40 Top Colleges Beat Lawsuit Over Financial Aid “Price Fixing”

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EVANSTON, IL,USA - JUNE 20, 2021 - Entrance sign and gardens to Northwestern University.

Key Points

A federal judge dismissed a lawsuit accusing 40 U.S. colleges of colluding to reduce financial aid awards by requiring noncustodial parent income information.Filing the FAFSA and CSS Profile is tedious and confusing for families looking for financial aid.The decision highlights the challenges children of divorced or estranged parents face in qualifying for financial aid.

This week, 40 prominent U.S. universities (including Harvard, Yale, MIT, Northwestern, Georgetown, and Cornell) won dismissal of a lawsuit (PDF File) that accused them of conspiring to overcharge students by limiting financial aid.

The lawsuit, filed by a Boston University student and a Cornell graduate, claimed the schools worked together through the College Board to require financial information from noncustodial parents - often those that were divorced or estranged. According to the plaintiffs, this inflated families’ expected contributions, cut down on financial aid packages, and cost students thousands more per year.

Judge Sara Ellis of the U.S. District Court in Chicago ruled that while the schools all used similar policies, the plaintiffs did not present enough evidence that the institutions had entered into an illegal agreement. The case was dismissed without prejudice, meaning the plaintiffs may try again in the future if they have stronger evidence.

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Why Non-Custodial Parent Rules Matter

When applying for federal aid, families submit the FAFSA, which only looks at the parent or household who provides the most financial support. But many private colleges also require the CSS Profile, run by the College Board, which allows schools to ask for both custodial and noncustodial parent financial information.

That distinction matters most for students whose parents are divorced, separated, or estranged:

If the noncustodial parent refuses to contribute, colleges may still count their income, leaving the student with a gap to cover.Loans and debt can increase, since the aid formula assumes resources the student cannot actually access.Aid awards differ between schools, since some institutions do not require noncustodial parent information.

According to the lawsuit, students attending schools with the extra requirement paid, on average, about $6,200 more per year than students at otherwise comparable colleges that did not.

The Court's Reasoning

Judge Ellis emphasized that antitrust law requires more than showing that schools used the same policy. To prove collusion, plaintiffs must demonstrate an actual agreement through evidence like coordinated policy changes, explicit communications, or secret arrangements.

In this case, the plaintiffs pointed to the College Board’s 2006 push to encourage schools to consider noncustodial parent income, which many institutions adopted over time. But the judge noted:

Schools did not adopt the policy all at once; the process stretched across nearly two decades.Each institution had discretion in how it used the data.Many other colleges outside the lawsuit also required the same information.

Without stronger evidence of coordination, the judge found the allegations insufficient under the Sherman Antitrust Act.

What Happens Next?

The plaintiffs’ lawyers can amend the complaint and refile, possibly adding more details on timing, communications, or evidence of a shared agreement. If they succeed, the case could return to litigation.

Meanwhile, the ruling may embolden universities to keep their current financial aid policies, while critics argue those rules remain unfair to students from divided households.

This case follows a 2022 antitrust lawsuit against a different group of elite universities (PDF File) accused of colluding on aid formulas under a now-expired federal exemption. That earlier litigation led to settlements totaling $166 million, showing that courts and families are willing to challenge elite institutions on financial aid practices.

What Families Should Do When Applying For Financial Aid

For parents and students navigating college costs:

Check each school’s financial aid policy. Not all colleges require noncustodial parent information. Some may offer waivers for cases of estrangement or nonpayment.Document family circumstances. If a noncustodial parent refuses to contribute, gather court orders, correspondence, or financial evidence that can support an appeal.Compare net prices. Use each school’s net price calculator to see how aid policies affect actual costs.

Key Takeaway

The dismissal is a reminder that while colleges may share similar approaches to calculating financial aid, proving illegal collusion is legally complex. For families, the bottom line is that aid rules (especially around divorced parents) remain a significant factor in what students ultimately pay.

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