Blog Post | July 2, 2012

Court Strikes Down Low “Gainful Employment” Repayment Rate Standard but Affirms Education Department’s Authority to Act and the Need to Do So

On Saturday, June 30, a judge on the U.S. District Court for the District of Columbia issued a decision in APSCU v. Arne Duncan et al which challenged the Department of Education’s gainful employment regulations. Those regulations apply to career education programs at public, nonprofit and for-profits colleges and were set to go into effect on July 1.

TICAS Vice President Pauline Abernathy issued the following statement in reaction to the ruling:

The Federal District Court decision issued this weekend leaves students and taxpayers exposed to unscrupulous schools that seek to swindle them and routinely saddle students with debts they cannot repay.

However, the court decision did affirm both the Education Department’s authority to enforce the gainful employment provisions in the law and the need to do so.  The court concluded that “The Department has set out to address a serious policy problem, regulating pursuant to a reasonable interpretation of its statutory authority….Concerned about inadequate programs and unscrupulous institutions, the Department has gone looking for rats in ratholes—as the statute empowers it to do.”

The court ruled that the Department did not provide adequate rationale for picking the 35% threshold for program repayment rates, leading it to vacate the entire rule as a result.  The decision faults the rationale for the 35% threshold, not the importance of the repayment rate measure, which effectively assesses the extent to which a program’s former students are able to pay down their loan principal.  Indeed, nearly two years ago, dozens of organizations advocating for students, consumers, higher education, civil rights and college access urged the Department to raise the repayment rate threshold, writing, “This standard is simply too low to demonstrate that programs are adequately preparing students for gainful employment.”

With student debt levels rising and 30 state attorneys general from both parties jointly investigating for-profit college industry practices, the need for action has never been more urgent.  To protect students and taxpayers, we call on the Administration to swiftly respond to this court decision and on Congress to promptly adopt bipartisan legislation that prohibits any school from using taxpayer dollars to advertise and recruit students and closes the “90-10 Rule” loophole that allows schools to count GI Bill funds and Department of Defense Tuition Assistance as private rather than federal dollars.