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[House Report 110-577]
[From the U.S. Government Publishing Office]

110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     110-577

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                 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\
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    \1\See United States v. Brown University, 1991 U.S. Dist. Lexis 
21168, 1993-2 Trade Cases 70,391 (E.D. Pa. 1991).
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    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.
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    \2\Higher Education Amendments of 1992, Sec. 1544, Pub. L. No. 102-
325, 106 Stat. 448, 837 (1992).
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    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.
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    \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).
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    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.
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    \5\Improving America's Schools Act of 1994, Sec. 568, Pub. L. No. 
103-382, 108 Stat. 3518, 4060 (1994).
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    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\
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    \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).
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    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.]

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