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California Association of Private Postsecondary Schools

Inquiry Into Aid Talks Ends

08/08/2013

Inside Higher Ed.  August 8, 2013.  By Scott Jaschik.  WASHINGTON -- The U.S. Justice Department has ended its investigation into talks among the leaders of some private colleges about ways to encourage institutions to spend more on need-based aid and less on non-need-based aid.

Colleges learned in June -- from letters they received from the department -- about the inquiry.  This week they received a one-paragraph letter, a copy of which was obtained by Inside Higher Ed, that states that the department "has closed without taking action its investigation into a possible agreement among colleges to restrict tuition discounting and prevent colleges from improving or changing financial aid awards to individual students."

A Justice Department spokeswoman did not respond to questions about why the investigation was closed.

While college officials were pleased with the news, some said the federal review appeared to make many presidents nervous about holding any discussions about how to change their financial aid spending.

For years, many college presidents have said they regret spending so much money on aid awards to students who can afford college without the help, but who are lured to attend one institution over another in part through this aid.

But many of those same presidents have said that they can't afford to shift their grants toward need-based awards without being sure that competing colleges do the same. Otherwise, presidents fear, the college down the road will land the students with the highest grades and test scores, and that institution will rise in the rankings. And at the same time, presidents have expressed fears of the Justice Department, which in the 1980s investigated colleges that shared information on aid packages and charged that the practice violated antitrust laws.

More recently, however, some college leaders have argued that there could be discussions they could hold that would not violate antitrust laws. And it was participants in those discussions who were surprised in June when the Justice Department sought information about the discussions. Leaders of colleges that received the letters from the agency in June generally said that they thought federal officials misunderstood what the discussions were about. No agreement was ever made, they said, and colleges were talking about the issues in very general ways, and with a goal of getting federal approval or legislation that would remove the threat of an antitrust investigation for such talks.

John McCardell, the University of the South's vice chancellor (the title the institution gives its president), said it was "a great relief though not in fact a great surprise" that the Justice Department dropped the investigation. "I was confident all along that our university, while concerned about the issues involved, had never behaved improperly." Indeed Sewanee in 2011 acted on its own to cut tuition and to cut spending on non-need-based aid.

McCardell said he thought the Justice Department investigation might have an impact, even now that it has ended. "I think this experience will have a temporary chilling effect on those discussions" among private college presidents, he said. People will be "much more sensitive to the implications of possible discussions."

Several others at institutions that received notice of the Justice Department investigations shared McCardell's view -- although they said they didn't want to be identified. Said one: "I think what the people who are active in this discussion now understand is that there are a very complicated set of conditions in which it's O.K. to have this discussion." He added that those conditions may be "so complicated" that presidents don't want to have the discussion.

Lloyd Thacker, founder of the Education Conservancy, has been involved with numerous discussions with college leaders about shifting more of their aid spending to those who have the greatest financial need. He said that many presidents have wanted to find a way to work together on the issue "for the common good," because, in the words of one president, "I hate giving money to someone who doesn't need it."

Thacker said he believes the Justice Department investigation will make it impossible to get many presidents to agree to further discussions. So Thacker said he will focus on a drive to get Congress to specify that such discussions would not violate antitrust law. "This letter from DOJ did scare presidents -- that was its intention," Thacker said. "But it also riled up some presidents and got them to say this isn't right." Thacker said he hoped the latter would make a priority of lobbying Congress on the issue.