Rice among 40 elite colleges sued in second financial aid antitrust lawsuit

By Prasi Desai     10/22/24 10:36pm

A class action lawsuit was filed Oct. 7 against 40 private institutions including Rice, accusing them of overcharging students by including noncustodial parents’ assets in determining financial aid. 

This lawsuit comes soon after Rice settled the financial aid “cartel” lawsuit in February for $33.75 million. According to Jeff Falk, the assistant vice president for strategic communications, the university will not comment on the recent lawsuit at this time. 

The lawsuit, filed in an Illinois district court, was brought by a Cornell University alumnus and a current Boston University student. In particular, the lawsuit takes aim at the CSS profile, which is favored by the defendant schools — including Rice — to assess students’ need for non-federal financial aid. 

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According to the lawsuit, the defendants engaged in “concerted action to require a noncustodial parent of any applicant seeking non-federal financial aid to provide financial information.”

The College Board, a nonprofit organization that created the CSS profile and oversees its application, was also named as a defendant. 

In a statement cited by Reuters, the College Board said that they were “confident that [they] will prevail in this action.”

According to Rice’s general counsel Omar Syed, the lawsuit has been filed in federal court but has not yet been served to Rice. The defendants, including Rice if served, will have 21 days to respond when the lawsuit is served. 

“[The plaintiffs’] legal obligation is to file, or serve, an already filed lawsuit within a reasonable time,” Syed said.

The CSS profile provides access to more than $10 billion in non-federal aid for thousands of students each year. In 2006, the College Board began pushing for noncustodial parents’ assets and financial information with the NCP (Noncustodial Parent) Agreed Pricing Strategy, according to the lawsuit. By requiring this information, universities could overestimate families’ financial contributions and reduce the aid provided to students.

While it isn’t inherently illegal for universities to have similar financial aid policies, the lawsuit describes the defendants as in violation of the Sherman Antitrust Act, which prohibits businesses from working together to limit competition in the market or form monopolies. According to the lawsuit, the NCP Agreed Pricing Strategy is anti-competitive and “constitutes an agreement between horizontal competitors related to price.”

In order to assess impact, the lawsuit focused on the 50 universities ranked highest in the U.S. News & World Report from 2008 to 2023. The plaintiffs claim that the average net price for students of the 40 universities using the NCP Agreed Pricing Strategy is $6,200 more than for the 10 non-NCP universities. 

In a statement referenced by USA Today, a New York University spokesman said “NYU intends to rigorously defend itself” and called the lawsuit meritless. No other defendant universities have publicly commented at this time. 

Syed said the first substantive statements from Rice and other universities typically occur in preliminary court filings. 

“We’ve typically found it wiser to let our court filings speak for our precise, full position on something,” Syed said. 

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