Education Department sued over gainful employment rule

Inside Higher Ed

Laura Spitalniak

January 5, 2024

The American Association of Cosmetology Schools said the rule is based on a “flawed” debt-to-earnings ratio.

Dive Brief:

The U.S. Department of Education is being sued over its new gainful employment rule by a trade organization representing postsecondary beauty schools.

The American Association of Cosmetology Schools, along with one of its members, filed the lawsuit in federal court late last month seeking to stop the rule’s forthcoming implementation on July 1. Chief among their complaints is that the rule’s debt-to-earnings ratio is a flawed metric and fails to properly track income for tipped workers like beauticians.

AACS argues the regulation is arbitrary and that the department overstepped its authority in adopting it. The organization also says the rule violates its institutions’ and students’ First Amendment right to free speech, since it will selectively restrict colleges’ ability to operate.

Dive Insight:

In September, the Education Department unveiled its long-awaited gainful employment regulation. The agency predicted the rule would prevent about 700,000 students nationwide from enrolling in low-performing career programs.

Under the regulation, career programs must prove their students make more money than they owe after graduation, and that at least half outearn other state residents with no postsecondary degree. Programs that don’t meet these standards could lose access to federal aid, something very few colleges can operate without.

DuVall’s School of Cosmetology, an AACS member and co-plaintiff in the case, said almost 68% of its revenue in 2022 came from federal student aid. If the Education Department cut off either of the Texas-based institution’s two programs, it would be forced to close, said the lawsuit, filed Dec. 22 in U.S. District Court in Texas.

The Education Department did not immediately respond to a request for comment Thursday.

The for-profit higher ed sector has long argued that gainful employment unfairly singles out its institutions. AACS’s lawsuit further argues that cosmetology programs will be disproportionately hurt by the methodology used by the Education Department to root out poorly performing programs.

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