Courthouse News Service: For-Profit Colleges Oppose New Higher Ed Rule

Friday, November 07, 2014

By Rose Bouboushian

   (CN) - A new regulation that requires for-profit colleges to prepare students for "gainful employment" will "needlessly harm millions," a trade group alleges in Federal Court.
     The Association of Private Sector Colleges and Universities, a voluntary association of about 1,400 accredited, private postsecondary schools, filed suit Thursday in Washington, D.C., against the U.S. Department of Education, challenging the newly adopted, so-called "gainful employment" rule.
     For-profit schools that belong to the APSCU "support lawful, rational regulations governing financial aid, but the challenged regulations are neither lawful nor rational," the complaint states. "Rather, they are unconstitutional; contrary to Title IV of the Higher Education Act of 1985, as amended; arbitrary and capricious; and otherwise in violation of the" Administrative Procedure Act.
     Adopted on Oct. 31, the regulations "exceed the [Education] Department's statutory authority and depart from settled principles of agency rulemaking," the association claims.
     "The department has already tried and failed to construct a regulatory regime on the basis of the same statutory phrase it invokes now - 'prepare students for gainful employment in a recognized occupation' - in a set of rules it promulgated in 2010 and 2011," the complaint states. "That fruitless attempt spanned several years; left policymakers, schools, and their students facing uncertainty; and needlessly imposed costs on taxpayers."
     But a federal judge in Washington struck that attempt down in 2012 "because a central feature of those regulations - the loan repayment rate test - lacked any reasoned basis," the association claims.
     "Instead of correcting the flaws that rendered its 2011 rule invalid, the department's new rule only repeats and exacerbates them," the complaint continues. "The department has since conceded that there was no reasoned basis for its loan repayment rate test, admitting that it 'has found no expert studies or industry practice,' nor any other alternative support."
     The association says that, "for close to 50 years, Congress has required by statute that certain postsecondary educational programs must 'prepare students for gainful employment' in a recognized occupation or profession to be eligible to participate in Title IV financial aid programs."
     "But until the 2011 rulemaking, that phrase was never understood to mean that a program could only remain eligible for Title IV funding if its recent graduates who received Title IV aid have attained a particular level of earnings relative to the amount of debt that they incurred to attend the program," the complaint continues.
     As authority for "its far-reaching regulatory test," the APSCU "mistakenly relies" on a law that essentially says programs need only prepare students for "a job that pays," the association claims.
     "Indeed, the regulations impose massive disincentives on private sector schools that currently seek to educate low-income, minority, and other traditionally underserved student populations, because, as an historical matter, those demographics are widely recognized as most at risk of failing the department's arbitrary test," the complaint states. "Thus, instead of increasing the availability of higher education, the department's regulations will limit educational opportunities for traditionally underserved groups - leaving those students with diminished access to higher education and potentially causing them to forgo postsecondary education altogether."
     The association insists that "No single, one-size-fits-all statistical test can accurately measure whether all programs in all fields prepare students for gainful employment."
     It wants the court to declare the regulation unlawful and set it aside.
     Douglas Cox and Timothy Hatch with Gibson, Dunn & Crutcher represent the group.
     The regulation is "so unacceptable and in violation of federal law, that we were left with no choice but to file suit," Steve Gunderson, the group's president and CEO, said in a statement. "If successful, our suit will protect student access and opportunity to higher education at a time when the U.S. Department of Education seems interested in limiting choices for students by closing private sector programs."

APSCU Press Release: APSCU Files Suit Against Anti-Student Gainful Employment Regulation

Washington, D.C., November 6, 2014

Today, in the United States District Court for the District of Columbia, the Association of Private Sector Colleges and Universities (APSCU), representing over 1,400 institutions educating millions of students, filed suit challenging the U.S. Department of Education's new gainful employment regulation.

"This regulation, and the impact it will have on student access and opportunity, is so unacceptable and in violation of federal law, that we were left with no choice but to file suit. If successful, our suit will protect student access and opportunity to higher education at a time when the U.S. Department of Education seems interested in limiting choices for students by closing private sector programs," said Steve Gunderson, president and CEO of APSCU.

