The Justice Department's antitrust suit against MIT has disrupted the historic need-based financial aid system and has unlawfully barred cooperation among charitable nonprofit organizations, MIT said in a statement last week.
MIT and eight cooperating Ivy League universities received no financial gain from making sure their private, non-commercial, charitable financial aid was fairly administered on the basis of financial need, MIT said in an 82-page brief filed in the federal District Court in Philadelphia.
Consistent with the policy and legal guidelines developed over the past 35 years by MIT, the other colleges, the US Department of Education and the Congress, the university's limited financial aid resources were distributed only to students with financial need.
In response to the application of these guidelines, the MIT brief comments that the Antitrust Division "has rewarded MIT with an oppressive, expensive and novel lawsuit." Need played no role in admissions, and merit played no role in financial aid under the "Overlap" system developed by these colleges.
The annual cooperative meeting among the nine schools was called Overlap in reference to undergraduate students who sought financial aid and who had overlapping offers of admission from more than one of the colleges. To determine the student's need, financial aid administrators from the colleges met and took many factors into account, using their professional judgment and usually-but not always-arriving at a consensus on how much the student and parents could afford to pay.
New information provided at the meetings sometimes increased and sometimes decreased the amount of the family contribution. The colleges did not "save" money if the family contribution increased; the money was simply made available to another student with greater need.
No Antitrust Liability
MIT submitted to the court a statistical analysis by economist Dennis W. Carlton of the University of Chicago of the Ivy League schools, MIT and many other comparable private colleges. The study showed that the Overlap process didn't increase revenues for the colleges. "It therefore did not produce the harm to consumers upon which antitrust liability is predicated," MIT said. MIT warned that "The elimination of Overlap will over time, seriously undermine the principles of merit admission and need-based aid."
"This case will determine whether MIT may voluntarily cooperate with other colleges and universities to assure that their limited charitable resources are used to keep college doors open to talented but poor students who must have private financial aid in order to attend. At issue is MIT's cooperation with eight other nonprofit colleges and universities, which together implemented their belief that scarce charitable resources should be given to those in need, rather than depleted by those who have no need. "
"Overlap was founded upon commonly held academic values and principles about the role of higher education in society: that education is a `public good' that serves to maximize human capital in our society; that a high-quality post-secondary education should not be a privilege reserved for the wealthy; and that limited financial aid resources should be dedicated to providing access to talented but economically disadvantaged students, and not wasted on students who have no need," said the brief opposing the government's April 3 motion for a summary judgment without trial. The judge has said it is "unlikely" it will be resolved without a trial, and has set a trial date of June 25.
The MIT brief summarized the situation as follows: "Overlap (1) had a purely charitable purpose; (2) furthered federal financial aid policies; (3) advanced widely accepted and government-endorsed educational and public policy objectives; and (4) did not produce additional revenues for the schools or cause other harmful effects to consumers. . . When the issues are addressed on the merits, the Division's case will not stand," the MIT brief said.
"Overlap was based on sound principles and policies. While the (Antitrust) Division may dislike Overlap as a matter of ideology, there is no principle of law that prohibits charities from coordinating their charitable gift-giving activities in order to better effectuate their charitable mission," MIT said.
MIT said the suit ignores Congressional laws on financial aid and federal court precedents in antitrust suits. MIT said it believes that the Justice Department has made "a fundamental mistake in applying antitrust's commercial standards of behavior to MIT's core charitable activities. MIT continues to believe that need-based aid and need-blind admission are primary and essential to MIT and to the role and character of higher education in the United States, and that cooperative efforts to sustain these values should not be thwarted by the misapplication of the antitrust laws."
MIT criticized the Antitrust Division's inconsistency in the consent decree which the eight Ivy League colleges signed last May 22. The eight said that they didn't want to undertake the heavy financial cost of fighting the Justice Department. The settlement document said that the Ivy schools could agree "to grant financial aid to recruited athletes or students who participate in athletics on the sole basis of economic need" and not on athletic merit.
