Rice University sets aside $33M for suit alleging price-fixing scheme
Houston’s Rice University has allotted $33.75 million to settle a class action lawsuit likely linked to a federal case alleging 17 elite institutions ran a coordinated price-fixing scheme that limited the amount of financial aid provided to students.
“In October 2023, the University settled a class action lawsuit in which it had been named a co-defendant along with sixteen other universities,” according to Rice’s consolidated financial statement for last fiscal year.
The price-fixing lawsuit is the only case Rice is named in that matches the financial statement’s description, but court documents do not reflect that the parties have agreed to a settlement. Rice declined to comment on the lawsuit and the financial statement.
The University of Chicago is the only defendant that has so far filed a settlement amount – $13.5 million – in court. The remaining institutions, aside from Rice, are Brown University, California Institute of Technology, Columbia University, Cornell University, Dartmouth College, Duke University, Emory University, Georgetown University, Johns
Hopkins University, Massachusetts Institute of Technology, Northwestern University, University of Notre Dame, University of Pennsylvania, Vanderbilt University and Yale University.
Rice’s financial documents show the university listed $33.75 million to settle the lawsuit with money from nonoperating revenue. Nonoperating charges are not associated with core business expenses and can sometimes include one-time legal costs.
The lawsuit surfaced in January 2022, when multiple former students accused Rice and other schools of violating antitrust laws by collaborating on a formula that calculated students’ financial need. The formula caused the net price of attendance to become artificially inflated, resulting in the overcharging of more than 170,000 students receiving financial aid and costing them hundreds of millions of dollars, the plaintiffs said in the lawsuit.
Rice University denied the allegations at the time the lawsuit was filed.
“We believe it is without merit,” a 2022 university statement read. “Rice University is proud of its financial aid practices and we are prepared to vigorously defend them in court.”
The 17 universities belonged to the so-called “568 Presidents Group,” which was predicated on admissions policies that are “need blind” and don’t consider a student’s ability to pay for tuition during the admissions process. Rice joined the group in 1993 and withdrew in 2009, before rejoining in 2017, the lawsuit states.
The member universities created the shared formula in 2003 to determine an applicants’ ability to pay for college, invoking a 1994 federal act that allowed schools with need-blind policies to collaborate on guidelines to assess financial need.
The act made such schools exempt from the antitrust laws that typically promote competition and prohibit the setting of prices, however, nine of the schools in the lawsuit weren’t “needblind” at all, the plaintiffs’ lawyers said. They considered the financial status of families in the admissions process at various points, even admitting children of past or potential donors and giving preference to the wealthiest people in waitlist admissions, the attorneys allege in the lawsuit.
Rice was not one of those nine universities, the lawyers said. The Houston school and several others “may or may not have” considered financial need as part of their processes, but they are accused of conspiring with the schools that did and should have known that the others weren’t abiding by the rules, according to the lawsuit.
Rice University this year has a $920 million operating budget and an almost $8 billion endowment. The private institution has expanded its financial aid as its sticker price has increased, beginning to offer loan-free financial aid around 2022 to all students who qualify based on need. Rice also extends full-tuition grants or scholarships to undergraduates whose families earn below $140,000 a year, as well as other discounts on a sliding scale.
Any settlement should allow money to be distributed back to students who were affected by the alleged price-fixing scheme, said Nathan Daun-Barnett, an associate professor of higher education administration at the University of Buffalo. And future students with some financial need might benefit from stronger financial aid packages as a result of any settlements in the case.
“It is the sort of behavior that gets elite, selective, and wealthy institutions into trouble on occasion,” DaunBarnett said in an email.