Duke named in lawsuit

[niveklaen]

https://www.nytimes.com/2022/01/10/u...-colleges.html

Duke is among the schools listed in an anti-trust lawsuit alleging illegal collusion in financial aid awards.

I have little/no familiarity with this are of the law and was curious what others thought about it

did we do it?
is it illegal?

(note - if this already being discussed in another thread or if it violates one of the board rules please move/lock as appropriate...)

[Bluedog]

Not a lawyer or familiar with the law, but find it pretty ironic that the schools getting sued are the ones that are among the most generous in giving financial aid out to a decently wide range of income levels. I guess because they use the same formula...

[CrazyNotCrazie]

Not a lawyer or familiar with the law, but find it pretty ironic that the schools getting sued are the ones that are among the most generous in giving financial aid out to a decently wide range of income levels. I guess because they use the same formula...

I agree. Are these schools under some obligation to offer financial aid? Couldn't they theoretically say "to heck with this, we don't want to deal with lawsuits, we're not going to offer any financial aid anymore."

It is obviously theoretically part of their mission (and increasingly so every day as they are hyper-focused on become more "equitable" and diverse), but they don't have to do it. Duke could probably charge $200k a year, offer no aid, and fill its class. It would get awful PR, but I don't see what is stopping it from doing so. I am not advocating for this but just trying to understand the situation.

[Tooold]

I don't understand the suit—maybe someone with more insight can explain the logic behind it. Duke promises “need blind” admissions (which, as a private school, they are under no obligation to do). They put together a financial package for all admitted students who qualify (which I believe is maybe 60%). It has to be based on some formula which accounts for family income and assets. Even if multiple schools use the same formula, couldn’t that be because the formula accurately reflects the financial need, or ability to pay?

Duke has prioritized financial aid over the last decade+. They have raised a tremendous amount of money to support financial aid packages so that students who cannot afford Duke can still attend. No good deed goes unpunished, I guess.

[Bluedog]

I don't understand the suit—maybe someone with more insight can explain the logic behind it. Duke promises “need blind” admissions (which, as a private school, they are under no obligation to do). They put together a financial package for all admitted students who qualify (which I believe is maybe 60%). It has to be based on some formula which accounts for family income and assets. Even if multiple schools use the same formula, couldn’t that be because the formula accurately reflects the financial need, or ability to pay?

Duke has prioritized financial aid over the last decade+. They have raised a tremendous amount of money to support financial aid packages so that students who cannot afford Duke can still attend. No good deed goes unpunished, I guess.

The argument is that they're not need blind for a full 100% of applicants. Here's the key passage:

"Under federal antitrust law, these universities are permitted to collaborate on financial aid formulas if they do not consider a student’s ability to pay in the admissions process, a status called “need blind.”

The suit alleges that "The University of Pennsylvania and Vanderbilt, for example, have considered the financial needs of wait-listed applicants, the lawsuit says. Other schools, the lawsuit says, award “special treatment to the children of wealthy” donors, which, given the limited number of spots, hurts students needing financial aid."

[sagegrouse]

Other schools, the lawsuit says, award “special treatment to the children of wealthy” donors, which, given the limited number of spots, hurts students needing financial aid."

And what prevents private universities from making such a determination? Every school in the known universe does this. This is a knee-slapper, unless I am missing some of the logic.

[Bluedog]

And what prevents private universities from making such a determination? Every school in the known universe does this. This is a knee-slapper, unless I am missing some of the logic.

They're arguing that federal anti-trust law only allows collaborating on/using the same financial aid formula IF they are 100% need-blind and that having a select few individuals where they consider potential to give money back makes them not 100% need blind. So, it's not the consideration itself that is illegal the argument goes, but that it is illegal in combination with the consistent financial aid formula being used across universities. I'm making no judgment on whether or not this argument is valid. But that's the argument. If the schools were NOT part of the 568 consortium and had individualized financial aid formulas, it would not be an issue.

The thing I don't really understand is that these schools do NOT give the exact same financial aid packages always, right? So, the formula they share is still tweaked in some capacity?

