[House Report 107-32]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 107-32
======================================================================
NEED-BASED EDUCATIONAL AID ACT OF 2001
_______
April 3, 2001.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 768]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 768) to amend the Improving America's Schools Act of
1994 to make permanent the favorable treatment of need-based
educational aid under the antitrust laws, having considered the
same, reports favorably thereon without amendment and
recommends that the bill do pass.
TABLE OF CONTENTS
Page
Purpose and Summary........................................ 1
Background and Need for the Legislation.................... 2
Hearings................................................... 3
Committee Consideration.................................... 4
Vote of the Committee...................................... 4
Committee Oversight Findings............................... 4
Performance Goals and Objectives........................... 4
New Budget Authority and Tax Expenditures.................. 4
Congressional Budget Office Cost Estimate.................. 4
Constitutional Authority Statement......................... 5
Section-by-Section Analysis and Discussion................. 5
Changes in Existing Law Made by the Bill, as Reported...... 5
Purpose and Summary
H.R. 768 makes permanent an existing temporary antitrust
exemption that allows colleges and universities that admit
students on a need-blind basis to agree on common standards for
assessing need for purposes of awarding institutional financial
aid. The current temporary exemption is set to expire on
September 30, 2001.
Background and Need for the Legislation
Beginning in the mid-1950's, a number of prestigious
private colleges and universities agreed to award institutional
financial aid (i.e. aid from the school's own funds) solely on
the basis of demonstrated financial need. Last year,
institutional grant aid at all colleges and universities
amounted to about $12.2 billion as compared to Federal grant
aid of about $8.9 billion. These schools also agreed to use
common principles to assess each student's financial need and
to give essentially the same financial aid award to students
admitted to more than one member of the group. Among the
schools engaging in this practice were the Ivy Overlap Group
(Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, Penn,
Yale, and MIT) and the Pentagonal/Sisters Overlap Group
(Amherst, Williams, Wesleyan, Bowdoin, Dartmouth, Barnard, Bryn
Mawr, Mount Holyoke, Radcliffe, Smith, Vassar, Wellesley,
Colby, Middlebury, Trinity, and Tufts).
From the 1950's through the late 1980's, the practice
continued undisturbed. In 1989, the Antitrust Division of the
Department of Justice brought suit against the nine members of
the Ivy Overlap Group to enjoin these practices. In 1991, the
eight Ivy League schools (i.e. all of the Ivy Overlap Group
except for MIT) agreed to a consent decree that for all
practical purposes ended the practices of the Overlap Group.
See United States v. Brown University, 1991 U.S. Dist. Lexis
21168, 1993-2 Trade Cases para. 70,391 (E.D. Pa. 1991).
In 1992, Congress passed a temporary antitrust exemption to
allow the schools to agree to award financial aid on a need-
blind basis and to use common principles of needs analysis.
Higher Education Amendments of 1992, Sec. 1544, Pub. L. No.
102-325, 106 Stat. 448, 837 (1992). This temporary exemption
specifically prohibited any agreement as to the terms of a
financial aid award to any specific student. By its terms, it
expired on September 30, 1994.
In the mean time, MIT continued to contest the lawsuit.
After a non-jury trial, the district court ruled that the
practices of the Overlap Group violated the antitrust laws, but
specifically invited a legislative solution. United States v.
Brown University, 805 F.Supp. 288 (E.D. Pa. 1992). On appeal,
MIT won a reversal of the district court's decision. United
States v. Brown University, 5 F.3d 658 (3d Cir. 1993). The
appeals court held that the district court had not engaged in a
sufficiently thorough antitrust analysis and remanded for
further consideration. After that decision, the parties reached
a final settlement.
In 1994, Congress passed another temporary exemption from
the antitrust laws. Improving America's Schools Act of 1994,
Sec. 568, Pub. L. No. 103-382, 108 Stat. 3518, 4060 (1994).
This exemption resembled the one passed in 1992 in that it
allowed agreements to provide aid on the basis of need only and
to use common principles of needs analysis. It also prohibited
agreements on awards to specific students. However, unlike the
1992 exemption, it also allows agreement on the use of a common
aid application form and the exchange of the student's
financial information through a third party. This exemption
roughly mirrors the settlement reached in 1993. It was to
expire on September 30, 1997.
Under that exemption, financial aid officers from some of
the affected schools in 1997 proposed a set of guidelines to
determine eligibility for institutional aid. These guidelines
address issues like expected contributions from non-custodial
parents, treatment of depreciation expenses which may reduce
apparent income, valuation of rental properties, and unusually
high medical expenses. However, a number of schools were
reluctant to join the discussions because of fears about the
expiration of the exemption.
In 1997, Congress extended the exemption again through
September 30, 2001. The 1997 extension passed the Committee and
the full House by voice vote. It passed the Senate by unanimous
consent.
