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Federal Update: June 25

Federal Update: June 25

GOVERNMENT RELATIONS HIGHLIGHTS
100% Certification Rule Lawsuit: The United States District Court for the Northern District of Texas, Fort Worth Division granted Plaintiffs’ motion for a preliminary injunction in 360 Degree Education v. U.S. Department of Education.
Second GE Lawsuit: The United States District Court for the Northern District of Texas, Fort Worth Division denied a motion for a preliminary injunction in Ogle School Management v. U.S. Department of Education.
Proposed Rule on Program Integrity and Institutional Quality: The Department of Education recently submitted its Proposed Rule on Program Integrity and Institutional Quality to the Office of Management and Budget’s (“OMB”) Office of Information and Regulatory Affairs (“OIRA”) for approval.
100% CERTIFICATION RULE LAWSUIT
What You Need to Know

The United States District Court for the Northern District of Texas, Fort Worth Division granted Plaintiffs’ motion for a preliminary injunction in 360 Degree Education v. U.S. Department of Education. The order prevents the Department’s revised 100% Certification Rule from taking effect on July 1, 2024. The order did not specify whether this injunction applies to only the parties in this case, or will be applied nationwide, but since the Plaintiff sought nation-wide relief, it appears this is a nation-wide injunction. Additionally, previous Fifth Circuit decisions indicate that the injunction may apply nationwide.
This ruling is significant as one of the criteria for a preliminary injunction is that the case is likely to succeed on the merits. In addition to this criteria, District Judge Mark Pittman held that the Plaintiff satisfied all four required conditions for granting a preliminary injunction:
Plaintiffs demonstrated that there is a substantial likelihood of success on the merits of this case;Plaintiffs demonstrated that it will experience irreparable harm if the preliminary injunction was not granted;The potential harm to the institutions outweighed any interests that the Department may have in enforcing the rule; andThe preliminary injunction is in the favor of the public interest, as the public interest is served when the law is followed.

Why This is Important
The revised 100% Certification Rule is set to take effect on July 1, 2024. AACS has provided updates to membership that the Department will use “enforcement discretion” for the period between July 1, 2024 and January 1, 2025. This ruling prevents the Department from enforcing the rule while the case is pending.

For more information:
Preliminary Injunction Order
SECOND GE LAWSUIT
What You Need to Know

The United States District Court for the Northern District of Texas, Fort Worth Division denied a motion for a preliminary injunction in Ogle School Management v. U.S. Department of Education. Ogle School Management, LLC and Tricoci University of Beauty Culture, LLC filed the lawsuit against the U.S. Department of Education challenging its Gainful Employment rule. This decision was not in the case brought by AACS.  

In his ruling in the Ogle matter, Judge O’Connor held that “Plaintiffs have not met their burden to justify an extraordinary remedy of injunctive relief at this stage….[However] This holding is not a substitute for a merits-based decision. Plaintiffs may ultimately succeed upon review of the full administrative record at summary judgment.” The preliminary injunction would have blocked enforcement of the Gainful Employment Final Rule until the district court ruled on the case.
As part of the order, Judge O’Connor found:

At this initial point of the case, the Court is not convinced that the Department misinterpreted the definition of “gainful employment” to necessitate a ruling for injunctive relief. The Court initially held that “gainful employment” encompasses profitability and advantageous financial outcomes and, therefore, the Department has not exceeded its authority in promulgating this Final Rule.As to whether the Final Rule is arbitrary and capricious, the Plaintiff has not yet met this burden as the Department engaged in “thorough rulemaking.” The Court found that the Department adequately reviewed and responded to each of the public comments proposed in the rulemaking process in accordance with the requirements of the Administrative Procedure Act.

Judge O’Connor further stated in the order, “Plaintiffs shall confer with Defendants regarding whether consolidation with American Association of Cosmetology Schools is appropriate.”

Why This is Important

AACS was hopeful that Ogle and Tricoci would be successful in obtaining a preliminary injunction against the enforcement of the GE Rule. However, the Judge has stated his ruling does not amount to a ruling on the merits. We additionally want to note that the AACS lawsuit includes a number of different arguments that were not raised in this lawsuit. 

The case brought by AACS remains on track for summary judgment briefing to be completed this fall. 

For more information:
Ogle School Management v. U.S. Department of Education
PROPOSED RULE ON PROGRAM INTEGRITY AND INSTITUTIONAL QUALITY
What You Need to Know

The Department of Education recently submitted its Proposed Rule on Program Integrity and Institutional Quality to the Office of Management and Budget (“OMB”) to the Office of Management and Budget’s Office of Information and Regulatory Affairs (“OIRA”) for approval. The Proposed Rule includes regulations on the following topics: Distance Education, Return of Title IV, HEA Funds, and Federal TRIO Programs. OIRA may review the Proposed Rule for up to ninety days, with a possibility to extend the review period to one-hundred and twenty days.

The draft language for the Proposed Rule was formed via the Negotiated Rulemaking Committee process, which held three sessions between January and March, 2024. The Department considered two proposals that particularly impact AACS members: (i) disallow asynchronous distance learning in clock hour programs that participate in Title IV federal student aid programs; and (ii) the exclusion of books and supplies (which includes kits for beauty and wellness institutions) from the definition of “tuition, fees and institutionally provided food and housing.” The negotiators did not reach consensus on either issue. In the Negotiated Rulemaking process, once negotiations have concluded, if consensus language is reached on a particular provision, the Department is required to use that regulatory language in its NPRM. As consensus was not reached, the Department may use regulatory language developed during the negotiations as the basis for its Notice of Proposed Rulemaking (“NPRM”), or develop new regulatory language for all or a portion of its NPRM.

