College prices are soaring.
Since the early ‘90s, the average cost of one year at a private nonprofit college has nearly doubled from $25,070 to $45,370 (and yes, that’s adjusting for inflation).
In that same period, median student loan debt has increased by nearly 164 percent.
Something has to change. And according to some colleges, it would … if they were free from antitrust laws.
What do antitrust laws have to do with college costs?
It all goes back to 1991, the year Nirvana released “Smells Like Teen Spirit” — and the year the Justice Department accused a group of elite colleges and universities of violating antitrust laws.
For years, this group had been discussing students who’d been admitted to more than one of their schools, with the goal of offering those students similar amounts of aid.
This process prevented the schools from competing for top students with bigger aid packages — a strategy that allowed them to save aid for those who needed it most, they said.
But the Justice Department saw it as something different: price fixing.
“Students and their families are entitled to the full benefits of price competition when they choose a college,” said then-Attorney General Dick Thornburgh, according to the New York Times. “This collegiate cartel has denied them the right to compare prices and discounts among schools, just as they would in shopping for any other service or commodity.”
Although the schools maintained they didn’t do anything wrong, they agreed to stop — except the Massachusetts Institute of Technology (MIT), which continued fighting until it reached a settlement in 1993.
The following year, Congress enacted Section 568, which extended some of the provisions of MIT’s settlement to other schools. For example, it allowed schools to use common principles to determine need but prohibited sharing the amount or terms of any individual aid award.
It also applied to need-blind institutions only.
To be “need-blind,” a school must not review an applicant’s financial status until after they’ve been admitted. There are approximately 100 such institutions in the U.S.
For the more than 1,500 private nonprofit institutions that aren’t need-blind, however, antitrust laws remain a shackle.
Why colleges want to be exempt from antitrust laws
Because these universities can’t communicate with one another, they say they’re trapped in a tuition arms race.
“They vie for students by offering bigger and bigger discounts they can’t afford — including to families that may not need them,” explained Jon Marcus in a piece for The Hechinger Report. “This pushes up the sticker price for everybody else, shifts money away from students who need it most, and threatens the very survival of some schools.”
That’s why some people argue colleges should be exempt from antitrust legislation.
“Colleges are highly motivated to reduce the cost of college, and they all have smart people who would like to work with others to develop new approaches,” explained Richard Detweiler, president of the Great Lakes College Association, in an email to Student Loan Hero. “Private nonprofit colleges should be allowed to openly discuss strategies to control the cost of college.”
The National Association of Independent Colleges and Universities (NAICU), a network of more than 1,000 private nonprofit colleges, agrees.
In a proposal to Congress, it asked for relief from antitrust laws for a five-year period — an exemption that would be extended only if it made college cheaper.
“For more than 20 years, antitrust restrictions have prevented private nonprofit colleges from engaging in full discussions of new business models,” NAICU explained. “These restrictions severely limit the sector’s ability to explore issues thoroughly and develop innovative solutions in areas such as financial aid, price, net price, discount rates, and myriad related topics.”
The other side of the argument
It might sound like a smart idea, but critics are concerned schools won’t do what they promise.
“I, frankly, am skeptical,” F. M. Scherer, a Harvard professor who focuses on antitrust policies, told The Hechinger Report.
He said collusion between the schools could actually increase the cost of college.
Supporting his position is a 2006 report from the Government Accountability Office, which examined 28 schools that were exempt from antitrust laws (thanks to Section 568) and had “developed a common methodology for assessing financial need.”
It concluded the collaboration didn’t achieve the desired results.
Although need-based (as opposed to merit-based) aid increased, it didn’t decrease the amount families paid, nor did it increase the number of low-income or minority students who enrolled. And tuition and fees rose at a faster rate at the exempted schools than at others.
So is exempting colleges from antitrust laws a good idea?
That’s a great question. And no one knows the answer.
But with student loan debt defining a generation, it’s obvious the current system isn’t working.
“There is no guarantee that having the opportunity for colleges to talk openly will reduce costs — perhaps there will not be a breakthrough in approach — but one thing that is clear is that the current policy which bans such conversations corresponds to a time when college prices have gone up more than ever before,” explained Detweiler.
If you support the idea of freeing colleges from antitrust legislation, call or email your representatives and let them know.
Maybe Detweiler is right. What do we have to lose?
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