Since that extension, the affected schools have made
further progress. Seventeen prestigious colleges that were not
part of the original overlap groups have joined the
discussions. Thus, the exemption has encouraged these schools
to adhere to need-blind admissions and need-based aid. That is
particularly important when the cost of elite universities is
increasingly beyond the reach of the middle class. See, e.g.,
Stuart Rojstaczer, Colleges Where the Middle Class Need Not
Apply, The Washington Post, at A27, March 9, 2001. The
presidents of the universities have tentatively agreed to a
common set of principles affirming the primacy of need-based
aid. In addition, they are discussing and testing guidelines
based on the 1997 proposals of the financial aid officers. The
presidents expect to announce agreement on the principles and
guidelines in the next several months. In the past 2 months,
Harvard, Princeton, and MIT have announced major new efforts to
reduce the amount of loans that students must take out by
substantially increasing their institutional grant aid. These
efforts demonstrate that nothing in the exemption limits the
ability of schools to respond to demonstrated need on an
individual basis. As this progress shows, common treatment of
these types of issues makes sense. The existing exemption has
worked well so far. Progress is being made, and more schools
are moving to need-blind admissions and need-based aid.
The need-based financial aid system serves social goals
that the antitrust laws do not adequately address--namely,
making financial aid available to the broadest number of
students solely on the basis of demonstrated need. Without it,
the schools would be required to compete, through financial aid
awards, for the very top students. Those very top students
would get all of the aid available which would be more than
their demonstrated need. The rest would get less than their
demonstrated need or none at all. Ultimately, such a system
would serve to undermine the principles of need-based aid and
need-blind admissions. No student who is otherwise qualified
ought to be denied the opportunity to go to one of the nation's
most prestigious schools because of the financial situation of
his or her family. H.R. 768 will help protect need-based aid
and need-blind admissions and preserve that opportunity.
Hearings
Because H.R.768 only makes permanent an already existing
temporary and noncontroversial antitrust exemption, the
Committee held no hearings on it.
Committee Consideration
After its referral to the Committee on the Judiciary, H.R.
768 was held at the full Committee. Thus, it received no
subcommittee consideration. On March 28, 2001, the full
Committee met in open session and ordered favorably reported
the bill H.R. 768, by a voice vote, a quorum being present.
Vote of the Committee
During its consideration of H.R. 768, the Committee took no
rollcall votes.
Committee Oversight Findings
In compliance with clause 3(c)(1) of Rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of Rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Performance Goals and Objectives
H.R. 768 does not authorize funding. Therefore, clause 3(c)
of Rule XIII of the Rules of the House is inapplicable.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of Rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of Rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 768, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, March 30, 2001.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 768, the Need-
Based Educational Aid Act of 2001.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Lanette J.
Walker, who can be reached at 226-2860.
Sincerely,
Dan L. Crippen, Director.
Enclosure.
cc:
Honorable John Conyers Jr.
Ranking Member
H.R. 768--Need-Based Educational Aid Act of 2001.
The Improving America's Schools Act of 1994 provided an
exemption from antitrust laws for certain institutions of
higher education. The exemption relates to the awarding of
financial aid to students from each affected school's own funds
and expires September 30, 2001. H.R. 768 would extend this
exemption indefinitely.
CBO estimates that enacting this legislation would have no
significant impact on the federal budget. H.R. 768 would not
affect direct spending or receipts, therefore, pay-as-you-go
procedures do not apply. This bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act and would impose no costs on
state, local, or tribal governments.
The CBO staff contact for this estimate is Lanette J.
Walker, who can be reached at 226-2860. This estimate was
approved by Peter H. Fontaine, Deputy Assistant Director for
Budget Analysis.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, Sec. 8 of the Constitution.
Section-by-Section Analysis and Discussion
Sec. 1. Short Title. Section 1 of H.R. 768 provides that it
may be cited as the ``Need-Based Educational Aid Act of 2001.''
Sec. 2. Amendments. Section 2 of H.R.768 strikes the
provision of the existing temporary exemption that would cause
it to expire on September 30, 2001 thereby making it permanent.
It does not make any change to the substance of the exemption.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets and
existing law in which no change is proposed is shown in roman):
SECTION 568 OF THE IMPROVING AMERICA'S SCHOOLS ACT OF 1994
SEC. 568. APPLICATION OF THE ANTITRUST LAWS TO AWARD OF NEED-BASED
EDUCATIONAL AID.
(a) * * *
* * * * * * *
[(d) Expiration.--Subsection (a) shall expire on September
30, 2001.]
* * * * * * *
Markup Transcript
BUSINESS MEETING
WEDNESDAY, MARCH 28, 2001
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m., in Room
2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner (chairman of the committee) presiding.
Chairman Sensenbrenner. Pursuant to notice, I now call up
H.R. 768, the Need-Based Educational Aid Act of 2001, for
purpose of markup, and move its favorable recommendation to the
House.
