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Rice University sets aside $33 million to settle price-fixing lawsuit

By Ikram Mohamed, The Texas Tribune

Rice University sets aside $33 million to settle price-fixing lawsuit” was first published by The Texas Tribune, a nonprofit, nonpartisan media organization that informs Texans — and engages with them — about public policy, politics, government and statewide issues.

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Rice University has set aside $33.75 million to settle an antitrust lawsuit filed against 17 prestigious private universities across the country accused of illegally running a scheme that limited the amount of financial aid given to students, according to the school’s financial statements for last year.

The Houston-based university’s financial statement for last fiscal year, first reported by the Houston Chronicle, says the school will use the money to settle “a class action lawsuit in which it had been named a co-defendant along with sixteen other universities.”

Court records related to the case reviewed Friday do not show a settlement agreement has been reached yet. Rice declined to comment on the lawsuit and the financial statement. The plaintiffs did not respond to a request for comment Friday.

Nine former students who attended some of the universities filed a lawsuit in January 2022 claiming that the schools’ financial aid and admission practices inflated the price of attendance. As a result, more than 200,000 students receiving financial aid were overcharged hundreds of millions of dollars, according to court documents. The U.S. The Justice Department has backed the lawsuit.

The burden “falls in particular on low- and middle-income families struggling to afford the cost of a university education and to achieve success for their children,” the lawsuit says.

The institutions named as defendants in the lawsuit are Rice, Brown University, California Institute of Technology, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, Johns Hopkins University, Massachusetts Institute of Technology, Northwestern University, University of Chicago, University of Notre Dame, University of Pennsylvania, Vanderbilt University and Yale University.

For nearly two decades, the universities banded together to design formulas on how to award financial aid. That behavior is usually prohibited under federal antitrust laws, which are partly meant to prevent competitors from joining to fix prices. The schools were allowed to work together by a federal law that protects universities with so-called “need-blind” policies — essentially stating that the universities will disregard an applicant’s financial status when making admissions decisions — from antitrust laws. The group called itself the 568 Presidents Group after the federal law that allowed them to collaborate.

The group dissolved in November 2022 after the lawsuit accused half of the group of violating their need-blind policies.

The plaintiffs claim nine of the schools involved in the lawsuit took students’ financial situations into consideration during the admissions process, favoring wealthier students or the children of past and potential donors when deciding whether to admit waitlisted or transfer students. The scheme effectively reduced the amount of funding provided to students seeking financial aid, the lawsuit says.

Rice was one of seven defendants who “may or may not have” considered applicants’ financial need, the lawsuit claims, but should have known the other universities involved weren’t abiding by the rules because of their work together.

Some of the universities have already settled. University of Chicago was the first in August with a $13.2 million settlement. Emory University followed soon after in September, settling for an undisclosed amount. Vanderbilt University also agreed to settle. Rice said it will use about 6% of its nonoperating revenue in 2023 to settle.

The rest of the defendants involved have until Jan. 31 to collect evidence. A trial date has not been set yet.

Disclosure: Northwestern University – Medill School of Journalism and Rice University have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

This article originally appeared in The Texas Tribune at https://www.texastribune.org/2024/01/19/rice-university-price-fixing-lawsuit/.

The Texas Tribune is a member-supported, nonpartisan newsroom informing and engaging Texans on state politics and policy. Learn more at texastribune.org.

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