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A federal judge has vacated several provisions of the controversial “gainful employment” rule, which the Department of Education issued last year in an effort to ensure that federal student-aid dollars flowing to vocational programs were good investments and helping prepare students for jobs that pay well. 

The decision, by Judge Rudolph Contreras of the U.S. District Court for the District of Columbia, was released Saturday in a case brought by an association that represents for-profit colleges, which have lobbied strongly against the rule.

Much of the ruling goes in the department’s favor, rejecting a broad challenge to its authority to issue the rule. “The gainful employment regulations are a reasonable interpretation of an ambiguous statutory command: that the Department provide Title IV funding only to schools that ‘prepare students for gainful employment in a recognized occupation,’” Judge Contreras wrote.

In looking at how the department arrived at the benchmarks it set for enforcing the rule, however, the judge found that one of them, a debt-repayment measure, was not the product of “reasoned decision-making.” That measure requires that at least 35 percent of a program’s graduates must be actively repaying their student loans.

But Judge Contreras says the department failed to provide a factual basis for why a repayment rate of 35-percent would be a “meaningful performance standard.” Instead, he wrote, it has said it chose that figure “because approximately one quarter of gainful employment programs would fail a test set at that level.” But the department could have chosen a percentage under which only one-tenth of the programs would have failed and justified it by the same rationale, he said. Therefore, he accepted the argument that the standard was arbitrary and capricious.

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Chairman John Kline (R-MN) and Higher Education and Workforce Training Subcommittee Chairwoman Virginia Foxx (R-NC) issued a statement commending the court for reining in the controversial gainful employment regulation. To read the statement, click here.

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