For-Profit Colleges Win Out Over Regulators

When the Department of Education announced new rules requiring for-profit colleges to show they were placing graduates in jobs or else lose federal funding, the institutions criticized the regulation as arbitrary, and over the weekend, a federal judge agreed with them. The decision from Judge Rudolph Contreras, of the Federal District Court in Washington, D.C., looks like a setback for the department, which had set out to prohibit colleges from getting federal student aid if their graduates didn't meet one of three standards: At least 35 percent should be repaying loans, the loans should be no more than 12 percent of graduates' earnings, "or they must not exceed 30 percent of discretionary income," The New York Times' Tamar Lewin reported. But as Bloomberg's John Hechinger and Joe Schneider bluntly explain, Contreras argued those standards had no basis in fact:

“No expert study or industry standard suggested that the rate selected by the department would appropriately measure whether a particular program adequately prepared its students,” Contreras wrote in the 38-page ruling. “The entire debt measure rule must therefore be vacated and remanded to the department.”

Still, the department portrayed the ruling as sort of a win, simply in the fact that it acknowledged the regulator did, in fact, have jurisdiction over the for-profit institutions. "The court clearly upheld our authority to regulate career-college programs," department spokesman Peter Cunningham told The Times. Now all it has to do is go back and write regulations based on measurable metrics. But it had better do so soon. According to Lewin, the universities in question "account for about 10 percent of the nation’s college enrollment, but nearly half the [debt] defaults."


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