Washington, D.C. -- The Justice Department’s controversial antitrust investigation of private colleges has come to an ambiguous close.
The department agreed in December to drop charges against the Massachusetts Institute of Technology, the only institution among the 57 it had examined against which charges remained.
MIT and the government also announced a new system in which colleges could resume some of the collaboration on student financial aid that set off the investigation -- if the colleges promise to admit students without regard to financial need and to meet the full financial need of those they admit.
The president of MIT, Charles M. Vest, said the agreement “signals a recommitment to make the best in American higher education accessible to the most talented students without regard to their financial circumstances.”
The practical effect of the agreement may be negligible, however. None of the Ivy League institutions that used to share information with MIT indicated a willingness to meet the conditions set by the Justice Department, and several said they were skeptical about ever doing so.
The agreement between MIT and the Justice Department bars one of the most controversial forms of collaboration: the comparing of individual aid packages prepared for students admitted to more than one institution to insure that comparable offers are made.
That allowed the Justice Department to declare victory, too. Robert E. Litan, Deputy Assistant Attorney General for antitrust, said the settlement had reached the “one goal” that the department had had all along: “to protect the interests of all students and their families.”
Although MIT was the sole antitrust defendant when the case was settled, the investigation had focused on MIT’s past collaborations with 22 other members of the Overlap Group. The group, which was founded in 1958, consisted of MIT, the eight Ivy League institutions, and 14 other private colleges and universities in the Northeast.
The members of the Overlap Group agreed to award aid based only on financial need. Every year, until 1991, the financial-aid directors of the group compared the aid offers made to students admitted to more than one member institution and worked out a common offer. In that way, members argued, they avoided “bidding wars” over students and allowed students to select colleges according to educational, not financial, criteria.
In 1989, however, the Justice Department opened an investigation of Overlap. It also asked for extensive records from many colleges outside the Overlap Group, although it never brought charges against any non-members.
In 1991, the department formally charged MIT and the Ivy institutions with violating antitrust laws. At that time, the Ivy institutions settled the case by pledging that they would not engage in further collaboration on aid awards.
Since then, all Overlap members except MIT have made similar agreements with the government.
MIT went to trial. In 1992, a federal district judge found that its Overlap activities had violated antitrust laws.
But an appeals court ruled in September 1993 that the lower court had not adequately considered MIT’s arguments, and ordered a new trial.
Since then, MIT and its supporters have urged the Justice Department to drop the case and worked at negotiating a settlement.
The agreement between MIT and the Justice Department allows colleges to agree jointly on a variety of financial-aid policies, to compare the data submitted to them by students, and to use a third party to make sure that colleges are abiding by any policies to which they agreed.
Mr. Vest of MIT said that those provisions “will put in motion a system that will maintain itself pretty well.”
He said he wished that the agreement had gone still further and allowed comparisons of aid offers made to individual students. In the past workings of the Overlap Group, such comparisons “made things more simple and straightforward,” Mr. Vest said.
Mr. Vest said he was not bothered by the condition imposed by the Justice Department that any participating colleges meet the full financial need of admitted students. “That is our current policy and intent, so we had no problem with that,” he said.
Many universities do have a problem with that provision, however.
David L. Warren, president of the National Association of Independent Colleges and Universities, called the requirements that colleges must admit students without regard to need and meet the full financial need of such students “narrow and restrictive.” He said they would have the effect of limiting financial-aid cooperation to “a handful of the most wealthy institutions.”
Even among the wealthiest institutions, the members of the Overlap Group, administrators said they were uncomfortable with the agreement.
The president of Harvard University, Neil L. Rudenstine, said in a prepared statement that it would be “simply beyond the means” of most colleges to meet the Justice Department’s stipulations. In the statement, which he said he had issued after consulting the leaders of the other Ivy institutions, Mr. Rudenstine called for more negotiations with the Justice Department.
The current agreement, he said, “while to some extent encouraging, will not by itself bring about an effective, inclusive system of need-based financial aid.”
Mary Patterson McPherson, the president of Bryn Mawr College, another Overlap member, said she was also dubious. “If you make that pledge, you don’t know whether you will be able to make it for any period of time. And I’m not clear that it’s the government’s business.”
The financial-aid directors of several Overlap institutions said they were anxious to resume Overlap-style activities and said they hoped their institutions would agree to the Justice Department terms. Asking not to be identified, they said the demise of Overlap had already enabled some students to deceive aid officers at some institutions and to obtain more aid than they deserved.
Several university officials said privately that former members of the Overlap Group were split on how to respond to the latest developments. The wealthiest members of Overlap may be more likely to agree to the Justice Department’s terms, they said, while others may not be in a financial position to do so.
But even among institutions not facing financial difficulties, some officials are hesitant about making commitments on financial-aid policy in a time of economic uncertainty.
Experts on student aid were divided on whether the Justice Department’s handling of the case would ultimately help or hurt students. Some backed the Overlap members’ contention that procedures in the old system were better.
Thomas G. Mortenson, an analyst who publishes Postsecondary Education Opportunity, said the comparisons of individual student aid awards had helped to “treat all people equally and fairly.”
He said the Justice Department had approached the issue without a sense of how financial aid works. “Any financial-aid officer can tell you stories about people effectively hiding their assets,” Mr. Mortenson said. The Overlap agreements, by helping to weed out such fraud, allowed more aid to go to deserving students, he said.
Others, however, said that the Overlap system had never been that beneficial, or that it benefited only some students and some institutions. Arthur M. Hauptman, a Washington higher-education consultant, said that it was ironic for Overlap members to complain about the Justice Department’s insistence on their promising to meet the full financial needs of their students if they want to cooperate.
