SAN JOSE, Calif. (CN) – Education Secretary Betsy DeVos disregarded harm to student borrowers when she repealed an Obama-era rule designed to protect students from taking on debt for worthless education programs, critics claim in a lawsuit filed Wednesday.
In July 2019, DeVos repealed the “Gainful Employment Rule,” which required schools to certify their programs adequately prepared students for decent-paying jobs after graduation. Enacted in 2015, the rule was intended to safeguard students from deceptive marketing by predatory, for-profit schools and inform them if a particular program offered a reasonable return on investment.
DeVos nixed the rule, arguing the repeal would eliminate onerous reporting requirements for colleges and allow students to retain “the right to enroll in the program of their choice, rather than allowing government to decide which programs are worth a student’s time and financial investment.”
The American Federation of Teachers, California Federation of Teachers and two individual teachers pursuing higher education programs sued in federal court Wednesday. They claim DeVos ignored important evidence, including estimates that the repeal will result in more students having difficulty repaying loans, leading to defaults and costing taxpayers $5.3 billion over 10 years.
In a final rule issued July 1, 2019, the department found eliminating reporting requirements and expanding choice for students outweighed such costs.
“Institutions will save considerable time and money by eliminating burdensome reporting and disclosure requirements,” the department stated in an executive summary for the final rule.
American Federation of Teachers president Randi Weingarten suggested the true motive behind the repeal was to benefit the for-profit college industry. At least two former industry lobbyists – Robert Eitel and Diane Auer Jones – were appointed to high-level positions within the Education Department.
“Rather than simply sticking with a rule that protects students, she writes a new one on behalf of her for-profit college friends – and can’t even get the details right,” Weingarten said in a statement Wednesday. “This error-ridden repeal would be comical if the stakes weren’t so high, but for borrowers confronting a lifetime of debt and worthless degrees, their lives are literally on the line.”
The 126-page lawsuit claims that in repealing the rule, DeVos ignored prior court rulings that held programs eligible for federal financial aid under Title IV of the Higher Education Act must “prepare students for gainful employment in a recognized occupation.”
The complaint further alleges the department justified the repeal by falsely asserting the rule disproportionately impacted for-profit colleges. DeVos argued it was easier for public institutions and nonprofits to show their programs were more valuable based on lower tuition rates due to government subsidies.
The plaintiffs characterized that argument as a red herring, noting that the gainful employment rule “applies the same standards to gainful employment programs at all types of institutions.”
According to the lawsuit, DeVos relied on flawed logic to debunk prior studies cited in support of enacting the rule in 2015. Her department claimed a comparison of costs and debt levels between community colleges and for-profit institutions was “illegitimate” because the study failed to account for the personal characteristics of students who tend to enroll in those schools. A student at a for-profit school is more likely to be a single parent and part of a minority group and less likely to have a parent who earned a college degree, according to a 2016 study by the Brookings Institute.
“These differences in characteristics may explain disparities in student outcomes, including higher borrowing levels and student loan defaults among students who enroll at proprietary institutions,” the department stated in the executive summary of its final rule.
The plaintiffs claim the department ignored other evidence from that same study finding the cost of education plays a bigger role on student debt than personal characteristics.
“Compounding the substantive errors, the repeal is also premised on additional, vague citations to ‘analysis’ or unnamed research,” the lawsuit states.
The plaintiffs also complain the department’s decision to expand information reported through its College Scorecard tool “is not a substitute” for information required to be disclosed under the gainful employment rule.
The rule required schools disclose their compliance or non-compliance with gainful employment rule certification requirements on a website, in all promotional materials and in direct mail or email to students. By contract, students must visit the Education Department’s College Scoreboard website to find information, and it will not list separate earnings data for programs with different lengths, such as one-year or two-year programs.
“In no case does the department provide the type of information necessary to compare earnings to debt, including no way for a student to determine whether median post-graduation debt is too high, given median post-graduation earnings,” the complaint states.
The plaintiffs say the repeal violates the Administrative Procedure Act, lacks a reasoned justification and is unsupported by substantial evidence. They claim the department deprived the public of a meaningful opportunity to comment by citing “unnamed sources and vague, undisclosed references to its own ‘analysis’” in its proposed rule.
They seek a court order to overturn the repeal of the gainful employment rule.
Glen Rothner of Rothern Segall & Greenstone in Pasadena and lawyers with the National Student Legal Defense Network represent the plaintiffs.
Reached by email, Education Department press secretary Angela Morabito said the department does not comment on pending litigation but added “it will vigorously defend its final regulation rescinding this deeply flawed rule.”