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Focus on Regulation

Court of Appeals Rejects Challenge to Gainful Employment Rule

shutterstock_296996492On March 8, a the three-judge panel of the United States Court of Appeals for the District of Columbia Circuit affirmed a lower court’s decision rejecting a challenge to the U.S. Department of Education’s “gainful employment” regulations. The regulations, which took effect July 1, 2015 (with the exception of certain disclosure requirements that will take effect January 1, 2017), establish measures for determining whether certain postsecondary educational programs prepare students for gainful employment in a recognized occupation and the conditions under which those educational programs remain eligible under the federal student aid programs authorized by Title IV of the Higher Education Act. In its decision, the Court of Appeals rejected each of the claims brought on appeal by the Association of Private Sector Colleges and Universities (APSCU):

  • That the Department’s interpretation of the Higher Education Act was an unreasonable interpretation of the text of the statute;
  • That the Department’s debt-to-earnings metrics established by the regulations were arbitrary and capricious; and
  • That the requirement that institutions report certain information to the Department exceeds the Department’s statutory authority and is not severable from the rest of the regulation, thereby requiring that the entire rule be vacated.

The Court of Appeals, in a brief, unpublished decision, agreed with the federal district court that the Department’s interpretation of the gainful employment provisions warrants deference because “the phrase ‘gainful employment’ does not unambiguously mean what [APSCU] says it means.” The appeals court concluded that the debt-to-earnings metrics established by the Department were consistent with congressional intent because “[i]t would be strange for Congress to loan out money to train students for jobs that were insufficiently remunerative to permit students to repay their loans.” The court also concluded that neither the 2014 regulations nor the Department’s rulemaking process was arbitrary or capricious: the court found that the Department had addressed the concerns raised by APSCU in conducting further analysis after the invalidation of an earlier set of gainful employment rules, described below. Finally, the court rejected APSCU’s challenge to the reporting requirement by noting that it is limited to information about students who receive Title IV funds and falls within a statutory provision that permits the Department to collect information in certain types of federal education databases.

The March 8 decision was the latest in a series of court battles related to the Department’s attempt to define gainful employment. After the Department issued its first gainful employment rules in 2011, APSCU filed a lawsuit that in 2012 led a federal court to strike down key parts of the 2011 regulations and caused the Department to propose the current framework. A separate challenge to the 2014 rule brought by the Association of Proprietary Colleges was dismissed by a federal judge in New York in May 2015.

Institutions that offer gainful employment programs should confirm that they are complying with all aspects of the gainful employment rules that took effect July 1, 2015. More information about the regulations can be found on the Department’s Gainful Employment Information website.