For-profit and nonprofit schools are increasingly going to court to oppose federal regulations that they say the Biden administration is imposing because of ideological differences.
Career Education Colleges and Universities, an advocacy group for for-profit schools, has backed litigation challenging the Biden administration’s borrower defense provisions and changes to the bare minimum rule, which critics say could force for-profit and nonprofit schools to shutter.
Nonprofit schools such as Keiser University are also fighting what they say are Biden administration policies that seem to be based on a desire for free schooling.
“It appears to be ideological and it also appears to be kind of a belief that higher education should be free as they have advocated,” said Arthur Keiser, chancellor of Keiser University. “Obviously, that creates a problem for private institutions.”
“There is a mix of schools that provide training for the workforce that doesn’t involve degree programs,” said Jed Brinton, senior vice president and general counsel for Career Education Colleges and Universities, which represents for-profit trade schools that train aircraft mechanics, cosmetology professionals and health care workers.
“There are some folks on the Democrat side of things who think it would be a better world in higher education if you got rid of all for-profit schools,” Mr. Brinton said. “From my perspective, that would be very harmful.”
Borrower defense to repayment
One of the provisions at issue is the borrower defense to repayment rule, which the administration moved to implement in 2022. The rule would allow students who meet various criteria to apply for loan forgiveness.
The rule would allow the Department of Education, rather than a court, to adjudicate a borrower’s complaint against an institution. If the department finds that a school acted by omission or fraudulently, the borrower’s loan could be discharged.
The federal government then could recoup the funds from the institutions.
Mr. Brinton’s organization supported a lawsuit by a group of Texas trade schools to enjoin the Education Department from enforcing the rule. The group argued that the department’s regulation was unlawful and would cost the schools money in recouping discharged loans.
The 5th U.S. Circuit Court of Appeals agreed in April and remanded the challenge to the district court with instructions to enjoin the department from enforcing the rule.
“The Rule presumes damages,” the 5th Circuit reasoned in its order.
“Schools are not provided with any discovery or cross-examination rights in either the borrower-defense or recoupment stage of the adjudication proceedings established by the Rule despite the fact that a successful borrower discharge claim would give rise to a presumption of liability against the schools in subsequent recoupment proceedings. Nor is there any requirement in the Rule that the Department official(s) in charge of the borrower defense or recoupment adjudication proceedings have any legal training.”
Another lawsuit involving the borrower defense rule is pending before the 9th U.S. Circuit Court of Appeals. A group of for-profit and nonprofit schools moved to intervene in a settlement between borrowers and the Department of Education, which had moved to fully discharge their loans at roughly 150 for-profit and nonprofit institutions.
Bare minimum rule
Another group of Texas trade schools halted the implementation of the Biden administration’s bare minimum rule, which would require for-profit schools to issue a license to a student within the minimum number of state-required hours to obtain financial aid.
For example, Texas requires a minimum of 500 hours of training for a massage therapist to obtain a license. A school that provides 600 hours of licensed training would not qualify for federal student aid.
The Texas trade schools said the rule violated federal law. The schools had been operating for several administrations under the 150% rule, which allows federal aid funding as long as a program doesn’t exceed 150% of the state’s minimum requirement.
The U.S. District Court for the Northern District of Texas enjoined the bare minimum rule from taking effect this month as the litigation plays out.
Gainful employment rule
A group of cosmetology schools challenged the gainful employment rule in the Northern District of Texas. The rule aims to prevent students from applying to career programs that yield little employment success. Programs must pass a debt-to-earnings test to demonstrate that graduates can pay back their student loans.
That lawsuit is pending.
The complaint says the regulation is part of the federal government’s “contempt for the proprietary education industry, promulgated without regard for what the agency’s openly flawed data say or how many socially beneficial small businesses will close, under the guise of addressing a problem that those most harmed by the regulation do not cause.”
Grand Canyon University
Education advocates are monitoring a legal dispute between the Department of Education and Grand Canyon University.
Grand Canyon University operated as a nonprofit, converted to a for-profit school and then back to nonprofit status recognized by the Internal Revenue Service and the state of Arizona.
The Department of Education has continued to classify Grand Canyon University as a proprietary school.
Bob Romantic, a spokesperson for Grand Canyon University, said the classification requires the school to operate under stricter guidelines. It sued the administration over the classification issue.
The Biden administration also alleged the Christian school was deceptive about the course and the cost of its doctoral program and fined it more than $37 million. The school is appealing.
Meanwhile, former Grand Canyon University students have filed a class-action lawsuit claiming their programs cost more than the institution advertised.
Mr. Romantic called the class action “ridiculous” in an email to The Washington Times.
“We believe these targeted actions are retaliation over GCU filing a lawsuit in 2021 against the Department of Education over its refusal to acknowledge our lawful nonprofit status,” he said.
Andrew Gillen, a research fellow at the Cato Institute’s Center for Educational Freedom, said that while virtually all new regulation involves litigation, the fine imposed on Grand Canyon University seemed “punitive” and out of the norm for the Department of Education.
A spokesperson for the Department of Education and the Department of Justice Department has not responded to a request for comment.
• Alex Swoyer can be reached at aswoyer@washingtontimes.com.
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