U.S. reveals details of college price-fixing suit

April 15, 1992|By Huntly Collins | Huntly Collins,Knight-Ridder News Service

PHILADELPHIA -- In the polite halls of America's most prestigious universities, tempers were flaring.

Stanford wasn't toeing the mark on student aid, grumbled an MIT administrator. Stanford, a private university in Palo Alto, Calif., needed to "get enough on our wavelength" and "look like one of the Ivies, meaning not off the reservation too often."

Meanwhile, Dartmouth accused Harvard of breaking ranks by sweetening the pot for a young soccer star's family. "Either we have an agreement we all stick to," fumed Dartmouth's Anthony Quimby, "or we do not have any agreement!"

That "agreement" became the subject of an antitrust suit pitting the U.S. Justice Department against some of the nation's most expensive universities: the eight schools in the Ivy League and the Massachusetts Institute of Technology.

The schools say all they did was make sure that aid went to truly needy students. The government says the schools began an illegal cartel in the 1950s that made higher education costlier, not cheaper, for some families -- and says the schools' own words prove it.

In effect, the government contends, high school seniors who went shopping for aid at Ivy League schools or MIT would find little or no difference in the amount of money their parents would fork over to each of these top-flight schools.

In an out-of-court settlement last May, the Ivy League schools agreed to stop sharing data about aid packages offered to students who applied at more than one of the schools.

But MIT is fighting on, arguing that a fundamental principle is at stake: awarding aid to students who need it the most.

"The private colleges' financial aid system was established to ensure that their limited, private financial aid funds were distributed solely on the basis of need," MIT said in a statement issued last week.

MIT and the Ivy League say that if the Justice Department prevails, it will ignite bidding wars for star students regardless of their financial need.

While the Justice Department suit was begun more than 10 months ago, government lawyers first offered graphic details in a 106-page brief filed April 3 in U.S. District Court in Philadelphia.

The brief, in support of a motion for a summary judgment against MIT, is backed by a 4-inch stack of documents that includes school officials' depositions, internal memos, electronic mail -- and the schools' joint manual on financial aid.

The documents provide a glimpse into what government lawyers say were the inner workings of an elite club known to its members as the Ivy Overlap Group.

Formed more than three decades ago, the group included MIT and the eight Ivy League schools: Harvard University, Princeton University, Yale University, Columbia University, Dartmouth College, Brown University, the University of Pennsylvania and Cornell University.

Here, the government contends, is how that group worked:

The schools' aid officers would meet four times a year and fix everything from the formula used to determine students' financial need to the payments expected from families whose children had applied at more than one school in the group.

The crucial meeting came every spring, just before the schools mailed out freshman acceptance notices for the fall term.

At that two-day session, officials, armed with rosters of applicants drawn up by a private data service, divided up into "bilateral" discussion groups and "multilateral" groups.

The bilateral group dealt with students who'd applied at two of the Overlap schools. The multilaterals dealt with those who'd applied at more than two.

The name of each applicant and the schools to which he or she had been admitted would be called out.

Working quickly, school officials would compare proposed aid packages, spending two or three minutes on each applicant.

Generally, if the proposed aid packages were less than $500 apart, no one objected. But when there were larger differences, the schools would a reach a compromise on what they'd offer -- literally, how much each school would ask that student's family to pay.

The government contends that the Overlap schools tried to recruit Stanford into their fold in 1986 because they were losing students to the West Coast school.

But Stanford resisted. The school feared that it might run afoul of antitrust law, the brief says.

While MIT has admitted that it was in the Overlap Group and that the group agreed to base aid solely on students' needs, the university disputes key government allegations.

It contends that there was no ironclad agreement on the aid formula and that MIT offered a combination of loans and grants that differed significantly from those of the Ivy League schools.

The university also argues that its aid program was a form of charity not subject to federal antitrust law.

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