Time for A Bidding War?

A two-year series of negotiations and investigations ended this week when the United States Justice Department filed an antitrust suit against nine colleges, including Harvard.

But the University decided to avoid a costly and time-consuming lawsuit by agreeing to a quick settlement: an end to the Ivies' "overlap" practice of agreeing upon financial aid packages, with no admission of wrongdoing.

The deal allows Harvard to maintain a viable need-based financial aid system and minimizes the University's risk from private lawsuits, but it may eventually force Harvard into a bidding war to attract the best-qualified students.

Several college attorneys say the consent agreement may take some steam out of a private suit filed by a Wesleyan graduate on behalf of about 100,000 students. The suit is slowly making progress in New York where a federal judge is expected to rule on class certification within the next two months.

Lawyers say that any admission of wrongdoing in the consent decree filed on Wednesday would have certainly helped the student's case.

But the agreement explicitly states that it should neither help nor hurt any private actions. "There is no admission of any fact or conclusion of law," said Vice President and General Counsel Daniel Steiner '54.

Stephen Kramer, the student's attorney, however, remained confident that the case would succeed and that the trial would be over by the end of the year.

"I'm not terribly surprised. It might make it more difficult for me, but that's no problem," Kramer said of the consent decree.

The agreement does raise several questions, however, about the future of the financial aid system.

With the overlap process eliminated, some observers have already noticed that students this year are receiving more disparate financial aid awards than they did in the past.

"I haven't seen enough to say it's a trend but I have noticed that financial aid packages have tended to differ more this year from one college to another. There's been a little more variance," said Kalman A. Chany, founder and president of Campus Consultants Inc., a Manhattan-based firm that guides parents and students through the admissions and aid process.

Chany says these students ask for "reconsideration" from the college that offered the lesser amount of aid and that the college will usually match the other school's offer. The result is that students get a better deal, but colleges spend more on financial aid.

Some university officials say that the end of overlap will mean a net decrease information made available about students' financial needs. Assuming that colleges set a fixed amount for total financial aid, too much financial aid for some students will mean not enough for others.

The consent decree also forces the Ivy League colleges to abandon their long-standing agreement to base financial aid solely on need and not merit.

While all the schools are expected to maintain their need-based policies, university officials are worried that the situation may change in the future and perhaps degenerate into unseemly bidding contests for the best students.

The result, they say, would be a less equitable distribution of financial aid, or a net increase of money being spent on financial aid.

And as universities are beginning to confront tighter budgets, some say they will also face increased pressure to abandon their expensive need-blind admissions policies.

College administrators are carefully monitoring the situation, and any such drastic change will probably prompt an appeal to Congress to pass legislation permitting them to renew the overlap process.

Officials at Columbia University have already indicated that they will seek appropriate Congressional action. But such action is probably unlikely unless the universities lobby for it collectively.

Despite the universities' arguments to the contrary, the Justice Department appears convinced that the added competition will lead to both lower tuition rates and higher awards for students.

Vice President for Finance Robert Scott, however, says the settlement might lead to an "upward pressure" on tuition as more financial aid is offered.

"I personally think that this is going to make the cost of higher education higher," Scott says.

In addition, under the terms of the decree, the colleges will have to establish an elaborate program that allows federal investigators to oversee compliance. This program, Steiner says, will also lead to greater budget demands.

Indeed, the best aspect of the consent decree for colleges may be that it ended a massive two-year series of investigations and negotiations that was costing a pretty penny: Princeton vice president Robert Durkee estimates that the eight universities have spent a total sum of more than $4 million already in legal and document costs.