Despite Previous Failures in Court, APSCU Takes Aim at Incentive Compensation Rule Again

The Association for Private Sector Colleges and Universities (APSCU) has tried twice – but failed – to convince federal judges to strike down a U.S. Department of Education regulation that has forced for-profit colleges to overhaul their recruiting policies.

But apparently the lobbying group won’t take “no” for an answer. APSCU is once again suing the Education Department over the rule.

The regulation in question eliminated the “safe harbors” that Bush administration officials put in place in 2002 to help for-profit schools skirt a long-standing federal law that prohibits colleges from compensating recruiters based on their success in enrolling students. In the preamble to the regulatory package it released in October 2010, the Department wrote that its “experience has demonstrated that unscrupulous actors routinely rely upon these safe harbors to circumvent the law.”

In its original challenge to the rule in 2011, APSCU portrayed its members as innocent victims of an administration on a crusade against their institutions for no apparent reason. “The final regulations are not the product of a reasoned decision-making process,” the career college group wrote in its initial complaint. “Their adoption dramatically affects private sector schools and their students, yet they are unsupported by factual evidence or logical reasoning.”

Both the U.S. District Court for the District of Columbia and the U.S. Court of Appeals for the District of Columbia Circuit rejected APSCU’s arguments – which the appellate court said were mostly “specious and unworthy of serious discussion.” The judges defended the Department’s decision to eliminate the safe harbors, saying that the agency acted appropriately in the face of “known” recruiting abuses.

The appellate court did require the Department to further address two aspects of the incentive compensation regulation “that are lacking for want of adequate explanations.” The court said that the Department had to provide “a better explanation” for why it chose to eliminate a safe harbor that allowed colleges to compensate recruiters based upon students successfully completing their educational programs. It also said that the Department needed to “offer a reasoned response” to concerns brought up during the rule-making process that the incentive compensation regulation could have a negative impact on minority enrollment. “It will be a simple matter for the Department to address these matters on remand,” the appeals court stated.

In response, the Department revised the preamble to the final rule to address these concerns.

But APSCU was not satisfied with those changes. In a new lawsuit that APSCU filed in the U.S. District Court for the District of Columbia in March, the organization argued that “the Department’s response does not take the remand seriously, and its approach is so legally flawed that APSCU is compelled to return to this Court for relief.”

In APSCU’s opinion, the Department should have conducted “a full rule-making proceeding with notice and comment in order to comply with the Court’s remand order.” In other words, despite its previous failures in court to have the rule struck down, the lobbying group wants the Department to open up the incentive compensation regulation to negotiation again, with the hope of undermining it.

The Department’s response rightfully argues that APSCU’s interpretation goes far beyond what the appellate court ordered. “The court did not vacate the compensation regulations or any portion of the regulations. Nor, contrary to the plaintiff’s suggestion, did the court require – or even suggest – that the Department solicit further public comment or amend the text of the regulations,” the Department wrote.

There’s no mystery why APSCU wants to gut the incentive compensation regulation. It has been by far the most effective action that the Department has taken to rein in the for-profit higher education industry.

The rule has forced the largest chains of for-profit colleges to fundamentally alter the way they recruit students and shape their student bodies. Both the University of Phoenix and Kaplan University, for example, have created tuition free orientation programs that are designed to give new students a risk-free opportunity to decide whether these institutions are the right fit for them before they commit to the programs.

But other for-profit college companies are clearly struggling to adapt to the new reality. Many have not figured out how to move away from the old model – which led schools to deliberately recruit and admit unqualified students who ended up taking on large amounts of debt for training from which they were unlikely to benefit.

With this lawsuit, APSCU is once again trying to protect the very worst players and practices, instead of helping its member institutions better serve their students.