MIT charged, along with other universities, in federal lawsuit for illegally limiting student financial aid awards

Defendant universities are alleged to have made admissions decisions without being fully need-blind

MIT is among 16 private national universities being sued by five former students in the U.S. District Court in Illinois for collaborating in a “price-fixing cartel” meant to limit the financial aid awards.

The suit, filed Jan. 9, claims that the defendant universities used a shared methodology to calculate applicants’ financial aid, which resulted in price-fixing and unfairly limited financial aid.

The universities are permitted to collaborate on financial aid under Section 568 of the Higher Education Act, which exempts universities that participate in need-blind (do not consider the applicant’s financial status) admission from federal antitrust laws that would usually prevent them from collaborating. However, the suit alleges that the schools are not fully need-blind, use a methodology that “deals exclusively with the family’s ability to pay for college,” and therefore do not qualify for the antitrust exemption.

The suit alleges that of the 16 universities, MIT and eight others “made admissions decisions with regard to the financial circumstances of students and their families, thereby disfavoring students who need financial aid.” The other seven defendants “may or may not have adhered to need-blind admissions policies, but they nonetheless conspired with the other Defendants.”

The suit writes that over 170,000 former undergraduate students who received partial financial aid at the defendant schools have been overcharged “by at least hundreds of millions of dollars.”

MIT wrote that “MIT is reviewing the filing and will respond in court in due time.”

In addition to MIT, other defendants in the suit include Brown University, the California Institute of Technology, the University of Chicago, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, Northwestern University, the University of Notre Dame, the University of Pennsylvania, Rice University, Vanderbilt University, and Yale University.

The suit resembles a civil antitrust case in 1991 in which MIT and the eight Ivy League universities were charged with violating the Sherman Antitrust Act by working together to limit price competition on financial aid to prospective students. 

In that case, the Ivy League schools signed a consent decree, agreeing to not collaborate on financial aid. MIT refused to sign the decree and instead participated in another federal trial. As a result of the trial, the U.S. Department of Justice dismissed the case against MIT and established new guidelines for non-profit universities to cooperate on need-based financial aid, which Section 568 was modeled after.