Court offers mixed ruling on challenge to new DoE regulations
Last Tuesday, a federal judge issued a split ruling that partially upheld the challenge the Association of Private Sector Colleges and Universities (APSCU) brought against new Department of Education regulations, while also siding with the government and throwing out two other requests of the plaintiff.
One rule the court tossed out was a proposed requirement to have institutions obtain formal authorization in each state where their students live in order to be eligible for federal financial aid, a decision that was hailed by the APSCU which filed its lawsuit against the department's regulations in January. APSCU officials contended that the regulations were "arbitrary and capricious," and that the department exceeded its statutory authority by putting them in place, arguing that they would have the effect of stifling the burgeoning online schooling and distance-learning sector that is lowering the barriers of entry to higher education.
"We believe this is a major victory for innovation in higher education and an important answer to the department's obvious over-reach in this area," APSCU said in a statement.
However, Judge Rosemary Collyer of the U.S. District Court for the District of Columbia rejected APSCU's argument that the Education Department lacks the authority to impose a licensing mandate on the states, leaving intact several mechanisms for state-level oversight of its members, including formal authorization and maintaining a complaint process. The judge ruled that APSCU lacked legal standing to challenge the viability of a federal mandate and did not address that issue in her ruling.
Instead, Collyer vacated the state authorization rule on procedural grounds. She concluded that the department failed to provide sufficient periods of public notice and comment on the state authorization provisions as it moved through the rulemaking process.
The judge further rejected APSCU's challenge to DoE regulations that sought to close loopholes in the longstanding compensation rules intended to bar institutions from basing employee bonuses or other incentive compensation on the number of students they recruit or how much federal financial aid they help secure. "Congressional concern behind this provision was the use of financial incentives to enroll students regardless of qualifications or program efficacy -- a practice that led to student loan defaults, leaving the taxpayers on the hook," Collyer explained in her ruling (available in PDF format here). APSCU argued that the new rules would set unreasonable restrictions on schools' ability to develop merit-based compensation plans for recruiters, amounting to a burdensome regulatory overreach that went beyond the department's authority.
In addition to its procedural objections relating to the way the department drafted and implemented the new regulations, APSCU mounted a First Amendment argument against the misrepresentation rules, contending that they unfairly impinged on the right to commercial speech.
"[T]he District Court's order leaves in place regulations that are harming the students served by APSCU's members and that are causing changes in the ways that schools can reward outstanding job performance and inform students about their programs," APSCU said of the decisions upholding the compensation and misrepresentation rules. The group is reviewing the ruling and its impact, and said it would consider appealing the partial dismissal of its case.
Taken broadly, these and other regulations are meant to ensure that for-profit higher education institutions are providing students with relevant and qualitative programs of instruction that will position them to succeed in the professional world. Perhaps the most hotly debated of the new regulations was the so-called "gainful employment" rule, which set benchmarks that career-oriented colleges would have to meet to qualify for federal student aid by demonstrating that sufficient numbers of graduates were able to find jobs in their field of study.
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