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Court Upholds New Gainful Employment Regulations

On July 23, 2015, U.S. District Court Judge John Bates ruled in favor of the U.S. Department of Education’s new gainful employment regulations, in APSCU v. Duncan (Civil Action No. 14-1870 (JDB)). The new regulations will go into effect on July 1, 2015.

The lawsuit concerns statutory language that requires education programs at for-profit colleges to “prepare students for gainful employment in a recognized occupation” [20 USC 1002(b)(1)(A)(i) and 20 USC (c)(1)(A)].

The Association of Private Sector Colleges & Universities (APSCU), a national trade group of for-profit colleges, argued that the U.S. Department of Education did not have the authority to impose gainful employment regulations and that, otherwise, any job should be considered to be gainful. The U.S. Department of Education argued that employment is gainful only if it yields sufficient income to repay the student’s education debt and proposed various debt-service-to-earnings ratios as a bright-line test to determine whether a program prepares students for gainful employment. APSCU also presented 13 arguments that aspects of the gainful employment regulations are arbitrary or capricious and, therefore, invalid. The court ruled in favor of the U.S. Department of Education.  

This is the second recent failed lawsuit against the gainful employment regulations. On May 27, 2015, U.S. District Judge Lewis Kaplan of New York ruled in favor of the U.S. Department of Education in a lawsuit filed by the Association of Proprietary Colleges (APC).

APSCU has not yet said whether it will appeal the judge’s decision. An appeal might argue that the judge erred in one or more areas of his decision. For example, the judge characterized the controversy over the 8% threshold as a “battle of experts” and ignored internal U.S. Department of Education documents that used a 10% threshold and the 2011 version of the gainful employment regulations which used a 12% threshold. In effect, the new gainful employment regulations require graduates of for-profit colleges to have 50% greater income than the 2011 regulations, a clear demonstration that the choice of threshold was arbitrary and not the product of reasoned decision-making.

The Republican-controlled Congress has also proposed blocking implementation of the new gainful employment regulations until Congress can address gainful employment as part of reauthorization of the Higher Education Act of 1965. A Senate subcommittee approved an appropriations bill on June 23, 2015 that would prohibit the U.S. Department of Education from “moving forward with regulations or policies to develop or implement a college ratings system, define gainful employment, establish requirements for the State authorization of higher education programs, define credit hour, and establish a new accountability framework for teacher preparation programs.” Congress is expected to work on reauthorizing the Higher Education Act later this year, after reauthorization of the Elementary and Secondary Education Act (ESEA) is complete.