For-Profit College Association Challenges New Regulations in Court

A group representing hundreds of private colleges has filed a lawsuit against the Department of Education in hopes of blocking new regulations on loan repayment and student debt levels.

Washington D.C.-based Association of Private Sector Colleges and Universities filed the lawsuit Wednesday. The Association counts Santa Ana-based vocational school operator Corinthian Colleges Inc. and Irvine-based American Career College Inc. among its roster of more than 1,600 members.

Last month the Department of Education passed new rules meant to stem the tide of loan defaults among graduates by making schools more accountable for graduate placement and debt levels.

Under the new regulations, for-profit colleges are required to have at least 35% of former students making federal loan repayments in a timely manner. Federal loans to graduates also cannot exceed 30% of a student’s discretionary income or 12% of the student’s total earnings after graduation.

Schools will be able to miss those guidelines three times over four years before they lose out on federal student aid programs.

The Education Department believes 18% of colleges’ academic programs will miss the mark on meeting at least one of those guidelines, and that 5% of those schools will lose out on federal aid eligibility.

The new rules were not as harsh as originally feared.

However, the association’s lawsuit contends the regulations were devised based on flawed data and will block access to college for some students.

The association’s lawsuit asks that the regulations be overturned.

The rules are set to go into effect next July.

ORANGE COUNTY BUSINESS JOURNAL

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