University administrators at a network of elite colleges across the U.S. have worked together to form a “cartel” that, as a group, drove up the cost of admissions and excluded financial aid students since at least 2003, a new lawsuit alleges.
Among the schools accused of participating in the alleged scheme is Rice University in Houston.
Rice is one of 16 colleges that “by their own admission, have participated in a price-fixing cartel that is designed to reduce or eliminate financial aid” as a competitive threat to their admissions prices, according to court documents filed in Illinois federal court last week.
The so-called cartel of universities was successful, and they “artificially inflated the net price of attendance for students receiving financial aid,” court documents said.
The plaintiffs in the suit are Sia Henry, Michael Maerlander, Brandon Piyevsky, Kara Saffrin and Brittany Tatiana Weaver, all former students at one of the defendant schools.
In a statement, Rice said: “After reviewing this lawsuit, we believe it is without merit. Rice University is proud of its financial aid practices and we are prepared to vigorously defend them in court.”
The lawsuit boils down to a dispute over whether the network of schools take the financial position of their applicants into account when assessing applications.
A law called the “Improving America’s Schools Act of 1994” gives universities a pass from antitrust laws if they use a “need-blind” admissions process that doesn’t consider applicants’ finances. Rice and the 15 other institutions claimed to be need-blind.
The lawsuit alleges, however, that the network didn’t just leave out students who needed financial aid; they allegedly developed a formula for determining whether applicants could pay full price or not, and used that same formula to assess applicants at each school.
By using this formula, the schools in the group successfully “artificially inflated prices,” overcharging more than 170,000 financial aid students by “at least hundred of millions of dollars,” according to court documents.
“In critical respects, elite, private universities like Defendants are gatekeepers to the American Dream,” lawyers for the plaintiffs wrote. “[The schools’] misconduct is therefore particularly egregious because it has narrowed a critical pathway to upward mobility that admission to their institutions represents,” court documents said.
“The burden of the cartel’s overcharges falls in particular on low- and middle income families struggling to afford the cost of a university education and to achieve success for their children,” plaintiffs claim.
Rice University is a private, non-profit institution with an $8 billion endowment; 64% of its student body are from families in the top 20% of U.S. incomes, while only 4.9% are from the bottom fifth.