(CN) - A new regulation that requires for-profit colleges to prepare students for "gainful employment" will "needlessly harm millions," a trade group alleges in Federal Court.
The Association of Private Sector Colleges and Universities, a voluntary association of about 1,400 accredited, private postsecondary schools, filed suit Thursday in Washington, D.C., against the U.S. Department of Education, challenging the newly adopted, so-called "gainful employment" rule.
For-profit schools that belong to the APSCU "support lawful, rational regulations governing financial aid, but the challenged regulations are neither lawful nor rational," the complaint states. "Rather, they are unconstitutional; contrary to Title IV of the Higher Education Act of 1985, as amended; arbitrary and capricious; and otherwise in violation of the" Administrative Procedure Act.
Adopted on Oct. 31, the regulations "exceed the [Education] Department's statutory authority and depart from settled principles of agency rulemaking," the association claims.
"The department has already tried and failed to construct a regulatory regime on the basis of the same statutory phrase it invokes now - 'prepare students for gainful employment in a recognized occupation' - in a set of rules it promulgated in 2010 and 2011," the complaint states. "That fruitless attempt spanned several years; left policymakers, schools, and their students facing uncertainty; and needlessly imposed costs on taxpayers."
But a federal judge in Washington struck that attempt down in 2012 "because a central feature of those regulations - the loan repayment rate test - lacked any reasoned basis," the association claims.
"Instead of correcting the flaws that rendered its 2011 rule invalid, the department's new rule only repeats and exacerbates them," the complaint continues. "The department has since conceded that there was no reasoned basis for its loan repayment rate test, admitting that it 'has found no expert studies or industry practice,' nor any other alternative support."
The association says that, "for close to 50 years, Congress has required by statute that certain postsecondary educational programs must 'prepare students for gainful employment' in a recognized occupation or profession to be eligible to participate in Title IV financial aid programs."
"But until the 2011 rulemaking, that phrase was never understood to mean that a program could only remain eligible for Title IV funding if its recent graduates who received Title IV aid have attained a particular level of earnings relative to the amount of debt that they incurred to attend the program," the complaint continues.
As authority for "its far-reaching regulatory test," the APSCU "mistakenly relies" on a law that essentially says programs need only prepare students for "a job that pays," the association claims.
"Indeed, the regulations impose massive disincentives on private sector schools that currently seek to educate low-income, minority, and other traditionally underserved student populations, because, as an historical matter, those demographics are widely recognized as most at risk of failing the department's arbitrary test," the complaint states. "Thus, instead of increasing the availability of higher education, the department's regulations will limit educational opportunities for traditionally underserved groups - leaving those students with diminished access to higher education and potentially causing them to forgo postsecondary education altogether."
The association insists that "No single, one-size-fits-all statistical test can accurately measure whether all programs in all fields prepare students for gainful employment."
It wants the court to declare the regulation unlawful and set it aside.
Douglas Cox and Timothy Hatch with Gibson, Dunn & Crutcher represent the group.
The regulation is "so unacceptable and in violation of federal law, that we were left with no choice but to file suit," Steve Gunderson, the group's president and CEO, said in a statement. "If successful, our suit will protect student access and opportunity to higher education at a time when the U.S. Department of Education seems interested in limiting choices for students by closing private sector programs."
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.