Settlement allows cooperation on awarding financial aid


The US Justice Department agreed December 22 to dismiss the financial aid antitrust case against MIT and establish a new way for nonprofit colleges to cooperate on need-based financial aid to undergraduates, MIT announced.

MIT President Charles M. Vest told a news conference at MIT, "I am very pleased to announce that the US Department of Justice has informed MIT it will drop the antitrust case it brought against the Institute nearly three years ago."

He said the resolution of the case is in two parts:

  • "First, the Justice Department will dismiss all of its claims against MIT.
  • "Second, the settlement establishes guidelines under which colleges and universities can coordinate their financial aid practices in order to insure that their limited financial aid funds are awarded to qualified students solely on the basis of need."

"This decision enhances competition between colleges on the quality of education," Dr. Vest said. "It re-establishes the principle that colleges, in awarding their funds for scholarships, can follow the same principles that the US government has followed in higher education. That principle is that because funds are limited, financial aid in the form of loans and grants is awarded to students who could not attend college without that financial assistance."

Dr. Vest noted that last year, of the $28 million in outright financial aid grants to needy MIT students, the federal government provided $3 million and MIT provided $25 million. MIT last year administered a total of $43 million in aid, including Federal and MIT loans, grants and other aid, to about 2,500 undergraduates.

"The settlement creates principles and procedures that... establish a more modern system to replace the overlap processes," Dr. Vest said. "The complaint brought against us three years ago was ill conceived. We appreciate the leadership of officials in the Justice Department who engaged in thoughtful discussions in our efforts to reach a principled resolution on these matters."

The settlement provides that nonprofit colleges may participate so long as they:

  • Agree to admit US citizens regardless of need, except for those admitted on a wait list.
  • Agree to provide enough financial aid to meet the full, proven need of a student.

Colleges may also:

  • Agree to provide only need-based aid from college funds.
  • Agree on common principles for determining a student's needs, and common financial aid forms. Colleges must not preclude the professional judgment of financial aid officers.
  • Exchange through a third party-before financial aid awards are made-the financial data submitted by individual students, to make sure the data are consistent.
  • Exchange retrospective data to make sure the colleges are consistent in their aid awards to students.

Colleges may not:

  • Discuss or agree upon individual family contributions, or the mix of loans, grants and self-help.
  • Discuss prospective tuition or general faculty salary levels.

Any nonprofit college (there are a very few for-profit colleges) may participate. The Ivy League colleges, which signed a consent decree in May 1991, may ask to come under these new standards of conduct. The government and the college "shall jointly move for and support modification of the consent decree to incorporate the standards of conduct," the agreement says.

The Justice Department agreed to dismiss the case after weeks of discussions between government and MIT attorneys following the unanimous decision September 17 of the Third Circuit Court of Appeals. The Circuit Court reversed the decision of the US District Court in Philadelphia that a simple "quick look" at the cooperative financial aid practices of MIT and the Ivy League schools determined that the schools violated the Sherman Antitrust Act.

The appeals court, recounting the history of the case in its September 1993 decision, said, "In 1991, the Antitrust Division of the Justice Department brought this suit alleging that the Ivy (League) Overlap Group unlawfully conspired to restrain trade in violation of section one of the Sherman Act... by (1) agreeing to award financial aid exclusively on the basis of need; (2) agreeing to utilize a common formula to calculate need; and (3) collectively settling, with only insignificant discrepancies, each commonly-admitted student's family contribution toward the price of tuition."

The eight Ivy League schools-Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, the University of Pennsylvania and Yale-signed a consent decree to stop the practices. But MIT insisted that its actions were both legal and necessary if the university was to continue its long-standing policy of offering admission on a need-blind basis and providing need-based aid so that all those admitted would be able to attend, regardless of financial circumstances. The Antitrust Division of the Justice Department brought suit against MIT on May 22, 1991.

All three appellate judges said the ruling should be reversed. One judge, Joseph F. Weis Jr., ruled unequivocally in favor of MIT, saying that the 1890 Sherman Antitrust Act did not apply in this case. Judge Weis said, "It does seem ironic... that the Sherman Act, intended to prevent plundering by the `robber barons,' is being advanced as a means to punish... philanthropy."

In the majority decision, the two other judges said the decision should be reversed and the case should be remanded for further proceedings on a rule of reason antitrust analysis, rather than the "quick look" ruling made September 2, 1992, by the US District Court in Philadelphia. The decision of the Appeals Court said higher education "is a common good that should be extended to as wide a range of individuals from as broad a range of socio-economic backgrounds as possible."

In closing Wednesday's news conference, President Vest said, "Let me say that I am very proud to be a member of this university. We stood up for the principles that we believe in. And when I say we, I mean students, faculty, staff, alumni and alumnae. We are also extremely grateful for the support that we have received from those who have no MIT connection but who have shared our strong belief in the principles of need-based financial aid."

A version of this
article appeared in the
January 5, 1994

issue of MIT Tech Talk (Volume
38, Number
18).


Topics: Administration

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