Court Battle over Gainful Employment Continues

September 10, 2012

The Department of Education has filed a motion asking the court that overturned much of its gainful employment rules to reinstate the reporting requirements, saying that they are necessary to the disclosure rules the court left in force. The plaintiff in the suit, the Association of Private Sector Colleges and Universities (APSCU), representing for-profit colleges, disagrees.

In June, the U.S. District Court for the District of Columbia ruled that ED had used flawed reasoning in setting a threshold for the loan repayment rate that would be used to determine continued eligibility for Title IV student aid funds for so-called gainful employment programs. At the same time, the court vacated the reporting rules under which institutions were required to provide data to ED on students enrolled in such programs, saying that the data submissions were no longer needed. ED used the data submitted by schools to calculate the loan repayment rates and debt-to-income ratios used to evaluate programs, but also provided median loan debt and other information back to the institutions for disclosure to prospective students.

In its court filing in late July, ED maintained that these measures provide valuable information to students on their own, regardless of whether they lead to sanctions against poorly performing programs, and that the court misunderstood the relationship between the various interconnected parts of the regulations. Institutions do not have sufficient data to calculate the measures on their own. ED uses the information submitted by institutions to calculate the measures using loan repayment and earned income data from ED and Social Security Administration databases, providing data on median values, by program, back to the institution.

APSCU objected to ED's motion, arguing that the disclosure rules did not require the debt measures to be effective and that the measures would not be meaningful to prospective students. As further evidence, they noted that the disclosure rules were promulgated seven months before the rules that defined the debt measures were issued. ED subsequently filed a rebuttal.

Future Still Murky

Under the reporting rules that were vacated by the District Court, institutions had been required to submit data on students in gainful employment programs in October. If the court were to reinstate the rules, deadlines would presumably be adjusted accordingly. ED has not yet indicated whether it plans to appeal the broader court decision on its attempts to restrict eligibility of some programs or if it will go through a new rulemaking process to modify the rules to meet the court's objections.