40 Top Colleges Beat Lawsuit Over Financial Aid “Price Fixing”

This week, 40 prominent U.S. universities (including Harvard, Yale, MIT, Northwestern, Georgetown, and Cornell) won dismissal of a lawsuit (PDF File) that accused them of conspiring to overcharge students by limiting financial aid. 40 Top Colleges Beat Lawsuit Over Financial

The lawsuit, filed by a Boston University student and a Cornell graduate, claimed the schools worked together through the College Board to require financial information from noncustodial parents – often those that were divorced or estranged. According to the plaintiffs, this inflated families’ expected contributions, cut down on financial aid packages, and cost students thousands more per year.

Judge Sara Ellis of the U.S. District Court in Chicago ruled that while the schools all used similar policies, the plaintiffs did not present enough evidence that the institutions had entered into an illegal agreement. The case was dismissed without prejudice, meaning the plaintiffs may try again in the future if they have stronger evidence. 40 Top Colleges Beat Lawsuit Over Financial

Why Non-Custodial Parent Rules Matter

When applying for federal aid, families submit the FAFSA, which only looks at the parent or household who provides the most financial support. But many private colleges also require the CSS Profile, run by the College Board, which allows schools to ask for both custodial and noncustodial parent financial information. 40 Top Colleges Beat Lawsuit Over Financial

That distinction matters most for students whose parents are divorced, separated, or estranged:

• If the noncustodial parent refuses to contribute, colleges may still count their income, leaving the student with a gap to cover.
• Loans and debt can increase, since the aid formula assumes resources the student cannot actually access.
• Aid awards differ between schools, since some institutions do not require noncustodial parent information.

According to the lawsuit, students attending schools with the extra requirement paid, on average, about $6,200 more per year than students at otherwise comparable colleges that did not. 40 Top Colleges Beat Lawsuit Over Financial

The Court’s Reasoning

Judge Ellis emphasized that antitrust law requires more than showing that schools used the same policy. To prove collusion, plaintiffs must demonstrate an actual agreement through evidence like coordinated policy changes, explicit communications, or secret arrangements. 40 Top Colleges Beat Lawsuit Over Financial

In this case, the plaintiffs pointed to the College Board’s 2006 push to encourage schools to consider noncustodial parent income, which many institutions adopted over time. But the judge noted:

• Schools did not adopt the policy all at once; the process stretched across nearly two decades.
• Each institution had discretion in how it used the data.
• Many other colleges outside the lawsuit also required the same information.