Department of Ed Being Sued Over Gainful Employment Regulation

Aug 08, 2011

New U.S. Department of Education regulations designed to make sure students are being prepared for employment after graduating college are being met with opposition from institutions that feel the Department is overstepping its authority. The issue has now been sent to the courts to decide.

By Jessica Lyons


The Regulations

Through the 'gainful employment' regulations, colleges will be required to improve their programs to make sure students are being prepared for employment after graduation. The goal of this is to help address student debt problems by making sure students can get jobs where they make enough to pay back their loans. Schools that don't comply with the new standards could end up losing Federal student aid.

In a press release, Secretary of Education Arne Duncan said, 'These new regulations will help ensure that students at these schools are getting what they pay for: solid preparation for a good job. We're giving career colleges every opportunity to reform themselves, but we're not letting them off the hook, because too many vulnerable students are being hurt.'

The Requirements

To be considered in compliance with the regulations, schools will have to meet one of three criteria. The first is that, of all the school's graduates, at least 35% need to be repaying their student loans. Secondly, the annual loan payments of the average student must not be more than 30% of that student's discretionary income. Finally, when it comes to the student's overall income, the annual loan payments cannot account for more than 12%.

Time to Reform

Schools will have several chances to get in compliance with the new regulations, which will go into effect on July 1, 2012. After schools fail to meet the standards three times within four years, they could lose their Federal aid edibility.

The first time schools are found to be in violation they must let their students know about it and the ways in which they plan to correct the problem. After the second violation, schools must explain students' transfer options and let them know that, after they graduate, they might not be able to afford to pay their debts and the program could lose its Federal student aid program eligibility.

A third violation in the 4-year span would mean losing eligibility. The school would not be able to reapply for eligibility for three years.

For-Profit Schools Sue

In July of 2011, the Association of Private Sector Colleges and Universities (APSCU), which has over 1,650 members, filed a lawsuit against Duncan and the Department of Education over the new regulations. Although the regulations will apply to all schools, it is expected they will hit for-profit schools the hardest since, according to the Department of Education, students from these schools are the 'most likely' to graduate with debts they can't afford and employment prospects that aren't very good. According to the Department of Education, although only 12% percent of college students attend for-profits, they hold 26% of all student loans and account for 46% of loans that are in default.

The APSCU is saying that the regulations represent an overreach of actual abilities by the Department of Education and that the process used to come up with them was flawed. Additionally, the organization argues that these regulations could result in limited educational opportunities for minorities, low-income students or other groups that tend to be underserved.

Brian Moran, the Interim President and CEO of APSCU, said, 'This lawsuit is necessary in order to protect 3.8 million students who attend private sector colleges and universities today and those who will attend our schools in the future. Adding complexity not clarity, the Department's unlawful regulations will hurt students and jobs, a consequence made still worse by a very uncertain economy.'

The U.S. Department of Education now lists college tuitions on a new website.

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