A group representing for-profit colleges on Thursday filed a lawsuit against the Obama administration's new gainful employment rules that aim to protect students from lackluster degrees and huge debt loads.
The Association of Private Sector Colleges and Universities, representing 1,400 institutions, filed the suit at the U.S. District Court for the District of Columbia, saying the rule is unconstitutional and would hurt millions of students in those colleges.
The Department of Education at the end of October unveiled new regulations aimed at ensuring that students attending for-profit colleges are not saddled with excessive debt and poor employment prospects.
"This regulation, and the impact it will have on student access and opportunity, is so unacceptable and in violation of federal law, that we were left with no choice but to file suit," president and CEO of APSCU Steve Gunderson said in a statement.
Under the new rule, programs would risk losing federal funding if the estimated annual loan payment of their typical graduate exceeds 20 percent of his or her discretionary income or 8 percent of his or her total earnings.
The gainful employment rule is set to take effect in July 2015.
According to the Education Department, a two-year for-profit institution costs a student four times as much as attending a community college.
The agency has said that while students at for-profit colleges represent 11 percent of the total higher education population, they account for about 44 percent of all federal student loan defaults.
Federal regulators have come down hard on the for-profit higher education sector. In September, the U.S. consumer finance watchdog sued Corinthian Colleges Inc, alleging the institute lured students into taking out private student loans by touting "bogus" job prospects and using illegal debt-collection methods.
In October, the state of California filed suit against Corinthian, alleging that it misrepresented job placement rates to its students and investors.
A U.S. district judge struck down the administration's first efforts to tighten rules on the for-profit career training industry in 2012, calling them arbitrary.
Some of the largest for-profit colleges are run by publicly traded companies such as Corinthian, Apollo Education Group Inc , which owns University of Phoenix, and DeVry Education Group Inc.
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