[duke79]

I don't understand the suit—maybe someone with more insight can explain the logic behind it. Duke promises “need blind” admissions (which, as a private school, they are under no obligation to do). They put together a financial package for all admitted students who qualify (which I believe is maybe 60%). It has to be based on some formula which accounts for family income and assets. Even if multiple schools use the same formula, couldn’t that be because the formula accurately reflects the financial need, or ability to pay?

Duke has prioritized financial aid over the last decade+. They have raised a tremendous amount of money to support financial aid packages so that students who cannot afford Duke can still attend. No good deed goes unpunished, I guess.

The argument is that they're not need blind for a full 100% of applicants. Here's the key passage:

"Under federal antitrust law, these universities are permitted to collaborate on financial aid formulas if they do not consider a student’s ability to pay in the admissions process, a status called “need blind.”

The suit alleges that "The University of Pennsylvania and Vanderbilt, for example, have considered the financial needs of wait-listed applicants, the lawsuit says. Other schools, the lawsuit says, award “special treatment to the children of wealthy” donors, which, given the limited number of spots, hurts students needing financial aid."

And what prevents private universities from making such a determination? Every school in the known universe does this. This is a knee-slapper, unless I am missing some of the logic.

Without reading the actual pleadings in this case, it's hard to decipher exactly what the plaintiffs are alleging in this lawsuit. I have read several news articles about the lawsuit but those stories are very cursory in their summary of the suit. If I understand it correctly, the basis of the current lawsuit goes back to the early 1990's when the Ivy League schools (and MIT) were alleged to be engaged in price fixing because they would (literally) meet after they had made their admissions decisions and they would then agree among themselves how much financial aid they would offer to their common admittees, so that they would not be competing with each other on the amount of aid offered to prospective students. The justice department then sued the schools, alleging anti-trust violations and price-fixing. The schools and the justice department eventually settled the lawsuit, with the schools and the justice department agreeing that the schools could continue to use a common financial aid calculator (but not actually meeting to fix the amount of aid offered to common admittees) AS LONG AS the schools also agreed that they would conduct their admissions process in a "need-blind" manner - meaning that they would not take into consideration for acceptance whether or not an applicant might be applying for financial aid. (Interestingly, MIT refused to go along with the settlement in the early 90's and they eventually won their lawsuit in the federal appeals court). I guess the thought behind the settlement was that, as long as everyone got a fair shake at admissions (based on ability to pay), then the colleges COULD essentially fix the amount of financial aid they offered to their students
So, if my understanding of the current lawsuit is correct, the plaintiffs are now alleging that, in fact, all of the colleges, including Duke, that agreed to this settlement have not been
conducting their admissions process in a need-blind manner and that applicants who come from affluent or rich families (and who can afford to pay the full tuition, room and board costs) have a distinct advantage in the admissions game. I don't quite understand how, even if this is true, as they allege, students on financial aid have overpaid by hundreds of millions of dollars to the colleges (maybe because if the schools did not "fix" the amount of financial aid that they all offer (based on the common financial aid calculator), that many students would receive more financial aid from those schools that really wanted those students to attend their school (a little like the current NIL situation with athletes where some colleges are offering certain athletes much more lucrative NIL deals, to attract them to their school).
Disclaimer: without actually reading the pleadings, this is almost 100% conjecture.

[sagegrouse]

They're arguing that federal anti-trust law only allows collaborating on/using the same financial aid formula IF they are 100% need-blind and that having a select few individuals where they consider potential to give money back makes them not 100% need blind. So, it's not the consideration itself that is illegal the argument goes, but that it is illegal in combination with the consistent financial aid formula being used across universities. I'm making no judgment on whether or not this argument is valid. But that's the argument. If the schools were NOT part of the 568 consortium and had individualized financial aid formulas, it would not be an issue.

The thing I don't really understand is that these schools do NOT give the exact same financial aid packages always, right? So, the formula they share is still tweaked in some capacity?

Seems like a far-fetched suit to me.

Just don't mess with the rumored "alumni preference" -- grandparents' edition.

[Tooold]

The irony is that much of the financial aid endowment has come from contributions from wealthy alums, and a wealthy alum might be more likely to donate money for financial aid scholarships when his/her child is admitted.

