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Court Vacates GE Regulations


APSCU – July 2, 2012 – Steve Gunderson, President and CEO

Dear Members,

On Saturday, June 30, 2012, Judge Rudolph Contreras of the United States District Court for the District of Columbia ruled that the "Gainful Employment" (GE) Loan Repayment Rate (LRR) violated the Administrative Procedure Act (APA) because the Department of Education’s decision to use a 35% minimum threshold lacked any reasoned basis. The court observed that the Education Department designed the three rules to work together; therefore, in vacating the Repayment Rate on the basis that it was arbitrary and capricious, the court ruled that the other two metric-based tests were invalid as well (Debt-to-Earnings and Debt-to-Discretionary-Earnings). As a result, our career colleges and universities can no longer face sanctions or lose Title IV eligibility due to the faulty GE tests and our students will continue to enjoy access to our institutions of higher education.

In striking down the regulations the court stated the following,

"The debt repayment standard was not based upon any facts at all. 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. Instead, the Department simply explained that the chosen rate would identify the worst-performing quarter of programs…That this explanation could be used to justify any rate at all demonstrates its arbitrariness…This is not reasoned decision making. ("[I]n the absence of any reasonable justification," the court "must conclude that this aspect of the [rule] is arbitrary and capricious."

APSCU v. Duncan, pg. 31, 11-1314 (RC) (6/30/12)

The court decision can be found here.

We believe vacating the core measures of the so-called "Gainful Employment" rule is an enormous victory, and even somewhat surprising, given the general deference to the agency in such matters.

Upon learning of this momentous decision, I immediately communicated my thoughts to Secretary of Education Arne Duncan. I informed him that it is my personal hope and that of the APSCU Board of Directors that the era of litigation is over and the era of public-private partnerships in putting people to work in good jobs with good incomes is ahead. Let's not renegotiate these contentious regulations; let's not continue litigation in the courts. Rather, let's look for ways to immediately move forward together in this important work.

While significant resources of time, intellect, and money have been invested by both sides in this debate, we can both agree that little progress has been made in our joint responsibility to provide students- especially those students most at risk, whom our sector serves proudly-with the education and skills to achieve real jobs, incomes, and opportunities for a middle-class life for their family. As a sector, we take great pride in educating for the market demands of one’s regional economy in ways that provide real opportunities for the students we serve.

There is much we can and should do together. The Association of Private Sector Colleges and Universities (ASPCU) seeks to build a new partnership for progress with the Department and the Administration in ways that best serve our students and nation. In this era of record budget deficits and program reductions to reduce such liabilities, our mutual and greatest challenge is providing access to postsecondary education resulting in real academic outcomes. As you know better than most, we are facing a need to provide an additional eight to 23 million students with postsecondary skills (above current services) over the next decade. We can only hope to achieve this goal if the Administration, the Department, APSCU, and all of our colleagues in higher education develop a joint partnership to advance new innovative ways to maximize access to postsecondary education. That is why in my letter to the Secretary, I promised him I would encourage each APSCU member to do their own proper analysis of the relationship between your academic programs and successful employment outcomes. In my letter to the Secretary I included the following: "You should know that in light of the court ruling, I'm asking our membership to carefully review any of your programs that might not have met the standards of Gainful Employment in the advisory analysis published last week. It is my hope that each school will review such programs to determine whether they meet the test of market demand and provide students valuable professional opportunities." We stand ready—and we look forward to working with all concerned to achieve education and skill outcomes for our students that changes their lives and builds new economic progress in our nation.

I want to acknowledge the fine work of our legal team at the law firm of Gibson Dunn; the APSCU Board of Directors who chose to pursue this cause; the assistance of those association members who served on our litigation working group; and, of course, all of our APSCU members who provided the necessary resources to fight this critical battle on behalf of our sector and the students we serve.

You may read my letter to Secretary Duncan here.


Steve Gunderson

President and CEO