Higher (Income) Learning? The University 568 Lawsuit Continues With New Filings

If money truly does talk, it might have a lot to say about what’s going on in a Northern Illinois courtroom over the past year. A lawsuit filed in federal district court back in 2022 claims that elite institutes of higher education were guilty of showing preference toward less qualified applicants from wealthy families over more deserving candidates. 

These accusations were leveled against 17 schools, including some of the nation's most prestigious colleges and universities. Additional filings made on December 16th, 2024, have added new allegations to the class-action suit. Some schools have already settled. What’s this all about? Let’s take a look at the case’s background.

The 568 “Cartel”

The case is an ongoing class action suit filed by former students against 17 highly-ranked colleges and universities in 2022. It alleges that the schools named in the suit acted as a “price-fixing cartel” that gave preference to inferior applicants due to wealth in their families and the potential for donations. This reduced the amount of financial aid available for other students.

The schools have claimed they were within Section 568 of the Improving America’s Schools Act of 1994. Their defense centers on the notion that the 568 Exemption is an exemption to antitrust laws that may have been applicable. They also either deny favoritism or say that any occurrences were extremely rare exceptions.

This hasn't stopped 10 of the schools from reaching settlements. The following schools agreed to a combined $284 million settlement in July of 2024:

• Yale
• Brown
• Columbia
• Dartmouth
• Duke
• Vanderbilt
• Rice
• University of Chicago
• Emory
• Northwestern

Some payouts have included $2,000 to former students who may have had their financial aid reduced by the admission of wealthy but sub-par students. It should be noted that these settlements were made with no admission of guilt. The 568 Exemption expired in 2022.

New Allegations

Motions filed in December of this year have targeted the schools that have yet to settle. The new allegations focus on the argument that Exemption 568 doesn't exonerate the schools in question from failing to be "need-blind" when considering applicants. This means that a student's financial needs cannot be a deciding factor for any college or university that accepts government funds for educational aid.

The smoking gun for the University of Pennsylvania is in the form of a deposition of a former associate dean of admissions. Sara Harberson testified that applicants backed by board members or big donors were tagged as BSI, which stood for "bona fide special interest." These were considered untouchable and a lock for admission. UPenn has strenuously denied this allegation.

Georgetown and the Massachusetts Institute of Technology are also accused of favoritism in the new filings. They, along with Notre Dame, Cornell, UPenn, and the California Institute of Technology, deny all claims of advantages being given to wealthy or connected applicants. Johns Hopkins is said to be working on a settlement agreement.

How Much Is Enough?

Power often holds sway. It's not difficult to imagine an admission officer capitulating to the pressure of the demands of a member of the school's board. But when it comes to money, how much is too much? Elite schools boast a loyal and successful alumni base, ensuring a steady flow of donations and endowments.

For example, the 2023 endowment income for Yale University was $1.8 billion. While 75% of donations come with instructions on where the money must go, $324 million was allocated to financial aid. This is before federal educational aid is added. Is a school justified in cow-towing in certain instances to keep the donor spigot flowing?

While the 568 Exemption is gone, schools are still motivated to keep donors happy. Whether they'll change their ways or just be more circumspect about it remains to be seen.

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