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Photos of Rice University, Emory University and Vanderbilt University.

Rice, Emory and Vanderbilt have all agreed to settle a federal antitrust lawsuit.

Photo illustration by Justin Morrison/Inside Higher Ed | Anatol Stefanowitsch/Wikimedia | SeanPavonePhoto/iStock/Getty Images

Emory, Rice and Vanderbilt Universities all appear to have settled in a financial aid antitrust lawsuit that accused 17 institutions of illegally colluding to limit student financial aid packages.

The class action case filed in January 2022 alleges that the highly selective universities effectively operated a “cartel” by colluding in the way they calculated financial aid awards. As a result, thousands of students overpaid for their education, plaintiffs argue.

While none of the three institutions has publicly announced a settlement, financial documents for both Emory and Rice indicate that both universities came to an agreement with plaintiffs in 2023. Court documents also show Vanderbilt agreed to settle.

Reaching the Settlements

The 17 institutions accused of operating a cartel are among the wealthiest in the U.S. Their endowment values range from about $8 billion to more than $40 billion.

The lawsuit initially named 16 defendants: Brown University, the California Institute of Technology, the University of Chicago, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, the Massachusetts Institute of Technology, Northwestern University, the University of Notre Dame, the University of Pennsylvania, Rice University, Vanderbilt University and Yale University. Johns Hopkins University was added later.

Those universities had long collaborated on financial aid formulas under a 1994 federal antitrust exemption, which banned them from weighing applicants’ ability to pay in admissions decisions. The carve-out—known as the 568 Presidents Group, after a section in the Improving America’s Schools Act of 1994—allowed them to discuss financial aid formulas with immunity from federal antitrust laws.

But the plaintiffs, a group of former students, alleged that the 17 defendants have long considered family finances in certain admissions decisions, partly by giving preferential treatment to the children of affluent donors.

The plaintiffs argued in 2022 court filings that the defendants “have participated in a price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition, and that in fact has artificially inflated the net price of attendance for students receiving financial aid.”

The U.S. Justice Department has also expressed interest in the case.

Now some of the implicated universities are seeking a way out of what is expected to be a protracted and expensive legal battle. The University of Chicago was the first to blink, settling for $13.2 million in August.

Emory quietly followed in September, settling for an undisclosed amount.

“In September 2023, the University reached a settlement in principle. The amount of the settlement offer has been accrued within accounts payable and accrued liabilities in the accompanying consolidated statements of financial position,” the university reported in recent financial documents, referencing the lawsuit brought against Emory and 16 co-defendants.

Emory did not respond to a request for comment from Inside Higher Ed.

Rice then reached a settlement in October, according to university financial records.

“In October 2023, the University settled a class action lawsuit in which it had been named a co-defendant along with sixteen other universities,” Rice reported in recent financial documents, citing the figure of $33.7 million.

Rice declined to provide a comment to Inside Higher Ed.

Vanderbilt University has also reached “an agreement in principle to settle the litigation, subject to Court approval,” according to a November filing. Court documents did not offer details on a timeline or the costs of the proposed settlement.

Vanderbilt did not respond to multiple requests for comment.

What’s Next?

Even with Chicago, Emory, Rice and Vanderbilt settling, multiple defendants remain in the lawsuit. None of the 13 other institutions provided a statement to Inside Higher Ed Tuesday.

Law firms representing the plaintiffs either did not respond or declined to comment.

Spencer Waller, a professor and director of the Institute for Consumer Antitrust Studies at the School of Law at Loyola University Chicago, noted that defendants have to consider multiple factors when weighing whether to settle or wage a costly legal fight.

Being the first to back down, as the University of Chicago was, can amount to a discount, he added, because it “gets the ball rolling” and raises the stakes for the remaining defendants in the lawsuit.

“Every settlement puts more pressure on the defendants and ups the ante for them for future settlements or, if there’s a flood of settlements, potential verdicts, if it goes to trial. How much pressure depends on how strong the plaintiff’s case is and what the defendants feel there,” Waller said.

The longer the case drags on, he noted, the greater the financial pressures on the defendants.

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