In the complaint, APSCU makes clear:
  • "The final so-called 'gainful employment' rule […] is unlawful, arbitrary […] and will needlessly harm millions of students who attend private sector colleges and universities";
  • The regulation is "unconstitutional […] arbitrary and capricious; and otherwise in violation of the [Administrative Procedure Act]";
  • The Administration's previous regulatory attempt "spanned several years; left policymakers, schools, and their students facing uncertainty; and needlessly imposed costs on taxpayers.  The United States District Court for the District of Columbia struck down that previous attempt to regulate because a central feature of those regulations—the loan repayment rate test—lacked any reasoned basis";
  • "Instead of correcting the flaws that rendered its 2011 rule invalid, the Department's new rule only repeats and exacerbates them";
  • In the final regulation, the Department "jettisoned the [proposed] pCDR measure, leaving only a single test […] as the regulation's sole measure of whether programs prepare students for gainful employment.  […] The Department did so despite its admission in the previous litigation that it 'has found no perfect single test,' […] and the Department's conclusion that it is necessary to have multiple tests working together, to mitigate the errors and inaccuracies in any single test."

APSCU asks the Court to declare the regulation unlawful and set aside the regulation.

"While we seek relief from the United States District Court for the District of Columbia, we are hopeful that the Congress will stop the Department's regulation and consider the best interests of all students when they reauthorize the Higher Education Act and develop policies that apply to all students, in all programs, at all institutions," added Gunderson.

The case is the Association of Private Sector Colleges and Universities v. Arne Duncan.  APSCU is represented by Douglas Cox and Timothy Hatch of Gibson, Dunn & Crutcher LLP.

Background on the gainful employment regulation
The Department's gainful employment regulation prohibits students enrolled in programs at certain institutions of higher education—primarily private sector institutions—from receiving federal student aid under Title IV of the Higher Education Act of 1985 unless the program satisfies a biased and arbitrary earnings metric.

The debt-to-earnings metric is set at eight percent – a level that would disqualify a law degree from George Washington University Law School, a bachelor's in hospitality administration from Stephen F. Austin State University and a bachelor's in social work from University of Texas. Further, according to the Department's own data, 43 percent of graduates from public colleges and 56 percent from private non-profit colleges would fail the metric.

Although the Department states that its new debt-to-earnings metric evaluates whether programs "prepare students for gainful employment in a recognized occupation," the Department's metric does not in fact assess program quality.  Instead, the regulation measures factors that are unrelated to program quality and beyond institution control—including students' individual employment choices, local job-market conditions, and students' financial circumstances.  The regulation also imposes on institutions an array of new reporting and disclosure requirements.

Direct link to press release:

Inside Higher Ed: What a GOP-Led Congress Means for Higher Ed

November 4, 2014 
With victories in several key Senate races last night, Republicans will take control of both chambers of Congress heading into the final two years of the Obama presidency -- a balance of power that sets up a much-changed dynamic for federal higher education policy-making in the coming months.

The change will likely be something of a double-edged sword for colleges and universities, higher education advocates said. On the one hand, colleges will find more help from Republicans in their longstanding efforts to roll back federal requirements they view as burdensome. At the same time, higher education may face tougher battles over federal funding for academic research and student aid programs, as GOP majorities embrace more austere budget caps.

Republican leadership of the Senate is also likely to complicate the Obama administration’s agenda for executive action, namely its regulations clamping down on the for-profit college industry as well as its desire to put into effect its full proposal for a college ratings system.
Policy priorities led by Senate Democrats that affect higher education are also expected to take a back seat under Republican leadership. Some of those proposals, such as allowing existing student loan borrowers to lower their interest rates, were featured prominently in Democratic campaign ads this year. Senate Democrats had also pushed new policies that sought to hold colleges more accountable for loan defaults and clamp down further on for-profit institutions.

The shift in power is likely to result in continued deadlock on higher education and other issues, especially since Republicans will not enjoy veto-proof margins in either chamber. As a result, they'll be unlikely to enact into law policies that the administration would reject (such as blocking of gainful employment).

New Committee Leadership

The next Congress will bring fairly significant changes to the lawmakers in charge of shepherding higher education legislation through the House and Senate; last night’s Republican victories are expected to catapult Senator Lamar Alexander to chairman of the Senate education committee from his current post as ranking member.

Alexander, a former U.S. education secretary and university president, has said that his higher education priority will be reducing federal regulation of college and universities. He has also pushed strongly a simplification of the Free Application for Federal Student Aid, known as the FAFSA, as well as some student loan and grant programs.

Alexander has said he wants to “start from scratch” on rewriting the Higher Education Act in an attempt to de-clutter the massive statute that governs federal student aid.

But beyond removing federal requirements viewed as burdensome and streamlining student aid programs, Alexander has not said publicly what else he wants to see in a new Higher Education Act.
One question for the next Congress will be the extent to which Alexander embraces some of the other “more imaginative” higher education policy ideas that have been offered in recent years by other Republicans, said Andrew Kelly, who directs higher education research at the American Enterprise Institute.

