The university system is broken. The United States has one of the most expensive university education systems in the world. Universities have found a way to game the system and constantly raise prices, knowing that the federal government, through its financial aid programs, will provide student loans. Many students find themselves shackled for life, paying off student debt unimaginable in most parts of the developed world. Many students find themselves permanently in debt, paying off student debt that universities knew was too large to be supported by future income. Democrats pushed for student debt cancellations, but there is no consensus yet on how deep this should go. The federal government, however, has joined in these struggles, with a trial which accuses Yale, MIT and 14 other elite private universities of acting as a price-fixing cartel created to “reduce or eliminate financial aid as a place of competition”, in effect inflating the net price of attendance of students who receive financial aid.
What makes this particularly pernicious is that for many people, an elite education is a bad investment. Many students borrow amounts of money that their post-college income simply cannot support. They are sold the dream that an elite college education is a ticket to better livelihoods, but in reality, in many fields, it leaves them financially hobbled for life. When you consider the opportunity cost of missing an investment in crypto metaverse, it looks more like a scam depriving American students of the opportunity to progress financially.
The lawsuit was filed in Chicago district court by five former students from some of the universities named in the lawsuit, for themselves and on behalf of similarly affected people. The lawsuit alleges that universities engage in price fixing under the guise of Section 568 of the American Schools Improvement Act of 1994. The 568 exemption exists under antitrust law, which generally prohibits competitors from conspiring. Yet the exemption states that “all students admitted are on the basis of need”. By this, the exemption means that there can be no discrimination based on financial status. However, these universities have overcharged some 170,000 students over the past 18 years, because these students were on financial aid.
The success of the lawsuit depends on how the court interprets the universities’ methodology for calculating financial need. These universities form what is known as the 568 Presidents Group, which determines how financial aid is calculated. This consensual approach to the development of financial assistance formulas is authorized by law. The plaintiffs believe that universities are not “blind to need” and do take into account a student’s ability to pay.
Not only do they consider students’ ability to pay, but these universities favor the children of wealthy donors. It is a powerful indictment of the education system, uniting the will of the elites to contain the poor and their determination to ensure that they privilege themselves.
We are sold the myth that admission to elite universities is a sign of merit, but for many wealthy people it is just a sign of social status, separate from merit. the Operation Varsity Blues Scandal revealed too clearly how the wealthy buy places for their children in elite universities. We have also heard the disturbing accusation that elite universities control admissions based on racial quotas.