In early November 2014, APC filed suit in the Southern District of New York, challenging the validity of the Department of Education’s Gainful Employment (GE) Rules. As we have pointed out through various blog posts and as formally outlined in that complaint, the Rules are unconstitutional, violate the plain language of the Higher Education Act, and are arbitrary and capricious.

Last Friday, we filed our motion for a summary judgment with the Court, setting forth the bases for our view that the Rules are legally flawed and clearly do not accomplish what they are designed to do — identify poorly performing programs. As noted in the filing:

“The GE Rules apply to tens of thousands of educational programs, affect the lives of millions of students, and will dictate the distribution of billions of dollars in federal student financial aid. Given the importance of these new regulations, one would think that the Department would rest the regulations of firm constitutional and statutory bases; commission careful studies; employ reliable methodologies; and rigorously determine the likely effect of the regulations. The Department did none of these things. Rather, the Department’s fundamentally flawed GE regime is unconstitutional, statutorily unauthorized, arbitrary and capricious, and deliberately structured to undermine proprietary educational institutions…(T)he GE Rules must be vacated on multiple independent grounds…”

Here is a summary of some of APC’s arguments regarding the flaws in the GE Rules, as outlined in our court filing that you can access here:

First, the GE Rules are unconstitutional.  They violate institutions’ Fifth Amendment Due Process rights by denying them the chance to see the evidence used to make adverse, and potentially lethal, determinations concerning their programs.  Instead, they rely on confidential Social Security Administration information regarding former students’ income to calculate the D/E Rates that the affected institutions never get to see, and the “alternative” appeal opportunities are ineffective. Even under the Queen of Hearts’ view of due process (“Sentence first – verdict afterwards”), the defendant gets to see the evidence before the sentence.  The GE Rule does not even meet the Queen of Hearts’ standard.

Second, the GE Rule overrides the role of accrediting agencies to oversee program quality, and particularly contradicts the requirements of the New York Board of Regents that require APC colleges to design broad degree programs that are intended to prepare students for life-long careers and civic engagement, rather than narrow vocational programs that would meet the standards of the GE Rules.

Third, the GE Rules are also arbitrary and capricious for a number of reasons.  For example:

  • While the Department’s stated basis for the GE Rules is to measure program quality, the Department presented no evidence that they do so.  Indeed, regression analyses (including the Department’s own) establish that almost half the variation in program performance under the D/E Rates is based on student demographics, such as family income, sex, race, and ethnicity.  Effectively, the Department has established a programmatic eligibility metric that eliminates programs serving the neediest students.
  • As common sense suggests, and as the Department admitted in the draft framework for its pending College Ratings System, “long-term earnings outcomes more closely correlate with an individual’s lifetime earnings and are thus a better proxy for career success.”  Yet the GE Rule evaluates a program’s success by measuring graduates’ income as little as 18 months after graduation, when their income is at its lowest.
  • The Department bases the specific 8% threshold to pass the annual D/E Rate on mortgage practices,, but the Department fails to offer any evidence that most of these recent graduates even have a mortgage 18 months after they graduate when the GE Rules’ metrics kick in.  The Department also ignores a growing number of reports showing that a large number of degree programs at some of the country’s most prestigious institutions would fail the Department’s threshold for the D/E Rate.
  • The GE Rules produce illogical results.  For example, a program that has a 0% graduation rate and a 100% default rate can avoid any penalty, while a program with a 100% graduation rate and a 0% default rate can fail.

The consequences of the ill-conceived and untested GE Rule are devastating:  in the next ten years, “between 2 and 7.5 million students will be denied access” to postsecondary education according to one study.

New York’s students and proprietary colleges deserve better — and we are proud to continue to fight for what’s right on their behalf. We will continue to update the latest developments with the lawsuit at the appropriate intervals.

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