Education Industry Reporter


Posted in Case Notes, Department of Education, Higher Education News, Higher Education Policy, Incenitve Compensation, Litigation News, Misrepresentation, State Authorization

Dennis Cariello

David P. Lewis

Sheldon Steinbach

The DC Court of Appeals has issued an important rulingAss’n of Priv. Sector Colls. and Univs. v. Duncan, No. 11-5174 (D.C. Cir. June 5, 2012), associated with the US Department of Education’s Program Integrity regulations, which were issued in October 2010.   We covered this story as it happened last week.

In its June 5, 2012 decision, the court addressed three of the new rules – the regulations on the payment of incentive compensation to various employees; misrepresentations; and the scope of state authorization needed for an institution to qualify for federal student aid programs, both in connection with on-ground and online campuses.

In short, while expressing concerns about each of the regulations, the Court:

  • Largely upheld the validity of the incentive compensation regulations, but
  • Required the Department to better explain its decision to eliminate the safe harbor based on graduation rates and
  • Required the Department to offer a reasoned response to the comments suggesting that the new regulations might adversely affect diversity outreach
  • Upheld in part and vacated in part the misrepresentation rule, requiring the Department  to:
  • Revise 34 C.F.R. §§ 668.71(b) (covering “misrepresentations regarding the eligible institution”) and 668.75 (covering misrepresentations related to an institution’s  relationship with the Department) because those sections include subjects not covered by the HEA;
  • Revise 34 C.F.R. § 668.71(a) to add additional procedural protections for fully certified schools; and
  • Revise 34 C.F.R. § 668.71(c), to exclude true statements that have the tendency or likelihood to confuse from the definition of misrepresentation
  • Generally upheld the validity of the state authorization rule but
  • Vacated the online education provisions of the state authorization rule as violating the Administrative Procedure Act
Please read our full client alert, complete with case summary and takeaways from the case.