For-Profit Colleges Sue Again Over Federal Gainful-Employment Rule

Career College Central Summary:

  • For-profit colleges wasted no time in challenging the U.S. Education Department over the latest version of its gainful-employment rule, filing a lawsuit on Thursday in the U.S. District Court here that seeks to overturn the measure.
  • The rule, which the department released last week, will judge career-oriented programs on the basis of their graduates’ ability to repay student-loan debts. Programs that repeatedly fail the rule's debt-to-earnings tests will become ineligible to award federal student aid.
  • Department officials declined to comment on the lawsuit.
  • The complaint, filed by the Association of Private Sector Colleges and Universities, revives many of the arguments the trade group made against a 2011 version of the measure: that the department had exceeded its authority; that the rule lacks a reasoned basis; that it unfairly takes aim at the for-profit sector; and that it is "arbitrary and capricious."
  • At least one of those arguments has worked before. In 2012 a federal judge on the same court vacated portions of the earlier rule, finding that the department had failed to justify a metric that would have judged career-oriented programs according to their graduates’ loan-repayment rates.
  • But the judge upheld the department’s authority to issue the rule, and rejected the association’s arguments against the rule’s debt-to-income metrics.
  • The big question now is whether the court will see things differently this time around. The revised rule lacks the repayment-rate test—which tripped up the department's 2011 version—as well as a cohort-default-rate test that the department floated in March.

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