For-Profit College Claims Are 'Nonsense,' Obama Administration Says

WASHINGTON, DC - JUNE 21:  U.S. President Barack Obama (L) urges Congress to pass legislation that would keep federal student
WASHINGTON, DC - JUNE 21: U.S. President Barack Obama (L) urges Congress to pass legislation that would keep federal student loan rates from doubling during an event with Education Secretary Arne Duncan in the East Room of the White House June 21, 2012 in Washington, DC. The White House warned that if Congress doesn't act, subsidized student loan debt would double to 6.8 percent on July 1, affecting nearly 7.4 million people who currently hold loans like Pell Grants and Stafford loans. (Photo by Chip Somodevilla/Getty Images)

For-profit college representatives say they shouldn't have to tell prospective students whether they are likely to afford their debts after attending school, arguing the disclosures wouldn't be helpful.

But the Department of Education says this is "nonsense," according to a filing last week, the latest round in a federal court battle between the Obama administration and a key for-profit college trade group.

At issue are rules that would require for-profit colleges to disclose statistics on how students cope with their debts after graduating or dropping out of school. The data would indicate how many students are repaying loans, and how their loan debts will compare to earnings after graduation.

For nearly three years, the administration has attempted to rein in abuses at for-profit institutions that leave students with huge debts and few job prospects. Because the industry gets most of its revenue from the federal government, in the form of Pell grants and student loans, the Department of Education has tried to gauge whether such schools are preparing students for careers that will allow them to repay debts.

In a federal court filing last month, the Association of Private Sector Colleges and Universities (APSCU) argued that the student debt disclosures would not provide "any meaningful information to prospective students."

Last week, the Department of Education replied: "Plaintiff's assertion that… information on a program's repayment rate and debt-to-income ratios will not be meaningful to students, is nonsense."

The department went on to say the measurements provide "valuable information that many – if not all – prospective students considering whether to enroll in a program would like to have."

The disclosures could cast many for-profit colleges in a negative light. According to preliminary data released by the Department of Education this summer, many for-profit colleges fared poorly on the student debt measurements. Nearly two-thirds of all programs failed to meet expectations in at least one of three tests.

The tests measured whether: 1) at least 35 percent of students are repaying a minimal amount of their student loans; 2) graduates have loan debts that comprise less than 30 percent of their discretionary income; or 3) graduates' student debts are less than 12 percent of total earnings.

The APSCU did not respond to a request for comment on the lawsuit.

The tiff over student debt disclosures is the latest in a string of legal challenges the for-profit college association has mounted against the Department of Education in the last two years. Originally, the student debt disclosures were part of a broader package of so-called "gainful employment" regulations that could have punished certain schools for not meeting student debt thresholds.

Under the original regulations released last summer, for-profit programs could eventually be cut off from federal student aid dollars if programs failed the department's guidelines three times in four years. The for-profit college association sued last year, and U.S. District Judge Rudolph Contreras struck down much of the regulation in June, ruling that the Department of Education didn't have the research to back up part of the rule.

One month after the judge's decision, in July, the department asked Contreras to reinstate parts of the rule that would require schools to at least report data showing how many students are repaying loans and how their loan debts will compare to earnings after graduation. The department argued that the disclosures would "provide valuable information to schools and students – a purpose that is consistent with the Department's acknowledged authority to 'better inform prospective students.'"