Penn accused of illegally favoring students of wealthy families

The lawsuit alleges they conspired in a scheme to “price fix” financial aid and college admissions in violation of federal antitrust laws.

Signage for the University of Pennsylvania

The University of Pennsylvania sign is shown in Philadelphia, May 15, 2019. (AP Photo/Matt Rourke, File)

From Philly and the Pa. suburbs to South Jersey and Delaware, what would you like WHYY News to cover? Let us know!

The University of Pennsylvania is one of nine schools still facing a lawsuit brought in 2022 that alleged that 17 of the nation’s most prestigious institutions colluded with each other to skew financial aid and college admissions for students from wealthy families.

In documents filed in the U.S. District Court in Illinois, lawyers for the plaintiffs alleged that the universities were part of the 568 Presidents Group that acted as a “cartel,” and conspired in a scheme to “price fix” financial aid and college admissions in violation of federal antitrust laws.

The lawyers for the plaintiffs, Gilbert Litigators & Counselors and Freedman Norman Friedland LLP, represent a group of several students who attended some of the universities.

  • WHYY thanks our sponsors — become a WHYY sponsor

In court papers, the lawyers said the shared information was used to artificially increase the price of tuition, plus fees for room and board at the schools. The lawyers said this practice benefited students from wealthy families that had made or were likely to make significant donations to them, to the detriment of the plaintiffs.

According to the class action lawsuit, about 200,000 students who attended the universities in a 20-year period were affected, potentially amounting to “billions of dollars.”

So far, eight of the universities have settled the charges, agreeing to pay at least $118 million to a fund for students who were harmed by the alleged scheme. One school, Vanderbilt University, declined to disclose the amount of its settlement.

In addition to the University of Pennsylvania, the remaining institutions facing legal action are California Institute of Technology, Cornell University, Dartmouth University, Georgetown University, Johns Hopkins University, Massachusetts Institute of Technology, Northwestern University and the University of Notre Dame.

If they ultimately lose the case, John Lopatka, a law professor at Penn State University and antitrust scholar, said Penn and the other universities would likely face significant payouts.

“The stakes are certainly going up for any non-settling universities, as more and more universities settle,” Lopatka said.  “The rule in antitrust cases in one of joint and several liability, which means that any non-settling defendant can be held liable for all of the damages caused by all of the conspirators. Hypothetically, if 10 are settled, and five go to trial and the plaintiff wins, then those five are liable for the damages of all 15.”

WHYY News reached out to the law firm WilmerHale, who is representing the University of Penn, for comment, but was unsuccessful.

In 2021, Penn had a total enrollment of about 28,000 and an endowment of $20.5 billion.

In January, five of the universities reached settlement agreements. Brown University agreed to pay $19.5 million; Columbia University and Duke University each agreed to pay $24 million; and Emory University and Yale University both agreed to pay $18.5 million. The settlements await the approval of U.S. District Judge Matthew Kennelly.

“It is past time for the presidents and governing bodies of the remaining defendants to stand up and do the right thing for their students and alumni, and resolve the overcharges to middle-class and working-class students that stemmed from the 20 years of collusion on financial aid by elite universities,” said Robert D. Gilbert, a partner at Gilbert Litigators & Counselors.

Ted Normand, a partner at Freedman Normand Friedland, and one of the lead counsel for the plaintiffs, said, “These settlements stand to be a significant benefit for the members of the proposed class, and we look forward to the Court’s resolution of our motion for preliminary approval.”

None of the schools that settled the charges admitted to any of the allegations. In fact, most said they settled the charges to avoid lengthy and costly litigation.

In a statement, a Yale University spokesperson, said: “As families nationwide face the pressure of rising college costs and student debt levels, Yale is proud of its 60-year tradition of need-blind admissions and its commitment to making undergraduate education accessible to students from all socioeconomic backgrounds. Yale College’s financial aid offers meet the full financial need of each student, with none of the aid in the form of repayable loans. This settlement contains no admission that Yale did anything wrong but allows the university to avoid the cost and disruption of further litigation and to continue its work in making undergraduate education more affordable for more families.”

Last year, University of Chicago became the first to settle its case, agreeing to pay $13.5 million. It was followed by Rice University, which also settled for the largest amount so far, $33.7 million, and Vanderbilt University, which settled for an undisclosed sum.

A 1990s-era antitrust exemption allowed the universities to work together when calculating finances and making admissions decisions, but only if they did not consider the students’ family financial situation.

But in 1991, the U.S. Justice Department sued Massachusetts Institute of Technology (MIT) and the eight universities that make up the Ivy League for similar antitrust allegations. The Ivy League reached an agreement to settle the charges that year, but MIT was found guilty in 1992.

  • WHYY thanks our sponsors — become a WHYY sponsor

In 2022, the exemption expired.

Get daily updates from WHYY News!

WHYY is your source for fact-based, in-depth journalism and information. As a nonprofit organization, we rely on financial support from readers like you. Please give today.

Want a digest of WHYY’s programs, events & stories? Sign up for our weekly newsletter.

Together we can reach 100% of WHYY’s fiscal year goal