Lawsuit accuses 16 major universities, including Yale and Northwestern, of illegally collaborating to limit students' financial aid

• A suit accuses 16 universities of illegally restricting financial aid, The Wall Street Journal said.
• It said schools, including Yale, illegally weighed students' abilities to pay when determining aid.

A new lawsuit accuses major universities, including Ivy League schools, of engaging in illegal behavior that restricts students' access to federal aid.

The Wall Street Journal reported on Monday that five former students were suing 16 schools in the US, including Yale, Georgetown, and Columbia, accusing them of engaging in price-fixing and unfairly cutting off some students from financial aid by collaborating on financial-need calculations.

The Journal reported that schools are legally allowed to collaborate on their financial-aid formulas, but the lawsuit said the schools weighed the students' ability to pay in some situations, which is not permitted under the law. Attorneys in the suit said more than 170,000 former students who received partial financial aid from the 16 schools could be eligible to become plaintiffs in the case.

Other defendants in the lawsuit include Northwestern University, Brown University, the University of Chicago, Dartmouth, and the Massachusetts Institute of Technology.

"While conspiring together on a method for awarding financial aid, which raises net tuition prices, defendants also consider the wealth of applicants and their families in making admissions decisions," Eric Rosen, a partner at one of the firms that filed the suit, told The Journal.

Representatives for all of the mentioned schools either declined to comment on pending litigation or did not immediately respond to requests for comment.

There's historical precedent for the type of anticompetitive behavior accused in the lawsuit. In 1991, all members of the Ivy League were charged with price-fixing, which is when competitors get together to set the price of a product, often making prices higher for consumers. As a result, Congress passed legislation that exempted those schools from antitrust violations as long as the collaborations on aid were need-blind — meaning not taking into account the student's ability to pay. This led to the creation of the 568 Presidents Group, a group of universities that meets a few times a year to discuss aid calculations on a need-blind basis.

But the new lawsuit argues that schools are collaborating on financial aid and admissions practices that aren't completely need-blind.

"Under a true need-blind admissions system, all students would be admitted without regard to the financial circumstances of the student or student's family," the lawsuit said. "Far from following this practice, at least nine Defendants for many years have favored wealthy applicants in the admissions process."

The Journal reported that the lawsuit is seeking damages and a permanent end to the schools' collaboration in determining and awarding financial aid.