U.S. Federal Judge Rudolph Contreras has overturned a main component of the Department of Education’s controversial “gainful employment” rules, which were applied to career-training programs and were contested by for-profit colleges. The regulations, issued last year and scheduled to go into effect last Sunday, were designed to prevent for-profit colleges–which get the bulk of their revenues from federal student aid–from leaving students with large debt loads and questionable credentials.
Under the regulations, programs had to meet one of three tests or lose their eligibility for federal student aid: At least 35% of graduates must be repaying their loans, the typical graduate’s estimated annual loan payments must not exceed 12% of earnings, or these load payments must not exceed 30% of discretionary income. Judge Contreras ruled that the 35% debt-repayment standard had no basis.
A spokesman for the Department of Education, emphasizing that the judge had not rejected the concept of gainful-employment regulations, said that the ruling would probably lead to further examination of appropriate benchmarks.