Judge strikes down 'gainful employment' rule on for-profit colleges

Here's an update on an issue I wrote a great deal about last year. The Obama Department of Education issued what they called "gainful employment" rules, which would pull eligibility to participate in the student loan program for those for-profit colleges who have a high number of students who default on their student loans.

Not surprisingly, since so many Obama administration staffers hail from traditional academia, the rule did not apply to not-for-profit colleges.

Well, at least for now, "gainful employment" has been held back.

From the New York Times:

A federal judge in Washington has overturned a main component of the federal Department of Education's "gainful employment” rules, which were applied to career-training programs and were hotly contested by for-profit colleges, saying that regulation was arbitrary.

The ruling by Judge Rudolph Contreras of Federal District Court was released on Saturday

The gainful-employment regulations, which were issued last year and were scheduled to go into effect on Sunday, were devised to prevent for-profit colleges, which get the bulk of their revenues from federal student aid, from leaving students with huge debt loads and credentials that provided little help in landing them a job.

Under the regulations, programs had to meet one of three tests or lose their eligibility for federal student aid: at least 35 percent of graduates must be repaying their loans, the typical graduate’s estimated annual loan payments must not exceed 12 percent of earnings, or they must not exceed 30 percent of discretionary income.

More from the Association of Private Sector Colleges and Universities:

APSCU Sends Letter To Education Department

Washington, D.C. - Former Congressman Steve Gunderson, the president and chief executive officer of the Association of Private Sector Colleges and Universities (APSCU) today released the following letter which was sent to the Department of Education. This letter is in response to the U.S. District Court for the District of Columbia vacating significant portions of the so-called "gainful employment" ruling. The letter is accompanied by APSCU's statement in response to the arbitrary and capricious regulation imposed by the Department of Education against career schools:

The district court's ruling concerning APSCU's challenge to the Department of Education's faulty 'gainful employment' regulation, showed that nearly all the overreaching elements of the regulation were vacated. The court’s opinion holds that the loan repayment test violated the Administrative Procedure Act concluding it was not the product of reasoned decision making. Next, the court vacated the reporting and disclosure provisions, as well as the program approval regulations because they too were centered on the 'gainful employment' rule.

Since 2010, there has been a significant debate between the Education Department and career colleges and universities concerning the proposed rulemaking on 'gainful employment.' It has only served to distract from our joint, core responsibility and mission, which is to provide students – particularly non-traditional ones such as veterans, adults and parents - with the education and skills they need to achieve their very own version of the American Dream. It is my personal hope, and that of our members, that the era of litigation is over, and the era of public-private partnerships in putting people to work in high-quality, good-paying jobs is ahead. We look forward to working with the federal government to prepare more Americans to compete successfully for 21st Century jobs and to move our nation's economy forward.

APSCU Letter to Department of Education:

July 1, 2012

The Honorable Arne Duncan
Secretary, Department of Education
400 Maryland Ave., SW
Washington, DC 20202

Dear Mr. Secretary:

Since 2010, there has been a significant debate between the Department and the Association of Private Sector Colleges and Universities related to the proposed rulemaking on Gainful Employment. While significant resources of time, intellect and money have been invested by both sides in this debate, we can both agree that little progress has been made in our joint responsibility to provide students – especially those students most at risk which our sector serves proudly – with the education and the skills to achieve real jobs, real incomes, and real opportunities for a middle-class life for their family.

Late last evening the United States District Court for the District of Columbia, through a ruling by Judge Rudolph Contreras, vacated a significant part of the Department's proposed rules regarding Gainful Employment.

Last week, the Department issued a set of preliminary findings of our sector's programs under a Gainful Employment regulation were it to go in effect at this time. While these findings were meant to be informational, I believe everyone, including the Department, was pleased to see that 95% of our programs met the test of providing gainful employment in recognized occupations to their students.

The combination of this preliminary data on our schools, combined with the Court's ruling, suggests that it is time for all sides to put this debate behind us and find ways to work together to best serve the 3.8 million students currently enrolled in our schools each year; the 13 million unemployed, and the 90 million currently under-employed. We have an opportunity, on a nonpartisan basis, to put the interests of our students first in ways that can produce a growth economy and better lives.

The Association of Private Sector Colleges and Universities (ASPCU) seeks to build a new partnership for progress with the Department and the Administration in ways that best serves our students and our nation. In this era of record budget deficits and a focus on program reductions to reduce such deficits, our mutual and greatest challenge is providing access to postsecondary education resulting in real academic outcomes. As you know better than most, we are facing a need to provide an additional 8 to 23 million students with postsecondary skills (above current services) over the next decade. We can only hope to achieve this goal if the Administration, the Department, APSCU, and all of our colleagues in higher education develop a joint partnership to advance new innovative ways to maximize access to postsecondary education. We stand ready – and we look forward – to working with you and all concerned to achieve education and skill outcomes for our students that changes their lives and builds new economic progress in our nation.

My personal hope, and that of our members, is that the era of litigation is over and the era of public-private partnerships in putting people to work in good jobs with good incomes is ahead. Let's not renegotiate these contentious regulations. Let's not continue litigation in the courts. Rather, let’s look for ways to immediately move forward together in this important work.

You should know that in light of this court ruling, I’ve asked our membership to carefully review any of their programs that might not have met the standards of Gainful Employment in your advisory analysis of this past week. It is my hope that each school will review such programs to determine whether they meet the test of market demand and a student's professional opportunities. If not, we will encourage them to either revise such programs or discontinue them. We, as a sector, take great pride in educating for the market demands of one’s regional economy in ways that provide real opportunities for the students they serve. There is much we can and should do together.

Sincerely yours,

Steve Gunderson
President & CEO
Association of Private Sector Colleges and Universities

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