Several of those ideas, which have been put forward by Senators Mike Lee and Marco Rubio and Representative Paul Ryan, revolve around making it easier for nontraditional programs to get access to federal aid through new accreditation entities.

“Alexander doesn’t seem as skeptical of the accreditation system as some other Republican lawmakers, so I don’t know that those would be at the top of his list,” Kelly said. “But it’s a big question mark.”

Kelly said that he sees an opportunity for a Republican-led Congress to embrace “some of the more imaginative ideas out there” by those Republicans, “who see student debt and college affordability as a campaign issue that families, their constituents are going to care about for a long time coming.”
In the House, Representative John Kline, Republican of Minnesota, is expected to continue as the chairman of the education committee. Kline won his re-election bid last night in spite of a high-profile effort by the comedian Bill Maher to unseat the seven-term Congressman, in part, because of his support of for-profit colleges.

Democrats, meanwhile, are losing two longtime education policy makers to retirement, as Senator Tom Harkin of Iowa and Representative George Miller of California leave Congress.

Senator Patty Murray of Washington, who currently chairs the budget committee, is expected to become the top Democrat on the Senate education committee. In the House, Representative Bobby Scott of Virginia is in line to take Miller’s place as the top Democrat on that chamber’s education panel.

Several other Democrats who had played prominent roles on higher ed issues lost their re-election battles. In the House, Reps. Tim Bishop (N.Y.) and John Tierney (Mass.) were both aggressive advocates for colleges and students -- Tierney more of a partisan bulldog, Bishop having developed his expertise as a longtime college administrator, at Long Island's Southampton College.

Sen. Kay Hagan, a North Carolina Democrat, also lost her re-election bid; she has been a member of the Senate's education panel.

A New Budget Dynamic

Beyond changes to the make-up of the education committees, higher education advocates said that they’re concerned about what a completely Republican Congress would mean for funding to student aid and academic research.

While both research and financial aid have historically enjoyed relatively strong bipartisan support from both Democrats and Republicans, advocates said that the more austere budgetary conditions that Republicans are likely to create may not bode well for funding to those discretionary programs.

“We’ve got a number of conservative Republicans who have been pointing to the Budget Control Act and sequestration and the fact that that has contributed to deficit reduction,” said M. Matthew Owens, vice president for federal relations at the Association of American Universities. Those automatic budget cuts and limitations on the overall pool of money available to be allocated to domestic programs will “hamstring the ability of Congress to make investment in scientific research and student aid,” he said.

“We have a number of Democratic leaders who have made it clear that they would like to see some relief from the Budget Control Act caps,” he said. “In that environment it would be less difficult for scientific research and financial aid.”

Another round of automatic budget cuts, set to take effect in the 2016 fiscal year, is “less likely to be averted with Republican control of the Senate,” said David Baime, senior vice president for government relations and research at the American Association of Community Colleges. He noted, though, that there was bipartisan support to provide some relief from budget caps in last year’s agreement to fund the government after the shutdown.

“There is a lot of concern on our campuses about the implications of a sequester taking effect in 2016 and what that might mean for specific programs,” Baime said. “If the overall budget pie gets shrunk through sequestration, you could see it meaning a narrower slicer for many programs that benefit our students and our colleges.”

Justin Draeger, president of the National Association of Student Financial Aid Administrators, said that advocates for student aid may find themselves in the position of having to stave off reductions or fight for at least flat funding. Increased funding appears to be far out of reach, he said.

“We’re not going to see significant new investments either way, simply based on where we’ve seen Republican talking points and rhetoric on cutting spending,” he said.

Draeger also said that colleges would have concerns about Alexander’s efforts to simplify federal loan and grant programs if they were to lead to effective cuts to the money the federal government spends on student aid.

“We want to be sure that simplification doesn’t become a way for us to make cuts to students,” he said. “We would draw a pretty bright line in paying down the deficits on the backs of students.”
However, Draeger said, Alexander had been “willing to engage” on the issue, and there was likely common ground over making loan programs easier for students to access.

More Roadblocks to Obama Agenda

President Obama’s plan to develop a ratings system for higher education and then link colleges’ performance in the ratings to their federal aid has always faced long odds since it was announced in August 2013. The administration has, on its own, been putting together the ratings system, an outline of which is set to be publicly released in the coming weeks.

But the White House would need Congressional approval to tie the ratings to federal funding. That proposal has already received a cool reception among many Democrats on Capitol Hill, not to mention the Republicans who have actively sought to block the Education Department’s power to produce any type of ratings system.

