Association of Proprietary Colleges Files Lawsuit Challenging Validity of Gainful Employment Rule

The Association of Proprietary Colleges (APC), an organization representing New York’s degree-granting, proprietary colleges, announced that it filed suit in the Southern District of New York earlier today challenging the validity of the Department of Education’s recently issued Gainful Employment (GE) Rule. A copy of the complaint can be found here.

Through the GE Rule, the Department of Education seeks to identify poorly performing higher education programs that don’t prepare students for gainful employment. APC contends that the Rule, which was published last week, is unconstitutional, violates the plain language of the statute, and is arbitrary and capricious.

“APC has long-endorsed the Department of Education’s efforts to protect students from bad or weak programs that leave them with big student loan debt and little education of value, but this GE Rule is not the impartial, equitable regulatory framework required,” said Donna Stelling-Gurnett, Executive Director of the Association of Proprietary Colleges. “Regretfully, after five years of discussion and negotiation with the Department, we still have a regulation that is long on political bias and short on factual basis. Filing this lawsuit is a matter of principle. New York’s students and proprietary colleges deserve better.”

Among the complaints:

  • The term “gainful employment” entered the higher education vernacular via the Higher Education Act decades ago, in the definition of an eligible program as “a program of training to prepare students for gainful employment in a recognized profession.” Nothing in the law or that short unambiguous phrase authorizes the Department to reverse decades of accepted interpretation in favor of new, complicated, debt-driven post-graduation metrics that do not accurately identify whether a program is successful.
  • Of particular interest to APC and its member colleges: The regulation conflicts with the recognized authority of The New York State Board of Regents, which is the primary governing body responsible for the general supervision of all educational activities within New York state. APC member colleges are bound to the academic standards and governance requirements of the Regents, and elements of the GE Rule directly conflict with the Regents’ approach to proprietary colleges and its oversight of their educational programs. According to the latest data prepared and published by the New York State Education Department, in 2012, students attending proprietary colleges graduated at a much higher rate than those attending public colleges and, in many instances at a higher rate than at non-profit independent colleges in New York. The GE Rule would threaten to close high quality educational programs that meet NY’s stringent requirements and have successful outcomes.
  • The Rule’s metrics are arbitrary and capricious. The Department adopted untested one-off metrics, failed to conform the GE Rules to any accepted methodology, and conducted no appropriate studies to test its hypothesis as to how the metrics would actually function, while the research that it did perform was careless if not deliberately misleading.

A third-party study conducted by The Parthenon Group, a global strategy consultancy, concluded that the GE Rule was based on flawed analysis, and that the Department ignored student demographic data that its own previous studies had clearly established were important factors in measuring students’ success.

A separate study conducted by Mark Schneider, the former Commissioner at the National Center for Education Statistics and a leading authority on education policy, also found that the metrics do not adequately assess program value. That study looked at programs in Texas, and found that more than one-quarter of bachelor’s programs and as many as 54 percent of the degree programs at the highly respected University of Texas would fail the GE Rule if they had to comply (as a public institution, its degree programs are not subject to the GE rule).

  • The GE Rule’s process to evaluate a program’s success by measuring graduates’ income from as little as 18 months after graduation — when the graduates’ income is at its lowest — is counterintuitive. As logic suggests, and expert studies submitted to the Department establish, that period does not accurately reflect the increase in income that students enjoy as a result of post-secondary education.
  • The Rule violates institutions’ Fifth Amendment Due Process rights by, among other things, improperly failing to provide institutions with the constitutional right to even see the evidence used against them. Instead, the Department relies on Social Security Administration information regarding former students’ income to calculate the debt-to-earnings rates, which the Department does not provide affected institutions — leaving them unable to challenge the accuracy of the Department’s data.
  • There is no graduation rate requirement, which does not make sense. Under the GE Rule, in its first year, 89% of community college programs and 64% of proprietary college associate programs are exempt simply because they do not graduate the required 30 students to be subject to the rule. Nearly 70% of community college programs are permanently exempt because an insufficient number of students will ever actually graduate from their programs. In New York, excellent programs at APC colleges with high graduation rates and low default rates will fail this rule, while programs at public colleges where the on-time graduation rates have been below ONE percent for the last 10 years will pass.

“We have consistently advocated that no effective rule measuring gainful employment can exist if it does not include a graduation rate requirement and are astonished and disheartened that a program with zero graduates would automatically pass the Rule’s litmus tests,” said Ms. Stelling-Gurnett. “The GE Rule clearly does not accomplish what it was designed to do — measure poorly performing programs — which is why we expect that it will ultimately be struck down in court.”

The Department’s first attempt in 2010 to create a GE Rule was successfully challenged in court by APSCU, the Association of Private Sector Colleges and Universities. A Federal district court found that key provisions of the proposed regulation were not based on relevant facts, and subsequently voided it.

Additional information about Gainful Employment and APC’s position on the issues can be found on the organization’s website and related blog.