The Chronicle of Higher Education:Gainful-Employment Rule Survives For-Profit Group’s Court Challenge

 June 24, 2015

[Last updated at 8 p.m., 6/23/2015, with additional comments about the proposed rule and its effect.]

The U.S. Education Department’s gainful-employment rule is one step closer to taking effect.

A federal judge on Tuesday rejected a serious legal challenge, brought by the Association of Private Sector Colleges and Universities, to the controversial rule. The lobbying group’s lawsuit was the highest hurdle remaining for the proposed rule, which will judge career-oriented programs on their graduates’ ability to repay their student loans. The rule is slated to take effect on July 1.

The department originally introduced the rule in 2011. The effort was dealt a major setback a year later, when a section of the rule was thrown out as a result of an earlier court challenge by the association, the main lobbying group for for-profit colleges. The group’s second challenge, to a revised rule, used many of the same arguments, asserting that the department had exceeded its authority in issuing the rule and that the rule was capricious and arbitrary.

In his ruling on Tuesday, Judge John D. Bates of the U.S. District Court for the District of Columbia dismissed those claims, saying the association “throws a host of arbitrary-or-capricious arguments against the wall in hope of a different outcome. None of them stick.”

Arne Duncan, the secretary of education, said in a written statement that the ruling was “a win for America’s students and taxpayers.” He added that every student “who enrolls in college of any kind deserves a fair shot at a degree or credential that equips them for success,” and said the department would “continue to fight until that’s a reality.”

Also in a written statement, the private-sector association’s general counsel, Sally Stroup, said the group was “disappointed” in the court’s decision and was considering its options. “Indeed, as numerous commentators have observed, the primary impact of the regulation will be to deprive hundreds of thousands of students of access to higher education,” she added.

The final rule, which was released last fall, is expected to cause 1,400 programs, 99 percent of them at for-profit colleges, to be put at risk of losing eligibility for federal student aid.

The victory for the department occurred on the same day a committee of the U.S. Senate approved a spending bill that would ax the gainful-employment rule and the department’s college-ratings plan.

Young Invincibles, a nonprofit group that lobbied for a tough gainful-employment rule last year, said in a statement on Tuesday evening that lawmakers “should allow the rule to go into effect — as planned — on July 1. It’s long past time for failing programs to be held accountable.”

Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, said the court’s ruling “was not a great surprise” because after the first rule was thrown out on legal grounds, “the department went to great lengths to make its regulation legally bulletproof.”

Mr. Hartle, whose organization has endorsed proposals to eliminate a number of Education Department regulations, including this one and the proposed college-ratings system, said he was not sure if the regulation would achieve the results its backers want. “No one really knows what the impact will be,” he said.

“It will create burdens for institutions,” he said, referring to the extra administrative and reporting requirements for many community colleges that offer career-focused certificate programs. Few such programs were predicted to fail any of the gainful-employment tests because those colleges don’t charge as much as for-profit colleges do. But community colleges are still required to administer the rule. And he said, “it may or may not provide information that will influence student decision making.”

Mr. Hartle also noted that many advocates of the rule were concerned that the revised regulation wasn’t tough enough to close down programs that are costly to students and leave them too deeply in debt. But after years of legal wrangling over the regulation, he said, “today’s decision pretty much guarantees that we’ll find out.”

Several for-profit-college companies said they had already taken steps in anticipation of the regulation, in some cases eliminating high-priced programs. Some, like ITT Educational Services, said they had also increased their spending on scholarships, which has reduced debt levels for students.

Despite the concerns of some student and consumer advocates over potential weaknesses in the regulation, Kevin Kinser, an associate professor at the State University of New York at Albany who studies for-profit colleges, said the revised rule was a step forward.

“There are very few ways to hold institutions accountable for the financial aid they are given,” Mr. Kinser wrote in an email to The Chronicle. “So now the Department of Education has another one. It’s the ‘skin in the game’ that Arne Duncan keeps talking about.”

