With Lawsuit, For-Profit Colleges Step Up Fight Against New Regulations

January 23, 2011

The association representing for-profit colleges is ratcheting up its campaign against the Obama administration's new regulations on student recruiting and other actions by the colleges, adding a legal push to its already vigorous lobbying and public-relations campaigns.

On Friday the Association of Private Sector Colleges and Universities sued the U.S, Department of Education, arguing that three new rules—one designed to prevent misrepresentation in recruiting, another to end the tying of compensation to enrollment, and a third to give states greater oversight over distance education—exceed the department's authority, were developed with inadequate due process, and, in at least one case, are unconstitutional.

The association said it had coupled its lawsuit with a letter to Education Secretary Arne Duncan, giving the department one week to voluntarily withdraw the contested regulations, which are scheduled to go into effect on July 1. If the department does not do so, the association said, it would file a second lawsuit seeking an injunction that could immediately block the rules while any legal issues are litigated.

Harris N. Miller, president of the association, acknowledged that suing the department was unusual but said his group's 1,500 member colleges felt it was the only choice because good-faith efforts at negotiations with the department had failed. The colleges believe the regulations leave too many ambiguities and they "can't just wait until July 1 and wait to be sued" by students or whistle-blowers alleging violations of the rules, he said in an interview on Friday.

The Education Department's single-sentence response signaled little sign of retreat. "We're confident that the published regulations will do the best job of protecting students and taxpayers," said Justin Hamilton, the department's chief spokesman.

Whether the case has merits or is simply part of a lot of "political theater" surrounding the regulations, as Terry W. Hartle of the American Council on Education put it on Friday, remains to be seen.

The for-profit colleges' complaint says the department "strayed beyond its statutory mandate and employed unlawful proceedings" in developing the rules.

The suit applies to a series of rules the department made final in October. It does not address the pending but already controversial "gainful employment" regulations, which would cut off federal student aid to programs whose students have high debt-to-income ratios and low loan-repayment rates, although that rule too is expected to prompt its own lawsuit, once it is finalized.

"If they're going to come out guns blaring on this, watch out for gainful employment," said Kevin Kinser, a senior researcher at the Institute for Global Education Policy Studies at the State University of New York at Albany who studies the for-profit education industry.

In the complaint filed in federal court in the District of Columbia Friday, the association asserts that the new rule prohibiting misrepresentation in student recruiting is too vague and could leave colleges liable for inadvertent misstatements. "Even before they officially become effective, the misrepresentation regulations are chilling schools' constitutionally protected speech," the complaint says.

The complaint argues that the new rule on states' authority to regulate all colleges operating in their jurisdictions impinges on states' prerogatives to define what rules they impose on colleges.

And it contends that eliminating the 12 "safe harbors" under which colleges could use enrollment and graduation goals as part of their criteria for compensating employees leaves institutions with too little guidance on what is lawful. (The "safe harbors" describe compensation approaches that are legal.)

Many traditional colleges also have concerns about the "lack of guidance" in the regulations covering compensation for college officials, said Mr. Hartle, senior vice president for government and public affairs at the council, an umbrella group for higher-education associations. As now written, some fear, the rule could be construed to prohibit compensation plans that reward presidents and others for enrollment growth or improvements in graduation rates. "We're hearing from provosts" and others, Mr. Hartle said Friday. But he said he's hopeful that a clarification that the department has promised to issue in early 2011 will resolve many of the concerns.

Lawsuits of this sort are not only unusual, they are also rarely successful. Typically, "courts give administrative agencies wide latitude in interpreting the law," Mr. Hartle noted. That was one of the reasons the council chose not to join the suit. Also, he noted, for the council, lawsuits are "an absolute last resort."

In announcing the lawsuit, the private-colleges association sought to capitalize on President Obama's recent business-friendly overtures, which included an executive order urging agencies to curtail overly burdensome regulations. The contested regulations are "a classic case of bureaucratic overreach" said Mr. Miller.

He said his group is also continuing to lobby on Capitol Hill against those rules and the gainful-employment regulation. "You can use as many branches of government as you want" to press a cause, he said. In Congress, "we haven't even had a chance to educate the new members."