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Court strikes down gainful employment regulation

Earlier this week, the U.S. District Court for the District of Columbia struck down a major portion of the regulations imposed by the U.S. Department of Education to ensure that career training programs at for-profit colleges meet performance standards.

The “gainful employment” measuring rules were designed to improve transparency and determine the success of career school graduates. The purpose was to make sure that federal student aid money was well spent.

The USDE promulgated three gainful employment regulations for career training programs, requiring at least one regulation to be met in three out of four consecutive years in order to continue to receive federal student aid.

In his decision, U.S. District Court Judge Rudolph Contreras said the debt repayment regulation that required 35 percent of a program’s former students to be actively repaying their student loans was “arbitrary and capricious,” and the USDE demonstrated no reasonable basis for it. Judge Contreras said the other two debt measuring regulations were closely related and vacated them, too.
“The Department has set out to address a serious policy problem, regulating pursuant to a reasonable interpretation of its statutory authority. But it has failed to provide a reasoned explanation for a core element of its central regulation. Both that regulation and those that depend upon it must therefore be vacated,” he said in the decision.

The court did uphold the authority of the USDE to issue gainful employment regulations and require schools to disclose career program information such as true cost, median loan debt, on-time graduation rates and job placement rates.

“The gainful employment regulations are a reasonable interpretation of an ambiguous statutory command: that the Department provide Title IV funding only to schools that “prepare students for gainful employment in a recognized occupation,’” Judge Contreras said in his ruling.

“The court clearly upheld the authority to regulate college career programs, but found that the Department had not provided enough explanation of its debt repayment measure, so it has given the Department an opportunity to address that concern,” said Peter Cunningham, USDE assistant secretary for communications and outreach, in a statement.

“We are reviewing our legal and policy options to move forward in a way that best protects students and taxpayers while advancing our national goal of helping more Americans get the skills they need to compete in the global economy,” he said.

The USDE career school program rules apply to Everest Institute in Rochester, several Monroe Community College programs and the Continental School of Beauty Culture.

Rochester Continental School of Beauty Culture President Charles Shumway said he knew Judge Contreras would agree with the plaintiff in the case — the Association of Private Sector Colleges and Universities.

“They came up with what proved to be arbitrary and capricious criteria for judging gainful employment,” Shumway said. “The unfair thing about it is the federal government has a rule if a student can’t pay back his loan in a timely manner they can get a legal forbearance, but if a student got a forbearance, then they weren’t paying back and everybody knew that was wrong from the beginning.
“Somehow the Feds believe their disclosure requirements will help students decide if they want to go to a particular school,” he added.
Shumway said he does think the disclosure requirements are easy to comply with and schools should prove they’re using public funds wisely.

“I think any student that receives Title IV money ought to be able to find employment,” he said.

“The U.S. District Court’s decision to strike down the “gainful employment” regulation is a victory for our students and for common sense,” said Kent Jenkins, Jr., a spokesman for Corinthian Colleges, which operates as the Everest Institute in Rochester. “We have said for many months that “gainful employment” is the product of an unfair process applied unfairly to one segment of higher education.
“Regardless of what comes next in the legal process, we will continue to offer our students a quality education and economic opportunity,” Jenkins continued. “We understand we have to be accountable to the public but we believe that all of higher education must be accountable to students and the public not just one small segment of higher education. We hope the Department of Education will now look for a fair, realistic and practical approach to measuring the value of all post-secondary education.”

Jenkins said Corinthian reviews the success and efficiency of its educational programs even without USDE requirements.
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