“That said,” he added, “it’s pretty weak tea as far as immediate impact. But it’s a model for other kinds of accountability measures that could transform financial-aid policy from being only about access to something that actually cares about outcomes as well. That is something that all of higher education — not just the for-profits — should watch for.”

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APSCU: Statement on APSCU v. Duncan

Washington, D.C., June 23, 2015—Following today's ruling in APSCU v. Duncan, APSCU's General Counsel Sally Stroup released the following statement:

"We are disappointed by today's decision from the District Court for the District of Columbia. We are closely reviewing the opinion and considering our options. This case presents very serious legal issues, of great significance not only to APSCU's members, but also to students.

"Indeed, as numerous commentators have observed, the primary impact of the regulation will be to deprive hundreds of thousands of students of access to higher education. That is inconsistent with the congressional plan under the Higher Education Act, unlawful, and bad policy."

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The Daily Caller: A Pincer Movement: U.S. Department of Education vs. For-Profit Schools

June 16, 2015

Glenn Bogart, Contributor 

Recently a Federal District Court in New York ruled against a coalition of New York private for-profit colleges in a suit where they sought relief from the U.S. Department of Education’s “gainful employment” rule, which is set to take effect in July of 2015. But that isn’t the end of this controversy. Another lawsuit is being decided by the Federal District Court for the District of Columbia — which was brought by the Association of Private Sector Colleges and Universities (APSCU) on behalf of its member schools all over the country. That’s the suit people in this industry are following. It’s their last hope, unless Congress acts, and it seems unlikely that even congressional action would survive a presidential veto.

The gainful employment rule, in the current incarnation and in the previous one (which was vacated in an earlier lawsuit) seeks to eliminate from participation in the federal student aid programs (Pell Grants, Stafford Loans, etc.) certain educational programs where the graduates of these programs allegedly do not earn enough money to make their student loan payments. It affects private for-profit schools overwhelmingly. That’s the short version.  But there is a lot more to this, than just that. There is actually a pincer movement, or squeeze, being pursued by the federal government in order to destroy these for-profit schools. First there was the 90/10 rule, and now there is the gainful employment rule. One has to look at these two things together in order to understand what the government is doing here.

The “90/10 rule” requires for-profit schools, if they wish have their students continue to be able to receive Pell Grants and federal student loans, to receive at least 10 percent of their tuition revenue from sources other than the federal student aid programs. Because many first-year students can receive more than $15,000 in federal student aid per academic year, these schools have to charge a bit more than that, so as to be sure students have to pay some cash for tuition on top of what they can get from Uncle Sam. This rule has been around for years.

And it’s insane. It almost guarantees that such schools will have to increase tuition in order to survive. If you’re a for-profit school, even if you could do just fine on the amount of money your students could bring in in federal student aid, you have to charge more than that if you want to stay in business — because otherwise, your students will lose their ability to get federal student aid, and if that happens, you can’t compete. Thanks, Congress, for making sure tuition is higher than it needs to be at these schools, just to be able to comply with this rule. Nice work. Imagine how grateful the students would be if they understood what you have done. They’re paying up to 10 percent more in tuition, just so their schools can meet this artificial requirement.

But now, there’s a “gainful employment rule” on top of that. Gainful employment requires that these schools’ educational programs graduate students who are able to earn enough, in their first jobs after school, so that their student loan payments will not exceed 8 percent of their incomes, or 12 percent of their “disposable incomes.”

So we have federal pressure both to increase tuition (to meet the 90/10 requirement) and to decrease it (to make it more affordable, so that graduates will not have student loan payments that are “too high,” according to an arbitrary formula developed pretty much out of thin air by the U.S. Department of Education).

At least the 90-10 rule has the benefit of having been passed by Congress. People in the industry don’t like it, and it’s pretty stupid, but it’s really a law. But the “gainful employment” rule cannot boast of the same. It is strictly the invention of the Department of Education.