For-profit colleges have sued federal officials to halt a regulation intended to protect students overburdened with loan debt who can’t land a job that pays enough.
The regulation at the heart of the lawsuit is known as the “gainful employment rule.” It restricts crucial access to federal student-aid dollars for these institutions. U.S. officials say many students are struggling to pay back their student loans from these for-profit colleges.
A trade group representing more than 1,400 for-profit colleges seeks to stop the regulation officially implemented last week by the U.S. Department of Education.
The rule restricts access to federal student-aid dollars for institutions deemed to have too many students who struggle to pay back their student loans.
To qualify for federal student aid, current law requires that most for-profit college programs and career certificate programs prepare students for “gainful employment in a recognized occupation.”
Under the regulations finalized this week, a program would be considered acceptable if “the estimated annual loan payment of a typical graduate does not exceed 20 percent of his or her discretionary income or 8 percent of his or her total earnings.
The rule targets institutions that charge excessive tuition, especially for programs that have little value on the job market.
The Department of Education says the regulation could potentially affect up to 840,000 students, and, the trade group says, 3.5 million in the next 10 years. Two million students are currently enrolled in for-profits.
At issue in the lawsuit are the criteria used to determine whether, and how many, students are struggling. The Education Department is proposing to compare graduates’ student loan debt to their earnings.
The schools contend that such a measure is unfair because how much money students make after graduating is not in their control.
“The gainful employment regulation is nothing more than a bad-faith attempt to cut off access to education for millions of students who have been historically underserved by higher education,” Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities, which brought the lawsuit, said in a statement.
Dorie Nolt, the Education Department press secretary, said, “We’re confident that the department is within its legal authority in issuing gainful employment regulations that will protect students and taxpayers’ investments by bringing more accountability and transparency to career training programs.”