(Corrects to include that request had been brought in previous lawsuit in second paragraph of story published Feb. 22.)
Feb. 22 (Bloomberg) -- The Association of Private Sector Colleges and Universities filed a complaint in its challenge to U.S. Education Department regulations on recruiters’ compensation, saying the amended rules are unjustified and hurt students.
The complaint filed Feb. 21 in federal court in Washington restates the trade group’s objections, filed last year in a previous lawsuit brought over the issue, to an amended Education Department statement of the regulation. A federal appeals court had found in 2012 that part of the regulation violated the Administrative Procedure Act.
Education Secretary Arne Duncan has said that some for-profit colleges lure students into expensive educational programs that don’t increase employability, while leaving graduates and dropouts with crushing debt. The schools get the bulk of their revenue from federal student grants and loans.
The trade group said in the complaint filed Feb. 21 that the Education Department, which revised its rules last year in response to a court order in the earlier lawsuit, still fails to provide a rational justification for its prohibition on paying recruiters based on student retention, graduation, job placement and racial diversity.
“The compensation regulations undermine the ability of all postsecondary educational institutions, including public and nonprofit schools, to pay their employees merit-based compensation both for helping students to persevere in their studies to graduation and to secure employment thereafter,” the group said in the complaint.
The U.S. Consumer Financial Protection Bureau, created in 2011 to regulate financial products, has said it’s preparing to to tackle student debt, which has climbed to $1.2 trillion and is pervasive among former students at for-profit colleges.
The for-profit colleges group had sued in 2011 to challenge a 2010 rule on what it calls graduation-based compensation for recruiters. A federal appeals court in 2012 ruled that the Education Department’s rule was “arbitrary and capricious without some better explanation,” according to yesterday’s complaint.
Last year’s amended rule recites “the same parade of horribles that the department invoked to justify the 2010 proposed rule,” according to the trade group. The seek a court order blocking the rule from taking effect.
Representatives of the Education Department didn’t immediately respond after regular business hours to an e-mail seeking comment on the lawsuit.
President Barack Obama pledged in his State of the Union address last month to “work with Congress to see how we can help even more Americans who feel trapped by student loan debt.” Sabrina Simone Jenkins, a former DeVry Education Group Inc. student with $90,000 in education-loan debt, was invited to sit in the First Lady’s box.
While for-profit colleges make up 10 percent to 13 percent of higher education enrollment, students who attended a for-profit college accounted for 47 percent of all federal student loan defaults in 2008 and 2009, according to an investigation by the Senate HELP Committee.
The trade group filed a new complaint to get around jurisdictional issues raised by the Education Department regarding the group filing its objection as a request for further relieved in the older lawsuit that had already been heard by the federal appeals court, according to a stipulation filed Feb. 21.
The case is Association of Private Sector Colleges and Universities v. Duncan, 14-00277, U.S. District Court, District of Columbia (Washington).
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