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Justice Dept., MIT Settle Antitrust Suit

By Ira E. Stoll

The Justice Department and MIT have settled an antitrust suit charging the institute with joining the eight Ivy League universities to fix the prices of college educations.

The settlement ends two and a half years of litigation. It bars colleges from discussing or agreeing on specific financial aid awards for individual applicants, but it allows the institution to exchange for verification purposes, through a third party, financial information submitted by prospective students.

The settlement also permits colleges to share information about financial aid awards--but only after the awards have been made.

Observers said the settlement would have little immediate effect on students.

The Justice Department drops any claims against MIT for participating in annual "overlap meetings" with financial aid officers from the Ivy League schools.

Those meetings, where officials compared and adjusted financial aid awards for individual students, halted in May 1991 after the eight Ivy schools signed a consent decree agreeing to end cooperation and discussion on tuition, financial aid and faculty salaries.

The Justice Department had argued that such meetings constituted price-fixing and violated the Sherman Antitrust Act. MIT held that the meetings were the most efficient and fair way of distributing limited financial aid money.

"This decision enhances competition between colleges on the quality of education," MIT President Charles M. Vest said in the statement released after the settlement. "It re-establishes the principle that colleges, in awarding their funds for scholarships, can follow the...principle that because funds are limited, financial aid in the forms of loans and grants are awarded to students who could not attend college without that financial assistance."

The settlement was announced December 22.

Harvard President Neil L. Rudenstine praised the agreement as "a first step toward recognizing the legality and importance of certain cooperative arrangements among colleges and universities for student financial aid."

But Rudenstine warned that the practical effect of the agreement will be "severely limited."

The agreement only allows cooperation betweenuniversities who both admit applicants withoutregard to their family's financial circumstancesand agree to provide full need-based aid to allstudents who are admitted. Rudenstine said only "avery small handful" of colleges and universitiescan afford such generous policies.

The practical effect of the agreement is alsolimited by the fact that many of the provisions inthe settlement were already included in the 1992Higher Education Reauthorization Act. The actallowed colleges to agree together to give onlyneedbased aid and to agree on principles ofprofessional judgment about financial aid.

The U.S. District Court in Philadelphia ruledon September 2, 1992 that MIT had violated theantitrust act. But on September 17, 1993, theThird Circuit Court of Appeals reversed theearlier decision and sent the case back to thelower court for consideration of the benefits ofthe overlap process

The agreement only allows cooperation betweenuniversities who both admit applicants withoutregard to their family's financial circumstancesand agree to provide full need-based aid to allstudents who are admitted. Rudenstine said only "avery small handful" of colleges and universitiescan afford such generous policies.

The practical effect of the agreement is alsolimited by the fact that many of the provisions inthe settlement were already included in the 1992Higher Education Reauthorization Act. The actallowed colleges to agree together to give onlyneedbased aid and to agree on principles ofprofessional judgment about financial aid.

The U.S. District Court in Philadelphia ruledon September 2, 1992 that MIT had violated theantitrust act. But on September 17, 1993, theThird Circuit Court of Appeals reversed theearlier decision and sent the case back to thelower court for consideration of the benefits ofthe overlap process

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