[House Report 105-144]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-144
_______________________________________________________________________


 
      NEED-BASED EDUCATIONAL AID ANTITRUST PROTECTION ACT OF 1997

_______________________________________________________________________


 June 23, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                        [To accompany H.R. 1866]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1866) to continue favorable treatment for 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........................................           2
Background and Need for the Legislation....................           2
Hearings...................................................           3
Committee Consideration....................................           3
Vote of the Committee......................................           3
Committee Oversight Findings...............................           4
Committee on Government Reform and Oversight Findings......           4
New Budget Authority and Tax Expenditures..................           4
Congressional Budget Office Cost Estimate..................           4
Constitutional Authority Statement.........................           5
Section-by-Section Analysis................................           5
Changes in Existing Law Made by the Bill, as Reported......           5

                          Purpose and Summary

    H.R. 1866 makes permanent an existing, but temporary, 
antitrust exemption for certain practices relating to need-
based financial aid for college students.

                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 aid at all colleges and universities amounted to 
about $8.6 billion as compared to federal aid of about $6.6 
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 1950s through the late 1980s, 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 professional 
judgment for determining need. 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, 307 (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. Section 568 in 
most respects mirrors the settlement reached in 1993. It 
provided for this exemption to expire on September 30, 1997.
    Under the exemption passed in 1994, the affected schools 
have recently adopted a set of general principles to determine 
eligibility for institutional aid. These principles 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. The Committee is not aware of any complaints 
about how the system has been working under Sec. 568. H.R. 1866 
would make the exemption passed in 1994 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. 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 
they need. The rest 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.
    In addition, the use of common principles for determining 
need increases the sophistication of the analysis and helps the 
schools to determine need more accurately in cases of unusual 
financial profiles. That, too, leads to a fairer distribution 
of need-based aid. 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. 1866 will help protect need-based aid and 
need-blind admissions and preserve that opportunity.

                                Hearings

    Because H.R. 1866 involves only the extension of an already 
existing provision of law, the Committee held no hearings on 
this bill.

                        Committee Consideration

    On June 18, 1997, the full Committee met in open session 
and ordered reported favorably without amendment the bill H.R. 
1866, by a voice vote, a quorum being present.

                         Vote of the Committee

    During its consideration of H.R. 1866, the Committee took 
no roll call votes.

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI 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)(l) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI does not apply because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 1866, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 19, 1997.
Hon. Henry J. Hyde,
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. 1866, the Need-
Based Educational Aid Antitrust Protection Act of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Mark 
Grabowicz, who can be reached at 226-2860.
            Sincerely,

                                           June E. O'Neill, Director.  
    Enclosure.

H.R. 1866--Need-Based Educational Aid Antitrust Protection Act of 1997
    The Improving America's Schools Act of 1994 (Public Law 
103-382) 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, 1997. H.R. 1866 
would extend this exemption indefinitely.
    CBO estimates that enacting this legislation would have no 
significant impact on the federal budget. H.R. 1866 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 of 1995 and would impose no costs 
on state, local, or tribal governments.
    The CBO staff contact for this estimate is Mark Grabowicz, 
who can be reached at 226-2860. This estimate was approved by 
James R. Homey for Paul N. Van de Water, Assistant Director for 
Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to Rule XI, clause 2(l)(4) of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, clause 8 of the Constitution.

                      Section-by-Section Analysis

Sec. 1.--Short Title
    Section 1 of H.R. 1866 provides that it may be cited as the 
Need- Based Educational Aid Antitrust Protection Act of 1997.
Sec. 2.--Continuation of Favorable Treatment for Need-Based Educational 
        Aid Under the Antitrust Laws
    Subsection 2(a) of H.R. 1866 strikes the provision of 
Sec. 568 of the Improving America's Schools Act of 1994 that 
would cause the antitrust exemption to expire on September 30, 
1997 and also strikes the word temporary from a section 
heading. Subsection 2(b) provides that the changes made by H.R. 
1866 take effect immediately before September 30, 1997 so that 
there will be no gap in coverage if H.R. 1866 does not become 
law until after that date. In other words, the Committee 
intends that the exemption should remain in place continuously 
irrespective of whether H.R. 1866 becomes law before or after 
September 30, 1997.



         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3 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, new 
matter is printed in italics, 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) [Temporary] Exemption.--It shall not be unlawful under 
the antitrust laws for 2 or more institutions of higher 
education at which all students admitted are admitted on a 
need-blind basis, to agree or attempt to agree--
            (1) * * *
          * * * * * * *
    [(d) Expiration.--Subsection (a) shall expire on September 
30, 1997.]
    [(e)] (d) Related Amendments.--The Higher Education 
Amendments of 1992 (Public Law 102-325) is amended--
            (1) in the table of contents by striking the matter 
        relating to section 1544, and part F of title XV, of 
        such Act; and
            (2) by striking part F of title XV of such Act.