MIT commented, "The [Antitrust] Division's acceptance of the prohibition against financial aid competition for student athletes, and rejection of the same conduct when the goal is to maximize educational access, is explainable only as a matter of subjective preference, not law."
The suit has halted the 35-year practice of fiscally prudent cooperation among the schools, which had served as a model for the development of Congressional laws requiring that federal aid to undergraduate students be based on demonstrated financial need.
MIT noted the recent protests at Brown University and other colleges about a possible end to need-blind admissions, and the fact that some private colleges are having trouble maintaining need-based aid in the financial aid world revolutionized by the Antitrust Division suit last May.
"While the Division seems oblivious to the damage it has done, students have been quick to realize that movement away from need-blind admissions reduces access, which in turn harms the educational process, and injures society at large."
MIT cited both conservative and liberal jurists (former federal Appeals Court Judge Robert H. Bork and the late Supreme Court Justice Felix Frankfurter, respectively) in pursuing its argument that the 1890 Sherman Antitrust Act does not apply and has never applied to the noncommercial, charitable financial aid activity of a bona fide educational institution.
MIT cited Bork's book, The Antitrust Paradox, in its closing argument. MIT commented that "The [Antitrust] Division's approach in this case is fairly characterized as an academic experiment. . . In the present case. . . its adventurous route leads far beyond its area of expertise. As Judge Bork has written, 'Antitrust has a built-in preference for material prosperity, but it has nothing to say about the ways prosperity is distributed or used. Those are matters for other laws.'"
Justice Frankfurter, in a concurring opinion [in Sweezy v. New Hampshire], wrote: "It is the business of a university to provide that atmosphere. . . in which there prevail `the four essential freedoms' of a university-to determine for itself on academic grounds who may teach, what may be taught, how it should be taught, and who may be admitted to study."
MIT Aid: $21 MillionThe admissions and financial aid situations of MIT and the eight Ivy League colleges provide far more scholarship funds to their students than does the federal government. For example, MIT in 1990 provided $21 million in financial aid scholarship grants to its undergraduates, compared to $3 million in grants provided by the federal government.
MIT said, "The Division apparently does not understand that each charitable dollar, once spent on no-need aid, cannot then be spent again to open college doors to able but poor students. Schools are faced with ever-increasing pressure on their limited resources, and. . . . these pressures have forced some schools to abandon their commitment to need-blind admissions."
The cost of education to MIT is far greater than the amount contributed by students. (In 1991, tuition was $139 million while the cost of education was $280 million, MIT reported last week.)
MIT found no precedent for the Antitrust Division's action in a review of all antitrust cases involving colleges and universities which have ever been decided.
Even in the landmark 1983 case of NCAA v. Board of Regents, which involved commercial television activities and was the only intercollegiate agreement ever found to violate the Sherman Act, "the Supreme Court upheld as reasonable" a second intercollegiate agreement "limiting the amount of financial aid that student athletes may receive.
"The Court explained that the agreement was justified in 'order to preserve the character and quality of the "product." The Court recognized that 'the integrity of the product [could not] be preserved except by mutual agreement."
Need for Cooperative SystemThe need for a mutually agreed system was clear when Overlap was set up in the mid-1950s. MIT's brief said, "Recognizing that without some standard measurement for defining 'need' their common commitment to a policy of need-based aid would have no meaning or efficacy, the Overlap schools developed uniform principles for assessing an applicant's financial need. The schools also determined that by sharing information and exchanging judgments about the particular circumstances of financial aid applicants, aid administrators could more fairly, efficiently and accurately determine the actual need of a financial aid applicant."
The system, which included the use of professional judgment in the analysis of need, was adopted by the US Office of Education in the 1960s and was later adapted by the Congress.
The civil suit was announced by former Attorney General Richard Thornburgh last May 22 shortly before he resigned to run unsuccessfully for the US Senate.
A version of this article appeared in the May 6, 1992 issue of MIT Tech Talk (Volume 36, Number 29).