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Gainful employment's future uncertain after court ruling

Now What?
March 21, 2013

WASHINGTON -- A federal court has again ruled against the U.S. Department of Education on its “gainful employment” regulations, with a decision that is likely to complicate a possible appeal. It could also fuel broader debates about government data collection in higher education.

Gainful employment, which was created in 2011, seeks to measure the performance of vocational programs, mostly at for-profit institutions but also at some nonprofit colleges. But the regulations were put on hold last June when Rudolph Contreras, a judge with the U.S. District Court here, struck them down in response to a legal challenge from the Association of Private Sector Colleges and Universities, the primary for-profit trade group.

Contreras wrote then that the department had failed to adequately justify the requirement that at least 35 percent of a program’s graduates are actively repaying their loans. That standard is just one of three thresholds under the regulations. The other two are based on debt-to-income ratios. But the finding that the loan repayment rate was set arbitrarily scuttled all of gainful employment’s enforcement and reporting requirements.

A month later the department filed a motion that attempted to keep gainful employment moving forward by reinstating its reporting requirements and portions of the debt measures. The challenge wasn’t an appeal and didn’t seek to bring back the full regulations. Instead, it made the case that it should be allowed to continue the data reporting side without collecting “identifiable student information” that is either new or unnecessary.

The gathering of that sort of data is a no-no, thanks to a law passed by Congress in 2008. The legislation banned the creation of a federal “student unit record system” -- which would have collected academic and other data about students at the individual (though anonymous) level -- because of concerns about privacy and mandatory data collection. Congress essentially blocked the Bush administration in its efforts to make public more data about the performance of colleges, such as new information about graduation rates and the use of financial aid.

In his ruling Tuesday, Contreras was unmoved by the department’s argument. He rejected the motion, saying the gainful employment data the department seeks to collect would be in violation of the 2008 ban.

What happens next is unclear. The regulations remain in limbo. And the new ruling appears to set a higher bar for an appeal, said Michael Hays, a D.C.-based lawyer and head of the litigation group at Dow Lohnes.

“The department’s motion to amend may have backfired on them,” said Hays, adding that the court’s decision might make an appeal less likely. “Without this ruling I would’ve given good odds that they would appeal.”

The department released a statement Wednesday saying it was reviewing the decision with the help of the U.S. Department of Justice. The judge’s two decisions back the department’s overarching desire to protect students and federal financial aid programs, as the statement noted.

The court “has provided clear guidance for collecting data on borrowers in career-training programs,” the department said. “America's students deserve career training that is affordable and leads to a good job in their chosen field, and taxpayers rightly expect their investment in federal student aid to reap returns for our economy and our nation."

The ruling is a setback for supporters of tighter regulation of for-profits. One outspoken critic of the sector said it was a mess partially of the feds' own doing.

“The department was dealt a tough hand and they didn’t play it well,” said Barmak Nassirian, an independent higher education consultant and former staffer at the American Association of Collegiate Registrars and Admissions Officers.

He said the for-profit industry spent plenty of money tying the department in legal knots on gainful employment, and the strategy apparently worked.

Nassirian is no fan of a federal student unit record, mostly because of the privacy issue. But now he agrees with supporters of that stalled idea that the 2008 ban is an “overreach.” And he said it’s past time for a good-faith debate about how to collect better data on students and colleges.

In striking down the motion the court also appeared to signal that Congressional action could be necessary for the gathering of gainful employment information. But the accountability push from Washington is a bipartisan one, with deep support from both sides of the aisle for more information about how colleges are performing. So while the unit record remains a long shot, it’s a safe bet that discussions about data collection will continue.

 

 

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