U.S. Department of Justice files statement of interest in financial aid lawsuit


Daily file photo by Madison Smith

The Department of Justice’s statement rebutts several arguments made by the universities in an April motion to dismiss the case.

Isabel Funk, Summer Editor

The U.S. Department of Justice filed a statement of interest Thursday in a lawsuit accusing Northwestern and 16 other private universities of colluding to limit or eliminate financial aid.

Nine former students of some of the universities, including NU, filed a lawsuit against them in January for alleged antitrust violations. The students claim the universities engaged in a price-fixing cartel designed to artificially inflate the net price of attendance for financial aid recipients. The former students filed the complaint on behalf of more than 200,000 similarly situated people.

In the Thursday statement, the Department of Justice, the entity that enforces antitrust laws, rebutted several arguments made by the universities in an April motion to dismiss the case.

NU and the other universities are part of the 568 Presidents Group, or “568 Cartel,” which, in 2003, set the Consensus Methodology, a formula to determine net price for tuition. This formula asks applicants’ families to pay “the maximum that they are capable of paying” to eliminate price competition.

A legal exemption to antitrust laws permits these “anticompetitive” actions, provided all members of the group admit all students on a need-blind basis. However, the lawsuit alleges all of the universities have considered financial circumstances of applicants and their families as an admissions factor.The universities’ motion for dismissal is drawn from this exemption. 

But, the Department of Justice said these arguments “rest on two legal errors.” 

The exemption covers agreements between “2 or more institutions of higher education at which all students admitted are admitted on a need-blind basis,” and defines need-blind as “without regard to the financial circumstances of the student involved or the student’s family.” 

The universities argue that this exemption protects institutions who are “unwitting conspirators” who “lack actual knowledge,” or were unaware, that not all institutions in the agreement are need-blind. 

However, the Department of Justice’s statement claims this argument is not based in the text of the exemption and falsely assumes that it protects unintentional collusion. 

“Under Defendants’ reading, schools would be discouraged from being transparent about their need-based financial aid policies — precisely the opposite of what Congress intended here,” the statement read.

The Department of Justice also concluded based on the text of the exemption that it would not cover agreements including an institution that does not accept all students on a need-blind basis. 

The former students additionally argue that the defendants do not admit “all” students on a need-blind basis because they are need-aware with regard to waitlist and transfer students and because they favor wealthy students.

The defendants argue they are allowed to favor wealthy applicants as long as they do not disfavor applicants who may require financial aid.

Robert Gilbert, a managing partner of Gilbert Litigators & Counselors, one of the three lead firms for the plaintiffs, said the legal team for the plaintiffs is “extremely pleased” by the Department of Justice’s statement. 

The exemption itself is set to expire Sept. 30 if not renewed by Congress, which would impact the universities’ defense.

The other 16 universities involved in the lawsuit are Brown University, California Institute of Technology, University of Chicago, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, Massachusetts Institute of Technology, University of Notre Dame, University of Pennsylvania, Rice University, Vanderbilt University, Yale University and Johns Hopkins University — which was added as the 17th defendant in an amended complaint in February.

A hearing on the defendants’ motion for dismissal is scheduled for Aug. 2, 2022, in Illinois federal district court.

The University has stated it does not provide comment on ongoing litigation.

Email: [email protected]

Twitter: @isabeldfunk

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