In a ruling that dealt a major blow to the Department of Education’s recent crack down on the for profit education industry, Judge Rudolph Contreas of Federal District Court struck down the “gainful employment” regulation which requires schools to prove that at least 35% of graduates are repaying their loans. The regulation was part of a number of measures the Obama Administration has taken to reform for profit universities that leave students saddled with huge debt and little means of paying it off. Unsurprisingly, FPUs have vehemently contested the measures, stating that the department was overreaching its authority, although many of the industry’s critics felt that the measures weren’t strong enough.
Judge Contreas explained his ruling by stating that the 35% standard had no basis for determining the viability of a school’s programs. However, he maintained the integrity of the department’s other regulations, which stipulate that graduate loan repayments cannot exceed 12% of earnings or 30% of discretionary income.
The Department of Education issued an initial report showing many programs failed to meet at least one of the requirements with some failing all three; the biggest offenders were for profit universities.