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Federal Court Upholds Gainful-Employment Rule, Dealing For-Profit Group Another Loss

The Association of Private Sector Colleges and Universities has lost another challenge to the U.S. Department of Education’s gainful-employment rule. A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled on Tuesday that the department’s rule, which seeks to judge career-oriented programs based on graduates’ ability to repay their loans, could stand after the association appealed a prior ruling.

Read the decision.

The association, the leading lobbying group of for-profit colleges, had argued that the department had overstepped its authority in issuing the rule, and that the rule represented an unreasonable interpretation of the federal student-loan program. In a decisive passage, the panel rejected that argument:

Had Congress been uninterested in whether the loan-funded training would result in a job that paid enough to satisfy loan debt, it would have created a federal grant system instead of a federal loan system focusing on preparation for gainful employment.

In a written statement, the association’s chief executive, Steve Gunderson, called on the department to “engage with us in finding ways to enhance both quality and opportunity for all students — especially those seeking employment skills.” He went on: “Judging an academic program by a debt-to-income ratio does not define academic quality. If it did, many programs all across higher education would fail.”

The department introduced the rule in 2011, but a year later a judge threw out a key portion of it after a court challenge by the for-profit-college association. After the department released a revised rule, the group challenged it but failed to persuade a district-court judge, who upheld the rule last year.

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