American Federation of Teachers v. DeVos

District Court, N.D. California·Decided September 3, 2020·No. 5:20-cv-00455·Unknown

Opinion

AMERICAN FEDERATION OF TEACHERS, et al., Case No. 5:20-cv-00455-EJD Plaintiffs, Re: Dkt. No. 26 v.

ELISABETH DEVOS, et al., Defendants.

PEOPLE OF THE STATE OF CALIFORNIA, Case No. 5:20-cv-01889-EJD Plaintiff, Re: Dkt. No. 18 v. ORDER GRANTING IN PART AND ELISABETH DEVOS, et al., DENYING IN PART DEFENDANTS’ MOTIONS TO DISMISS Defendants.

Under Title IV of the Higher Education Act of 1965 (“HEA”), see 20 U.S.C. § 1070 et seq. (1988), students may receive “Guaranteed Student Loans” (“GSLs”) to pay for their postsecondary tuition and expenses. However, in order for the postsecondary institutions to be eligible to accept these GSLs, the institutions 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) (emphasis added). The Secretary of the Department of Education (“the Secretary”) has broad authority to prescribe any rules and regulations that she deems necessary or appropriate to administer the HEA. See 20 U.S.C. § 1221e-3; see also id. § 3474. Case Nos.: 5:20-cv-00455-EJD; 5:20-cv-01889-EJD For nearly 45 years after the HEA’s enactment, the regulations promulgated pursuant to this broad authority did not specifically address the meaning of “gainful employment” or impose any obligations on postsecondary institutions in connection with this language. This changed in 2010 when the DOE issued a series of new Title IV disclosure and eligibility requirements aimed at ensuring certain educational programs actually “prepared students for gainful employment.” See Program Integrity Issues, 75 Fed. Reg. 34,806 (June 18, 2020); Program Integrity Issues, 75 Fed. Reg. 66,832 (Oct. 29, 2010). Most of these regulations were struck down in 2012. See Ass’n of Private Sector Colls. & Univs. v. Duncan (“APSCU III”), 110 F. Supp. 3d 176, 182 (D.D.C. 2015) (finding that the DOE could interpret the term “gainful employment,” but striking down the regulations because the DOE failed to provide adequate explanations). In 2014, the DOE promulgated a series of revised regulations, which were designed to counteract the deceptive marketing practices that certain for-profit postsecondary institutions used to entice students to take on large amounts of debt to pursue worthless degrees or credentials. See Program Integrity: Gainful Employment, 79 Fed. Reg. 64,890 (Oct. 31, 2014). These regulations became effective on July 1, 2015, but were not immediately implemented. Following the 2016 presidential election, the DOE further delayed implementing the regulations. Then, on June 16, 2017, the DOE announced its intent to initiate a new negotiated rulemaking committee to reconsider the Gainful Employment regulations. Intent to Establish Negotiated Rulemaking Committees, 82 Fed. Reg. 27,640 (June 16, 2017). After the committee failed to reach a consensus, the DOE issued a notice of proposed rulemaking. Program Integrity: Gainful Employment, 83 Fed. Reg. 40,167 (August 14, 2018). Thereafter, the DOE issued a final rule that rescinded the 2014 rule. Program Integrity: Gainful Employment, 84 Fed. Reg. 31,392 (July 1, 2019) (hereinafter “the 2019 Rescission Rule”). The 2019 Rescission Rule forms the basis of the two above-captioned actions. Plaintiffs in each action challenge the lawfulness of the repeal, both substantively and procedurally. The DOE and its Secretary, Elisabeth DeVos (collectively “Defendants”) argue that Plaintiffs in each action Case Nos.: 5:20-cv-00455-EJD; 5:20-cv-01889-EJD lack standing. Having considered the Parties’ briefs and having had the benefit of oral argument on August 27, 2020, the Court agrees and GRANTS in part and DENIES in part Defendants’ motions to dismiss the respective complaints. A. Factual Background 1. The Gainful Employment Rule The HEA authorizes the federal government to provide financial aid to students at postsecondary institutions. Under this program, more than $150 billion in federal aid is provided annually to students at postsecondary schools. See Ass’n of Private Sector Colls. & Univs. v. Duncan (“APSCU I”), 681 F.3d 427, 425 (D.C. Cir. 2012). That money supports students who attend a wide array of institutions, including “private for-profit institutions, public institutions, and private nonprofit institutions.” Id. Loan recipients must eventually repay their debt to the federal government, otherwise taxpayers bear the burden of student tuition. Id. Of course, the institutions receive their tuition dollars regardless of whether a loan recipient repays their debt—the money is “fronted” by the federal government. To “guard against abuse by schools[,]” various statutory requirements exist to discourage postsecondary institutions from taking federal monies without providing students with quality education. Id. The basic idea is simple: if students receive quality education, they will be better able to repay their loans in the future as they will have a higher likelihood of increased earning potential. One of these statutory protections is the Gainful Employment (“GE”) provision, which limits institutions that can receive federal loans to those that provide “an eligible program of training to prepare students for gainful employment in a recognized occupation[.]” 20 U.S.C. § 1002(b)(1)(A)(i), (c)(1)(A) (emphasis added). The statute does not define “gainful employment.” Instead, it vests the Secretary with the authority to “make, promulgate, issue, rescind, and amend rules and regulations governing” Title IV programs. See id. § 1221e-3. This includes the authority to define “gainful employment” by regulation. Ass’n of Private Sector Case Nos.: 5:20-cv-00455-EJD; 5:20-cv-01889-EJD Colls. & Univs. v. Duncan (“APSCU IV”), 110 F. Supp. 3d 176, 182 (D.D.C. 2015). 2. The 2014 Gainful Employment Rule In 2014, the DOE announced its intention to define “gainful employment.” Program Integrity: Gainful Employment, 79 Fed. Reg. 16,426, 16,433 (Mar. 25, 2014). The proposed regulations were intended to address growing concerns about postsecondary programs that leave “students with unaffordable levels of loan debt in relation to their earnings, or leading to default.” Id. (discussing how a number of programs do not adequately train students, provide expensive training in low-wage occupations such that the costs of training are unjustified, and produce only a few number of graduates, despite high enrollment numbers). The DOE found that underperforming GE Programs charged “excessive costs;” possessed “low completion rates;” “fail[ed] to satisfy requirements that are necessary for students to obtain higher paying jobs in a field;” exhibited a “lack of transparency regarding program outcomes;” and engaged in “aggressive or deceptive marketing practices.” Id. In its March 2014 notice of proposed rulemaking, the DOE included statistics that showed that students who complete certain GE programs often had low incomes, despite their significant investment into postsecondary education. Id. at 16,433–34. Of particular concern to the DOE was the lack of information available about these poor-performing GE programs. Thus, in the March 2014 notice of proposed rulemaking, the DOE noticed its intent to make rules about access to information. Id. at 16,435 (“[S]tudents seeking to enroll in these programs do not have access to reliable information that will enable them to compare programs in order to make informed decisions about where to invest their time and limited educational fund

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