Judge Upholds Biden-Era Gainful Employment Rule

A federal judge rejected an effort to overturn the gainful-employment rule, which was put in place during the Biden administration.

In an opinion issued Thursday, Judge Reed O’Connor from the Northern District of Texas sided with the Education Department on every point. One of the plaintiffs, a trade association representing cosmetology schools, had argued in its lawsuit that the regulations jeopardized the “very existence” of cosmetology schools and used flawed measures to determine whether graduates of career education programs are gainfully employed.

Under the rules, for-profit and nondegree programs have to prove that their graduates can afford their loan payments and earn more than a high school graduate. Those that fail the tests in two consecutive years could lose access to federal financial aid. The regulations also included new reporting requirements for all colleges under the financial value transparency framework. 

The lawsuit started under the Biden administration, and Trump officials opted to defend the regulations in court and urged the judge to keep the rules in place. 

Similar gainful-employment rules survived a legal challenge in 2014 but were ultimately scrapped by the first Trump administration. However, in recent years, lawmakers on both sides of the aisle have become more interested in finding ways to hold colleges accountable for their students’ career outcomes. Under legislation that Congress passed this summer, most college programs will have to pass a similar earnings test. How the Education Department carries out that test will be subject to a rule-making process set to kick off later this year.

Jason Altmire, president and chief executive officer of Career Education Colleges and Universities, which represents the for-profit sector and opposed the Biden rule, said in a statement that he looks forward to revisiting the issue during the rule-making process.

“We are confident the Biden Gainful Employment Rule will be revised to incorporate a fairer accountability measure that will apply equally to all schools, ensuring all students can benefit,” he said. “We look forward to a full consideration of these issues during the months ahead.”

Dan Zibel, vice president of the legal advocacy group Student Defense, applauded the court ruling in a statement. 

“Higher education is supposed to offer students a path to a better life, not a debt-filled dead end,” he said. “The 2023 Gainful Employment Rule reflects a common-sense policy to ensure that students are not wasting time and money on career programs that provide little value.”