Cases & Developments

Memorandum Opinion & Order granting-in-part and denying-in-part Plaintiffs’ Motion for Preliminary Injunction. Plaintiffs, “a coalition of vocational schools with a member-program in Arlington, Texas,” challenged the Department of Education’s new maximum program length regulation, which provides that vocational programs may require no more than the minimum number of hours a state requires for licensure in a given field, alleging that (1) the Department exceeded its authority under the HEA and that the Rule violates the Administrative Procedure Act (APA) because it is arbitrary and capricious and was not a “logical outgrowth” of the Department’s Notice of Proposed Rulemaking (NPRM). The Rule would replace the Department’s “150% Rule,” which provides access to federal student aid up to 150% of the state’s required hours and does not entirely deny eligibility to programs exceeding this threshold. The court held plaintiffs were likely to succeed on the merits of their APA claims, finding that (1) the Department had not sufficiently explained either the grounds for “converting a program intended to be a safe-harbor into a strict-liability trap” or for altering the 150% rule after 30 years and (2) the NPRM did not signal that the Department “was considering removing one leg from the triad, accreditors, from the process entirely” by “imposing an absolute condition precedent to federal funds.” The court found, however, that plaintiffs failed to show that the proposed regulation “usurp[ed] authority traditionally reserved for states,” noting that courts have long recognized the federal government’s power to “regulate-by-incentivization.”   

Comment Letter from the American Council on Education and 29 other higher education associations to the U.S. Department of Education on Financial Value Transparency (FVT) and Gainful Employment (GE) Reporting Requirements. The letter requests that the Department delay the current October 1st reporting deadline to a later date commensurate with the ongoing delays associated with the FAFSA. It notes the Department’s estimate that the reporting burden for the first year of the reporting will be 5,078,260 hours for the approximately 4,518 institutions regulated. It also notes that delays in the Department’s guidance on the FVT/GE reporting requirements and delays related to the FAFSA process have impacted institutions’ ability to prepare their FVT/GE data.  

U.S. Department of Education Notice of Proposed Rulemaking (NPRM) on Student Debt Relief. The NPRM, “in accordance with the Secretary’s authority to waive repayment of a loan provided by the HEA,” proposes “to provide debt relief targeted to address certain specific circumstances as part of a comprehensive effort to address the burden of Federal student loan debt.” Those circumstances include “growth in a borrower’s loan balance beyond what was owed upon entering repayment, the amount of time since the loan first entered repayment, whether the borrower meets certain criteria for loan forgiveness or discharge under existing authority, and whether a loan was obtained to attend an institution or program that was subject to secretarial actions, that closed prior to secretarial actions, or was associated with closed Gainful Employment programs with high debt-to-earning rates or low medium earnings.” Comments are due on or before May 17, 2024.  

U.S. Department of Education Electronic Announcement (GE-24-02) on Guidance Resources regarding the Financial Value Transparency and Gainful Employment (FVT/GE) Final Regulations. The Electronic Announcement highlights a new Financial Value Transparency and Gainful Employment Information Topics page, which will serve as a “repository for regulations, policy guidance, publications, and operational information” related to the new regulations. The Electronic Announcement also notes a new Frequently Asked Questions page organized in categories for General, Debt to Earnings Rates, Earnings Premium, Warnings, Disclosures and Acknowledgements, and Reporting.  

Opinion reversing denial of preliminary injunction and remanding with instructions to enjoin and postpone the effective date of the challenged regulations. Plaintiffs, the Career Colleges and Schools of Texas (CCST), sued the Department of Education to challenge the borrower-defense and closed-school discharge provisions of the November 1, 2022, Final Regulations on Institutional Eligibility Under the Higher Education Act of 1965 asserting that the regulations are inconsistent with the Higher Education Act and unlawful under the Administrative Procedure Act. The district court denied a preliminary injunction, finding CCST had not shown irreparable harm. In reversing and remanding with instructions to enjoin and postpone the effective date of the provisions pending final judgment, the Fifth Circuit found CCST’s assertions of compelled compliance and compliance costs, altered business operations and missed opportunities, and imminent threats of costly and unlawful adjudications sufficient to show a substantial threat of irreparable harm. It also found “a strong likelihood that the plaintiffs will succeed on the merits in demonstrating the Rule’s numerous statutory and regulatory shortcomings.”