Obama Administration Wins Legal Battle with For-Profit Colleges



For-profit colleges lost their bid to block an Education Department rule denying funds to schools that saddle students with excess debt.

U.S. District Judge John Bates in Washington on Tuesday rejected a request by the Association of Private Sector Colleges and Universities to strike down the so-called “gainful employment rule.” Under the measure set to take effect July 1, for-profit colleges whose graduates use more than 30 percent of their discretionary earnings and 12 percent of total income to repay loans risk losing access to government funds.

“The Department’s ‘gainful employment’ regulation — including the current debt-to-earnings test and disclosure, reporting, and certification requirements — survive this court challenge in their entirety, just as prior courts have concluded,” Bates wrote in his decision.

The for-profit colleges rely on federal grants and loans for as much as 90 percent of their revenue. The association, in a complaint naming the Education Department and Secretary Arne Duncan, argued the rule is unlawful and will harm students who attend private-sector colleges.

The ruling is another “clear sign that the courts continue to recognize both our legal authority and our reasonable approach in establishing these consumer protections,” Duncan said in a statement.

Sally Stroup, a lawyer at the association, said in a statement that the group is disappointed by the ruling and considering what to do next.

The regulation will “deprive hundreds of thousands of students of access to higher education,” Stroup said in the statement. “That is inconsistent with the congressional plan under the Higher Education Act, unlawful, and bad policy.”

The case is Association of Private Sector Colleges and Universities v. Duncan, 14-cv-01870, U.S. District Court, District of Columbia (Washington).


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