Washington Update

U.S. Department of Education Will Not Appeal Gainful Employment Rule

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The U.S. Department of Education (the Department) has decided not to appeal a federal judge’s decision that blocked key provisions of the gainful employment rule before it took effect. Last June, Judge Rudolph Contreras struck them down in response to a legal challenge from the Association of Private Sector Colleges and Universities, the primary for-profit trade group.

Judge Contreras wrote that the Department failed to adequately justify the requirement that at least 35 % of a program’s graduates are actively repaying their loans. That standard is just one of three thresholds under the regulations. The other two are based on debt-to-income ratios. But the judge’s finding that the loan repayment rate was “arbitrary” scuttled all of gainful employment’s enforcement and reporting requirements.

In response to the judge’s ruling, the Department filed a motion in an attempt to keep gainful employment by reinstating the reporting requirements and portions of the debt measure. The Department was trying to make the case that it should be allowed to go forward without collecting “identifiable student information.” However, Congress passed a law in 2008 which banned the creation of a federal “student unit record system.” Judge Contreras rejected the Department’s motion, saying the gainful employment data that the Department was seeking to collect would be in violation of the 2008 ban.

In light of the ruling, the Department has begun holding hearings in advance of a second round of rulemaking which is expected to begin this fall.

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