Court dismisses challenge to Dep’t of Education’s “gainful employment” rule

A federal district court in New York has dismissed a lawsuit filed by a group of for-profit colleges challenging regulations issued by the Department of Education to limit student debt.

The Department adopted the “Gainful Employment” rule in 2014 to address overwhelming evidence that some postsecondary career training programs, particularly at for-profit institutions, were failing to prepare students for jobs that would enable them to repay their federal student debt, thus endangering the federal government’s investment in these schools by way of federal student aid and leaving some students worse off than they would have been had they never pursued postsecondary education. The rule imposes new accountability and disclosure requirements for certain career training programs, and make the colleges' access to federal financial aid contingent on their ability to demonstrate that their graduates earn enough money to repay their loans.

In his opinion, the judge noted the Department's “strong interest in ensuring that students – who are, after all, the direct (and Congress’s intended) beneficiaries of federal aid programs – attend schools that prepare them adequately for careers sufficient for them to repay their taxpayer-financed student loans.”

On behalf of 25 groups (advocates for students, consumers, civil rights, and veterans), Public Citizen had filed an amicus brief in support of the rule.

A similar lawsuit is pending in a district court in DC. (See Public Citizen's amicus brief here.) The court heard oral argument in that case last week.

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