AFT and Student Defense Sue DeVos for Breaking Federal Law to Help Predatory For-Profit Colleges

Illegal Repeal of ‘Gainful Employment’ Rule to Worsen Student Debt Crisis and Cost Taxpayers $5.3 Billion 

SAN FRANCISCO—Student Defense is filing a landmark federal lawsuit today, on behalf the American Federation of Teachers, the California Federation of Teachers and individual members, targeting the Trump administration’s illegal repeal of protections for students at for-profit and career college programs.

The complaint accuses Education Secretary Betsy DeVos of violating federal law by pushing through a repeal riddled with errors and unfounded assertions. It argues the repeal puts students at the mercy of for-profit schools with a documented history of leaving borrowers with worthless degrees and tens of thousands of dollars of debt they cannot repay.

The lawsuit asks the court to immediately reinstate the “gainful employment” rule and restore vital protections for students considering enrolling in a career-certificate program or a for-profit college. By the Department of Education’s own estimates, the lawsuit also stands to save taxpayers $5.3 billion by ending the flow of federal funds to failing programs.

“Predatory for-profit colleges have been trying to escape accountability for years, and Secretary DeVos was only too happy to help them,” said Student Defense President Aaron Ament. “With this lawsuit we are going to strike down DeVos’ illegal repeal of the gainful employment rule and protect students from schools that leave borrowers with worthless degrees and debt they can never repay.”

“You can gauge a person’s soul by how they respond in a crisis. It’s telling that Betsy DeVos, when confronted with the biggest student debt disaster in American history, decides once again to side with profiteers, not borrowers,” said AFT President Randi Weingarten. “Rather than simply sticking with a rule that protects students, she writes a new one on behalf of her for-profit college friends—and can’t even get the details right. This error-ridden repeal would be comical if the stakes weren’t so high, but for borrowers confronting a lifetime of debt and worthless degrees, their lives are literally on the line. We are confident the court will reject this illegal gambit and back the students DeVos has shafted over and over again.”

“College students rely on the protections of the gainful employment rule not only to protect themselves from for-profit scams, but as a guardrail so they can make informed decisions about their future careers,” said California Federation of Teachers President Jeff Freitas. “Betsy DeVos wants to tear those protections away because she would rather do the bidding of predatory colleges than help the students she’s sworn to serve.”

Student Defense also filed the lawsuit on behalf of Isai Baltezar, a fifth-grade teacher in Santa Cruz, Calif., and Julie Cho, a lecturer at the University of California at Irvine. Both Baltezar and Cho, like so many teachers across the country, are considering enrolling in additional postsecondary programs to further their careers. However, both have been unable to find the information they need about programs’ outcome measures, including completion rates and job placement rates, as well as information about how many graduates are successful in repaying their student loans. Baltezar and Cho are both members of the CFT and the AFT.

The complaint, filed in the United States District Court for the Northern District of California, is available here.

Background 

The 2014 gainful employment rule
In 2014 the Department of Education finalized the gainful employment rule, establishing debt-to-earnings ratios for most for-profit colleges and vocational programs. Under the rule, which took effect in 2015, schools that did not meet the requirements would have to improve or lose eligibility to participate in the Title IV federal financial aid programs, meaning that students would be unable to take out federal loans to attend. The rules also mandated that schools disclose important information such as the percentage of students who successfully graduate, how much debt their graduates accrue, and how much they earn.

At the time, the department estimated that about 1,400 programs serving 840,000 students would not pass the accountability standards. Because DeVos halted enforcement of the rule upon taking office, no schools have been held accountable for their failures. 

The 2019 repeal
In July 2019 the Department of Education published a notice repealing the gainful employment rule. In doing so, the department failed to provide the justifications required under the federal law governing rulemaking, the Administrative Procedure Act. The department completely ignored the extensive commentary and criticism it received when it first proposed the repeal, even ignoring its own Office of Inspector General’s warnings that the move would leave a vacuum in accountability. 

The lawsuit filed today details extensive failures by the department to comply with the law. For example:

• The department claims that the statutory term “gainful employment in a recognized occupation” is unambiguous and does not need to be defined by regulation, contradicting multiple court opinions.
• The department misinterprets the evidence that supported the gainful employment rule and justifies its repeal without sufficient evidence. The department also failed to adequately consider reasonable alternatives to repeal, as required by law.
• One of the department’s main arguments justifying the repeal—that the gainful employment rule unfairly targeted proprietary institutions—is simply false. The rule did not discriminate against these types of institutions. Rather, the underlying statute made a distinction between gainful employment programs (at all types of institutions, both nonprofit and for-profit) and non-gainful employment programs.

For-profit colleges drive the debt crisis
The whopping $1.5 trillion in outstanding student loan debt poses a major challenge for millions of borrowers across the nation. However, students who attend for-profit schools are dramatically more likely to have difficulties paying back their loans. Roughly 11 percent of all students attend for-profit schools, but for-profit students represent about half of all student loan defaults. For-profit schools also disproportionately target students of color, who are then set up for failure by the low-quality programs.

In 2017, the Department of Education determined that virtually all of the programs that were failing the gainful employment debt-to-earnings metrics were at for-profit colleges. Specifically, more than 800 programs failed the metrics, 98 percent of which were at for-profits.