[H.R. 768 follows:]
Chairman Sensenbrenner. Without objection, the bill will be
considered as read and open for amendment at any point. I move
to strike the last word and recognize myself for 5 minutes.
Today, the committee considers H.R. 768, the Need-Based
Educational Aid Acct of 2001. This bill was introduced by
Representatives Lamar Smith and Barney Frank. It makes
permanent an anti-trust exemption that allows universities to
agree on common standards of need when awarding financial aid.
This exemption has been passed on a temporary basis several
times without controversy, and the current version is set to
expire at the end of September. It appears to be working well,
and I am hopeful that it now can be made permanent.
With that, I yield back the balance of my time and
recognize the gentleman from Michigan, Mr. Conyers, for 5
minutes for his statement.
Mr. Conyers. Thank you, Mr. Chairman.
I support permanizing this need-based proposal of the
gentlemen from Massachusetts and Texas, and I ask unanimous
consent to insert my statement into the record at this time.
Chairman Sensenbrenner. Without objection, so ordered.
[The statement of Mr. Conyers follows:]
Prepared Statement of Hon. John Conyers, Jr., a Representative in
Congress From the State of Michigan
I support the passage of H.R. 768, the ``Need-Based Educational Aid
Act of 2001.'' This bi-partisan bill would make permanent an exemption
in the antitrust laws that permits the Ivy League schools to agree to
award financial aid on a need-blind basis and to use common principles
of needs analysis in making their determinations.
The exemption also allows for agreement on the use of a common aid
application form and the exchange of the student's financial
information through a third party.
In 1992, Congress passed a similar temporary exemption, which was
extended in 1994, and again extended in 1997. The exemption passed in
1997 expires later this year. During the almost ten years of its
operation, we have been able to witness and evaluate the exemption, and
we have found that it has worked well.
The need-based financial aid system serves important social goals
that the antitrust laws do not adequately address--such as making
financial aid available to the broadest number of students solely on
the basis of demonstrated need. Without it, the schools would be
required to compete, through financial aid awards, for the very top
students.
The result would be that the very top students would get all of the
aid available, which would be more than they need. The rest of the
applicant pool would get less or none at all. Ultimately, such a system
would undermine the principles of need-based aid and need-blind
admissions which are so important to achieving educational equality.
No student who is otherwise qualified ought to be denied the
opportunity to go to one of the nation's most prestigious schools
because of the financial situation of his or her family. H.R. 768 will
help protect need-based aid and need-blind admissions and preserve that
opportunity.
Chairman Sensenbrenner. Does the gentleman from Texas, Mr.
Smith, the author of the bill, seek time?
Mr. Smith. Mr. Chairman, I seek brief time just to go into
a little bit more detail.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Smith. Mr. Chairman, as you pointed out, H.R. 768, the
Need-Based Educational Aid Act of 2001, was introduced by me
and also Mr. Frank. Beginning in the mid 1950's, a number of
private colleges and universities agreed to award aid solely on
the basis of demonstrated need. These schools also agreed to
use common criteria to assess each student's financial need and
to give the same financial aid award to students admitted to
more than one member of the group.
From the 1950's to the late 1980's, the practice continued
undisturbed. In 1989, the Antitrust Division of the Department
of Justice brought suit against nine of the colleges that
engaged in this practice. After extensive litigation, the
parties reached a settlement in 1993.
In 1994, and again in 1997, Congress passed a temporary
exemption from the antitrust laws that codified that
settlement. It allowed agreements to provide aid on the basis
of need only, to use common criteria, to use a common financial
aid application form, and to allow the exchange of the
student's financial information through a third party. It also
prohibited agreements on awards to specific students. This
exemption expires on September 30, 2001.
Common treatment of these types of issues make sense, and
in my knowledge, there are no complaints about the existing
exemption. H.R. 768 would make the exemption passed in 1994 and
1997 permanent. It would not make any change to the substance
of the exemption.
The need-based financial aid system serves social goals
that the antitrust laws do not adequately address; namely,
making financial aid available to the broadest number of
students solely on the basis of demonstrated need. No student
who is otherwise qualified should be denied the opportunity to
go to one of these schools because of the limited financial
means of his or her family.
H.R. 768 will help protect need-based aid and need-blind
admissions.
Mr. Chairman, I thank you for the time and urge my
colleagues to support this bill.
Chairman Sensenbrenner. The gentleman yields back the
balance of his time.
Are there any amendments to the bill?
If there are no amendments, the chair notes the presence of
a reporting quorum, and the question occurs on the motion to
report the bill H.R. 768 favorably.
All those in favor will say aye.
Opposed, no.
The ayes have it, and the motion to report favorably is
adopted.
Without objection, the bill will be reported favorably to
the House. Without objection, the chairman is authorized to
move to go to conference, pursuant to House rules. Without
objection, the staff is directed to make technical and
conforming changes, and all members will be given 2 days, as
provided by House rules, in which to submit additional
dissenting, supplemental or minority views.