Judge Rejects Second 'Gainful' Challenge

June 24, 2015

A federal judge dismissed a second challenge Tuesday to the U.S. Department of Education's gainful employment rule.

U.S. District Court Judge John Bates upheld the department's gainful employment regulations, including the debt-to-earnings test and disclosure, reporting and certification requirements that had been challenged in a lawsuit by the Association of Private Sector Colleges & Universities (APSCU), which is the for-profit sector's trade group.

It was the second attempt at blocking this version of the Obama administration's attempt to regulate the industry by holding for-profit colleges accountable for the type of employment and debt students hold once they leave the institution. (A federal judge in 2012 largely invalidated a previous version of the rules.) APSCU argued that any employment after college should be viewed as gainful. The court disagreed, however. The department can measure the average debt load of a program's former students against their earnings and only those graduates who make enough money to service their educational debt will be viewed as gainfully employed. The court also rejected the for-profit group's argument that the metrics are arbitrary.

Last month, a New York federal judge ruled in favor of the department and dismissed a lawsuit brought by the Association of Proprietary Colleges, which represents for-profits in that state.

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