Cornell Students To Apply For Antitrust Settlement Funds

Cornell students can now apply to share the funds from a long-running class action lawsuit regarding cooperation between top-tier private universities to collaborate on calculating financial aid awards.

Cornell students who received at least some financial aid between Fall 2003 and February 28, 2024 are eligible to apply. The claims form must be submitted by December 17, 2024. If about half of the eligible students and alumni file claims, the average payment will be about $2,000.

Background

For decades, the Ivy League, along with other similar schools, such as MIT and Stanford, worked together to develop a consistent approach to gathering data about a prospective student’s financial need and using it to calculate a financial aid package that includes scholarship grants, loans, parent contributions, and work study. The schools’ goal was to allow each entering freshman to pick a school without worrying about financial costs.

Although schools claimed that they competed for students based upon the quality of education and of the campus life, a key factor in freshmen applying to private schools vis-a-vis public schools was the ever-increasing “sticker price” of posted tuition and total cost of attending.

However, as financial aid became more wide-spread and financed an increasing portion of undergraduates, schools started reporting to the federal government their “Net Price” which was the posted sticker price less the average financial aid award. For low income students, the net price for attending top private schools was very similar to attending public universities.

For greater fairness, colleges adopted “need-blind” admissions procedures. The school would decide which students to accept as freshmen first without looking at parent’s resources, and then would later perform financial aid calculations.

Critics viewed the cooperation between schools as a price-fixing conspiracy. In 1973, Jane P. Danowitz ‘75 ran for student trustee on a platform of pursuing the Ivy League for price fixing. In 1992, the Dept. of Justice and eight Ivy schools entered into a consent decree. Without admitting guilt, the schools promised to stop collaborating on financial aid. However, MIT would not settle and went to trial in 1993. The Dept. of Justice and MIT agreed to collaboration between schools that offered need-blind admissions. In 1994, Congress incorporated this exception to the Antitrust Laws in Section 568 of the Improving America’s Schools Act. 

In 1998, 28 college presidents formed the 568 Presidents Group to discuss common financial aid policies under this exemption. Cornell and its financial aid officials have been active in the group. However, it turns out that some of the group’s members had exceptions to the need-blind admissions policy, calling the antitrust exemption into doubt. For example, one school selected students from its wait list based upon ability to pay, and other schools offered admissions to the children of donors or potential donors.

Section 568 expired on Sept. 30, 2022. On November 4, 2022, the 568 Presidents Group and all of its committees formally dissolved.

RELATED: Cornell Lags in Financial Aid

The Brown Lawsuit

In January 2022, eight students that had received financial aid filed a class action lawsuit against Brown University, Cornell and 15 other colleges. The schools filed motions to dismiss the lawsuit, but on August 15, 2022, District Court Judge Matthew Kennelley allowed the case to continue. 

Because the case alleges an antitrust conspiracy, each defendant school is jointly and severally liable for any judgment awarded after a full trial and appeals. This means that even if some colleges settled and only one college later lost at a jury trial, that school would have to pay for the full economic loss of students from all of the schools, including treble damages.

After losing the motion to dismiss, the plaintiff law firms began pressuring the individual colleges to settle. As each college settled, they raised the amount demanded from the next college to add pressure to bring colleges to the negotiating table. The settlement amounts for each college are:

On July 20, Judge Kennelley approved the settlement and distribution plan.

Dividing the Settlement Funds

An estimated 200,000 students are covered by the settlement.  Under the court approved plan, any full time student on financial aid that attended any of the 17 colleges while those colleges participated in the conspiracy can apply to a part of the settlement fund. For Cornell, this means Fall term 2003 through February 2024.  The claim form asks the student to list all of the semesters he attended full time. A student’s share of the settlement is determined by a fraction with the numerator being the total of the Net Price for each semester divided by the total of all of the Net Prices claimed by all of the applicants. The fraction is applied to the net amount left after paying the law firms and the original plaintiffs ($186 million).

Each of the eight original plaintiffs will receive $20,000 from the settlement fund.

Because the law firms took this class action lawsuit on a contingency fee, they will receive $3.5 million in expense reimbursement plus $94.6 million (33% of $284 million) in legal fees.

Many eligible Cornellians are expected to apply. The amount paid out to Cornellians does not affect the amount that Cornell might owe as it continues to fight the lawsuit. 

If 200,000 claims are filed, the average payout would be $930.

Cornell Impact

Cornell and the other six colleges that did not settle continue to fight the lawsuit on its merits. No date has been set for the trial, which may be at least a year from now.

Meanwhile, Cornell has become increasingly secretive regarding its financial aid policies. Both the Cornell Review and the Sun have found it impossible to get Cornell to comment on these matters. This is understandable because the plaintiffs cited articles in a Columbia student-edited newspaper as evidence that Judge Kennelley quoted in his decision.

One issue raised by the lawsuits is a trend in higher education called “yield management” or “enrollment management” which uses data analytic techniques to increase enrollment by accepted students. Yield management can consider the economic background of student applicants. In general, Cornell and other colleges watch their market for incoming students carefully and try to learn how to continue to attract students.

In 2019, Cornell named Jonathan Burdick as vice provost for enrollment. He was known for advocating a holistic view of recruitment, admissions and financial aid. In 2023, Burdick left Cornell without any announced reason. His duties have been assumed by Lisa Nishii, Vice Provost for Undergraduate Education. According to Burdick’s biography, Burdick “has addressed hundreds of conference audiences worldwide as a guest speaker, and has routinely contributed insight to podcasts and publications including the New York Times, Washington Post, Wall St. Journal, Forbes, the Chronicle of Higher Education, NPR, and US News and World Report.”

With a $98 million war chest, the plaintiff law firms are expected to continue to pursue Cornell and the six other remaining defendant colleges.