End Misrepresentation in College Pricing

July, 2024

Washington —  Of all the current problems in U.S. higher education (and there are many), one is said to be especially unsolvable:  pricing.

Credit is due Ben Unglesbee of Higher Ed Dive for describing why, and what pricing involves: discounting and other financial aid, legions of consultants, and even antitrust considerations.  An excerpt from his reporting:

The practice of marking down tuition sticker prices is decades old and comes with few benefits at this point, many experts say. It can mislead students and muddy the conversation around the value of a college education, while for institutions tuition discounting can wear on revenue and finances in a competitive environment.

“It’s not good for anybody. It’s not good for the students. And it’s not good for the institutions,” said Phillip Levine, an economics professor at Wellesley College, in Massachusetts, and author of the book “A Problem of Fit: How the Complexity of College Pricing Hurts Students — and Universities.”

“If you interviewed university leaders and institutions that are doing this, they will tell you it doesn’t make sense,” Levine added. “But there’s no way to get out of it.”

...Trying to tailor aid — and hence price — takes complicated statistical crunching. Often colleges turn to outside firms that can build what’s called a leveraging matrix for admissions offices....

Convoluted as the pricing system might be, there is no easy off ramp.  As Levine noted, one fairly straightforward — but illegal — fix would be for institutions to work together on pricing.

Elite colleges have indeed tried such a tactic in the past, and they’ve been sued under antitrust laws. The U.S. Department of Justice reached a consent decree in the 1990s with Ivy League schools in such a case, and more recently top-ranked universities settled a price-fixing lawsuit brought by private plaintiffs.

Notwithstanding the above, there is a way to get out of this self-destructive dilemma, which I outlined briefly on p. 86 of Stephen Burd's (ed.) new book Lifting the Veil on Enrollment Management....  Let me describe it here in more detail.

Misleading students and parents is often inherent in pricing, particularly when price is set by what is known in the enrollment management industry as financial aid leveraging.  Thousands of schools, public and private, contract with consulting firms to maximize enrollment at the least possible cost to their budgets, even to the considerable disadvantage of populations they purport to serve.*  How they do it — their algorithms and aid packaging practices — is not disclosed to consumers, for fear disclosure would defeat the purpose of the processes.  The current system depends on a certain degree of secrecy and deception.  

Too many in higher education, generally speaking, do not know that under current law, full disclosure of both the amounts of all financial aid awards, which determine actual price, and the criteria used to arrive at those amounts, is required of all schools participating in federal student aid programs ("Title IV").**  Moreover, misrepresentation of price can result in removal of a school from federal program participation.***  

The Secretary of Education could and should issue a "Dear Colleague" letter to all Title IV schools reminding them of current law requirements and advising them that he will be sending program review teams to representative schools to assess compliance.  The review teams would be looking at both in-house and consultant-contracted pricing practices.  Particular attention would be paid to how the practices either support or undermine the statutory purposes of Title IV programs, which are to improve higher education access for the financially needy.  

The Secretary would use the review teams to identify any regulatory ambiguities that need clarification and any practices that countervail Title IV programs, which would be considered pricing misrepresentations as well as violations of legally-bound fiduciary duty under Title IV program participation agreements.  

When current law, as above, is followed by schools and reinforced by the Secretary, antitrust concerns will be minimized by removing the need for alleged anticompetitive collusion among schools in pricing.  The Justice Department will recognize that the Secretary's enforcement of current law consumer-protection disclosure requirements is pro- rather than anticompetitive and that the Secretary's identification and elimination of pricing practices that undermine the purpose of Title IV programs are not violations of either the "per se rule" or "rule of reason" standard of anticompetitive behavior (DOJ's concerns), because the Dear Colleague is issued by the Secretary based on law and is not the result of any agreements among institutions. ****  

Dear Colleague letters are sub-regulatory and a time-honored way to solve even the most difficult problems.  In this case, such a letter could soon end a pricing system that so many university leaders agree "doesn't make sense."  

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* See especially Peter Schmidt, "Words Without Actions: The Troubled Relationship Between Enrollment Management and Diversity," in Lifting the Veil on Enrollment Management....(2024).

** 34 CFR § 668.42 Financial assistance information   

*** 34 CFR § 668.71 Scope and special definitions

**** https://www.justice.gov/atr/case-document/file/1518171/dl?inline

        

Replace Judge Cannon

July, 2024

Washington —  Whether federal district Judge Aileen Cannon should be replaced in the Trump classified documents case, for alleged incompetence and prejudice, is a matter that may soon be taken up by the 11th Circuit Court of Appeals.  She has already been reversed twice in the case by the higher court and her latest decision looks to meet the same fate.  

This recalls my own experience* with a federal judge several years ago, in a case in which I was the plaintiff against nine student loan lender defendants, calling out their false claims against federal taxpayers.  

