For-Profit Schools Fail to Topple Regulations

     (CN) – A federal judge upheld rules that require for-profit colleges to show that their students make enough money after graduating to service their student loans.
     The Department of Education had adopted the rules at issue in October 2014 to address concerns that for-profit colleges prey on low-income students and fail to deliver on promises of high-paying careers after saddling them with prohibitive student loans.
     The Association of Private Sector Colleges and Universities had persuaded a federal judge to strike down earlier regulations in 2012 and returned to court in hopes of defeating the new rules as well.
     The new rule measures the average debt load of a program’s past students against their earnings, and only graduates who make enough money to service their student loans will be considered “gainfully employed.”
     A program will fail the test if its graduates’ median annual loan payment is both more than 30 percent of discretionary income and more than 12 percent of annual earnings.
     If a program fails the debt-to-earnings test for two out of three consecutive years, it will become ineligible for federal financial aid for three years. Moreover, schools on the verge of losing their funding must warn students and prospective students of this danger.
     The for-profit-college industry meanwhile argues that a student should be considered “gainfully employed” simply if they have a job – any job. It claims that the proposed debt-to-earnings test exceeds the scope of the Higher Education Act.
     In a major blow to the for-profit education industry, U.S. District Judge John Bates found for the government Tuesday.
     Congress does not define the word “gainful” in the Higher Education Act, therefore it is up to the agency to interpret Congress’ intent, the opinion says.
     Competing dictionary definitions of the word complicate the industry’s challenge.
     While the colleges relied on Webster’s definition – “productive of gain” or “provid[es] an income,” regulators note that Black’s Law Dictionary defines the term as “profitable” or “lucrative.”
     The latter definition, “of course, implies that a ‘gainful’ job must not just pay, but instead must pay enough to exceed the job-holder’s expenditures,” Bates wrote.
     “This back-and-forth is the very definition of ‘ambiguous,'” he added.
     Relying on Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., the cornerstone in Supreme Court precedent for agency deference, Bates agreed with the feds that “balancing former students’ debt against their earnings is a rational mechanism for assessing whether a program has, in fact, prepared those students for such employment.”
     Bates also noted that equipping students to make enough money to cover both living expenses and their loans has also been an important cause in Congress.

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