Ass'n of Private Colleges & Univs.v. Duncan

• Decision Date: 30 June 2012
• Docket Number: Civil Action No. 11–1314 (RC).
• Citation: 870 F.Supp.2d 133
• Parties: ASSOCIATION OF PRIVATE COLLEGES AND UNIVERSITIES, Plaintiff, v. Arne DUNCAN, in his official capacity as Secretary of the Department of Education, and United States Department of Education, Defendants.
• Court: U.S. District Court — District of Columbia

870 F.Supp.2d 133

ASSOCIATION OF PRIVATE COLLEGES AND UNIVERSITIES, Plaintiff,

v. Arne DUNCAN, in his official capacity as Secretary of the Department of Education,andUnited States Department of Education, Defendants.

Civil Action No. 11–1314 (RC).

United States District Court, District of Columbia.

June 30, 2012.

Held Invalid

34 C.F.R. §§ 600.10(c), 600.20(d), 668.6(a), 668.7.

Douglas R. Cox, Derek S. Lyons, Nikesh Jindal, Veronica S. Root, Gibson, Dunn & Crutcher, L.L.P., Washington, DC, Timothy John Hatch, Gibson, Dunn & Crutcher, Los Angeles, CA, for Plaintiff.

Marcia Berman, Gregory Peter Dworkowitz, Michelle Renee Bennett, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

RUDOLPH CONTRERAS, District Judge.

To be eligible to accept federal funds under Title IV of the Higher Education Act, some institutions of higher education must “prepare students for gainful employment in a recognized occupation.” 20 U.S.C. §§ 1001(b)(1), 1002(b)(1)(A)(i), (c)(1)(A). Last year, the Department of Education (the “Department”) published a rule that tests compliance with the gainful employment requirement by examining the debt, earnings, and debt repayment of a program's former students. The Association of Private Colleges and Universities (the “Association”) has brought suit against the Department and its Secretary to challenge those debt measures and two other related rules. Because one of the debt measures lacks a reasoned basis, that regulation will be vacated as arbitrary and capricious. Because the majority of the related rules cannot stand without the debt measures, they will be vacated as well.

I. BACKGROUND

A. Title IV of the Higher Education Act

Every year, Congress provides billions of dollars through loan and grant programs to help students pay tuition for their postsecondary education. The Department of Education ... administers these programs, which were established under Title IV of the Higher Education Act of 1965.... Students must repay their federal loans; the costs of unpaid loans are borne by taxpayers.

To participate in Title IV programs— i.e., to be able to accept federal funds—a postsecondary institution ... must satisfy several statutory requirements. These requirements are intended to ensure that participating schools actually prepare their students for employment, such that those students can repay their loans.

Ass'n of Private Sector Colls. & Univs. v. Duncan, 681 F.3d 427, 433–34 (D.C.Cir.2012); see also id. at 435 (“[S]chools receive the benefit of accepting tuition payments from students receiving federal financial aid, regardless of whether those students are ultimately able to repay their loans. Therefore, Congress codified statutory requirements in the HEA to ensure against abuse by schools.”). The statutory requirement at issue in this case makes that intent explicit, requiring that certain institutions “prepare students for gainful employment in a recognized occupation.” 20 U.S.C. §§ 1001(b)(1), 1002(b)(1)(A)(i), (c)(1)(A). For some institutions, that preparation must take the form of an “eligible program of training,” id., § 1002(b)(1)(A)(i), (c)(1)(A); an “eligible program,” in turn, is one which “provides a program of training to prepare students for gainful employment in a recognized profession,” id. § 1088(b)(1)(A)(i). These requirements have a long history in the statute, which bears some review.

B. Statutory History

Over three weeks in 1965, Congress enacted the National Vocational Student Loan Insurance Act, Pub.L. No. 89–287, 79 Stat. 1037 (codified at 20 U.S.C. §§ 961–96 (Supp. I 1965)) (“NVSLIA”), and the Higher Education Act, Pub.L. No. 89–329, 79 Stat. 1219 (codified at 20 U.S.C. §§ 1001–107 (Supp. I 1965)) (“HEA”). Both were intended “to encourage States and nonprofit private institutions and organizations to establish adequate loan insurance programs for students in eligible institutions.” NVSLIA § 2(a)(1); HEA § 421(a)(1). Because many states did not yet have such programs, each Act also established “a Federal program of student loan insurance for students who do not have reasonable access to a State or private nonprofit program.” NVSLIA § 2(a)(2); HEA § 421(a)(2). Under each program, the federal government itself would ensure loans “made to a student who ... has been accepted for enrollment at an eligible institution.” NVSLIA § 8(a)(1); HEA § 427(a)(1). The structures of those programs were quite similar,¹ but their definition of “eligible institution” differed. Only “a public or other nonprofit institution” could be eligible under the Higher Education Act. HEA § 435(a)(4). Although that Act was primarily targeted towards institutions awarding bachelor's degrees or granting credit that could be used towards such a degree, see id. § 435(a)(3), nursing schools were also eligible for its loan insurance program, as was “any school which provide[d] not less than a one-year program of training to prepare students for gainful employment in a recognized occupation,” id. § 435(a). The National Vocational Student Loan Insurance Act, by contrast, extended eligibility to for-profit schools but limited it to institutions providing “a program of postsecondary vocational or technical education designed to fit individuals for useful employment in recognized occupations.” NVSLIA § 17(a).

