In a major development for higher education and antitrust law, 40 prominent U.S. colleges and universities have successfully defeated a class-action lawsuit accusing them of conspiring to limit financial aid and overcharge students. The decision, issued by U.S. District Judge Sara Ellis in Chicago, dismissed the case but allowed plaintiffs the opportunity to file an amended complaint.
The Lawsuit at a Glance
The lawsuit was brought by a Boston University student and a Cornell University graduate, who alleged that the schools had colluded for nearly two decades to require applicants to disclose the financial information of noncustodial parents when applying for need-based aid.
The plaintiffs argued that this practice drove up families’ expected contributions and reduced the amount of aid students received. They estimated that as many as 20,000 students could qualify as part of a potential class, claiming they collectively overpaid millions of dollars in tuition and fees as a result.
The case targeted some of the country’s most elite institutions, including Harvard University, Yale University, Northwestern University, Dartmouth College, Brown University, Georgetown University, and Cornell University. All of the schools have consistently denied wrongdoing.
The Court’s Reasoning
Judge Ellis determined that the plaintiffs had not plausibly alleged that the universities acted through an explicit agreement that would violate antitrust law. Under U.S. antitrust principles, merely having similar policies is not enough — plaintiffs must show evidence of a concerted effort or conspiracy among the schools.
The judge also dismissed claims against the College Board, the nonprofit organization behind the CSS Profile used by many schools to assess financial aid. Plaintiffs had alleged that the College Board encouraged schools to align their policies in a way that reduced competition for students. However, the court concluded that the plaintiffs had not presented sufficient evidence that the College Board engaged in illegal coordination.
Importantly, the dismissal was without prejudice, meaning the plaintiffs can attempt to revise and refile their claims with more robust factual allegations.
Broader Legal Context
This ruling is part of a wider pattern of legal challenges that have taken aim at the way elite colleges and universities collaborate on financial aid decisions.
In 2022, another high-profile lawsuit accused a group of top schools of violating antitrust laws by coordinating on admissions and aid formulas under Section 568 of the Higher Education Act, which had previously granted them an antitrust exemption. Several universities, including Dartmouth, Northwestern, Rice, and Vanderbilt, ultimately settled those claims for a combined $166 million.
The plaintiffs in this more recent case sought to build on those earlier victories, but Judge Ellis’ ruling shows the high bar plaintiffs must clear to prove collusion — especially when universities can point to legitimate policy reasons for including noncustodial parent finances in aid calculations.
Arguments From Both Sides
Plaintiffs’ Perspective:
- The joint adoption of noncustodial parent asset reporting created a de facto cartel.
- Students from divorced or separated households were disproportionately burdened, since aid packages did not account for real-world challenges such as estranged parents refusing to contribute.
- The alleged agreement harmed competition among schools that might otherwise have offered more generous packages to attract students.
Defendants’ Perspective:
- Each institution independently determines its financial aid methodology.
- Considering all parental resources, custodial or not, is a fair and reasonable approach to distributing limited aid funds.
- The plaintiffs’ claims would effectively penalize schools for making prudent, individualized policy decisions.
Implications for Students and Families
While the case was dismissed, it highlights an increasingly contentious issue: how colleges define financial need. The growing complexity of aid formulas and the significant role of noncustodial parent assets have been criticized by advocates who argue that these policies disadvantage children of divorce, estrangement, or financially uncooperative parents.
The decision could also influence how other lawsuits are framed. Future plaintiffs may need to produce stronger evidence, such as internal communications or synchronized policy updates, to show a true conspiracy among universities.
What Happens Next
The plaintiffs’ attorneys have indicated they are considering filing an amended complaint to address the deficiencies identified by the court. If they do, the case could return to litigation later this year.
Legal experts say this ruling is unlikely to be the final word. “This decision provides a roadmap for what plaintiffs will need to allege next time if they hope to survive dismissal,” noted one antitrust scholar.
Meanwhile, universities may use the ruling as a green light to maintain their current financial aid methodologies, but they will likely continue to face scrutiny from lawmakers, advocates, and prospective students about transparency and equity in aid awards.
The Bigger Picture
The case underscores a growing tension in higher education: balancing fairness, competition, and institutional autonomy. With college costs continuing to rise and student debt topping $1.7 trillion, disputes over financial aid practices are likely to remain a flashpoint.
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