In January, five former students filed a class lawsuit against 16 American universities for price fixing their financial aid packages. The 16 universities were among the US News’ top ranking, most famous schools: Columbia, Dartmouth, Duke, Georgetown, the Massachusetts Institute of Technology (M.I.T.), Northwestern, Notre Dame, the University of Pennsylvania, Vanderbilt, Brown, the California Institute of Technology, the University of Chicago, Emory, Rice, Vanderbilt and Yale. What does this lawsuit mean, and how is it relevant to us in the AISG community?

Price Fixing

Generally, students who apply to university in the U.S. can also apply for financial aid to partially or fully cover their tuition. When these universities send out acceptance letters, they also send out the financial aid package that they are willing to offer each individual student. The idea behind this system is that universities will compete for the admission of students by trying to offer more financial aid than other universities. Under this system, while universities spend extra money to attract the students they want, and students should be able to choose between several financial aid packages and find the university that best accommodates for their needs. Price-fixing between universities interferes with this system.

In this case, price-fixing refers to colluding with other universities to set standardized financial aid packages for individual students. When the universities set and send out the same financial aid package to an applicant, they are no longer in competition with each other over the student, and hence can collectively offer less aid with no repercussions on admission. As a result, the student applying for financial aid gets weak aid packages, and going to university becomes either a difficult or impossible financial burden.

Because of the Improving America’s Schools Act of 1994, need-blind colleges are in fact allowed to meet up and establish standards of financial need and packages. Need-blind schools are schools that do not consider a candidate’s financial situation when reviewing their application. The lawsuit’s claim is that Columbia, Dartmouth, Duke, Georgetown, the Massachusetts Institute of Technology (M.I.T.), Northwestern, Notre Dame, the University of Pennsylvania, and Vanderbilt are not need-blind, and the other 7 sued schools are aware of this, making their meetings illegal.

AISG Reactions

All of the 5 students interviewed for this article hadn’t heard about the lawsuit prior to the interview. Junior Sharon C. didn’t expect to hear this news, saying: “It is kind of disappointing that [these universities] come together in this.”

On the other hand, sophomore Jerry L. seemed to start off with different expectations. “I’ve never heard of this, but I’m not really surprised that they would be doing this,” he responded.

Although none of the interviewees looked particularly pleased to hear the news, there was also acknowledgement of the issue from the universities’ more practical perspective. Having heard and generally agreed with his peers’ reactions to the news, senior Anderson F. pointed out: “But if you don’t have money, how are you going to be a top elite school?”

In discussing a similar point, AISG college counselor Dr Walker points to a Revisionist History podcast episode, where researcher Malcolm Gladwell compares the food at two American colleges, Vassar and Bowdoin. Vassar is a school that spends a lot on financial aid for low-income-family students, while Bowdoin has less students and a big endowment from donors. Bowdoin has better food and dorms than Vassar: because of the extra money not spent on financial aid, Dr Walker summarizes, Vassar becomes “a little less beautiful, a little less enticing” than Bowdoin. Perhaps it is the price-fixing that allows the sued colleges to have the prestige that they do.

Financial Aid for AISG Students

“Financial burden” isn’t a term we associate much with students at private schools like ours: but is it really a term completely irrelevant to us? In a society that reveres money as an emblem of success, we seem to spend a lot of time avoiding discussion about it.

Though interviewees like Anderson F. admits that the price-fixing situation is “bad for the poor students,” no one made any verbal connection between the news and the college applications of themselves or their peers.

“[The need for financial aid] probably affects more people than the ones who talk about it,” says English and Beacon advisor Mrs. Walker.

According to the Education Data Initiative, the average annual cost of attending college, including tuition and living costs, adds up to over 35,000 USD. Though our community’s average income is much higher than that of many schools around the world, some students from AISG will be applying for financial aid to carry at least some the burden of such an astronomical price.

Dr. Walker explains that in college applications, “ability to pay certainly could affect your acceptance, especially if the school is need-aware”. Many international school students also apply to private schools (like the ones being sued) to make the most of scholarships and other forms of financial aid, which are generally only offered to in-state students at public institutions.

With all this in mind, when applying to a college and its financial aid program, it can be good to know if the school is need-blind in name but practicing need-aware policies or price-fixing their financial aid packages.

Beyond Money

For students who aren’t planning to apply for aid, does this lawsuit have any relevance?

From a moral standpoint, the lawsuit brings up questions on inclusivity and diversity in education. In college, Ms. Walker was track teammates with a dyslexic person: she believes that because her teammate was good at track, she gained access to “a new world” of university education and resources that she otherwise would’ve struggled to get, based on her dyslexia-caused high school learning struggles. Similarly, the financial aid packages give students access to schools they couldn’t have afforded otherwise. With the price-fixing affecting access to financial aid, Ms. Walker brings up the question: “Should everyone have access to something they are passionate about despite the cost?”

For sophomore Hannah P., the lawsuit “taints [the universities’] reputation as a top school, because you expect them to care for you and match your principles, but then you find out they don’t”. But, again, it could be argued that the money from their actions is what allowed them to gain a reputation as a good school with lots of resources and money to invest in research, facilities and faculty.

From a business perspective, senior Robert Y. says, “[The universities] are violating laws, using their advantage to gain revenue. It is definitely unethical on some grounds, but it is profitable for the owners.”

Dr Walker’s reminder is to keep in mind that many universities are, at the end of the day, businesses: “Don’t be fooled by what these schools are advertising. They are not doing it out of the good of their hearts. They take care of themselves first, and if you don’t believe that, that’s a little bit naïve.”

Understanding this lawsuit and its implications is a way of getting to know the schools and systems you are applying to, no matter your stance on the issue.

“It’s a system of wealth. It doesn’t play by the same rules as other systems,” says Dr. Walker.

Whether you need financial aid or not, this lawsuit and the system behind it may be worth a moment’s consideration.

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For more information on the lawsuit itself, visit The Times, CNN, Forbes, NY Times, CBS News or WHECTV. A more opinionated piece on the lawsuit can be found on BIG by Matt Stoller.