MIT Aid Policy Is Ruled Form of Price Fixing

A federal judge ruled Wednesday that colleges and universities that share information on the finances of their prospective students before giving out scholarship aid violate federal laws against price fixing.

The ruling by U.S. District Judge Louis C. Bechtle in Philadelphia came in a test case filed by the Massachusetts Institute of Technology and calls a halt to a 34-year-old practice among Ivy League colleges of collaborating before offering financial aid to their applicants.

Although Wednesday’s decision dealt specifically with MIT, a Justice Department attorney said that federal attorneys are continuing to examine financial aid policies at colleges around the nation.

“Our investigation is continuing,” said Charles A. James, the acting director of the department’s antitrust division. University officials “would be wise to read this opinion closely,” he said.

According to Bechtle, a university is a “commercial enterprise,” and financial aid grants determine the price that a student will pay for that commercial service.

MIT President Charles M. Vest said that he had read Bechtle’s opinion and planned to appeal it. “Student aid is the opposite of an across-the-board price-fixing policy. It is a gift-setting policy,” Vest said in a statement issued by the Cambridge-based university.

During the 1980s, tuition at the nation’s colleges and universities rose far faster than the rate of inflation. Room, board and tuition at MIT, for example, will cost a student $23,565 this academic year.

These soaring costs in a time of low inflation led some students, parents and government officials to suspect that the institutions were engaging in a form of price fixing.

Without attacking tuition-setting policies directly, the government undertook an investigation three years ago into financial aid policies at 55 institutions, including Stanford and USC. However, it brought price-fixing charges only against MIT and the eight Ivy League colleges whose officials met annually to compare notes on applicants’ financial status.

Since 1958, the nine prestigious colleges in the Northeast had agreed to give out scholarship aid based only on a student’s financial need, not on academic merit.

The nine schools also agreed that their financial aid officials would meet annually and set common standards for measuring a family’s financial status. The universities said that they wanted to equalize their aid offers so that students could choose a school based on a reason other than money.

But Justice Department attorneys maintained that this policy had the effect of blocking free competition for students and that competition could result in larger financial aid offers for some.

In its civil suit against the Ivy League contingent, the government charged the nine schools with violating the Sherman Anti-trust Act and its ban on conspiracies “in restraint of trade.”

In response, the eight Ivy League colleges agreed to stop sharing information on prospective students. They are Harvard, Yale, Princeton, Brown, Dartmouth, Columbia, Cornell and Penn.

But MIT officials chose to fight the government in court. It contended that its scholarship awards were a type of “charitable gift,” not the equivalent of a price set by a commercial company.

The American Council on Education, which represents the major colleges and universities, filed a court brief supporting MIT.

Although Stanford was ordered to submit documents to the Justice Department, it is not under investigation, according to a university spokeswoman. A USC official said that no price-fixing charges were ever brought against USC and that it is not under investigation.