[duke79]

The irony is that much of the financial aid endowment has come from contributions from wealthy alums, and a wealthy alum might be more likely to donate money for financial aid scholarships when his/her child is admitted.

yea, like most things in this world, money is the life blood of all of these colleges and universities. They NEED rich alumni, whether they made their money through hard work or inheritance, to donate large sums to their alma mater. And there's no doubt that Duke (and all the other top colleges) accept some kids every year who might not otherwise be admitted because they come from very wealthy families. You can argue it's unfair and immoral but it's reality, just like Duke accepts kids who are talented basketball or football or lacrosse athletes who would otherwise not be admitted to Duke because Duke likes having winning sports teams (that helps to generate more donations to the school). A bigger question here is whether or not the federal government should be telling Duke or Harvard or Yale or Stanford how to run their admissions process?

[Skydog]

). A bigger question here is whether or not the federal government should be telling Duke or Harvard or Yale or Stanford how to run their admissions process?

You oversimplify this by framing it as “government telling elite schools how to run their admissions”.

In issues related to this lawsuit the gov’t isn’t telling elite universities how to run their admissions. Duke, Brown, Dartmouth, etc. are free to set their own policies about how much financial aid they want to offer, whether they want to be “need blind” or not, whether they have a special list of “donor children” that get preference, and so on. What they CAN’T do, according to anti-trust law, is stifle competition for students by colluding in setting student “net price” (student cost after aid).

Actually that was the case until a law was passed that allows them to bypass anti-trust law IF their admissions process is “need blind.”

The universities being sued are those who, under the auspices of this law, joined a consortium of schools who have agreed to not undercut each other on net price if admission. The lawsuit argues that the consortium is illegal because many of it’s members don’t follow “need blind” admissions as required by law. Therefore the price fixing collusion by this consortium is illegal.

They further argue that this illegal price fixing cost them money because they didn’t get the benefit of these universities bidding against each other to get them to enroll. So they are suing to recover damages.

tl;dr These former students are suing for damages due to illegal price fixing by a consortium of elite schools.

[Tooold]

A bigger question here is whether or not the federal government should be telling Duke or Harvard or Yale or Stanford how to run their admissions process?

Yep…and I don’t think they should. Life is not always fair, and some people get advantages that others don’t get. I am proud that Duke has been making an effort to enable really qualified students, who otherwise would not be able to afford Duke, to attend with the financial aid program. Maybe Duke uses a formula similar to that used by other schools, but in my mind that may actually lend credibility to the formula. Would the litigant be happier if we awarded financial aid to fewer students?

[Acymetric]

Yep…and I don’t think they should. Life is not always fair, and some people get advantages that others don’t get. I am proud that Duke has been making an effort to enable really qualified students, who otherwise would not be able to afford Duke, to attend with the financial aid program. Maybe Duke uses a formula similar to that used by other schools, but in my mind that may actually lend credibility to the formula. Would the litigant be happier if we awarded financial aid to fewer students?

Then the school should not have sought an exception from antitrust behavior. As best as I can tell (SkyDog's post above was very well written) the schools are free to so whatever they want if they stop colluding with each other while they do it.

[duke79]

You oversimplify this by framing it as “government telling elite schools how to run their admissions”.

In issues related to this lawsuit the gov’t isn’t telling elite universities how to run their admissions. Duke, Brown, Dartmouth, etc. are free to set their own policies about how much financial aid they want to offer, whether they want to be “need blind” or not, whether they have a special list of “donor children” that get preference, and so on. What they CAN’T do, according to anti-trust law, is stifle competition for students by colluding in setting student “net price” (student cost after aid).

Actually that was the case until a law was passed that allows them to bypass anti-trust law IF their admissions process is “need blind.”

The universities being sued are those who, under the auspices of this law, joined a consortium of schools who have agreed to not undercut each other on net price if admission. The lawsuit argues that the consortium is illegal because many of it’s members don’t follow “need blind” admissions as required by law. Therefore the price fixing collusion by this consortium is illegal.

They further argue that this illegal price fixing cost them money because they didn’t get the benefit of these universities bidding against each other to get them to enroll. So they are suing to recover damages.

tl;dr These former students are suing for damages due to illegal price fixing by a consortium of elite schools.

