The group of schools using the exemption  reviewed a draft of this report and stated it was a careful and objective  report, but raised concerns about the data used in our econometric  analysis and the report’s tone and premise. Legal History of Antitrust Exemption for Higher Education Institutions

In the early 1990’s the U.S. Department of Justice (Justice) sued nine  universities and colleges, alleging that their practice of collectively making  financial aid decisions for students accepted to more than one of their  schools restrained trade in violation of the Sherman Act. 1)
While the federal methodology is used to determine a student’s eligibility  for federal aid, some institutions use this methodology to award their own  institutional aid. Twenty-Eight Schools Used the Antitrust Exemption to Develop a Common Methodology for Assessing a Family’s Financial Need

Twenty-eight schools formed a group under the antitrust exemption and  engaged in one of the four activities allowable under the exemption. In developing the common methodology,  called the consensus approach, schools modified an existing need analysis  methodology and reached agreement on how to treat each element of the  methodology. Members  of the group are all private 4-year schools that have highly selective  admissions policies. As the Cost of Attendance at Schools Using the Exemption Rose, the Amount of Institutional Grant Aid They Provided to Students Increased at a Slower Rate

The cost to attend the schools participating under the exemption rose over  the past 5 years by over 10 percent while cost increases at all other private  schools rose at about half that rate. Cost of Attendance Increased at Schools Using the Exemption Corresponding to Increases at Other Private Schools

During the past 5 years, the cost of attendance—tuition, fees, room, and  board—at schools using the exemption increased by approximately   13 percent from $38,319 in school year 2000-2001 to $43,164 in school year  2004-2005, a faster rate than other schools. Overall, the average total institutional grant aid awarded to  students, which included both need and non-need-based aid, increased  from $18,675 in 2000-01 to $19,901 in 2005-06, or 7 percent. Students Accepted to Both Schools Using the Exemption and Comparable Schools Had No Appreciable Difference in the Amount They Would Be Expected to Contribute Towards College

There was virtually no difference in the amounts students and their  families were expected to pay between schools using the exemption and  similar schools not using the exemption. Although officials from schools using the exemption expected that  students accepted at several of those schools would experience less  variation in the amounts they were expected to pay, none of our analyses  confirmed this. The lack of consistency in EFCs among schools using the  exemption may be explained by the varied implementation of the  consensus approach. As previously mentioned, not all schools using the  consensus approach chose to adopt all the elements of the methodology. Implementation of a Common Methodology Has Not Significantly Affected Affordability or Enrollment at Schools Using the Exemption

Based on our econometric analysis, schools’ use of the consensus  approach did not have a significant impact on affordability, nor did it  cause significant changes in the likelihood of student enrollment at  schools using the consensus approach compared to schools that were not  using the consensus approach. As shown in table 5, while we found that  the consensus approach resulted in higher need-based grant aid awards  for some student groups (middle income, Asian students, and Hispanic  students) compared to similar students at schools that were not using the  consensus approach, this increase was likely offset by decreases in non- need-based grant aid, such as academic or athletic scholarships. In  particular, the consensus approach did not significantly increase the  likelihood of enrollment of low-income or minority students or any  student group. Appendix I: Statistical Analysis of Expected Family Contributions at Schools Using the Exemption and Comparable Schools

We compared variation in expected family contributions (EFCs) between  students who were admitted to both schools using the exemption and  comparable schools that did not. Students accepted to only schools not using the exemption (type 3  students). Compared to the schools that did not use the consensus approach, we  expected that the implementation of the consensus approach would have  a significantly greater impact on the schools using the consensus approach  because its use has potential implications for affordability and enrollment  of students in these schools. Similarly,  the effects of the student-level variables would depend on the theories of  the effects of the exemption.
Why GAO Did This Study

In 1991 the U.S. Department of Justice sued nine colleges and universities, alleging that they had restrained competition by making collective financial aid determinations for students accepted to more than one of these schools. Against the backdrop of this litigation, Congress enacted a temporary exemption from antitrust laws for higher education institutions in 1992. The exemption allows limited collaboration regarding financial aid practices with the goal of promoting equal access to education. The exemption applies only to institutional financial aid and can only be used by schools that admit students without regard to ability to pay. In passing an extension to the exemption in 2001, Congress directed GAO to study the effects of the exemption. GAO examined (1) how many schools used the exemption and what joint practices they implemented, (2) trends in costs and institutional grant aid at schools using the exemption, (3) how expected family contributions at schools using the exemption compare to those at similar schools not using the exemption, and (4) the effects of the exemption on affordability and enrollment. GAO surveyed schools, analyzed school and student-level data, and developed econometric models. GAO used extensive peer review to obtain comments from outside experts and made changes as appropriate.

What GAO Found

Twenty-eight schools--all highly selective, private 4-year institutions--formed a group to use the antitrust exemption and developed a common methodology for assessing financial need, which the group called the consensus approach. The methodology used elements already a part of another need analysis methodology; schools modified this methodology and reached agreement on how to define those elements. By the 2004-2005 school year, 25 of 28 schools in the group were using the consensus approach. Schools' implementation of the approach varied, however, with officials from 12 of the 25 schools reporting that they partially implemented it, in part because they believed it would be costly to do so. Over the last 5 years, tuition, room, and board costs among schools using the antitrust exemption increased by 13 percent compared to 7 percent at all other private 4-year schools not using the exemption. While the amount of institutional aid at schools using the exemption also increased--it did so at a slower rate. The average institutional grant aid award per student increased by 7 percent from $18,675 in 2000-2001 to $19,901 in 2005-2006. There was virtually no difference in the amount students and their families were expected to pay between schools using the exemption and similar schools not using the exemption. While officials from schools using the exemption expected that students accepted to several of their schools would experience less variation in the amount they were expected to pay, GAO found that students accepted to schools using the exemption and comparable schools not using the exemption experienced similar variation in the amount they were expected to pay. Not all schools using the consensus approach chose to adopt all the elements of the methodology, a factor that may account for the lack of consistency in expected family contributions among schools using the exemption. Based on GAO's analysis, schools' use of the consensus approach did not have a significant impact on affordability--the amount students and families paid for college--or affect the likelihood of enrollment at those schools to date. While GAO found that the use of the consensus approach resulted in higher amounts of need-based grant aid awarded to some student groups compared to their counterparts at schools not using the consensus approach, the total amount of grant aid awarded was not significantly affected. It was likely that grant aid awards shifted from non-need-based aid, such as academic and athletic scholarships, to aid based on a student's financial need. Finally, implementing the consensus approach did not increase the likelihood of low-income or minority students enrolling at schools using the consensus approach compared to schools that did not. The group of schools using the exemption reviewed this report and stated it was a careful and objective report. However, they had concerns about the data used in GAO's econometric analysis, which GAO believes were reliable.