University of Chicago settles ‘price-fixing’ case in which Penn remains a defendant

The University of Chicago became the first of 17 elite colleges, including the University of Pennsylvania, to settle a case that accused the schools of illegally conspiring to fix financial aid packages offered to students, keeping down the amounts offered and limiting competition.

The school admitted no liability in agreeing to pay $13.5 million to settle the antitrust class-action lawsuit, according to the Wall Street Journal.

» READ MORE: University of Chicago to settle student aid price-fixing lawsuit for $13.5 million

Penn declined to comment Wednesday on whether it also would settle the case.

“We typically don’t offer comment on litigation,” said Penn spokesperson Ron Ozio.

The lawsuit was filed in Illinois federal court in January 2022 by several former students who attended Duke, Northwestern, and Vanderbilt. In the lawsuit, students accused the colleges of participating in a “price-fixing cartel” that was “designed to reduce or eliminate financial aid as a locus of competition.” Their actions reduced the amount of financial aid they offered to admitted students and ultimately benefited students from more wealthy families, the suit said.

Other colleges named in the suit besides Duke, Northwestern, Vanderbilt, the University of Chicago and Penn, are Brown, Yale, Columbia, California Institute of Technology, Cornell, Dartmouth, Emory, Georgetown, the Massachusetts Institute of Technology, Notre Dame, Rice and Johns Hopkins.

The colleges were part of the 568 Presidents Group, which worked together to set standards for distributing financial aid. Penn joined the group in 1998 and withdrew in 2020, according to the lawsuit. The schools claimed an antitrust exemption, but that would only be permitted if they were “need blind,” meaning they did not consider a students’ financial ability to pay tuition. While many of the colleges say they are need blind, plaintiffs in the lawsuit claimed they actually do consider the wealth of applicants.

The lawsuit cited quotes from a former Penn admissions official who said Penn gave “preference to ‘full-paying student[s]’ on the wait list over those who need financial aid.”

Some of the colleges, including Penn, have maintained “admissions systems that favor the children of wealthy or potential future donors,” the suit said.

The colleges have overcharged more than 200,000 students by hundreds of millions of dollars, the lawsuit says. Both current and former students who were impacted by the alleged price fixing stand to benefit from the lawsuit settlement. That includes some students who had applied to Penn, said Eric Cramer, chairman of the Philadelphia-based law firm Berger Montague, one of the lawyers representing the plaintiffs.

The case is about halfway through the discovery process, and, barring settlements, would likely be ready for trial toward the end of next year, he said.

Cramer said the group is pleased to have reached a resolution with the University of Chicago.

“They have agreed to provide information about their financial aid practices, which will help us in litigating the rest,” he said.