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MIT declines to settle suit

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(By Linda D'Angelo)


MIT has declined to sign a consent decree that would have settled the Justice Department suit against the Institute for allegedly colluding with other universities on financial aid in violation of antitrust laws.


The eight Ivy League schools also named in the 10-page civil antitrust suit -- Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, the University of Pennsylvania and Yale -- signed the consent decree, US Attorney General Richard Thornburgh said at a May 22 news conference.

"We do not believe that our practices violated the antitrust laws," Provost Mark S. Wrighton said. "Our interest all along has been providing the maximum amount of financial aid . . . in a way that allows students of modest means to have the kind of education that we offer."

Wrighton added that MIT officials did not know if they

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would be named in the Justice Department suit until the press conference. MIT is still waiting to receive the official complaint, he added.

According to MIT attorney Thane D. Scott, MIT has 20 days from the day it receives the official complaint in which to respond. He said MIT's lawyers were "still considering the various ways in which MIT can respond."

As part of the settlement between the Justice Department and the Ivy League, the schools will no longer hold Overlap Group meetings -- annual spring gatherings at which the Ivy League schools, MIT and 14 other private institutions met to exchange information on the financial need of common applicants and agreed to offer those students roughly the same financial aid packages.

Several of the schools have said they believe the Overlap meetings -- which they still contend were lawful -- assured that available financial aid moneys from universities and the government served the largest group of eligible students.

The objective was to make it possible for students to "optimize their educational aims without regard for their financial means," Wrighton said of the meetings.

He added that the meetings allowed schools to agree on the best financial aid package for prospective students and freed prospective students to "make a judgment based on their own interest about where they would like to go" rather than on which school offered them more aid.

Daniel Steiner, chief counsel for Harvard University, told the Boston Globe that the exchange of financial aid information at the Overlap meetings actually ensured that the neediest students received aid.

Without the Overlap meetings, schools competing for the same student can use financial aid as an incentive, Steiner said. He predicted that a "bidding war," in which applicants receive offers of financial aid whether they need it or not, would result.

"It is already happening now," Steiner said. "Money is being used to subsidize well-to-do students at the expense of students who can't afford to pay. We don't think that is a good result."

The Ivy League schools said they signed the consent decree in order to end a costly legal battle. Dartmouth reported it had spent $400,000 -- the equivalent of 40 typical scholarships -- on legal costs.

Wrighton said he could not estimate what the cost of not settling the antitrust suit would be for MIT.

Because MIT did not sign the consent decree, the case against it will continue in the Federal District Court in Philadelphia, where the attorney general filed suit.

For the Ivy League schools that signed the decree, the case is still pending as well. After a 60-day period for the general public to comment on whether the Ivy League's consent decree is in the public interest, the settlement must be approved by Judge Louis Bechtle in Federal District Court in Philadelphia.

As part of the settlement, the Ivy League schools agreed "that they will no longer collude or conspire on financial aid," Thornburgh said. The schools "also agreed not to discuss or agree on future tuition or faculty salary increases," he said, although the issue of tuition or faculty salaries was not mentioned in the suit.

The settlement also bars direct or indirect agreements with any other college or university regarding financial aid formulas, individual financial aid packages beyond what is required by federal law, the offering of merit aid, and the setting of student fees and faculty salaries. The schools are also prohibited from exchanging information about budgetary plans or projections.

Under the settlement, schools will still be allowed to continue to disclose financial aid policy information and to continue consultations with the College Scholarship Service regarding the processing and presentation of financial aid data.

The schools will be required to obtain annual certification of compliance with the terms of the settlement for a period of 10 years, under penalty of criminal contempt of court.

Assistant Attorney General James F. Rill said at the news conference the lack of merit-based aid was one of the concerns that led the Justice Department to file suit. He said the action was an effort to challenge the schools' alleged agreement that no merit-based aid would be offered and that the schools would follow a common formula for calculating need-based aid.

Rill added, however, that the settlement does not prohibit a college from individually deciding to offer only need-based aid. Rather, it prohibits "a collusive establishment of a policy that aid will be based only on need."

The eight Ivy League schools have since released separate statements ensuring the continuance of need-based aid.

Thornburgh said he could not predict how much money students and their families would save as a result of the settlement because decisions on financial aid are now left to the individual schools. "What we have ensured," he said, "is that whatever benefit comes from competition is going to accrue to the benefits of parents and students and will not be precluded by collusive agreements among the universities."

The Justice Department will continue its two-year investigation of 46 other colleges and universities nationwide that also hold annual overlap meetings, Thornburgh said.

(Editor's note: Andrea Lamberti contributed to the reporting of this story.)