming under increased scrutiny for exorbitant tuition costs, trustees who are not appropriately performing their fiduciary duty may find themselves cleaning up their admission offices’ future messes.


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