Regulatory Breaks for For-Profit Colleges Spur Challenge

WASHINGTON (CN) — The government’s abandonment of disclosure requirements for for-profit colleges spurred a federal complaint Tuesday by 18 Democratic attorneys general.

Adopted three years ago by the Obama-era U.S. Department of Education, the rule in question is tailored to a requirement by the Higher Education Act that schools must ensure their programs prepare students for gainful employment in recognized occupations.

Regulators crafted the rule in response to reports of debt-ridden students who are unable to get work in the programs for which they trained. Though for-profit colleges rely on federal aid for the bulk of their revenue, few checks exist on whether their programs adequately prepare students to obtain employment that will allow them to pay back their loans.

An Oct. 17 complaint led by Maryland Attorney General Christopher Madaio notes that the gainful-employment rule took effect in July 2015 and has been upheld three separate times in federal courts.

In recent months, however, the rule became the latest target of the Trump administration’s deregulation pruning shears.

Education Secretary Betsy DeVos delivered the first hit on July 5, just a week after a challenge to the rule by the American Association of Cosmetology Schools won narrow relief.

Since many cosmetologists are self-employed, or might derive much of their income from tips, the AACS called it unfair to use Social Security data as a metric of performance for program graduates.

The court that ruled for AACS took care to limit its relief to AACS member schools, but Madaio and the other attorneys general note that DeVos nevertheless cited the ruling on July 5 in issuing two deadline extensions for all schools under the gainful-employment rule.

DeVos pushed the deadline to comply with the disclosure requirements relating to promotional materials and direct notifications to students about to enroll to July 1, 2018, and she chucked the deadline altogether for all programs across the country to file alternate earnings appeals.

Madaio notes that this delay occurred without notice of rulemaking.

“By illegally delaying these disclosure deadlines and extending alternative appeal deadlines to all institutions affected by the rule, the department upended the Gainful Employment administrative scheme in its totality,” the complaint states. “This is precisely what the court in AACS sought to avoid doing.”

DeVos followed up with a second delay notice in August, this time extending the deadline to file a notice of intent to file an alternate earnings appeal to Oct. 6, 2017, and extending the deadline for filing an appeal to Feb. 1, 2018.

Madaio notes that DeVos again failed to limit such relief to AACS member schools and again failed to follow the notice-and-comment procedures of federal rulemaking.

He says the data that DeVos put on hold is critical to the work by regulators in calculating the debt-to-earnings rates, as the rule requires.

“By refusing to provide Draft GE Completers Lists to institutions as required by the rule, the department has further upended the Gainful Employment administrative scheme,” the complaint states.

Madaio and his fellow attorneys general note that they devote significant energy toward bringing enforcement actions against for-profit schools, from Corinthian Colleges to ITT Educational Services.

“The investigations leading to many of these actions demonstrated that many for-profit educational institutions have deliberately targeted low-income and minority residents with deceptive information about their programs and enrolled students in programs that were unlikely to lead to employment that would allow graduates to repay the high cost of tuition,” the complaint states. “As a result, low-income and minority residents are often the primary victims of conduct that the rule was designed to prevent.

“The department’s illegal delays and refusal to enforce the rule harm current and prospective students by depriving them of adequate information to make informed choices about enrolling in educational programs,” the complaint continues. “Were students given full and complete information about the costs, benefits (or lack thereof), and potential for the program to be ineligible for Title IV loans, many students would choose not to enroll in programs that saddle them with massive debt burdens and limited employment prospects. Instead, such students would choose to enroll in other educational programs that make more economic sense, including, in some cases, programs at state-funded institutions of higher education.” (Parentheses in original.)

Madaio is joined in the complaint by the attorneys general of California, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Massachusetts, Minnesota, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia and Washington.

Education Department spokeswoman Liz Hill called the complaint frivolous.

“While this administration, and Secretary DeVos in particular, continue work to replace this broken rule with one that actually protects students, these legal stunts do nothing more than divert time and resources away from that effort,” Hill said in a statement.

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