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reexAMining college financial aid

Skyrocketing college tuition is keeping many parents across the United States awake at night. Today the average cost per year is $34,000 at a private university and $16,000 at an in-state public university. Colleges and the federal government are simply not keeping pace: The financial aid they oer students is being outstripped by tuition increases. As a consequence, cost is rapidly becoming the biggest obstacle to higher education.

The Institute for College Access & Success (TICAS) is one organization trying to address the mounting crisis of escalating college tuition. An independent nonprofit, TICAS conducts and supports research and advocacy with the aim of improving public policies aecting higher education’s access and aordability.

applying antitrust law to colleges Shearman & Sterling recently advised TICAS pro bono on a little-known area of antitrust law and its appli- cability to colleges that wish to share financial aid information as a way to curb “bidding wars” for the most talented students. TICAS attached the firm’s 21-page legal memo on the subject to a white paper it

According to TICAS, many public and private colleges hand out financial aid in excess of students’ actual needs in order to attract the best candidates. Colleges believe this “merit aid” is an investment in institutional quality and diversity. Because top students are in high demand, colleges often end up bidding against each other, raising the amounts of money oered to these students well beyond their actual financial need. This leaves colleges less money for “need-based aid,” and, as a result, less financial assistance available for low- and moderate-income students.

More cooperation among colleges potentially means more funding diverted from merit-based to need-based scholarships. In the past, several colleges agreed to

released in June.

we Are proud to hAve been pArt of this project [And] whAt it is trying to Achieve: AffordAble higher educAtion for All students.

share financial aid information in order to collectively determine aid packages for students who were admitted to two or more of the participating schools. After investigating this activity from 1989–91, the Department of Justice challenged this practice as price-fixing in vio- lation of the antitrust laws. As part of the settlement of this litigation, colleges agreed to cease sharing detailed financial aid information about prospective students.

Congress then passed the Higher Education Amendments of 1992, which exempted from anti- trust laws some exchanges of financial information

“Because this is a very complex, highly specialized corner of antitrust law–with a substantial education policy overlay–we did a lot of research for TICAS so that they could better advocate for their position, which is the adoption of new initiatives to improve the accessibil- ity and aordability of higher education,” says Vittorio Cottafavi, a second-year Antitrust associate who worked on the matter. “We drafted a legal memo that included a description of the Department of Justice’s investigation into the exchange of financial aid information among colleges, a survey of the resulting litigation and congres- sional responses, and an analysis of the antitrust risk schools would face if they were to venture beyond the current statutory exemptions.”

among colleges. TICAS, however, does not believe the exemptions went far enough. The organization is now lobbying for an expansion of the current statute.

“We are proud to have been part of this project,” says Cottafavi. “The TICAS white paper is both impressive and important in what it is trying to achieve: aordable higher education for all students.”

Antitrust associate Timothy Haney also contributed to the project, and Antitrust partner Wayne Dale Collins oversaw the assignment.

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