During OIRA’s review of the Proposed Rule, the public has the option to request a meeting with OIRA. AACS has secured a meeting with OIRA to discuss its issues with the Proposed Rule. Following this review period, the Department will publish its NPRM in the Federal Register and invite the public to comment on the draft language.

Why This is Important

The two provisions referenced above may significantly impact AACS member institutions. As to the regulation on asynchronous distance learning, those cosmetology schools that have incorporated asynchronous distance learning into their programs will lose that flexibility.The proposed changes to the definitions of “books and supplies” prohibits institutions from automatically charging students for books and supplies without initially providing students with an option to purchase these items from a third-party. Students will still have the option to “opt-in” and purchase the items directly from the institution. 
BDR LAWSUIT
What You Need to Know

The U.S. Court of Appeals for the Fifth Circuit ruled against the U.S. Department of Education’s petition for rehearing in CCST v. U.S. Department of Education. The Department filed this motion to overturn the Fifth Circuit’s previous order of a preliminary injunction preventing the Department from implementing the 2022 Borrower Defense to Repayment Rule. Petitions for rehearing are rarely granted, and the Fifth Circuit was not expected to grant this motion.

Why This is Important
As a result of the order, the preliminary injunction of the 2022 Borrower Defense to Repayment Rule will remain in effect as the U.S. District Court for the Western District of Texas continues to hear the case.
For more information:
Fifth Circuit Order
TITLE IX LAWSUITS
What You Need to Know

There have been nine lawsuits filed by states, school districts, independent organizations, and individuals against the Department of Education regarding the Final Rule. In two of those lawsuits, plaintiffs moved for and were granted preliminary injunctions.

The states of Louisiana, Mississippi, Montana, and Idaho along with the Louisiana Department of Education, Rapides Parish School Board, and seventeen Louisiana School Districts filed suit in the United States District Court in the Western District of Louisiana against the Department on April 29, 2024. The court granted the motion for preliminary injunction on June 13, 2024. The Department recently filed an appeal with the Fifth Circuit to overturn the granting of the preliminary injunction.
Tennessee, Kentucky, Ohio, Indiana, Virginia, and West Virginia filed suit in the United States District Court in the Eastern District of Kentucky against the Department on May 3, 2024. The Plaintiffs moved for a preliminary injunction and the court granted their motion on June 17, 2024.

Why This is Important

On April 19, 2024, the Department released its final rule on Title IX (“Final Rule”). The Final Rule and its accompanying regulations are slated to go into effect on August 1, 2024, when federally funded education programs and activities must comply or they will be denied federal funding. Title IX institutions in the ten states referenced above will not be bound by the Final Rule and will prepare for the 2024-2025 school year based on the 2020 Title IX regulations until the cases are decided in court.
For more information:
Preliminary Injunction Order – Louisiana
Preliminary Injunction Order – Tennessee
Appeal
GUIDANCE ON GE METRIC REQUIREMENTS
What You Need to Know

The Department published an Electronic Announcement that provides additional information for institutions on the inclusion of new GE requirements under the Administrative Capability regulations in 34 C.F.R. § 668.16(t) and the Financial Responsibility regulations in § 668.171(c), which go into effect July 1, 2024.Under the Administrative Capability Final Rule, institutions are required to receive less than half of its total Title IV, HEA funds from programs that are “failing” the new GE Final Rule for the most recent award year.

For the Financial Responsibility Final Rule, “[o]ne of the new mandatory triggers is § 668.171(c)(2)(iii), which is triggered when an institution receives at least 50 percent of its Title IV, HEA program funds in its most recently completed fiscal year (FY) from GE programs that are “failing” under subpart S of 34 C.F.R. Part 668 [GE Final Rule].

Why This is Important
The new Final Rules on Administrative Capability and Financial Responsibility are set to take effect on July 1, 2024. Institutions should be aware of its obligations under the Final Rules, and how non-compliance with the GE Final Rule may impact these other regulations.

For more information:
Electronic Announcement

PELL GRANT PRESERVATION ACT

What You Need to Know

Last week, U.S. Senators Mazie K. Hirono (D-HI), Patty Murray (D-WA), Jack Reed (D-RI), and Sheldon Whitehouse (D-RI) and Representatives Mark Pocan (D-WI) and Robert C. “Bobby” Scott (D-VA) introduced the Pell Grant Preservation and Expansion Act of 2024. The legislation proposes to “double the maximum Pell Grant award, index the maximum award for inflation… makes the Pell Grant funding fully mandatory to protect it from funding shortfalls, expands the program to include DREAMers, and restores lifetime eligibility for the program to 18 semesters, among other changes that will benefit students.” The provisions in this legislation will apply to all institutions.

Why This Is Important

It is not likely that this legislation will garner sufficient Republican support to pass both chambers of Congress. However, this legislation represents another attempt by the Democratic Party to substantially increase the Pell Grant award among other provisions to make postsecondary education more affordable.

For More Information:
Press Release
Bill Text
Fact Sheet

FAFSA PARTNER PORTAL CORRECTIONS

What You Need to Know

The Department will host a webinar on Friday, June 28, 2024 at 3:00PM EST to demonstrate the process for institutions to submit FAFSA corrections on FAFSA Partner Portal. The webinar “will walk through the process of submitting school-initiated corrections electronically by entering the data manually in the FPP, as well as performing a dependency override and a professional judgement when federal tax information (FTI) is on the FAFSA.”

Why This is Important

We have continued to hear from membership about the impact that the FAFSA rollout has had on your administrative teams and students. The impact of the FAFSA rollout has been felt by almost every sector of the higher education industry. This webinar should provide helpful information to institutions to resolve any discrepancies with FAFSA applications. 

For more information:Electronic Announcement

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