Elite Colleges Admit to Favoring Wealthy Families
Credit: Adventure_Photo / iStock Unreleased / Getty Images- In recent court filings, plaintiffs claim damages of $685 million from elite universities accused of price-fixing financial aid awards.
- Evidence and testimony allege elite universities used tactics to attract and admit affluent students.
- Of the original 17 defendants, 10 have settled claims, and two more are pending.
- Total damages could exceed $2 billion.
Putting a self-incriminating spin on the term “selective college admissions,” several elite institutions have revealed they offered special treatment for applicants from wealthy families, even those who were unqualified for admission.
Now they face potential damages exceeding $2 billion.
Class-Action Suit Alleges Price-Fixing
In this class-action suit — Henry et. al. vs. Brown University et. al., filed in 2022 — plaintiffs allege 17 elite private colleges are in violation of the Sherman Antitrust Act because they failed to uphold a commitment to need-blind admissions as required by Section 568 of the Improving America’s Schools Act of 1994.
The claim contends these universities conspired to artificially reduce financial aid awards and increase the net cost of attendance through the use of a consensus methodology for determining aid. Since 2004, more than 200,000 students have paid higher tuition and incurred larger debt absent competition among these institutions, the suit alleges.
This methodology, plaintiffs contend, created a “price floor” for each student’s expected family contribution and prevented “bidding wars” for students who might have otherwise received more aid.
Of those 17 institutions, collectively dubbed the “568 Cartel,” 10 have settled claims for a total of $284 million: Brown University, the University of Chicago, Columbia University, Dartmouth College, Duke University, Emory University, Northwestern University, Rice University, Vanderbilt University, and Yale University.
On Jan. 17, plaintiffs filed a motion to accept settlements from Johns Hopkins University and the California Institute of Technology, which agreed to pay $18.5 million and $16.75 million, respectively. Pending court approval, these latest settlements would bring the total damages to almost $320 million.
That would leave Cornell University, Georgetown University, the Massachusetts Institute of Technology (MIT), the University of Notre Dame, and the University of Pennsylvania (Penn) as defendants.
“It is long past time for the president and trustees of the five remaining defendants … to stand up finally, do the right thing, and compensate their students and alumni for the massive overcharges that occurred while their endowments were skyrocketing,” Robert Gilbert, co-lead attorney for the plaintiffs, said in a statement.
In court filings submitted in December, the plaintiffs claimed damages of $685 million against the then-remaining institutions at the time that hadn’t agreed to settlements — a figure that, under U.S. antitrust laws, would automatically treble (triple) to more than $2 billion, as BestColleges previously reported.
That’s not necessarily the worst part. These filings detail specific actions designed to favor applicants from wealthy families, exposing the grimy underbelly of elite college admissions most people assume exists but seldom see laid bare.
Favoring the Wealthy in Admissions Decisions
Documents filed with the court appear to show that the defendant universities considered the financial circumstances of applicants when making admissions decisions, violating the antitrust exemption rule of remaining need-blind.
Administrators from these universities copped to it in documents and testimony.
For decades, Notre Dame “admitted students based on factors which included the applicant family’s donation history and/or capacity for future donations,” affording “massive allowances to the power of the family connections and funding history.”
Penn assigned special designations to applicants from wealthy families, offering them admission “almost 100% of the time,” a former admissions dean testified. Some were accepted with “statistically significant lower … [SAT/ACT] scores.”
And Georgetown, the purported “ringleader” of the 568 group, maintained a “Special Interest Policy” allowing the university to “consider special circumstances in the admission of some qualified candidates who might not be admitted competitively.”
After reviewing parents’ financial capacity, the university created an annual “President’s List” of about 80 students with the directive “Please Admit” scrawled across the top.
In 2015, President John DeGioia told an “elite audience” at the Economic Club of Washington that Georgetown had “never met a marginal child of a big donor.”
To be fair, some 568 members left the group because of its formulaic restrictions on financial aid. Penn departed in 2020 citing the need for “increased flexibility in our needs analysis.” Yale left in 2008 so it would be “free to give families more aid than would have gotten under the consensus methodology.”
Harvard University, conspicuous by its absence, declined to join because it “would not be able to award the financial aid we had awarded to families — we’d have to reduce it,” a former financial aid director said.
During the 20 years preceding the group’s 2022 dissolution, members saw their endowments grow by $165 billion, reaching $220 billion by 2022. Plaintiffs argue that each school could have awarded an additional 10-20% in financial aid from its unrestricted endowment but instead chose to restrict aid awards while growing its war chest.
“Our motion today spells out very substantial evidence supporting our claim that the defendants colluded with each other for 20 years on financial aid and that illegal collusion resulted in the defendants providing far less aid to students than would have been provided in a free market,” Gilbert said in a statement.
“The motion also documents defendants’ pattern of favoring students from wealthy backgrounds, which we assert disqualifies defendants from shielding their behavior behind an inapplicable antitrust exemption.”
Defendant Universities Refute Claims
The defendant universities don’t exactly agree. Attorneys representing them called the $685 million in damages “junk science” owing to the variations in expected family contributions over 20 years.
Penn officials claim the case has “no merit.”
“The actual evidence in the case makes clear that Penn does not favor in admissions students whose families have made or pledged donations to Penn, whatever the amount,” a spokesperson said in a statement according to The Philadelphia Inquirer. “In fact, the university takes great precaution to ensure that no such preference is given. As a result, only qualified candidates are admitted.”
Likewise, MIT believes the case is “baseless.”
“MIT has no history of wealth favoritism in its admissions; quite the opposite,” a spokesperson wrote in an email to The Washington Post. “After years of discovery in which millions of documents were produced that provide an overwhelming record of independence in our admissions process, plaintiffs could cite just a single instance in which the recommendation of a board member helped sway the decisions for two undergraduate applicants.”
A spokesperson from Georgetown said the university will continue to defend itself in court.
“We believe the university has acted responsibly and always with the goal of only admitting students who will thrive in, contribute to, and further strengthen our community,” Meghan Dubyak, associate vice president for strategic communications and public affairs, told the Post.
Yet the momentum in this case suggests these remaining institutions might be wise to settle. Since the University of Chicago became the first institution to settle claims in April 2023, nine others have followed suit, and for good reason.
Not only does the evidence demonstrate a departure from a strict adherence to “need-blind” admissions, but the potential exists for more damning evidence that could further embarrass institutional leaders and families alike.
“Meanwhile, the remaining defendants maneuver through various stages of discovery with the threat of having highly sensitive and revealing admissions secrets exposed. It’s likely more will settle in the months to come,” BestColleges predicted last January.
Since then, six additional institutions have settled (with two more pending), and the settlement amounts don’t begin to approach the fines currently being discussed.
Billions of dollars is at stake, as are the reputations of these institutions in the court of public opinion.