New Lawsuit Claims 40 Private Universities Overcharged Students
- A class action lawsuit accuses 40 private colleges of overcharging students by requiring noncustodial parent financial information.
- These 40 institutions use the College Scholarship Service Profile form, which since 2006 has included noncustodial finances.
- The College Board administers the CSS Profile and is also named as a defendant.
- Plaintiffs claim students have been overcharged an average of $6,200.
A new class action lawsuit alleges 40 private colleges and universities have been overcharging certain students since 2006.
The suit, Hansen v. Northwestern — brought on behalf of the plaintiff class by Maxwell Hansen, a current Boston University student, and Eileen Chang, a Cornell University graduate — alleges the defendant institutions “engaged in concerted action” to raise the prices class members paid (and currently pay) to attend college.
How so? By requiring students and families to include financial information from noncustodial parents.
The Free Application for Federal Student Aid (FAFSA) form doesn’t ask students to include financial information from noncustodial parents (e.g., divorced, separated, never married).
But the College Scholarship Service (CSS) Profile, administered by the College Board, does.
This form, used almost exclusively by private colleges and universities, has included noncustodial parent financial information since 2006. Today, roughly half of the 270 colleges that use the CSS Profile require families to submit this financial data.
Including such information increases the expected family contribution for these students, even if, in some cases, the noncustodial parent has no intention of financially supporting a student’s college education.
“Students were told there were no exceptions to the requirement — even if a divorce court order was issued concerning college expenses,” the suit points out. “Formulas are then used to generate a financial aid offer. The student then ultimately receives an estimate for the family contribution based on what the two parents can contribute, regardless of whether both parents do actually contribute.”
The suit claims the resulting net price among these 40 defendant schools is about $6,200 more than that of the other 10 private colleges within the “top 50” that don’t use the College Board’s CSS Profile.
“The financial burden of college cannot be overstated in today’s world, and we believe our antitrust attorneys have uncovered a major influence on the rising cost of higher education,” Steve Berman, managing partner and co-founder of Hagens Berman, the firm representing the plaintiffs, said in a statement.
“Those affected — mostly college applicants from divorced homes — could never have foreseen that this alleged scheme was in place, and students are left receiving less financial aid than they would in a fair market.”
Among the 40 institutions named are seven Ivy League schools and other elite privates such as Northwestern University, the University of Chicago, Emory University, and the University of Notre Dame.
The College Board, also a defendant, stands accused of an “intentional push” to require schools to consider the income and assets of noncustodial parents.
Princeton University, the only Ivy school not named, is one of a few top private institutions, along with Rensselaer Polytechnic Institute and Vanderbilt University, that don’t require the CSS Profile.
The remaining schools fall within the “top 50” institutions as determined by the U.S. News World Report rankings.
Together, these 40 schools have an 84% market share of the top 50 based on undergraduate attendance, according to the suit.
This “market,” the suit argues, doesn’t include liberal arts colleges, which “offer distinct products and are generally more like each other than like elite, private universities.” Such logic suggests that students considering Brown University and Dartmouth College don’t cross-shop Amherst College and Williams College.
The suit also excludes those few public institutions that require the CSS form.
Further implicating defendant institutions is the symbiotic relationship they have with the College Board. University employees attend College Board meetings, supervise operations, and “participate in the development of College Board aid methodologies and related standards,” the suit contends.
Such devised methodologies include the noncustodial parent contribution, referred to in the suit as the “NCP Agreed Pricing Strategy.” The suit also uses the term “NCP Cartel,” intentionally or otherwise referencing a similar group of institutions known as the “568 Cartel.”
Several institutions implicated in this latest case are also defendants in the ongoing 568 Cartel case, which alleges that 17 elite universities violated the Sherman Antitrust Act by failing to uphold a commitment to need-blind admissions.
That lawsuit contends these universities conspired to artificially reduce financial aid awards and increase the net cost of attendance by using a consensus methodology to determine aid.
To date, 10 of the 17 defendant universities have settled claims totaling $284 million.
A number of media outlets say this new lawsuit seeks $5 million in damages, though the financial ramifications aren’t entirely spelled out in the complaint.
In an email to BestColleges, attorneys at Hagens Berman noted the approximately $6,200 per affected student, adding that “if one were to do quick math estimating the number of affected tuition payers since 2006 … the damages quickly add up.”
That math — $6,200 times the 20,000 in the plaintiff class — equals more than $120 million, which begins to approach the magnitude of penalties incurred by the 568 Cartel institutions. Assuming the $6,200 represents an annual overage, this figure rises exponentially.
The email also referenced punitive damages, which can be trebled (tripled) if the court were to find for the plaintiffs. All told, the financial implications suggest a figure far beyond $5 million, but that is perhaps to be determined.
At least one defendant institution, New York University (NYU), remains confident it will prevail.
“This lawsuit has no merit, and NYU intends to vigorously defend itself and its financial aid policies and procedures,” university spokesperson John Beckman said in a statement.
Financial considerations aside, the suit also seeks a permanent injunction enjoining universities from “continuing to illegally conspire regarding their pricing and financial aid policies and practices.”
As admissions and financial aid practices increasingly become subject to external scrutiny by the federal government, states, and watchdog groups, any signs of collusion among institutions, especially those resulting in price-fixing and limitations on financial aid, will likely trigger similar investigations and perhaps further legal action.