[House Report 110-577]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 110-577
======================================================================
NEED-BASED EDUCATIONAL AID ACT OF 2007
_______
April 10, 2008.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Conyers, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1777]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1777) 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.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for the Legislation.......................... 2
Hearings......................................................... 3
Committee Consideration.......................................... 3
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 4
New Budget Authority and Tax Expenditures........................ 4
Congressional Budget Office Cost Estimate........................ 4
Performance Goals and Objectives................................. 5
Constitutional Authority Statement............................... 5
Advisory on Earmarks............................................. 5
Section-by-Section Analysis...................................... 5
Changes in Existing Law Made by the Bill, as Reported............ 5
Purpose and Summary
H.R. 1777 would make permanent an exemption to 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 a student's financial
information through a third party. Without this legislation,
the exemption will expire on September 30, 2008.
Background and Need for the Legislation
BACKGROUND
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. 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, Barnard,
Bryn Mawr, Mount Holyoke, Radcliffe, Smith, Vassar, Wellesley,
Colby, Middlebury, Trinity, and Tufts).
From the 1950's through the late 1980's, this 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 this practice. In 1991, the
eight Ivy League schools (i.e., all of the Ivy Overlap Group
except for MIT) entered into a consent decree that for all
practical purposes ended the practices of the Overlap Group.\1\
---------------------------------------------------------------------------
\1\See United States v. Brown University, 1991 U.S. Dist. Lexis
21168, 1993-2 Trade Cases 70,391 (E.D. Pa. 1991).
---------------------------------------------------------------------------
In 1992, Congress passed a temporary antitrust exemption
authorizing the schools to agree to award financial aid on a
need-blind basis and to use common principles of need
analysis.\2\ 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.
---------------------------------------------------------------------------
\2\Higher Education Amendments of 1992, Sec. 1544, Pub. L. No. 102-
325, 106 Stat. 448, 837 (1992).
---------------------------------------------------------------------------
In the meantime, 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.\3\ On appeal, MIT
won a reversal of the district court's decision.\4\ 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.
---------------------------------------------------------------------------
\3\United States v. Brown University, 805 F.Supp. 288 (E.D. Pa.
1992).
\4\United States v. Brown University, 5 F.3d 658 (3d Cir. 1993).
---------------------------------------------------------------------------
In 1994, Congress passed another temporary exemption from
the antitrust laws.\5\ 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 need
analysis. It also prohibited agreements on awards to specific
students. Unlike the 1992 exemption, however, it also allowed
agreement on the use of a common aid application form and the
exchange of the student's financial information through a third
party. This temporary exemption roughly mirrored the settlement
reached in 1993, and extended the exemption until September 30,
1997.
---------------------------------------------------------------------------
\5\Improving America's Schools Act of 1994, Sec. 568, Pub. L. No.
103-382, 108 Stat. 3518, 4060 (1994).
---------------------------------------------------------------------------
In 1997, Congress passed a law further extending the
exemption until September 30, 2001,\6\ as attempts to make the
exemption permanent were unsuccessful. The exemption was
extended again in 2001, and is now set to expire on September
30, 2008.\7\ The 2001 law, H.R. 768, directed the GAO to
conduct a study to determine the effect of the exemption on
institutional financial aid and to issue a report by September
30, 2006.\8\
---------------------------------------------------------------------------
\6\Need-Based Educational Aid Antitrust Protection Act of 1997,
Pub. L. 105-43 (1997). The extension passed the Senate by unanimous
consent and by voice vote in the House.
\7\Need-Based Educational Aid Act of 2001, Pub. L. 107-72 (2001).
This was passed under suspension in the House by a vote of 400 to 0 and
in the Senate by unanimous consent. The legislation passed by the House
contained a permanent exemption, but the Senate passed amendments to
the bill limiting the exemption to a specified number of years.
\8\The GAO completed the report in 2006. See U.S. Gov't
Accountability Office, Schools' Use of the Antitrust Exemption Has Not
Significantly Affected College Affordability or Likelihood of Student
Enrollment to Date (2006).
---------------------------------------------------------------------------
H.R. 1777, introduced by Rep. Bill Delahunt and Ranking
Member Lamar Smith, would make the exemption passed in 1994
permanent. It would not make any change to the substance of the
exemption.
NEED FOR THE EXEMPTION
The need-based financial aid system serves social goals
that the antitrust laws do not address, namely, making
financial aid available to the broadest number of students
solely on the basis of demonstrated need. The schools are
concerned that without this exemption, they would be required
to compete, through financial aid awards, for the very top
students. This could result in those students getting an excess
of the available aid while other qualified applicants with
similar or greater need would get less or none at all.
Ultimately, such a system would serve to undermine the
principles of need-based aid and need-blind admissions. These
schools are endeavoring to ensure that no student who is
otherwise qualified is 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. 1777 will help protect
need-based aid and need-blind admissions and preserve that
opportunity.
Hearings
The Committee on the Judiciary held no hearings on H.R.
1777.
Committee Consideration
On April 2, 2008, the Committee met in open session and
ordered the bill, H.R. 1777, favorably reported without
amendment, by voice vote, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that there
were no recorded votes during the Committee's consideration of
H.R. 1777.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises 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.
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. 1777, 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, April 7, 2008.
Hon. John Conyers, 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. 1777, the ``Need-
Based Educational Aid Act of 2007.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Leigh Angres,
who can be reached at 226-2860.
Sincerely,
Peter R. Orszag,
Director.
Enclosure
cc:
Honorable Lamar S. Smith.
Ranking Member
H.R. 1777--Need-Based Educational Aid Act of 2007.
H.R. 1777 would make permanent a provision that exempts
institutions of higher education from regulation under Federal
antitrust laws when awarding need-based student aid. Under
current law, the provision expires on September 30, 2008. CBO
estimates that implementing the bill would have no significant
effect on the Federal budget. Enacting H.R. 1777 would not
affect direct spending or revenues.
H.R. 1777 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 staff contact for this estimate is Leigh Angres, who
can be reached at 226-2860. The estimate was approved by Peter
H. Fontaine, Assistant Director for Budget Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
1777 continues the current antitrust clarification that enables
participating colleges to coordinate policy on need-based
financial aid awards.
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, section 8, clause 3 of the
Constitution.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 1777 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.
Section-by-Section Analysis
Sec. 1. Short Title. Section 1 sets forth the short title
of the bill as the ``Need-Based Educational Aid Act of 2007.''
Sec. 2. Amendment. Section 2 repeals subsection (d) of
section 568 of the Improving America's Schools Act of 1994. As
a result, the exemption would be permanent.
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, 2008.]
* * * * * * *