November 7, 2014

Entitled For-Profit Colleges File Meritless Suit to Block Obama Rule


On Thursday, November 6, the national trade association of for-profit colleges, APSCU, sued the Obama Administration in federal court in Washington DC to strike down the new 2014 “gainful employment” rule. The complaint repeats many of the claims from APSCU’s suit to strike down the 2011 gainful employment rule: that the U.S. Department of Education didn’t have the authority to issue such a rule; that the Department has not provided a reasoned basis for the rule; and that the rule is “unlawful, arbitrary, and irrational.” (The same day, the New York-based Association of Proprietary Colleges filed a separate suit to strike down the rule in federal court in Manhattan; the complaint raises some of the same arguments as APSCU’s but also alleges the regulation is inconsistent with New York state rules.)

The industry’s claims have no merit. The 2014 regulation, far from mistreating for-profit colleges, in fact treats them much too gently — it will hold career training programs accountable only for some of the most egregious abuses of students, and many programs that are harming students will remain eligible for taxpayer dollars. The government did not exceed its authority in issuing the rule, and nor do the industry complaints demonstrate any violation of the law.

All this lawsuit proves is that the big predatory for-profit colleges that dominate APSCU — like EDMC, Kaplan, Career Education Corp., and Bridgepoint (collapsing Corinthian and ITT apparently have now left the group) — believe their industry is permanently entitled to tens of billions annually from taxpayers, with no accountability for their poor performance, or for the many ruined lives of students that result.

The federal district judge who heard the case on the 2011 rule upheld the authority of the Department to issue the rule, and he upheld the prong of the rule evaluating schools by comparing the debt of program graduates to their earnings (debt-to-earnings or DTE).  The judge voided the regulation because he concluded that the Department did not provide an adequate rationale for a separate prong of the rule, which would have allowed schools that repeatedly failed the DTE test to remain eligible for federal aid if they passed a separate test, measuring the loan repayment rate for graduates and dropouts alike.

The 2014 regulation eliminates this repayment rate escape hatch, paring down the rule to the debt-to-earnings approach already upheld by the court in the prior case.  The 2014 DTE test is also somewhat more stringent than the 2011 version.  Thus the rule is a little tougher on the industry, and APSCU may have completely miscalculated and may thus be a little bummed.  But none of that renders the rule arbitrary or irrational.  Indeed, the overwhelming evidence since 2011 of abuses disclosed by media and government investigations, covering many of the major actors in the for-profit college industry, and the evidence of harms suffered by students, more than justifies a strengthening of the rule.

APSCU’s arguments are desperate, absurd, offensive, and based on distortion of the facts. For example, APSCU says (p. 49 of the Complaint) that the rule must be struck down because one stated justification for the rule was to address the problem of “churn” — students enrolling and soon dropping out, and, without the repayment rate test, or the programmatic cohort default rate (pCDR) alternative the Department proposed in the 2013-14 rulemaking, the rule does nothing to address dropouts and churn. That argument is offensive coming from an organization whose members have been responsible for so much of the churn. It’s also incorrect.  The rule’s DTE test may in fact ultimately penalize schools that do engage in churn, because there is some correlation between schools that fail DTE and those that churn. In addition, the rule retains provisions requiring schools to disclose dropout rates to students, and that will directly address churn.

For-profit colleges get more than $30 billion a year in taxpayers’ money, and yet their trade association APSCU even argues in the complaint (p. 69) that they should not be required to disclose truthful information about their performance to students.

Since many APSCU members receive 90 percent or more of their revenue from taxpayers, we all are paying for APSCU to hire one of the country’s most expensive law firms, Gibson Dunn, to pursue this lawsuit (as well as paying for the government lawyers on the other side, and the judge) — which makes this case even more of a travesty.

This article also appears on Huffington Post.