Yea, there may have been some oversimplification and hyperbole in my statement you quote. Admittedly, I haven't read the lawsuit so I don't know their exact allegations. I don't fully understand why the Justice Department, in the early to mid 90's, when they settled the case with the Ivy League schools and allowed them to continue to use a common financial aid calculator IF they also agreed to a needs-blind admission process (and other schools like Duke, Rice, etc. then joined in on that arrangement). Perhaps I'm wrong, but in the bolded section above, I'm not sure the schools have all agreed NOT to undercut each other on net price but that they simply agreed to use a common financial aid calculator and the schools can then tweak that calculation to fit their own goals. And financial aid offers can and do vary from school to school. Again, I may be wrong about that?

[duke79]

Interesting summary (from MIT) of the settlement with the Justice Department that was reached in 1993:

http://tech.mit.edu/Bulletins/ovrlp-pr.html

When you read the list of conditions that the schools agreed to abide by, maybe I wasn't exaggerating too much when I asked if the federal government should be running the admission policies at these various private colleges and universities.

[Bluedog]

Somewhat ironically, while schools like Duke DO likely practice "donor awareness" in borderline admissions for a select few, the practice of admitting someone who has overcome obstacles due to limited resources (i.e. is from a lower class family, attends a school without as many resources) with borderline academic credentials is far far more prevalent. I'd argue that these schools considering wealth actually "benefit" the lower class more (purely from an admittance perspective) as universities look to have socioeconomic and racial diversity. If top schools didn't consider resources and just cared about "stats", there'd be an even larger skew than there is today.

[Skydog]

Yea, there may have been some oversimplification and hyperbole in my statement you quote. Admittedly, I haven't read the lawsuit so I don't know their exact allegations. I don't fully understand why the Justice Department, in the early to mid 90's, when they settled the case with the Ivy League schools and allowed them to continue to use a common financial aid calculator IF they also agreed to a needs-blind admission process (and other schools like Duke, Rice, etc. then joined in on that arrangement). Perhaps I'm wrong, but in the bolded section above, I'm not sure the schools have all agreed NOT to undercut each other on net price but that they simply agreed to use a common financial aid calculator and the schools can then tweak that calculation to fit their own goals. And financial aid offers can and do vary from school to school. Again, I may be wrong about that?

I read the lawsuit and still have the same questions. Why did Justice agree to allow price collusion if the school agreed to needs-blind admissions? Why would needs-blind admissions make price fixing ok?

I'm also unclear on how the price fixing works in terms of differing offers from schools. I think it has to do with a fixed "net price" formula the member schools abide by. But there is a lot of evidence that being a member of the consortium DOES indeed stop member schools from undercutting each other - several colleges who left the consortium (including Harvard or Yale, can't remember) publicly said they were leaving because they wanted to wanted to offer more aid than was allowed if they stayed a member.

Btw, some of these "taking the high road" universities quietly rejoined the consortium a few later.

[drhbre]

One thing that Duke has done that I am not a fan of (Others may disagree) is to increase the percentage of the class accepted from Early Decision (As an example, 36% for Class of 2014 to 49% now). I know the reasons for this including knowing people are committed to the school, helping the yield stats, etc.. But, it does impact certain other types of candidates. One of those as related to this thread is people who need financial aid. Early decision is often discouraged for people who have financial need as they can't compare financial aid packages.

[Bluedog]

One thing that Duke has done that I am not a fan of (Others may disagree) is to increase the percentage of the class accepted from Early Decision (As an example, 36% for Class of 2014 to 49% now). I know the reasons for this including knowing people are committed to the school, helping the yield stats, etc.. But, it does impact certain other types of candidates. One of those as related to this thread is people who need financial aid. Early decision is often discouraged for people who have financial need as they can't compare financial aid packages.

I went to an event with Dean Guttentag several years ago where he stated Duke plans to continue to get a good majority of its class from regular decision and not be like Penn (where he used to work) which got about half its class from ED. And what has Duke proceeded to do?😉 They'd argue it's because the applicant pool has gotten so much stronger that they can admit that many without a dropoff in credentials but certainly as you say, it might impact people who want to compare financial aid packages. -Signed someone who applied to Duke ED and needed/got financial aid