Judge strikes down for-profit college loan repayment regulation

A federal judge is sending the Department of Education back to the drawing board on its effort to crack down on the scammiest, most useless for-profit college career-training programs. Under the Obama administration's gainful employment regulations, in order to maintain eligibility for federal student aid, career training programs must meet at least one of three tests: At least 35 percent of a program's former students must be repaying their loans, or else the program has to have estimated annual loan payments of no more than 30 percent of a former student's discretionary income or 12 percent of total earnings. Nearly 200 programs are currently failing to meet even one of these thresholds'but for the moment at least, they're off the hook:

But Judge Contreras ruled that the 35 percent debt-repayment standard had no basis. "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," the opinion said. "Instead, the department simply explained that the chosen rate would identify the worst-performing quarter of programs. Why the bottom quarter? Because failing fewer programs would suggest that the test was not 'meaningful' while failing more would make for too large a 'subset of programs that could potentially lose eligibility.'"

Since it seems the concept that 35 percent of students of a career-training program should be able to pay back their loans doesn't pass legal muster, the administration will have to come up with a replacement regulation; the good news here is that that's possible since the judge only overturned a specific test rather than the entire concept of regulating the for-profit college industry in this fashion. The better news is that the for-profit college industry is a target-rich environment and the government shouldn't have much trouble coming up with a new test, backed by expert study, to rein in programs that put students deeply in debt without equipping them to get jobs that will enable them to pay off that debt.