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Court Strikes Down Parts of Gainful Employment Rule. So What Now?

By Alyson Klein — July 02, 2012 1 min read

So lots of folks are putting out statements about that big court decision. Not, not that one. In case you hadn’t heard, a federal judge struck down a key component of the U.S. Department of Education’s controversial “gainful employment” rule—affecting for-profit colleges—over the weekend.

The regulation, issued last year, was designed to make sure that the federal government was getting bang for its student aide buck. In order to be eligible for student loans, programs had to prove that 35 percent of their graduates were actively repaying student loans. But a federal judge called that percentage “arbitrary.” The court also struck down other parts of the rule, including one that required one that requires institutions that want to offer new vocational program to get prior approval from the department.

So what’s the political upshot? Well, Republicans on Capitol Hill, who really hated the Gainful Employment rule, are happy with the ruling. Here’s a joint statement from Rep. John Kline, R-Minn., the chairman of the House Education Committee, and Rep. Virginia Foxx, R-N.C., who oversees the panel that deals with higher education policy:

The red tape and bureaucracy associated with the so-called 'gainful employment' regulation would have severely limited students' academic options and made it impossible for many schools to respond quickly to local workforce needs without pre-approval from the Secretary of Education. The court's decision to strike the most burdensome portions of the 'gainful employment' regulation is a welcome development in the fight to remove unnecessary federal rules that restrict choice and opportunities in higher education."

But the U.S. Department of Education was ready to go back and come up with a version of the rule that will pass legal muster. Here’s a statement from Peter Cunningham, a spokesman for the department:

The court clearly upheld the authority to regulate college career programs, but found that the Department had not provided enough explanation of its debt repayment measure, so it has given the Department an opportunity to address that concern. We are reviewing our legal and policy options to move forward in a way that best protects students and taxpayers while advancing our national goal of helping more Americans get the skills they need to compete in the global economy."

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