DC Court Upholds Gainful Employment Rule

Earlier today, the District Court for the District of Columbia held that the US Department of Education’s (“Department”)”‘gainful employment‘ regulations—including the current debt-to-earnings test and disclosure, reporting, and certification requirements—survive this court challenge in their entirety.”  [JUNE 24 UPDATE – here are the Chronicle of Higher Education and Inside Higher Ed reports on the decision.] [ANOTHER JUNE 24 UPDATE – here are the statements from Department Secretary Arne Duncan and  APSCU’s General Counsel Sally Stroup.]  This follows a disappointing decision from the Southern District of New York also upholding the validity of the Department’s Gainful Employment Rule (“GE Rule”) published by the .  In so doing, the Court dealt an important win to the Department, although the effort does not seem to have concluded.  Not only may plaintiff Association of Private Sector Colleges and Universities (“APSCU”) appeal this decision, but the currently pending spending limitations in the Labor HHS appropriations bill preventing the Department of Education from using federal funds to “implement, administer, or enforce” the gainful employment rule (see page 119).

We will have a complete analysis of the decision in short order.    On a first read, however, it was interesting that the court accepted the Department’s argument that the clause “in a recognized occupation” in the phrase “gainful employment in a recognized occupation” sufficiently modified “gainful employment’ to make the phrase ambiguous enough to allow the Department to impose a debt-to-income metric.  Whatever the merits of the the GE Rule or the other merits of the decision, this seems pretty tenuous.  Indeed, the plain meaning of that phrase “recognized occupation” would seem to referred to something like Standards of Occupational Classification Codes.

Also interesting is that the Court disregarded the prior administrative rulings in cases like In re Academy for Jewish Education, where the Department argued that the program did not lead to gainful employment because the education did not provide skills to the student that would enable to them to hold a job.  This APSCU Court found that the because the training in question did not lead to any employment, “the Department had little reason to settle on a more nuanced definition for the full ‘gainful employment’ provision.”  This seems to miss the mark – the point is that the Department’s position in that case (and other administrative cases like it) was the Department’s interpretation of the whole phrase.

In addition, putting aside the issue of ambiguity, the Court seemed too eager to put aside APSCU’s argument that moving from two debt standards to one debt standard was a reversal of position that warranted a far better basis for doing so that offered by the Department.  Indeed, in the first GE litigation the court – in evaluating a standard that had two debt-to-income metrics (based on actual and discretionary income, as the case now) and a repayment rate metric — “noted that the Department’s debt-to-earnings test was ‘designed to work together’ with its separate (but now abandoned) debt-repayment test.”  This Court, however, found:

Instead, it [the Department] said that “no single percentage . . . answers the question of how much students can borrow without risking repayment difficulties,”—a statement wholly consistent with its current debt-to-earnings test, which calculates two distinct percentages for students’ average debt load: a debt-to-annual earnings percentage and a debt-to-disposable income percentage (citations omitted).

This seems to be a bit of revisionist history.  If the Department’s point in 2011 was it needed two percentages to evaluate a program, there would have been no need to invalidate the GE rule for failure of one of repayment rate to be the product of reasoned rule making.  Indeed, the Department could have raised just such an issue if percentages did not mean, results from two different tests.