Judge Strikes Main Element of For-Profit College Rules

Tuesday, July 3, 2012
A federal judge in Washington has overturned a main component of the federal Department of Education’s “gainful employment” rules, which were applied to career-training programs and were hotly contested by for-profit colleges, saying that regulation was arbitrary. The ruling by Judge Rudolph Contreras of Federal District Court was released on Saturday. The gainful-employment regulations, which were issued last year and were scheduled to go into effect on Sunday, were devised to prevent for-profit colleges, which get the bulk of their revenues from federal student aid, from leaving students with huge debt loads and credentials that provided little help in landing them a job. Under the regulations, programs had to meet one of three tests or lose their eligibility for federal student aid: at least 35 percent of graduates must be repaying their loans, the typical graduate’s estimated annual loan payments must not exceed 12 percent of earnings, or they must not exceed 30 percent of discretionary income.

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