The U.S. Department of Justice has begun an investigation into “a possible agreement” among colleges to reform their financial-aid policies, according to a letter sent last month to at least two college presidents.
The investigation, several sources said, was prompted by recent discussions among a handful of college officials about how—or whether—they could collaborate to limit their use of merit-based financial aid and reduce bidding wars for applicants.
In the May 21 letter, a copy of which was obtained by The Chronicle, a lawyer in the department wrote that an agreement “to restrict tuition discounting and prevent colleges from changing or improving financial-aid awards to individual students” may restrain competition in violation of antitrust laws.
The letter instructs recipients to preserve all documents, including e-mails, pertaining to “proposed or actual agreements among colleges not to change financial-aid awards,” as well as communications with other colleges, associations, and campus employees. The letter also instructs colleges to preserve information relating to a session held at the Council of Independent Colleges’ annual Presidents Institute, in January.
During that session, titled “Collaborative Efforts on Student-Aid and Admissions Policies,” a group of private-college presidents unveiled the draft of a “statement of principle” affirming their commitment to need-based aid.
The document, headlined “High Tuition/High Discount Has No Future,” described current aid strategies as “unsustainable” and stated that tuition discounting “had led to an allocation of higher-education resources that is neither efficient nor just, and has contributed to the rising cost of higher education.”
Among the document’s list of principles was: “We will strive, as a matter of policy, to meet full need.” Another: “A financial-aid offer, once made, will be final, unless a family’s economic situation changes.”
The document, drafted by John M. McCardell Jr., president and vice chancellor of Sewanee: the University of the South, stated that “we do not deny our own responsibility for fostering the climate in which we now find ourselves.”
‘Unspeakably Strange’
Tori Haring-Smith, president of Washington & Jefferson College, in Pennsylvania, and a panelist at the January session, was among those who received the Justice Department’s letter. “It’s unspeakably strange,” she said in an interview on Friday.
Although the Justice Department’s letter mentions “a possible agreement” among colleges, several participants in the session insisted that no agreement had been reached. Ms. Haring-Smith said there had been confusion about the nature of the statement of principles, which she described as a conversation starter—not a pledge.
She and some of her counterparts, she said, had merely hoped to spark discussion about how colleges could work together to improve the financial-aid system. Some presidents have also expressed interest in discussing potential legislation to loosen antitrust restrictions on colleges.
“This conversation is harmless,” Ms. Haring-Smith said. “It’s not, ‘How much money are you going to give to Johnny?’”
College presidents have long cited concerns about federal scrutiny as a reason they could not collaborate. Decades ago, officials from dozens of highly selective colleges met regularly to discuss the financial needs of students they had commonly admitted. The goal of the so-called Overlap Group was to ensure that students received similar institutional aid awards, allowing them to choose colleges based on factors other than cost.
The Justice Department brought antitrust charges against participating colleges in the early 1990s. The Massachusetts Institute of Technology, the lone college to fight the charges, negotiated a settlement that allowed for some cooperation among institutions, yet the federal case effectively ended the era of collaboration.
Now, only about two dozen colleges, which admit students without consideration of financial need, are permitted to discuss their aid policies. Those colleges compose the 568 Presidents Group, named for Section 568 of a federal law amended by the Need-Based Educational Aid Antitrust Protection Act, which will come up for renewal in 2015.
Obstacles to ‘the Common Good’
Ms. Haring-Smith said she and other presidents had planned to discuss ideas about how Congress might ease those restrictions during a pre-conference session this week at the annual conference of the Annapolis Group, which represents more than 100 liberal-arts colleges.
“What we’re looking for is clarity on the kinds of conversations that we can or cannot have,” Ms. Haring-Smith said. “That clarity will allow us to look at those restrictions, which are obstacles to working together for the common good.”
Yet the session, which had been scheduled for Monday, was canceled after the Justice Department letters were sent.
S. Georgia Nugent, the departing president of Kenyon College and a panelist at the January meeting, also received a letter from the Justice Department, according to two sources with knowledge of the investigation.
Ms. Nugent could not be reached for comment on Friday through a college spokesman. At the January meeting, she urged presidents interested in discussing ways of reforming the financial-aid system to contact her. “It’s not impossible,” she said, “for us to stand up and do things differently.”
A spokesman for Sewanee could not confirm whether Mr. McCardell, who drafted the statement of principles, had received a Justice Department letter. A spokesman for the department declined to comment on the investigation last week.
At the Council of Independent College’s gathering in January, David L. Warren, president of the National Association of Independent Colleges and Universities, said he had held preliminary discussions with Justice Department officials about how colleges might share information about their financial-aid practices without violating antitrust laws.
On Friday a spokesman for Naicu described Mr. Warren’s recent discussions as “preliminary and exploratory” but said the result of those discussions “wasn’t real promising.” Mr. Warren, who was traveling on Friday, was unavailable for comment, the spokesman said.
Several sources who had read the letter from the Justice Department described it as troubling. “We’re in a mode where you can almost get in trouble for talking about talking about something,” said one higher-education official who asked not to be identified, citing his possible connection to the investigation.
In an e-mail, a spokeswoman for the Council of Independent Colleges described the session in January as a “free exchange of ideas” in which many opinions were expressed. “We are not aware of collective action on anyone’s part (presidents, associations, or organizations),” she wrote, “that might suggest an antitrust issue.”
