NAICU Washington Update

Gainful Employment Rule Withstands Court Challenge

May 29, 2015

The Education Department’s second try at writing a Gainful Employment regulation survived a legal challenge from the New York Association of Proprietary Colleges in a judicial decision handed down by the U.S. District Court in New York on May 27, 2015.

District Court Judge Lewis Kaplan rejected the arguments made by the New York group that the rule violated the colleges’ constitutional due process rights, went beyond the Department of Education’s authority, and was arbitrary. Judge Kaplan rejected all three rationale

A separate case by the Association of Private Sector Colleges and Universities, a national group, has not yet been decided and will be considered by a district court judge in Washington, D.C. It will use different legal arguments. (See February 12, 2015 Washington Update). 

The gainful employment rules were developed to get at programs that strap students with high levels of debt but do not prepare them with the ability to earn adequate incomes. The rules require significant reporting and disclosures, and schools whose former students have high debt levels compared to their income can lose eligibility to participate in federal student aid programs. Although, the regulations affect almost all for-profit institutions, programs at nonprofit and public institutions that offer certificates must also comply.

The gainful employment rule will take effect July 1, if not barred by judicial action.

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