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Judge strikes down loan-repayment rule for career-training programs

Federal rules that sought to limit the amount of debt graduates of career-training programs could face were thrown out by a district court judge.

A federal district court judge in Washington, D.C., has ruled that a key portion of the U.S. Department of Education’s “gainful employment” rule is “arbitrary and capricious.” The rule, which was to go into effect on Sunday, was intended to make sure that students enrolled in for-profit career-training programs do not rack up unmanageable debts preparing for poorly paid jobs.

After a heated, months-long public comment period the department last year released rules requiring that private colleges, community colleges and other programs that prepare people for certain types of jobs collect and report data on graduation rates, job-placement rates and student debt loads.

In order to remain eligible for federal student aid, which makes up the bulk of the tuition paid to the often-pricey for-profits, schools had to pass one of three tests. At least 35 percent of graduates must be repaying their loans, and annual loan payments must not exceed 12 percent of grads’ expected earnings or exceed 30 percent of their discretionary income.

No basis for selected rate

Judge Rudolph Contreras’ 38-page decision recognized the department’s authority to regulate the programs, but said the 35 percent repayment threshold wasn’t based on any meaningful calculation.

“No expert study or industry standard suggested that the rate selected by the department would appropriately measure whether a particular program adequately prepared its students,” the opinion said. “Instead, the department simply explained that the chosen rate would identify the worst-performing quarter of programs. Why the bottom quarter? Because failing fewer programs would suggest that the test was not ‘meaningful’ while failing more would make for too large a ‘subset of programs that could potentially lose eligibility.’ ”

The preceding quote is from a New York Times article that does a tidy job of  explaining the possible ramifications, as well as the scope of the problem. There’s no reason to re-cover ground the great Grey Lady has already covered quite well, so Your Humble Blogger will make a couple of observations you can keep in mind as you click through, or don’t.

One: The bottom line, the DOE seems confident, is that the detartment will take the same framework, attach it to a threshold that has a rational basis and issue a new rule, all of which will take time. (It also could see renewed opposition, given the degree of animus our own John Kline, Lakeville Republican and head of the U.S. House of Representatives Education and the Workforce Committee, bears toward the restrictions.)

What might that less arbitrary and capricious formula look like? Hop in the MinnPost wayback machine and spend a few minutes in the halcyon days of 2009, when the public and industry pooh-bas were busy commenting on possible approaches.

Two: You know who hasn’t been caught up in any of the controversies in any way? Minnesota’s publicly traded hometown for-profit Capella University, an online school that offers very few of the vocational career-prep tracks at issue, which, the rule’s title notwithstanding, tend not to be so gainful. The lion’s share of Capella’s courses are geared for working professionals who need a graduate degree or specialized certificate to advance in a career in which they are already working.

Bonus fun fact: A sizable number of those working professionals are educators looking to move up in public and nonprofit education arenas.

Duncan’s fondness for odd numbers

And finally, three: A slice of Your Humble Blogger’s mental hard drive is sadly occupied by questions she periodically — and fruitlessly — puts to policymakers about U.S. Secretary of Education Arne Duncan’s fondness for odd numbers and arbitrary-seeming thresholds.

Such as our new national obsession with the lowest-performing 15 percent of K-12 schools. Why 15 percent? Why not 20, or 25 or 10? Local education policy types can cheerfully reel off the names of struggling districts where the second-lowest-performing 15 percent of schools are performing virtually as poorly as the bottom 15 percent.

But I digress. YHB senses in Judge Contreras a kindred spirit. Indeed, you can almost hear his impatience in his summary of the DOE’s explanation of its thinking:

“The department analyzed how many schools in various sectors ‘would satisfy loan repayment thresholds of 45 and 35 percent,’ concluding that ‘[t]he number of institutions with very low loan repayment rates, particularly in the for-profit sector, is alarmingly high.’

“After its analysis, the department proposed that programs with a repayment rate of at least 45 percent would pass the debt repayment test, those with repayment rates lower than 45 percent but higher than 35 percent would face restricted eligibility, and programs with repayment rates below 35 percent would face ineligibility.

No explanation for thresholds

“The department did not explain why it had chosen those thresholds, although it did indicate that, ‘[a]t the negotiated rulemaking sessions,’ it had ‘suggested a loan repayment rate of 75 percent of all borrowers in a program, and later suggested a rate of 90 percent for completers’ but ‘modified its expectations for loan repayment in light of further research and community input.’”

And lastly, and now I really will quit: Am I the only person in the US of A who repaid every nickel of her student loans?

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