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Financial aid lawsuit exposes elite college 'need blind' contradictions

The suit alleges that 16 colleges, including in the Ivy League, are breaking the law because many, if not all, discriminate in favor of wealthy applicants.
Image: Harkness Gate
A pedestrian walks past Harkness Gate on the Yale University campus in New Haven, Conn., on June 12, 2015.Craig Warga / Bloomberg via Getty Images file

The nation’s top private universities have long faced an awkward dilemma: They purport to be meritocratic institutions, educating the best and brightest regardless of wealth, and yet year after year, they enroll a student population that skews wildly toward the affluent. Research from a few years ago found that Yale University had 33 times as many rich kids as poor kids; Duke University, 18 times as many; and Brown University, 17 times as many.

These colleges nevertheless insist that they welcome students of all financial backgrounds, citing as evidence their “need-blind” admissions.

These colleges nevertheless insist that they welcome students of all financial backgrounds, citing as evidence their “need-blind” admissions — meaning they don’t discriminate in admissions against low-income and working-class families who cannot possibly pay sticker prices of nearly $80,000 a year.

However, a new class-action antitrust lawsuit, filed by former students against 16 elite universities, seeks to blow the lid off that claim. Under Section 568 of the Improving America’s Schools Act of 1994, the plaintiffs allege, universities are allowed to meet periodically and agree to use a common formula that limits financial aid for students, but only if “all students are admitted on a need-blind basis,” which the statute defines as “without regard to the financial circumstances of the student involved or the student’s family.” In other words, if universities want to collude on setting financial aid, they have to agree not to discriminate in admissions based on a student’s family finances. (Most colleges named in the suit either declined to comment or did not respond when contacted by NBC News earlier this week; Yale, CalTech and Brown sent statements denying any wrongdoing.)

The suit alleges that 16 colleges in the “568 cartel” are breaking the law because many, if not all, are not truly need blind in admissions and indeed do discriminate in favor of wealthy applicants. In the zero-sum game of selective admissions, discriminating in favor of the advantaged, by definition, discriminates against everyone else. “Privileging the wealthy and disadvantaging the financially needy are inextricably linked,” the plaintiffs argued. “They are two sides of the same coin.”

The legal complaint is filled with quotations from loose-lipped admissions officers who allegedly admit that the wealthy routinely receive favorable treatment in admissions. The complaint claimed at Dartmouth College, for example, up to 5 percent of the student body is admitted from a special list of students created by the development office. At Northwestern University, the university president personally reviews hundreds of applicants, including those associated with wealthy donors. At the University of Pennsylvania, the complaint claimed applicants from wealthy families are “tagged” for being a “high priority for the institution.”

These practices are pervasive, the plaintiffs alleged. They quoted former Vanderbilt University President E. Gordon Gee, who said in 2019 that any president under “truth serum” would admit that donor connections influence admissions decisions. And if the case moves forward, it will be fascinating to watch as leading college presidents and admissions officers are subjected to the legal system’s version of a truth serum: disclosure of files and sworn testimony under oath outlining the extent of preferences provided to the wealthy.

Eric Rosen, who was the lead prosecutor in the so-called Varsity Blues scandal, is among the attorneys who filed the lawsuit. Rosen noted the similarity between the two sets of cases.

“Varsity Blues took on the side door of admissions,” Rosen said in a statement, referring to actions such as the special treatment offered to applicants by athletic coaches who were personally bribed. “This case takes on the back door,” in which colleges themselves “favor wealthy applicants in making admissions decisions.”

Entry through the back door may be more genteel than through the side door, because money exchanged for special favors lines the pockets of institutions rather than individuals, but either process stinks of corruption.

Cynics might say this is all old news: The wealthy have always gotten special treatment in many walks of life, including admissions to elite colleges. But the lawsuit suggests that so long as universities violate need-blind admissions, they must give up their ability under Section 568 to collude to limit financial aid offerings. “The law does not allow them to do both,” Rosen said.

As the plaintiffs pointed out, Harvard University, for example, refused to join the 568 group because it offers more generous financial aid to students than the group’s collective agreement would allow. Harvard generally provides financial aid on a sliding scale for families making up to $200,000 annually.

The universities would argue that financial aid collusion helps students by getting universities to focus aid on those who need it most. If universities instead compete to recruit star students by showering them with far more aid than they actually need, the pot of money for the neediest students could be depleted. Because universities are unlikely to unilaterally disarm in the competition for students with high SAT scores (but minimal financial need), the best solution is to collectively agree on fair levels of need-based aid, universities argue.

But if that high-minded case for collusion is correct, universities have a ready solution: They can become truly need blind and stop advantaging the wealthy. Indeed, some universities have recently begun edging in that direction on the related issue of legacy applicants. In October, Amherst College agreed to jettison legacy preferences that privileged the children of alumni, following the lead of Johns Hopkins University, which abandoned the practice in 2014. As Hopkins President Ronald J. Daniels wrote in his insightful new book, “What Universities Owe Democracy,” whereas social mobility is healthy for democracy, “legacy preference is immobility written as policy.”

The new antitrust lawsuit correctly noted that elite universities “are gatekeepers to the American Dream,” which provide a “critical pathway to upward mobility.” Indeed, Harvard's Raj Chetty and colleagues found that while top colleges admitted very few low-income students, those who did attend did extraordinarily well after graduating. If the 568 lawsuit does indeed expose need-blind admissions as a charade, perhaps universities will at long last feel pressure to focus more attention on strivers who have overcome obstacles and actually deserve special attention in admission.