Judge Guts Education Dept's 'Gainful Employment' Rule

Another bad Obama idea (mostly) bites the dust. In a ruling handed down Saturday, US District Court for the District of Columbia Randolph Contreras ruled that several aspects of the Obama Dept. of Education’s “gainful employment” rule were not the product of “reasoned decision-making” and should be vacated, including its debt-repayment measure.


That measure requires that at least 35 percent of a program’s graduates must be actively repaying their student loans.

But Judge Contreras says the department failed to provide a factual basis for why a repayment rate of 35-percent would be a “meaningful performance standard.” Instead, he wrote, it has said it chose that figure “because approximately one quarter of gainful employment programs would fail a test set at that level.” But the department could have chosen a percentage under which only one-tenth of the programs would have failed and justified it by the same rationale, he said. Therefore, he accepted the argument that the standard was arbitrary and capricious.

The judge rejected a similar argument against the rule’s other debt measures, which compare program graduates’ debt to their earnings. Those, he said, “were based upon expert studies and industry practice—objective criteria upon which the Department could reasonably rely.” But because the debt-to-income measures were intertwined with the debt-repayment measure, he said, he had to vacate them too.

By the same reasoning, he also vacated two other provisions that rely in part on the debt-repayment measure: one that requires institutions seeking to offer a new vocational program to get prior approval from the Education Department, and one that requires institutions to provide data to the department for calculating the debt measures.


Judge Contreras allowed other aspects of the rule to stand, and overall allowed that the department has the authority to make such rules.

The gainful employment rule has come under challenge because it imposes post-graduate employment standards on for-profit institutions that it does not impose on taxpayer-funded institutions. It has sparked controversy even among liberal Democrats who argue that it unfairly targets schools that help minority students obtain knowledge and training that help them gain jobs and advance in their careers. The Department of Education issued the gainful employment rule in 2011 and it was to go into effect on July 1, 2012.

“Gainful employment” has been seen as one of many Obama administration regulations that harm private sector enterprises and favor government run entities.



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