Mr. Hauptman noted that the Overlap members had said all along that their system was designed to help them preserve a policy of meeting full need. “The Justice Department is just hoisting the schools on their own petard,” he said.
As to the complaints from Overlap members that the Justice Department’s agreement will only be an option for a few colleges, Mr. Hauptman noted that the group had only 23 members. It was those members, he said, that benefited from their cooperation, not other colleges that had a tougher time recruiting top students against the collaborative efforts of the Overlap Group.
“It really comes down to a broader issue,” he said. “Are we better off having all the brightest kids go to 25 schools? Or are we better off having the cadre of the brightest go to 100 schools? I think we are better off having it spread to 100.”
David W. Breneman, the former president of Kalamazoo College and a visiting professor of education at Harvard, said he thought the outcome of the Justice Department’s investigation was positive. He praised the department for barring discussions among Overlap members of prospective tuition levels, a practice that he said could encourage higher tuition rates.
Colleges considering significant increases in tuition get “a comfort level if they have the general sense and advance information of what a set of peer institutions are doing,” he said.
Mr. Breneman said it was unrealistic to expect most private colleges to agree to cooperation on financial aid. Most of them, he said, must make student-aid awards in part “to meet our enrollment targets.”
“People are using discounting to attract students, so there is no incentive for a second-tier private college to cooperate with anybody,” Mr. Breneman said.
He also scoffed at the complaints from Overlap members about their difficulties when students receive differing aid offers from different institutions. “I hate to see money being spent to lure a kid from Yale to Princeton or vice versa,” he said. But Ivy League institutions can deal with that, he said, by simply refusing to engage in bidding wars.
And if bidding wars do erupt? “Whether a kid goes to Yale or Princeton is not a major issue in the long-term state of the country,” he said.
Michael S. McPherson, co-director of the Project on the Economics of Higher Education at Williams College, said he thought the agreement was “a neat example of real innovation emerging out of a legal conflict.”
He said the consultations permitted under the agreement would “serve the legitimate objectives that the original Overlap Group had.” At the same time, Mr. McPherson added, the agreement bars “the head-to-head comparisons, which appeared unprincipled and which provoked this.”
July 1989: The Justice Department begins to collect extensive financial information from private colleges, including all 23 members of the Overlap Group. Eventually, at least 57 colleges will be asked to provide information. The Overlap Group members are Amherst, Barnard, Bowdoin, Bryn Mawr, Colby, Dartmouth, Middlebury, Mount Holyoke, Smith, Trinity (Conn.), Vassar, Wellesley, and Williams Colleges; Brown, Columbia, Cornell, Harvard, Princeton, Tufts, Wesleyan, and Yale Universities; the Massachusetts Institute of Technology; and the University of Pennsylvania.
March 1991: The Overlap Group says it will cancel its annual spring meetings, at which aid packages of students admitted to more than one member institution were compared.
May 1991: The eight Ivy League universities agree to stop sharing financial-aid information on the same day the Justice Department formally charges them and the Massachusetts Institute of Technology with violating antitrust laws. The Ivy League agreement ends the case against those institutions, but MIT vows to fight the charges in court.
January 1992: The Justice Department starts to notify colleges in the investigation that are not Overlap members that they are no longer part of the inquiry.
June 1992: A trial on the charges against MIT begins in federal district court in Philadelphia before Judge Louis C. Bechtle.
July 1992: President Bush signs the reauthorization of the Higher Education Act, which includes a provision allowing colleges to declare jointly that they will award student aid based only on financial need, and to consult with each other on definitions of need -- provided that individual award packages of students are not compared.
September 1992: Judge Bechtle rules against MIT, which says it will appeal his decision.
June 1993: A three-judge panel of the U.S. Court of Appeals for the Third Circuit hears the MIT appeal. Numerous higher-education associations and some individual colleges file briefs on behalf of MIT.
September 1993: In a 2-to-1 decision, the appeals court rules that tuition and financial-aid policies can violate federal antitrust laws. But the court finds that Judge Bechtle did not fully consider possible benefits of the Overlap Group procedures that may make its activities legal. The court returns the case to Judge Bechtle for another trial.
December 1993: MIT and the Justice Department announce an agreement under which charges against MIT are dropped. The Justice Department grants colleges the right to set financial-aid policies jointly, to share certain financial information about common applicants, and to have a third party examine whether colleges are abiding by their joint agreements, but only if the colleges promise to maintain “need blind” admissions policies and to meet the full financial need of accepted applicants.
Participating colleges must:
* Be non-profit institutions.
* Admit U.S. citizens to undergraduate programs without regard to financial need, except for those admitted from waiting lists.
* Promise to meet the full financial needs of all admitted students.
Participating colleges may:
* Jointly agree to provide only need-based financial aid and to prohibit merit scholarships.
* Jointly discuss and agree upon principles of need analysis.
* Jointly develop financial-aid applications.
* Exchange relevant financial and personal data on commonly admitted applicants through a central computer facility. The information could include family and student assets and income, the number of siblings of applicants, and the number of those siblings in college. Each college may retrieve such data only once for each applicant.
* Submit information to a third party, after student financial-aid awards have been made, so that the third party can analyze whether colleges that are in joint agreements are arriving at similar aid awards.
Participating colleges may not:
* Discuss the aid packages offered to individual students.
* Agree on the mix of grants and “self-help” on which to base aid awards.
* Agree on or exchange information about prospective tuition rates or faculty salaries.