The 568 Cartel Lawsuit Demands Clearer Definition of ‘Need-Blind’

A new lawsuit against 17 elite private universities has caught the attention of the national media and reignited the moral outrage around wealth and privilege in college admissions.

Fresh off the 2019 “Varsity Blues” scandal, this “568 Cartel” case attempts to blow the lid off the notion of need-blind admissions and expose a price-fixing conspiracy that has been operating for decades.

But there’s a difference between these two cases. The actions of individuals implicated in the Varsity Blues case — bribery and fraud — were illegal, while the known core activities of the 568 Cartel appear completely legitimate under federal law. Except for the one wrinkle on which this case hinges: the adherence to need-blind admissions, or admission decisions made independent of financial need.

I’m not going to review all the details of the case because there’s an excellent synopsis here. Suffice it to say it’s a complaint against 17 elite private universities claiming that they’ve conspired to cap financial aid awards and thus drive up the net cost of attendance.

The so-called “568 Presidents Group” includes six Ivy League schools and other top institutions such as Northwestern University, Vanderbilt University, the University of Chicago, California Institute of Technology, and MIT. An amended complaint, filed on Feb. 15, adds Johns Hopkins University as a defendant.

The moniker “568 Cartel,” which appears 110 times in the complaint, suggests nefarious activity on par with South American drug lords. We’re supposed to immediately suspect foul play.

The group’s name refers to Section 568 of the Improving America’s Schools Act of 1994, a Congressional sanction allowing these colleges to formulate common approaches to awarding financial aid.

Before this group formed, the eight Ivy League schools and Massachusetts Institute of Technology conducted similar activities as the “Overlap Group.” They met regularly to discuss aid awards for students who were admitted to more than one of their members. In 1991, the U.S. Department of Justice charged them with violating antitrust laws, and the group disbanded.

The 568 Presidents Group doesn’t discuss individual students but instead adheres to common methodologies when evaluating financial aid awards. And again, that’s entirely legitimate in the eyes of the federal government — provided these colleges adhere to need-blind admissions policies.

The lawsuit claims nine of the colleges are in violation of the Sherman Antitrust Act because they don’t uphold that commitment to need-blind admissions and therefore aren’t entitled to the Section 568 protections. The remaining seven institutions may or may not have adhered to need-blind admissions policies, the complaint claims, but they “nonetheless conspired with the other Defendants,” so they’re equally guilty of antitrust violations.

So according to this logic, absent the commitment to need-blind admissions, what these colleges are doing is illegal.

Just how do these colleges stray from their need-blind commitment? By favoring wealthy families in some admissions decisions, according to the lawsuit. They consider the financial need of students on the waitlist, engage in “enrollment management” practices to secure full-pay students, and woo kids of donors or potential donors.

A number of elite colleges consider family wealth when it comes to admitting kids off the waitlist. In fact, when MIT reached a settlement after the Overlap Group fiasco 30 years ago, it maintained its right to factor family wealth into waitlist decisions. Sara Harberson, who’s quoted in the complaint, has characterized this activity as higher education’s “dirty little secret.”

Enrollment management refers to a college’s holistic approach to recruitment and retention that integrates admissions with financial aid and student support services. The concept has been around since the 1970s, and the vast majority of colleges operate under this strategy.

The suit claims colleges use enrollment management to favor full-pay students. Any private-college admissions office needs to craft a class that makes sense fiscally as well as academically and socially. While it’s a laudable goal, a college can’t admit a class full of low-income students. It’s not financially prudent for most schools.

Plus, those full-pay students help fund financial aid pools that support their lower-income classmates, as the suit acknowledges.

And what about those “development admits” — children of donors who receive the “proverbial golden ticket”? Annika Neklason, writing in The Atlantic, notes wealthy students “have always enjoyed disproportionate access to elite colleges in the U.S.” She notes wealthy students have long benefitted from legacy status and family donations, among other advantages.

In the suit, former Duke President Richard Brodhead is quoted as saying, “It would be naïve to say that any university should pay no attention to a family’s ability to help the university.” Likewise, former Vanderbilt President E. Gordon Gee, said “donor connections make a difference in admissions.”

The simple truth is that all private colleges engage in this activity to some extent. They put a thumb on the scale for wealthy families — whether under the banner of “enrollment management” or in response to a development office’s entreaties.

An anonymous enrollment manager quoted in the claim concludes, “Good luck getting any institution to tell you exactly how they handle ability to pay as a driver in their admit decision. … What they will say is ‘We’re need blind.’ That’s bullshit. They would never tell you exactly how they do it, but they do it all the time.”

Legislators who formulated Section 568 should have known this. College presidents who formed the group definitely knew. It’s not like these practices favoring wealthy kids sprang up after the legislation passed.

The spirit of the bill rests on a commitment to need-blind admissions in the purest sense. However, it’s doubtful the crafters of need-blind policies intended to completely upend prudent financial decision-making in college admissions. Perhaps an implicit acknowledgment of need-aware practices was baked in.

That’s not to suggest the case doesn’t have merits given a strict interpretation of need-blind and that, technically speaking, the plaintiffs might be correct. The situation does, however, beg for a more fully articulated and perhaps more transparent definition of need-blind, as unlikely as that may be.

Colleges waving the “need-blind” banner are, in truth, need-aware. Need-blind implies colleges aren’t poring over FAFSA forms and income statements when making admissions decisions. Financial forms go to one office, applications to another, and aid discussions are supposed to occur after a student is admitted. But the term doesn’t imply finances play no part in admissions decisions, at least in practice.

Even if admissions officials didn’t actively seek clues about wealth (which they do), they’re entirely front and center.

The Common App, used by all the Ivies and most other private colleges, asks students if they’ll require financial aid. If they check “no,” that’s a clue. If they attend an expensive prep school, that’s another clue. Parental employment and zip codes offer further evidence, as do personal statements about summering on Nantucket.

Are the 568 schools trying to pull a fast one, or are they operating under a common, longstanding interpretation of what need-blind means in the real world of college administration? Perhaps the latter isn’t enough to sway a court. Tradition doesn’t alleviate guilt.

And it certainly won’t assuage the American public. As with Varsity Blues, this kind of news makes sensational headlines because of the brand names involved.

We pay disproportionate attention to these schools that together enroll less than 1% of undergraduates nationwide but, as the claim suggests, collectively act as the “gatekeepers to the American Dream.” Never mind that you can achieve the dream by attending your state college, as millions of kids have.

As the Ivies and other top privates become increasingly selective, families want to know why Johnny, with his outstanding grades, didn’t get in. Our anger breeds suspicion. We want transparency, yet the truth is these private colleges can operate largely as they wish within legal parameters.

We might get some of those answers if this case moves forward. How a court determines financial reparations for some 170,000 graduates who were purportedly overcharged is anyone’s guess. It likely would involve only punitive damages.

The suit also wants the court to enjoin the 568 group from further activity. That outcome would at least temporarily satisfy public perception. But it won’t deliver to a vengeful public the systemic change that might actually eliminate the advantage rich kids have in the elite-college admissions game.