Judge Upholds Gainful Employment Rule, Throws Out For-Profit Industry Lawsuit

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The Department of Education’s gainful employment rules, aimed at reigning in the for-profit college industry, came one step closer to its July implementation today as a judge threw out a for-profit industry lawsuit that attempted to further weaken the upcoming law.

Reuters reports that U.S. District Court of New York Judge Lewis Kaplan upheld the rules, putting an end to one of two lawsuits filed by the for-profit education sector intended to diminish provisions that would penalize for-profits if too many of their graduates failed to succeed.

The Association of Proprietary Colleges filed the lawsuit last November asking a federal judge to strike down the gainful employment rule that threatens to take away for-profit colleges’ access to federal student aid if they can’t prove they provide students with adequate tools to find employment.

In his 57-page decision Kaplan said the for-profit colleges have high student loan default rates and low graduation rates while spending a disproportionate amount of money on recruiting and marketing.

“DOE has a strong interest in ensuring that students – who are, after all, the direct (and Congress’s intended) beneficiaries of Title IV federal aid programs – attend schools that prepare them adequately for careers sufficient for them to repay their taxpayer-financed student loans,” Kaplan wrote.

For-profit colleges, which receive about 90% of their funding from student aid, have continually come under scrutiny for failing to demonstrate that students could find gainful employment in the fields in which they had been trained.

Under the new rules, for-profit colleges will be at risk of losing their federal aid should a typical graduate’s annual loan repayments exceed 20% of their discretionary income, or 8% of their total earnings.

In a statement following the ruling, Association of Proprietary Colleges, which represented 20 schools, executive director Donna Stelling-Gurnett expressed her displeasure with the outcome.

“While we agreed with the Department’s goals for this rule from the outset, we remain steadfast in our conviction that this regulation does not achieve those goals,” she said.

Although the judge’s decision is a bright spot for gainful employment, another for-profit industry-led lawsuit remains pending.

The Association of Private Sector Colleges and Universities also filed a similar lawsuit back in November.

APSCU claims in that lawsuit – which names Secretary of Education Arne Duncan as a co-defendant – that the rule is “unlawful, arbitrary and irrational and will needlessly harm millions of students who attend private-sector colleges and universities.”

Judge upholds U.S. ‘gainful employment’ rules for for-profit colleges [Reuters]

by Ashlee Kieler via Consumerist