For-Profit Schools Beat Obama in Court!

The Obama administration has suffered a rebuke in its effort to regulate private-sector colleges, after a federal judge ruled that a proposed rule restricting bonuses for college recruiters was enacted without any proper evidence or justification for its existence.

The ruling is the second setback of its type for Obama’s Department of Education in three years.

Federal law has for decades banned educational recruiters from receiving compensation based on the number of students they enroll, in order to discourage aggressive sales tactics, fraud and other harmful behaviors. However, during the Obama administration a major push has been made to tighten this rule in order to prevent what the administration says are evasive practices.

In 2011, the Department of Education eliminated 12 “safe harbors” that allowed bonus compensation for recruiters in certain circumstances, including one that allowed for recruiters to receive bonuses based on how many students they recruited who graduated, rather than merely enrolled. The Association of Private Sector Colleges (APSCU) and Universities promptly sued, arguing the restrictions were illegal and offered without justification. In 2012 a federal court ruled on their behalf concerning the graduation bonus and ordered the Department of Education to provide better reasoning for its rules.

obama educationIn its second attempt, the Obama administration argued that the graduation bonus was an effort to evade the ban on enrollment bonuses, since all students must enroll to graduate.

That reasoning doesn’t fly, wrote Judge Rosemary Collyer of the D.C. Circuit Court of Appeals.

“If accepted, this rationale would allow the Department to ban all incentive-based compensation in higher education, as enrollment is always a necessary predicate to any assessment of program,” wrote Collyer in her ruling.

The Department of Education also attempted to justify the rule by claiming that recruiters were driving students towards shorter, less rigorous programs that they were more likely to graduate from, but which would help the students less than other programs. That might be true, Collyer said, but if it is, the federal government has provided no evidence that is the case.

“The Department does not identify factual grounds in the record for its concerns,” Collyer says. Even though it would have been “a simple matter” for the Department of Education to back up its claims more substantively, Collyer said, it failed entirely to do so, dooming its case.

Collyer also pointed out that federal laws concerning higher education are written with the explicitly stated goal of boosting graduation from postsecondary institutions. Incentivizing graduation would appear to help that goal, not hinder it, said Collyer, and the government had totally failed to explain how that was not the case. Nor had the government responded to an argument made by for-profit colleges that its rules would hinder the college graduation rates of minority students by prohibiting certain incentives to recruit them.

APSCU released a statement after the ruling saying it was “pleased” and requesting that the Department of Education to start its proposed for-profit college regulations from scratch.  The Department of Education has not said what is planned response is.

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