Federal judge strikes down loan repayment threshold regulation
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July 06, 2012
Washington, D.C.: A federal judge has struck down a Department of Education regulation that sets a minimum threshold for the percentage of students repaying their loans in order for a for-profit college to qualify for federal grants. Judge Rudolph Contreras issued the ruling on June 30, 2012, stating the threshold of 35 percent of students repaying was arbitrary and not based on any fact.[1]
“No expert study or industry standard suggested that the rate selected by the department would appropriately measure whether a particular program adequately prepared its students,” Contreras wrote in his ruling. “The entire debt measure rule must therefore be vacated and remanded to the department.”[1]
The rule, set to go into effect on Sunday[2], was intended to prevent students from taking on large sums of debt for degrees that would likely not result in income that would be sufficient to repay the debt in a reasonable timeframe. Industry representatives, however, claimed the rule would limit access to higher education and training for some people.[3] Had the rule gone into effect, more than 190 career-training programs (approximately 5 percent of such programs) would fail to meet the repayment requirement, and thus be ineligible for federal loans.[1]
Judge Contreras did not, however, strike down the entirety of the DOE’s regulation. He “upheld the government’s disclosure portion of the regulation, which requires institutions to report to students their graduation and placement rates and their students’ median debt load.”[1]
Shares for some of the for-profit schools, including Corinthian Colleges, rose after the announcement of Judge Contreras’ ruling.[3]
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