Court Supports Intent of ‘Gainful Employment’ Rules but Strikes Key Enforcement Mechanism

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The U. S. Department of Education had hoped its “gainful employment” rules would curb the most egregious practices of for-profit career colleges. The regulations were designed to rein in programs that don’t provide value to students or taxpayers, by ensuring they meet very minimum standards about quality and cost. And while the Federal District Court emphasized the department’s right to issue the rules (specifically approving the debt-to-income measures), its decision prevents the department from enforcing the regulations as written. The ruling leaves students vulnerable to the unscrupulous practices of for-profit career colleges that saddle them with mountains of debt and nearly worthless credentials.

Judge Rudolph Contreras went out of his way to note that the Department of Education did not overstep any statutory bounds with the regulations. He also agreed that practices of some for profits were harmful to students, noting that the department was “looking for rats down rat holes.”

The rules regulating for-profit career college programs, which would have gone into effect next year, required that career-training programs meet a basic standard in at least one of three metrics over a three-year span to remain eligible for federal student aid. The court ruled that one of the three standards — a minimum 35 percent repayment for student loans — was chosen arbitrarily. That standard was at the center of the other portions of the gainful employment rules. Invalidating it meant the department would not be allowed to enforce the whole rule, even the other thoughtful — and legally allowable — provisions. But it was only the lack of evidence to support the use of a 35 percent repayment rate that led the court to vacate the rule. By emphasizing the department’s authority, the court’s ruling provides a path forward to protecting students now that the regulatory vacuum leaves them newly vulnerable.

“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,’” Contreras wrote. With such a clear endorsement of the underlying intent of the rules — and millions of students relying on the federal government to protect their interests — it is crucial that the Education Department act to regulate these programs by re-issuing regulations that are legally sound. Such rules are needed to ensure students can earn, and pay for, credentials that are actually worth something in the job market.

— Nicole Tortoriello and Jim Davy