Antitrust suit alleges 16 elite universities colluded to limit financial aid
A student studies in Doe Library at the University of California at Berkeley in Berkeley, California May 12, 2014. REUTERS/Noah Berger

Sixteen elite universities were sued in federal court late Sunday over an alleged price-fixing scheme in which plaintiffs say the schools formed a "cartel" to limit the amount of financial aid they would each offer to low- and middle-income prospective students—breaking antitrust laws.

Five students who previously attended some of the universities filed the federal lawsuit in Illinois, arguing that in defiance of legislation passed in the 1990s, at least some of the schools take families' financial needs into account when making admissions decisions. The schools in question are part of a group called the "568 Presidents Group," which was formed after Ivy League schools were charged with price-fixing in 1991 and is supposed to admit students on a "need-blind" basis.

"As a result of this conspiracy, the net price of attendance for financial-aid recipients at defendants' schools has been artificially inflated."

After the schools were accused of colluding with their competitors to set a formula for determining how much financial aid was needed by families—driving up college costs for all students—Congress passed legislation allowing the schools to collaborate on financial aid methodologies, but only if they did not take into account students' financial needs when making admissions decisions.

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According to the lawsuit filed Sunday, Columbia University, Dartmouth College, Duke University, Georgetown University, the Massachusetts Institute of Technology (MIT), Northwestern University, Notre Dame University, the University of Pennsylvania, and Vanderbilt University all take financial needs into account.

"Nine defendants have thus made admissions decisions with regard to the financial circumstances of students and their families, thereby disfavoring students who need financial aid," the plaintiffs said in court filings.

Seven other universities—Brown University, the California Institute of Technology, the University of Chicago, Cornell University, Emory University, Rice University, and Yale University—are also part of the 568 Presidents Group and may or may not consider financial needs, the lawsuit says.

Several of the schools—including Yale, Columbia, University of Pennsylvania, Notre Dame, and MIT—have among the largest university endowments in the country, ranging from more than $11 billion to more than $31 billion.

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The schools—called the "568 Cartel" in the lawsuit—are accused of giving preferable treatment to the children of wealthy donors. The lawsuit cites an article published in the Daily Northwestern in 2019 in which university president Morton Schapiro acknowledged he personally gets involved in certain admissions decisions. Schapiro told the newspaper that applications of "legacy students [and] children whose family members have donated" to the school reach his desk.

The 568 Presidents Group meets several times a year to discuss its financial aid formula.

"In collectively adopting this methodology, and regularly meeting to implement it jointly, the 568 Cartel has explicitly aimed to reduce or eliminate price competition among its members," the plaintiffs said in the suit. "As a result of this conspiracy, the net price of attendance for financial-aid recipients at defendants' schools has been artificially inflated."

The lawsuit specifically alleges that low- and middle-income students were overcharged by "at least hundreds of millions of dollars." According to the plaintiffs, about 170,000 former students who attended the schools over the past 18 years could be eligible to join the lawsuit.

Former students from lower- and middle-class backgrounds "might have student debt because of illegal collusion," tweeted organizer Melissa Byrne.

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The lawsuit was filed amid growing fury over the student loan debt crisis in the United States, with more than 43 million people owing an average of nearly $40,000 each. Student debt now totals $1.75 trillion and is growing six times faster than the nation's economy, according to EducationData.org.

The plaintiffs believe former students deserve compensation from the schools if they "paid tuition, room, or board not completely covered by aid" during the time period covered by the lawsuit, according to the Yale Daily News.

"In critical respects, elite, private universities like defendants are gatekeepers to the American Dream," the plaintiffs said. "defendants' misconduct is therefore particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents."