Rice in talks to settle financial aid ‘cartel’ lawsuit for $33 million

By Brandon Chen     1/30/24 11:21pm

Rice has set aside $33.75 million to settle a class-action antitrust lawsuit filed against 17 elite universities, according to Rice’s financial statement for last year. The settlement amount would be the highest so far in the case, which the plaintiffs colloquially call the “568 Cartel Lawsuit.”

The plaintiffs allege that shared financial aid methodologies among the 17 universities resulted in price-fixing and unfairly limited aid to students, breaking federal antitrust laws. All schools have denied the allegations.

Rice’s financial statement calls the $33.75 million an “agreed upon settlement amount,” though it is unclear if the final settlement will reflect this value. Rice has yet to file for preliminary court approval of the settlement.

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A spokesperson for Rice declined to comment.

Seven other universities have reached preliminary settlements, according to court filings. The University of Chicago was the first to begin settlement discussions in April, signing an agreement for $13.5 million in August. Last week, Brown University, Columbia University, Duke University, Emory University and Yale University moved for preliminary approval of settlements totalling $104.5 million after four months of negotiations.

According to publicly available filings, Vanderbilt has also reached an agreement in principle to settle, but the amount has yet to be disclosed publicly.

As universities began to settle in the last few months, the plaintiffs began increasing the settlement amounts with each successive agreement or set of agreements to “put pressure on the non-settling Defendants to settle imminently or risk having to pay significantly more by waiting,” according to court documents. This could explain why Rice’s $33.75 million exceeds Duke and Columbia’s $24 million payments.

The complaint centers around the “568 Presidents Group,” a coalition of universities that collaborated on aid formulas and was dissolved in November 2022, ten months after the case was filed. This collaboration is legal under federal law: Section 568 of the Improving America’s Schools Act allows universities to collaborate on their financial aid formulas, but only if all schools involved are “need-blind.” The plaintiffs allege that at least nine of the schools failed to conduct need-blind admissions.

The remaining universities, including Rice, “knew or should have known that the other Defendants were not following need-blind admissions policies,” the plaintiffs wrote in court filings. Thus, plaintiffs allege that Rice conspired to reduce financial aid and increase the price of attendance, breaking the  antitrust exemption in Section 568.

The proceeds from the settlements will be pooled to provide payouts to the entire “settlement class” of affected undergraduates. Currently, the proposed settlement class for Rice includes anyone who was enrolled as a full-time undergraduate since Fall 2003 and received need-based financial aid covering some but not all tuition, fees, room or board.

The claimant administrator, Angeion Group, will calculate each claimant’s share. Each claimant would receive a share of the net settlement fund, proportional to an estimate of the net price charged per school for up to four years, lawyers for the plaintiffs wrote in court filings for their allocation plan.

Last March, Rice saw the largest increase in undergraduate tuition in recent years, which became effective this academic year. Increasing by 5.7%, the total cost of attendance is now $74,028. Rice spent over $249 million on financial aid last year. According to the financial aid website, 57% of undergraduates receive some kind of aid.

“It is past time for the presidents and governing bodies of the remaining defendants to stand up and do the right thing for their students and alumni, and resolve the overcharges to middle class and working class students that stemmed from the twenty years of collusion on financial aid by elite universities,” Robert D. Gilbert, a partner of Gilbert Litigators & Counselors, said in a Jan. 23 press release.

Editor-in-Chief Prayag Gordy contributed reporting.

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