May 20, 2015

In Court, For-Profit Colleges Demand End to Gainful Employment Rule


The big for-profit colleges were back in court in Washington again this morning, arguing to a federal judge that the Obama Administration did not have the power to subject them to even the most minimal standards of accountability for leaving their students with overwhelming debt.

Despite the mountain of evidence that many for-profit colleges have engaged in predatory behavior by deceiving, under-educating, and overcharging students, despite the scores of lawsuits and investigations underway by federal and state law enforcement, these for-profit colleges are demanding permanent entitlement to billions annually from taxpayers without having to meet any real measures of success at all.

The issue presented in the case, brought by the for-profit college’s lobbying group, APSCU, is whether the Administration was within the law when it issued its “gainful employment” rule, which would cut off federal student aid to career education programs that consistently leave graduates earning too little to pay down their loans.

APSCU managed to get the first version of the rule overturned by a different judge in 2012, on the ground that the Department of Education failed to provide a good reason for one component of the rule.  So the Department held another round of rulemaking sessions, and dropped the offending component. The resulting new rule is pretty weak, potentially affecting only some very poor quality, high priced programs, and leaving other bad programs untouched. But it still could do some good. That’s why APSCU is determined to kill it, and that’s what today’s hearing was all about.

Before U.S. District Judge John Bates entered, APSCU’s CEO, former congressman Steve Gunderson, strode in, and someone asked him, “Is Sally coming?” He wasn’t sure. “Sally” was likely Sally Stroup, who was Assistant Secretary of Education under President Bush, responsible, among other things, for overseeing aid to for-profit colleges. Oversight, to say the least, was not strong in those years, as schools like Corinthian and ITT began raking in billions, developing systematic means to mislead students and cash their federal checks. Sally’s job now? She’s Executive Vice President of Government Relations and General Counsel — at APSCU.

During argument by his lawyer, Gunderson sat, eyes half-closed, listening reverently.  A lawyer from APSCU’s law firm, the litigation powerhouse Gibson Dunn, was by his side.

Douglas Cox, a Gibson Dunn partner who boasts on the firm website that he “played a principal role in the firm’s successful representation of the prevailing candidate before the Supreme Court of the United States in Bush v. Palm Beach County Canvassing Board and Bush v. Gore,” argued for APSCU.

In attacking the gainful employment rule, Cox discussed how a formulation in the rule came from a research paper by “two gentlemen named Baum and Schwartz.” This might have surprised one of the paper’s authors, Sandy Baum, who is a woman.

And that was after Cox insisted that the case turned on the word “prepare.”

Two Justice Department lawyers divided their oral presentation in half.  (One of them made a reference to the friend-of-the-court brief filed in support of the government’s rule by the coalition of veterans, student, teacher, civil rights, and consumer groups in which I participate.)

Judge Bates demonstrated strong knowledge of the issues, and he asked good questions. His task should not be too difficult.  The law requires courts to give strong deference to government in issuing regulations. If the rules are rational and consistent with the mandates of Congress, and the agency provides a reasonable explanation for them, the government should prevail.

Here there is a clear problem — predatory schools using taxpayer money to make students worse off than when they started. A rule that cuts off aid to programs that do so consistently — by measuring whether students earn enough to pay down their loans — is a modest, sensible solution. If a court declared the Department out of order here, it’s hard to say how the government could ever be free of giving money to anyone who demanded it.  (A similar lawsuit brought by another for-profit college trade group was argued before a federal judge in Manhattan a few weeks ago.)

While I contemplated the arrogance of APSCU’s position, a bug with about 30 legs ran from under one of the lawyers’ tables into the gallery, scampered across the beige carpet, and stopped in front of my shoe for a long while.

Judge Bates said at the end that he would issue an opinion “not in the near future, not in the distant future, but in the foreseeable future.”

The for-profit college industry is greatly weakened since the last gainful employment lawsuit.  The growing evidence from government and media investigations has reached the student population, and enrollments, revenues, and all-important stock prices are way down for many companies. But rather than accepting the need for reforms, the industry fights on, clinging to the hope that a more sympathetic president will restore its privileged access to taxpayer money, campaign contributions will continue to buy congressional inaction, public scrutiny will die down, and bad actors in the sector can go back to their predatory ways.

One of the worst aspects of this APSCU lawsuit is that taxpayers are paying for pretty much all of it. Of course we are paying for the judge and the courtroom, and for the team of Justice Department and Department of Education lawyers to defend the rule. But because many of for-profit colleges in APSCU get around 90 percent of their revenue from federal aid, we also are effectively paying for APSCU to sue the government, and APSCU has hired some of the most expensive lawyers in America.  At least citizens who could afford the trip to Washington were entitled to attend the hearing for free, although most in attendance just looked to be other lawyers.

This article also appears on Huffington Post.