January 2, 2024

Cosmetology Schools Sue to Void Rule Aimed at Protecting Students From Heavy Debt

Cosmetology Schools Sue to Void Rule Aimed at Protecting Students From Heavy Debt

On December 22, the trade association American Association of Cosmetology Schools, along with Texas-based DuVall’s School of Cosmetology, sued the U.S. Department of Education, seeking to void the federal “gainful employment” rule, which aims to hold accountable those for-profit and career college programs that consistently leave graduates with debts they cannot afford to repay.

After an elaborate process, involving extensive meetings with stakeholders and review of public comments on a draft rule, the Biden administration issued its final version of the gainful employment rule on September 27.

The new rule is aimed at redressing decades of abuses at many for-profit colleges that have used deceptive advertising and recruiting to lure students — single moms, veterans, immigrants, and others — into overpriced programs that ruin their financial futures, whether students drop out mid-program, or else graduate but can’t find work that pays them enough to pay back their loan debts.

The gainful employment rule implements language in the federal Higher Education Act passed by Congress decades ago, requiring that all programs at for-profit colleges, and non-degree certificate programs at all colleges, “prepare students for gainful employment in a recognized occupation.”

The rule holds schools to that standard by essentially requiring that graduates earn enough money to be able to afford paying down the federal student loans they take out to pay for their educations.

More specifically, for a school program — in nursing, criminal justice, culinary arts, information technology, cosmetology, or other career field — to comply with the new rule, the share of its graduates’ annual earnings they need to devote to paying their student loan debt must be equal to or less than 8 percent of their income, or equal to or less than 20 percent of their discretionary earnings (meaning annual earnings above 150 percent of the Federal poverty guideline). In addition, at least half of graduates of a program must have higher earnings than a typical high school graduate in their state’s labor force who never pursued a postsecondary education.

Schools whose programs fail at least one of those tests must warn students that the program is at risk of losing access to federal aid. Programs that flunk the standards on the same metric twice in a three-year period will lose access to federal aid.

The new complaint from the cosmetology schools, filed in federal court in Fort Worth, Texas, garishly proclaims that the new rule “is a product of the government’s contempt for the proprietary education industry, promulgated without regard for what the agency’s openly flawed data say or how many socially beneficial small businesses will close…” Attorneys for the trade association, from the corporate law firm Duane Morris, which has long represented for-profit colleges, including some of the industry’s worst actors, claim the rule must be struck down as arbitrary, violative of free speech rights, and beyond the power of the Department of Education to issue.

In reality, the complaint is just more for-profit college industry propaganda, filtered through conservative legal language, that the gainful employment rule will kill access to education programs for Americans.  In fact, the rule by design will cut off access only to programs that clearly leave students worse off than when they started. It’s just common sense to do that. It is, in fact, the least we can do for students.

Unfortunately, the federal courts, now dominated by appointees of lawless ex-president Donald Trump and other hard-right conservatives, may well end up sustaining this challenge, as they have in recent years approved other challenges to federal regulations aimed at protecting consumers, health, safety, and the environment. But a central difference here is that the government is not aiming to tell businesses what they may do with their own resources; rather, the Department of Education is setting conditions for receipt of taxpayer dollars. One still hopes that traditional conservative impulses to guard against waste, fraud, and abuse in government programs might ultimately push a few Republican-appointed Supreme Court justices to accept that the Department is not powerless to halt the flow of federal funds to predatory schools offering low quality programs that wreck students’ finances.

The gainful employment rule, originally devised under the Obama administration, has been repeatedly attacked by the for-profit college industry and its lobbyists. Corporate lawyers paid by the industry managed to get the initial version of the rule struck down by a judge, before the Obama team crafted a second, slightly stronger, version that the courts upheld. Some Members of Congress, Republicans and Democrats, who take campaign contributions from the for-profit college industry, have tried to overturn the rule. During the Trump administration, Secretary of Education Betsy DeVos, who staffed her office with former for-profit college executives, cancelled the rule entirely. To its credit, the Biden administration, undeterred, issued a new version of the rule, one that is somewhat stronger and improved from the Obama version.

UPDATE o4/02/24:

second lawsuit has been filed by cosmetology schools against the gainful employment rule — like the first lawsuit, filed in the Northern District of Texas, Fort Worth division. This time, former US solicitor general Paul Clement is the lawyer. The new case was filed on March 20, and the cosmetology schools have filed a motion for a preliminary injunction to promptly halt the rule.