The House subcommittee considering the National Vocational Student Loan Insurance Act “devoted the majority of its attention to the ‘eligible institution’ definition....” H.R.Rep. No. 89–308, at 9 (1965). “It was the determined intent [of both the House and Senate subcommittees] that the ‘fly-by-night’ institutions of the post-World War II era be explicitly eliminated from eligibility.” Id.;S.Rep. No. 89–758, at 12 (1965), 1965 U.S.C.C.A.N. 3742, 3753. Both subcommittees heard testimony from Dr. Kenneth B. Hoyt, a professor of education at the University of Iowa who ran “a national research program aimed at studying students who attend a trade, technical, or business school at the post-high-school level.” H.R.Rep. No. 89–308, at 3 (1965). They placed considerable weight on Dr. Hoyt's testimony, reprinting his comments at length in otherwise brief reports and emphasizing their influence. Id. (“Dr. Hoyt soon dispelled any doubts the subcommittee may have had about the need for such legislation and about the caliber of student attending a vocational institution.”); S.Rep. No. 89–758, at 3 (1965), 1965 U.S.C.C.A.N. 3742, 3744 (“Dr. Hoyt's statement confirmed the committee's estimate of the need for such legislation and of the high caliber of students attending vocational institutions.”).

Dr. Hoyt began his discussion of the experiences of students after completing their vocational training by posing two questions: “If loans were made to these kinds of students, is it likely they could repay them following training? Would loan funds pay dividends in terms of benefits accruing from the training students received?” H.R.Rep. No. 89–308, at 4 (1965); S.Rep. No. 89–758, at 7 (1965), 1965 U.S.C.C.A.N. 3742, 3748. He noted that “most of these students do complete their training” but nonetheless “included both those who completed and those who failed to complete training” in his “analyses of posttraining vocational experiences.” H.R.Rep. No. 89–308, at 4 (1965); S.Rep. No. 89–758, at 7 (1965), 1965 U.S.C.C.A.N. 3742, 3748. Those analyses indicated that “over 95 percent of those who sought employment found it,” and a substantial majority found employment related to their training. H.R.Rep. No. 89–308, at 4–5 (1965); S.Rep. No. 89–758, at 7 (1965), 1965 U.S.C.C.A.N. 3742, 3748. As Dr. Hoyt concluded:

It seems evident that, in terms of this sample of students, sufficient numbers were working for sufficient wages so as to make the concept of student loan [repayment] to be rapid following graduation a reasonable approach to take.... [A]ll data presented here support the reasonableness of making loan funds available to students attending trade, technical, and business schools. I have found no reason to believe that such funds ... would represent a poor financial risk.

H.R.Rep. No. 89–308, at 5–6 (1965); S.Rep. No. 89–758, at 8 (1965), 1965 U.S.C.C.A.N. 3742, 3749 (first alteration in House version). Each subcommittee also emphasized other testimony suggesting that vocational students would be able to repay the loans incurred to gain that training.²

Congress merged the two student loan insurance programs in 1968, but retained their separate definitions of eligibility. Higher Education Amendments of 1968, Pub.L. No. 90–575, § 116(a), 82 Stat. 1014. Any school that had been an “eligible institution” under the Higher Education Act became an “institution of higher education,” id.§ 116(a)(3), while those that had been eligible under the National Vocational Student Loan Insurance Act became “vocational schools,” see id.§ 116(a)(4)(B). Both institutions of higher education and vocational schools were now eligible to participate in Title IV programs. See20 U.S.C. § 1085(a) (1970) (“The term ‘eligible institution’ means (1) an institution of higher education, [and] (2) a vocational school ....”); id. § 1085(b) (defining “institution of higher education”); id. § 1085(c) (defining “vocational school”). As the Higher Education Act evolved over the years, these definitions remained remarkably stable. See20 U.S.C. § 1085(a)-(c) (Supp. II 1972) (definitions unchanged by Education Amendments of 1972, Pub.L. No. 92–318, 86 Stat. 235); 20 U.S.C. § 1085(a)-(c) (1976) (no relevant amendments made by Education Amendments of 1976, Pub.L. No. 94–482, 90 Stat. 281); 20 U.S.C. § 1085(a)-(c) (Supp. IV 1980) (no relevant amendments made by Education Amendments of 1980, Pub.L. No. 96–374, 94 Stat. 1367); 20 U.S.C. § 1085(a)-(c) (1988) (no relevant amendments made by Higher Education Amendments of 1986, Pub.L. No. 99–498, 100 Stat. 1268).

In 1992, Congress revised and reorganized the definitions, replacing ...