The rule, known as gainful employment, threatens to withhold student aid from vocational programs that have graduates who consistently end up with more debt than they can repay. It took nearly five years to implement the regulation as for-profit colleges petitioned the courts to prevent what they regard as an attack on their sector. Those schools, critics say, have found an ally in DeVos, who has halted enforcement of the rule as her department prepares to rewrite it entirely.
“It’s outrageous for the department to say they’re going to allow these predatory institutions to continue to take advantage of people who are vulnerable, people with very few resources,” Maryland Attorney General Brian Frosh, who is leading the lawsuit, said in an interview Tuesday.
A program is considered to lead to “gainful employment” if the annual loan payment of a typical graduate does not exceed 20 percent of their discretionary income or 8 percent of their total earnings. Exceeding those debt-to-earnings rates means possible expulsion from the federal student aid program. Eight-hundred of the 8,700 programs reviewed by education officials at the end of last year failed to meet the thresholds. Ninety-eight percent of those programs are offered by for-profit colleges, while the remaining 2 percent are at private nonprofit schools, such as Harvard University.
As the rule is written, the government is supposed to cut off federal student aid to any program that fails twice in a three-year period or teeters on the line for failure for four consecutive years. Failing programs are supposed to notify students they are at risk of losing access to federal loans and grants. But that hasn’t happened.
Since March, the department has given schools more time to appeal the agency’s review of their debt-to-earnings data, comply with disclosure requirements and create a list of students who have completed their programs as outlined in the rule. Prosecutors say each of those steps have undermined the regulation’s aim of holding schools accountable for saddling students with hefty debt but without the skills needed to repay the money. The continued delays and refusal to enforce aspects of the rule violates federal law, according to the complaint.
“This is just the latest in a string of frivolous lawsuits filed by Democratic attorneys general who are only seeking to score quick political points,” said Liz Hill, a spokeswoman for the Education Department, in an email. “While this administration, and Secretary DeVos in particular, continue work to replace this broken rule with one that actually protects students, these legal stunts do nothing more than divert time and resources away from that effort.”
DeVos has derided the employment regulation as being overly burdensome and in need of an overhaul.
“Gainful employment regulations have been repeatedly challenged by educational institutions and overturned by the courts, underscoring the need for a regulatory reset,” DeVos said, when she announced plans to rewrite the rule in June. “Once fully implemented, the current rules would unfairly and arbitrarily limit students’ ability to pursue certain types of higher education and career training programs.”
The department officials have said delaying elements of the rule was necessary in light of a federal lawsuit brought by an association of for-profit cosmetology schools seeking exemption. The organization claimed the debt-to-income calculation in the rule wrongly excluded the tips that hairdressers often earn as a part of their overall pay. A federal judge in June ordered that cosmetology schools in the association be given more flexibility in appealing the earnings data. Though the judge said the ruling was meant to avoid “upending ” the entire regulation, the department applied the rationale to all schools.
“It was a very narrow exception and the court made very clear that it didn’t relate to the larger rule,” Frosh said. “You’ve got three court decisions upholding the rule and the department is still saying we don’t think it’s right, so we’re not going to implement it.”
Frosh and the other state attorneys general are seeking injunctive relief, which if granted would force the department to immediately implement the rule. He said there has been a steady increase in consumer complaints against for-profit colleges in Maryland, and authorities have a responsibility to hold bad actors in the sector accountable.
Democratic attorneys general have been waging fights in the courts to get the Trump administration to uphold a series of regulations to protect students from predatory for-profit schools. A separate lawsuit filed in July by 19 state prosecutors, including those from Maryland, Virginia and the District, accuses the Education Department of violating federal law by halting updates to a regulation known as the borrower defense to repayment. That rule, which dates to the 1990s, wipes away federal loans for students whose colleges used illegal or deceptive tactics to get them to borrow money to attend. The Obama administration revised it last year to simplify the claims process and shift more of the cost of discharging loans onto schools, but Devos suspended the changes over the summer.