In our case, after the judge in question had been assigned and began to make decisions, five of the defendants objected to him continuing, as they had no confidence that he was up to the job.  In advance of their request for his removal, the defendants asked us as the plaintiff if we would join them in seeking a different judge for their five cases.  I recall my lawyers saying to me that ordinarily, if the other side doesn't like a judge, we should welcome his assignment, but in this case the defendants seemed all too correct in their assessment.  They felt that the judge was so erratic that the outcome could be disastrous for either side based on neither facts nor law.  

So we joined with the defendants and a magistrate judge was appointed by the district court as a replacement, to handle the five cases.  Within a few months, settlements were reached.

But that left four other defendants that the first judge had previously tried to dismiss from the case.  We successfully appealed that decision to the 4th Circuit, which reversed and remanded the case back to him, not to the magistrate.  I asked my counsel if we should ask once again for him to be replaced with a different judge for the remand, given that the judge would likely hold it against us that we had previously asked for his removal on the other cases, and succeeded.  They concluded that it was very difficult to remove a judge based on only one side's request, and that we would have to take our chances with him, dangerous as that might be.

We paid the price.  His decision on remand went against us, which we then had to appeal once again to the 4th Circuit, which again reversed him.  These successful appeals are known by their shorthand descriptions: Oberg I, Oberg II, and Oberg III.  The latter decision was taken by the defendant Pennsylvania Higher Education Assistance Agency to the U.S. Supreme Court, which denied certiorari. This reversal continues to stand as an important precedent in matters of sovereign immunity of quasi-governmental entities.

But the remand sent the merits issues back to the same judge for a jury trial.  Again, my counsel and I discussed whether to request a different judge, on the basis that he had ruled against us three times, had been reversed three times (with the last reversal being validated by the Supreme Court), and would be looking for vindication in a jury trial over which he presided.  Again, we decided to press ahead with the same judge, sensing no chance that he would be replaced.  

The trial was marked by two important rulings the judge made against us.  He did not permit us to enter evidence from the Pennsylvania Auditor General and he did not allow us to present numerous instances of PHEAA perjury.  He did not give the jury instructions that followed the statutory definition of false claims, omitting "reckless disregard" as a basis for conviction.  He did not allow jurors to take notes during the trial and refused a jury request early in their deliberations to put his jury instructions in writing for them.  

I knew what we were getting into when we went to trial, so I was not surprised at either the process or our loss in this judge's courtroom.  The loss had to be weighed against several successes involving other defendants.  We won settlements in seven of the nine original cases and set an important standard for determining sovereign immunity.  Other plaintiffs would eventually succeed in litigation against PHEAA due to its loss in Oberg III.  

But that took time.  Rather than face mounting legal challenges, PHEAA finally gave up being a federal loan servicer four years after the trial, but only after doing enormous damage in the billions of dollars to the Public Service Loan Forgiveness program in the meantime.  PSLF has never been straightened out satisfactorily. 

It should be easier to replace judges when there is good reason to question their competence and prejudices.  Based on my experience, I think Judge Cannon should be relieved of any further work in the classified documents case, before even more damage is done to national security.  It should have been done much earlier.  The handling of classified documents is too important to be left to such a judge.  As a naval officer, I was once a ship's cryptographer with a top secret crypto clearance.  It was drilled into us that the mishandling of classified documents would have dire consequences.  It must stay that way.     

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* See Dan E. Moldea, Money, Politics, and Corruption in U.S. Higher Education (2020). 

   

 

Justice Department Should Act to Reassure

July, 2024

Washington — In the wake of the tumultuous U.S. Supreme Court decision in Trump v. United States, a case that has alarmed Americans in that it puts a president above the law for actions most of us consider despicable, the Department of Justice should issue an emergency "Statement of Policy" to assure the country that it will continue to prosecute criminal and civil wrongdoing in the time-honored, two-century tradition of the U.S. Constitution.

Specifically, the Department of Justice should announce it will, notwithstanding Trump v. United States:

•  define "official" actions narrowly to prevent their being employed to cover illegal "unofficial" actions;

•  consider all presidential powers in the context of America's framework of limited government, with its separation of powers and checks and balances, including "core" presidential powers, which if used corruptly, cannot be "absolute";

•  rebut any "presumptive immunity" that tilts history's judicial scales unfairly, including those of Hammurabi, Moses, and Solon, and rely additionally on our own authors of The Federalist papers, who wrote that presidents must be "liable to prosecution and punishment in the ordinary course of law."  Immunity would not extend to withholding evidence from a jury when tantamount to bearing false witness. 

This emergency "Statement of Policy" will reassure citizens that the government's top agency for prosecution of wrongdoing, part of a co-equal branch in our system, is still on the job. 

The public should be given 45-day notice in the Federal Register to comment. Reaction will be overwhelmingly supportive, if the public is given the chance to weigh in.