Rice University in Houston is being sued along with fifteen other private universities in a class-action lawsuit alleging unfair practices to determine which students get financial aid. The schools are also accused of violating antitrust laws, and for over two decades, overcharging for as many as 170,000 students who had been eligible for financial aid.
Scott Jaschik, editor of Inside Higher Ed, says the suit claims that the methodology the universities use to award need-based aid aren’t “blind,” as the universities had claimed. Instead, they allegedly favor wealthier applicants. Need blind refers to the idea that a college admits all eligible students, regardless of their financial need. But Jaschik says it’s relatively rare in private higher education for an institution to be need blind.
Listen to the interview with Jaschik in the audio player above or read the transcript below to learn more.
This interview has been edited lightly for clarity.
Texas Standard: This has echoes of antitrust action the Justice Department filed against Ivy League schools and MIT back in the 1990s. That was what I immediately thought of when I heard about this story.
Scott Jaschik: Yes, I thought of it as well. Now, it’s a different type of antitrust violation in the ’90s. What they were taking action against was the Ivies, and MIT and other colleges, met annually to talk about the specific aid awards they gave to students who were admitted to more than one Ivy university. So the students, in theory, wouldn’t have to pick based on cost. They could pick based on fit that was declared to be a violation of antitrust laws. And so that went away. Now they’re being charged because they have taken advantage of something called the 568 group exemption.
That is a group that currently has 21 colleges and universities. It’s an exemption from the antitrust law in developing a common methodology to award need-based aid. So those colleges meet regularly and talk about a common methodology – you know, do we count this? Do we count that? But it’s not, they no longer are looking at the aid they’re going to give to each individual student.
The reason that that methodology is under attack is that this suit claims that some of the 16 universities aren’t, in fact, need blind, meaning that they favor the wealthier applicants’ need. “Blind” is a term that’s used to refer to a college that admits all of its students, regardless of their financial need. It’s a relatively rare thing in private higher education to be need blind. Rice University is. And they claim that some of the universities favor wealthy students. And so that’s why they are being sued.
But they do declare that other universities, such as Rice, they haven’t found any evidence that Rice violates the terms of the agreement. But they say that Rice knew that the others did. And so that is the thing they got Rice on.
So they’re taking on all these university and college members of this particular group, the 568 Presidents Group?
No, they’re not actually. And it’s not clear why. There are some in the  group they are not suing.
So why would Rice, which has denied any allegations of wrongdoing – why would it be looped in?
It’s because the claim is that Rice knew that the others weren’t in compliance with need blind, and looked the other way. But that is not proven.
How does this differ from universities claiming to be need blind and giving financial aid offers to attract the the kids of wealthy donors, for example? Colleges have acknowledged that they do this sort of thing from time to time based on a wide variety of criteria.
Yes, some colleges have acknowledged it, but not these colleges; these colleges claim not to. And so that’s what it comes down to: are some of the colleges, in fact, not living up to the obligations to be a member of the 568 group, which is very important because the 568 group gave them the right to meet and come up with this common methodology to use.
Why are we talking about just private universities here?
Well, for a variety of reasons. One, they are very wealthy institutions. All of these institutions have a lot of money. They are generally considered the very best institutions. Now, that’s no offense to any UT-Austin alums or Texas A&M alums who are listening, but they are historically the the privates, the Ivies, you know, are historically thought of as the best. And so they have separate rules about financial aid.
This lawsuit has now been filed in Chicago. What happens with this case? And is the Justice Department on it, or is this completely private?
It is completely private. It’s by a group of lawyers. Now, it’s interesting, one of the lawyers used to work for the Justice Department and was a prosecutor in the Varsity Blues case, which your listeners may have followed about other abuses in admissions. But Varsity Blues was totally about a total scam on admissions. This is a little different. But what will probably happen is, my guess is the universities will seek to have the case dismissed and then a judge will rule on that. And and if it’s not dismissed, will be a discovery period.
The Varsity Blues scandal you mentioned shone a light on all sorts of inequities in the admissions process, and I’m wondering if you see this litigation having a similar effect.
It could if the claims are proven, and that’s what the lawyers are vowing to do. And they’re trying to show that, you know, the wealthy are in advantage, already illegal advantage, because of the 568 group in admissions. Now, there’s nothing that prevents any college from admitting that it favors wealthy applicants, but not to do so and be in the 568 group.