Eight Ivy League universities agreed Wednesday not to conspire in determining financial aid for students after the Justice Department charged them with antitrust violations in their assistance programs.
But the Massachusetts Institute of Technology, the ninth school named in the unprecedented government action, refused to sign the consent decree that would settle the civil suit and will go to trial.
In the decree, filed in federal court in Philadelphia, the eight schools--while admitting no wrongdoing--also promised not to discuss or agree on future tuition or faculty salary increases.
Atty. Gen. Dick Thornburgh, branding the alleged collusion a “collegiate cartel,” said that similar investigations of other schools are continuing, but declined to name the institutions.
In addition to MIT, the suit named as defendants Brown University, Columbia University, Cornell University, Dartmouth College, Harvard University, Princeton University, the University of Pennsylvania and Yale University.
Mark S. Wrighton, provost of MIT, said he does not believe the Sherman Antitrust Act--the statute that outlaws conspiring to restrain price competition--applies to universities and that, even if it does, the school’s financial aid practices do not violate antitrust laws.
Undergraduate fees of the defendants in the suit are among the highest in the nation, all exceeding $18,500 in the 1989-90 school year, according to the Justice Department’s complaint.
The defendants all belong to an organization of financial aid administrators, known as the “Overlap” group, which conducts a series of meetings each year and sets restrictions on financial aid that is awarded undergraduates, the suit alleged.
Under these agreements, financial aid would be awarded solely on the basis of family income and assets and the Overlap group schools would not offer financial aid based on “merit,” including academic achievement, talent or diversity. The group also used a formula for determining family contributions for financial aid applicants.
The suit alleged that the Overlap members compared family contributions for financial aid applicants admitted to more than one of their schools and eliminated sizable differences to make the family contributions comparable.
“Students and their families are entitled to the full benefits of price competition when they choose a college,” Thornburgh said at a Justice Department press conference announcing the suit and consent decree. “This collegiate cartel denied them the right to compare prices and discounts among schools, just as they would in shopping for any other service.
“The defendants conspired to eliminate cost competition as a factor in choosing a college,” Thornburgh said. “The choice of whether to consider price when picking a school belongs to parents and students, not the college or university.”
The Justice Department’s investigation began nearly two years ago with a focus on the Overlap group, which included 23 elite colleges that met annually to discuss financial aid awards to students who had been admitted to at least two of the schools. The inquiry, relying on civil investigative demands--the civil equivalent of a criminal case subpoena--then was expanded to about 55 schools nationwide, including USC and Stanford University in California.
USC and Stanford are not members of Overlap and some education experts speculated that they were included in the investigation for a wider sampling of tuition-setting practices at expensive schools. Admissions officials at USC and Stanford were not available for comment Wednesday.
Jonathan Brown, president-elect of the Assn. of Independent California Colleges and Universities, said that schools in the state share information on admissions and personnel policies but do not conduct formal meetings to review financial aid to specific candidates.
He nevertheless took sharp exception to Thornburgh’s contention that the East Coast meetings amounted to price fixing.
“It’s ludicrous,” Brown said. “I think he is trying to make a political point. . . . To think it is somehow collusion when institutions of higher education talk about admissions policies is a stretching of the concept. It’s wrong.”
Schools had defended the sharing of scholarship information as a way to prevent bidding wars for top students. Peter Smith, a spokesman for the Assn. of American Universities, said Wednesday: “If that’s right, I suppose you’ll get some of that (bidding) now. But I don’t have a feel for how many kids that may involve.”
Daniel Steiner, vice president and general counsel of Harvard, said he is concerned that Wednesday’s action may lead to student financial awards in excess of need. “We have already seen in other parts of the U.S. too much evidence of bidding contests for students.”
Thornburgh said the suit and proposed settlement would have no effect on athletic scholarships at universities and colleges.
“The best thing that can be said about this investigation is that it is over,” said Cary Clark, a Dartmouth counsel. Officials at the college estimated that the investigation and a class-action suit cost Dartmouth about $550,000 in legal expenses, enough for about 55 typical scholarship packages for a year.
In 1989, a Wesleyan student filed a class-action suit in federal court in New York, alleging that 12 colleges and universities, including Stanford, engaged in price fixing in their tuition and aid policies.
The student’s attorney in that pending case, Steven Kramer, said he had hoped the federal government would have won its case in court rather than settle with a consent decree--an action that he said would have made his charges easier to prove.
“Now we have to do it ourselves,” he said, adding that he is confident of winning in the trial which he expects to begin next spring.
Ostrow reported from Washington and Gordon from Los Angeles.