Courts uphold “gainful employment rule” protecting low-income students at predatory for-profit career programs that leave students in debt that they cannot repay.
In March 2015, Public Good signed on to a pair of briefs in support of the U.S. Department of Education’s efforts to protect low-income students from the depredations of unscrupulous for-profit colleges that seek to spend as little as possible on education while saddling student-borrowers with tens of thousands of dollars of debt. In separate cases in Washington, D.C., and New York City, the for-profit college industry trade group challenged the Department of Education’s “gainful employment rule,” which withdraws some federal student aid from schools that cannot certify that their graduates’ debts are not so disproportionate to their incomes that they cannot repay their loans. In addition, schools must make meaningful disclosures to students and their families, including the total cost of tuition, fees, books, supplies and equipment. The rule is a modest response to overwhelming evidence that some career training programs, particularly at for-profit institutions, fail to prepare students for jobs that would enable them to repay their federal student loans, and leave many students worse off than before they considered going to college. The briefs were drafted by Public Citizen Litigation Group and signed by two dozen consumer, student, labor and veterans’ groups.
The trial courts in both cases upheld the rule. The New York decision was not appealed, and the Washington decision was affirmed in a unanimous decision by the D.C. Circuit Court of Appeals, which commented, “It would be a perverse system that, by design, wasted taxpayer money in order to impose crippling, credit-destroying debt on lower-income students and graduates.” However, the Trump administration has signaled that it may relax enforcement of the rule, to the benefit of for-profit colleges.
107 F.Supp.3d 332 (S.D.N.Y. May 27, 2015); 110 F.Supp.3d 176 (D.D.C. June 23, 2015), and affirmed, 640 Fed.Appx. 5 (D.C. Cir. March 8, 2016).