Republican control of the Senate now means that the president’s goal of linking student aid to colleges’ performance in a ratings system has an even slimmer chance, if any, of becoming law.
“A united Republican Congress, I think, basically spells a death knell for any effort to tie college ratings to student aid,” said Kelly, the AEI scholar.

The Obama administration’s other higher education policy efforts are also likely to come under greater scrutiny by newly empowered Republicans in the Senate, especially its recently released “gainful employment” rule that targets mostly for-profit colleges.

Direct link to article:

Press Release: Representatives Matt Salmon (AZ-05) and Alcee L. Hastings (FL-20) Statement on the Obama Administration’s New Gainful Employment Regulation

Oct 31, 2014
Press Release 
Washington, D.C. — Today, Representatives Matt Salmon (AZ-05) and Alcee L. Hastings (FL-20) issued the following statement in response to the new gainful employment regulations the Obama Administration released yesterday.

“We are deeply disappointed in the administration’s announcement of a final rule on gainful employment without full knowledge of how it will affect our nation’s students.  Earlier this year, we introduced H.R. 4897, the Transparency in Education Act, that has strong bipartisan support and would require the Department of Education to study the effects on students prior to implementing their rule.  We are pleased that a companion bill has since been introduced in the Senate.  We will continue to work toward ensuring the Department does not hurt the same students it claims to help and we plan to reintroduce this legislation in the 114th Congress.”

Background: On October 30, 2014, the Department of Education released a 945-page final rule on gainful employment.  While they removed the cohort default rate requirement from the rule, they moved forward with their debt-to-income ratio requirement.  In an effort to prevent this rule from keeping thousands of students from achieving their educational goals, Reps. Salmon and Hastings introduced H.R. 4897 which has 27 cosponsors.  The full text of the Transparency in Education Act can be found here.

Direct link to Press Release:

APSCU Blog: GAINFUL EMPLOYMENT UPDATE: Questions Still Left Unanswered

With the gainful employment regulation finalized, there are still many questions left unanswered. Below are eight of the most egregious unanswered questions.
Question 1: What does this new regulation mean for students?
What ED is not telling you: Millions of students will lose access to the higher education career training program of their choice – limiting economic opportunities for them and their families.
questions post rule drop chart with percentages
Question 2: Why is the Department picking winners and loser based on politics and not results?
What ED is not telling you: The Department has carved community colleges from the GE regulation based on politics, not results.  Private sector institutions have lower default rates and higher graduation rates than Community Colleges, but, inexplicably, Community Colleges are the ones left unregulated by the Department.
Ge drop slide (5) (2)
Question 3: Does the gainful employment regulation help or hurt President Obama’s goal of having the most college graduates by 2020?
What ED is not telling you: The regulation hurts this worthy goal. Thousands of programs will be eliminated or shut down, denying millions of students access to higher education and economic opportunity.

Question 4: What does this mean for employers looking for job-ready employees?
What ED is not telling you: Employers continue to struggle finding qualified workers to meet their needs. This problem is worsened as a result of the regulation. Thousands of employers will be left without job ready employees because the training pipeline they rely on for qualified health care professionals, automotive techs, HVAC techs, and information technology professionals, among others, will be eliminated.

Question 5: What does this mean for states?
What ED is not telling you: This regulation will cost states billions of dollars over the next few years as they struggle to fill the gap left by private sector institutions that served students overlooked by traditional higher education.
Question 6: Is this about student protection?
What ED is not telling you: No, the regulation does not address the vast majority of programs or students. Instead, it singles out institutions that serve historically underserved students and cuts off new traditional student access to higher education.

Question 7: How does this regulation compare to the President’s proposed Ratings System?
What ED is not telling you: The regulation stands in stark contrast to what has been said by the Administration about the President’s Ratings System. While the Administration claims it wants a ratings system that “thoughtfully measure indicators like earnings, to avoid overemphasizing income or first jobs,” according to Deputy Under Secretary Jamienne S. Studley, the reality is that the Department is creating the exact opposite with the GE regulation.
  • Early year earnings are a core component of the regulation’s metrics.
  • The regulation ignores the fact that private sector institutions are significantly more likely to serve low-income, first generation, and minority students, and have much higher graduation rates than community colleges.
  • The regulation evaluates programs that serve low-income students on measures of income and loan repayment, which could lead institutions to accept fewer of these students.
Question 8: Will the regulation close programs that provide a significant earnings gain for graduates?
What ED is not telling you: Yes. It is unclear why the Department wants to close programs that are providing graduates, their families and their communities with an economic advantage.