Cornell’s financial aid website touts an “Ivy League education within reach,” but a class-action lawsuit that some universities recently settled alleges that Cornell and 16 other schools engaged in a “price-fixing cartel” to reduce student financial aid awards.
On Jan. 23, five universities — Yale, Emory, Brown, Columbia and Duke — agreed to settle the case for a total of $104.5 million, according to a press release by the plaintiffs’ legal team.
In light of the new settlements, Robert D. Gilbert, one of the plaintiffs’ lawyers, said in the same press release that it “is past time for the presidents and governing bodies of the remaining defendants to … resolve the overcharges to middle-class and working-class students that stemmed from the twenty years of collusion on financial aid by elite universities.”
Prior to this announcement, the University of Chicago settled separately for $13.5 million in August, while Rice University agreed to pay $33.75 million, according to its financial documents. Vanderbilt University also settled for an undisclosed amount in November.
According to statements provided to Inside Higher Ed, the five settling universities denied the allegations and expressed confidence in their educational and financial aid programs.
“Though we believe the plaintiffs’ claims are without merit, we have reached a settlement in order to maintain our commitment to the privacy of our students and families and keep our focus on providing talented scholars from all social, cultural and economic backgrounds one of the world’s best undergraduate educations,” a Vanderbilt representative said to the outlet.
The Original Complaint
The complaint — initially filed in U.S. District Court on Jan. 9, 2022 by several current and former students of the accused universities — alleges that this group violated Section 568 of the Improving America’s Schools Act of 1994. Section 568 is a now-expired antitrust exemption that allowed a group of universities to share financial aid information and methodology among themselves.
The schools, dubbed the “568 Cartel,” include Brown University, the California Institute of Technology, the University of Chicago, Columbia University, Cornell University, Dartmouth College, Duke University, Johns Hopkins University, Georgetown University, the Massachusetts Institute of Technology, Northwestern University, the University of Notre Dame, the University of Pennsylvania, Rice University, Vanderbilt University and Yale University.
The accused universities were exempt from antitrust law as long as they admitted students “without regard to the financial circumstances of the student involved or the student’s family,” referred to as a need-blind admissions policy.
The amended complaint argues that the defendants violated that exemption because they were not acting in a need-blind manner before its expiration.
“Far from adhering to this statutory requirement when the 568 exemption existed, all defendants considered the financial circumstances of students and their families in deciding whether to admit students,” the suit alleges.
The defendants allegedly raised the net price of attendance for over 200,000 financial aid recipients in the amount of several billions of dollars, in violation of Section 1 of the Sherman Antitrust Act.
Two Brown University basketball players filed a similar class-action lawsuit against the Ivy League in March 2023 that also referenced Section 568. They alleged that the Ivy League policy of not awarding athletic scholarships — borne out of Section 568 — had “direct anticompetitive effects, raising the net price of education that Ivy League athletes pay.”
Cornell’s Position
Cornell, along with eight other schools, remains a defendant in the suit. The University declined to comment on pending litigation.
The plaintiffs’ lawyers claimed in the press release that they had “pursued a strategy of increasing the settlement amounts with each successive agreement to exert pressure on non-settling defendants to reach agreement imminently or risk having to pay significantly more by waiting.”
This raises questions about whether Cornell and other schools would be forced to pay out a larger settlement if they decide to wait.
Because of a legal doctrine called joint and several liability, “the more everyone settles, the more pressure there is on the [universities] … left over [in the lawsuit] because if they’re left holding the bag, it’s a big bag,” said antitrust specialist Prof. George A. Hay, law.
With no clear trial date yet, the case remains unresolved. According to Hay, the plaintiffs will have to get the court to certify a very large class, demonstrate that the universities overcharged students and prove damages.
Regardless, whether Cornell settles is likely to hinge on the strength of its case.
“Cornell, if it holds out, is on the hook for everything — the whole shooting match. They’re going to be under enormous pressure to settle,” Hay said. “They have to be very confident that they’re going to eventually win this case to justify holding out much longer.”