Advocates for student debtors chalked up a victory in May, when a New York federal judge dismissed a challenge to the U.S. Department of Education’s “gainful employment rule.” The rule, slated to go into effect next month, will limit for-profit colleges’ access to federal student loans on the basis of their graduates’ incomes and debts. The Obama administration enacted the rule to curb what it perceives as abuses by the for-profits—namely, enrolling students with a low likelihood of success and encouraging them to borrow large sums. Graduates often cannot find suitable work for their credentials and remain shackled to their loans. Or they default without any consequences to their schools.
Needless to say, proprietary colleges and universities have fought the administration at every step, including filing a lawsuit that successfully torpedoed the government’s first attempt at fashioning a gainful employment rule in June 2012. The Department of Education revised the rule, and the for-profits sued again last year, alleging constitutional and procedural claims. This time the court threw out the case, ruling in May that the regulation was the product of “reasoned decision-making.” Similar lawsuits are pending in other federal courts, but the rule is expected to go live on July 1.
