[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.

                                
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