For-profit colleges are suing the federal government, saying new rules pick on them unfairly for high student debt.
The suit, filed by the Association of Private Sector Colleges and Universities, says an Education Department regulation issued last month “arbitrarily” attacks them.
Under the rule, for-profit schools and universities stand to lose federal aid if graduates’ average annual loan payment exceeds 12 percent of their total earnings or 30 percent of their discretionary income.
The federal ax falls if a school crosses either threshold in four consecutive years or if it crosses both twice in three years. The department will track students’ debt by monitoring their Social Security payments.
“This regulation, and the impact it will have on student access and opportunity, is so unacceptable and in violation of federal law, that we were left with no choice but to file suit,” said Steve Gunderson, APSCU president. “If successful, our suit will protect student access and opportunity to higher education at a time when the U.S. Department of Education seems interested in limiting choices for students by closing private sector programs.”
Education Department spokeswoman Dorie Nolt said the feds are “confident” the courts will reject the case, adding, “The Department is within its legal authority in issuing gainful employment regulations that will protect students and taxpayers’ investments by bringing more accountability and transparency to career training programs.”
The regulation is the administration’s main weapon against rising student debt, which has tripled since 2004 and now tops $1 trillion. The administration claims it is justified focusing on for-profit institutions because the problem is “particularly troubling” in their case. Students at for-profit colleges account for 11 percent of the total higher education population but 44 percent of all federal student loan defaults, it says.
APSCU says the higher default rates are because many of its students had past financial problems or came from disadvantaged backgrounds.
“[T]he regulatory process was marked by well-substantiated allegations of bias and misconduct that led several Members of Congress to accuse the Department of bad faith,” the association alleges in the suit, which was officially filed on Nov. 6.
An Education Department source said the rule also applies to non-degree programs at public and private nonprofit schools and that the Higher Education Act, the law that allows federal aid, limits the new rule’s impact to just those programs.
“These regulations will set standards for such ‘gainful employment’ programs regardless of sector. Degree programs at public and non-profit schools are not required by the HEA to prepare students for gainful employment, and are not subject to these regulations for that reason,” the source said.
Ben Miller, a senior policy analyst at the New America Foundation, agreed, saying the 1965 statute clearly distinguishes between degree programs, such as in liberal arts, and certificate courses, such as for career training. Only the latter must provide gainful employment. “So if you are a nonprofit but you offer a certificate, your certificate program gets caught up in this. But if you offer a bachelor’s degree, it doesn’t,” he said.
