[00:00:02] Speaker 00:
Case number 15-5190, Association of Private Sector Colleges and Universities Appellant versus Arne Duncan and his official capacity as Secretary of the Department of Education, Office of the Secretary at ELL.

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Mr. Cox for the appellant, Mr. Waldman for the appellees.

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We appreciate everybody's willingness to make their schedules a little earlier in hopes that we can all avoid the blizzard of the century or at least blizzard of the year or something.

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So, no further ado.

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Good morning, Your Honor.

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May it please the Court.

[00:00:37] Speaker 05:
My name is Douglas Cox.

[00:00:39] Speaker 05:
I represent APSCUE, and I have reserved five minutes for rebuttal.

[00:00:43] Speaker 05:
Under the department's regulation, two schools may offer identical programs that provide identical training and identical costs, yet one may fail while the other passes.

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These different regulatory outcomes may be the product of graduates' personal job search and family decisions, personal financial circumstances, or even local economic conditions, all unrelated to the quality of training schools provide.

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A program that provides an excellent education at low cost with a 100% graduation rate and a 100% placement rate can still fail.

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Congress never gave the Department authority to curtail Title IV eligibility through debt and earnings metrics that turn on factors outside the school's control, and for decades the Department never claimed otherwise.

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But even if Congress had authorized the Department to condition programs' eligibility on whether programs enable students to repay their debts, this regulation does not do that in a rational way.

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Key elements of the debt metrics, such as the 8 percent threshold repayment timelines, are arbitrary and unsupported by the record.

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This is not, as the department asserts and the district court evidently believed, a case about defaulted student loans.

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This rule does not address defaults.

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Let me begin with the statute.

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The plain meaning of prepare students for gainful employment is prepare students for a job that pays.

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That is supported by the words that Congress chose.

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It's also supported by the way the Department historically has interpreted the phrase.

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In a number of cases, administrative law cases back in the 1990s, for example, the Seminar El Moro's case, they said what gainful employment about is whether or not a program has, quote, an occupational objective.

[00:02:42] Speaker 01:
Well, you're not arguing, are you, that if circumstances changed and the department had new information or additional information that

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It couldn't change its position or elaborate further, are you?

[00:02:58] Speaker 05:
No, Your Honor, I'm not.

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But two things.

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First, as a matter of statutory construction, the fact that they historically have interpreted that way shows that it's an unreasonable interpretation now.

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If you accept your plain meaning argument, if you think there's some ambiguity or a gap,

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then we're in a different analytical.

[00:03:23] Speaker 05:
No, Your Honor.

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I think, again, as a matter of statutory instructions, as the Court knows, you look at the tax to use all of the interpretive materials.

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One of the things the Court will look to is, how big is the ambiguity?

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It doesn't swallow the entire statute.

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You have to go no further than the ambiguity it permits.

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You look at the words Congress used.

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You also look at the way they've historically interpreted it.

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And under Bunty Brothers,

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The fact that they interpret it that way illuminates the reasonableness.

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Then, Your Honor, if I may just jump ahead for a moment so we don't lose the point in response to your question, under the APA, of course they can change their mind.

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Of course they can't.

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But they have to know that they're changing their mind.

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They have to say they are.

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That's the teaching of FCC versus Fox.

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And here, they don't even admit that they did change their mind.

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So, Your Honor, I think as a matter of statutory construction, we're clearly right.

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And as a matter of the APA on this issue, we're also clearly right.

[00:04:15] Speaker 01:
Well, of course, in the rulemaking itself, the department talks about growing concerns that it's seeking to address in this rulemaking.

[00:04:30] Speaker 05:
That's right, Your Honor, but they never address their prior position that they had interpreted the gainful employment standard to mean, as the words suggest, a job that pays.

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So if they, I just want to be clear about this in my own mind, if they interpreted it to mean so long as the schools are providing quality education that enables its graduates to obtain gainful employment,

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Is there no implication that gainful employment is tied to the notion that this is not a grant program, but a loan program?

[00:05:15] Speaker 05:
No, Your Honor, I don't think that's what the words Congress chose say.

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I don't think that's, as I say, the way they interpreted it historically.

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It is the case, Your Honor, that if you take their reading that gainful must mean profitable, that still doesn't get you to where they want to end up.

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It's too many jumps in the statutory interpretation.

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Where would you point to what their previous interpretation of gainful employment was?

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Your Honor, we cite a number of those cases.

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One of them is the one I mentioned, the Seminar El Moro's case.

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Which one is that?

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It is a case involving a program of education primarily directed at Jewish students.

[00:05:57] Speaker 04:
Yes, so I read that case, and that just seems like an easy case.

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That is one where they were not preparing them for any kind of job at all.

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that doesn't mean and and the government's position is

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That's the threshold level.

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At least you must prepare for an occupation.

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And if you don't, then we don't need to go to the next question in that case.

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So that doesn't necessarily resolve this.

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No, Your Honor, with respect, the Seminar-O'Moros case is a case where they uphold the program.

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It's saying it does train for gainful employment.

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And the test they apply is we look at it in a very common sense way.

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Is the course of study serving the occupational objective?

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There's no suggestion that they're going to look at debts.

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So those are the other Jewish theological?

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There are a number of cases that center on the same set of concerns.

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Okay.

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Let me, if I may, turn to the APA.

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I think it is conceded by the department that the tests turn on factors the schools cannot control.

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The debt threshold here, this 8% threshold that they bring up, it's from a different context.

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It's from the mortgage context.

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It's also the case that it is they've set the ratio of 8% at a level that their own statistics show is too low.

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So for example, there's a education department study in the appendix at 548 that says that the department knows

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that 13% of the graduates of profit schools and 16% of graduates of private nonprofit schools who are employed, who are paying back their loans, still have average debt-to-earnings ratios that would fail the test.

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So I think that that's another thing the court needs to look at under the APA.

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There are rationally short timelines.

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We already talked about the FCC versus Fox issue.

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Let me also, keeping an eye on the clock here, turn to the third issue we have raised, which has to do with the reporting requirement.

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The Department does not deny that the requirement that schools report student-specific, personally-identified information, private loan data violates 1015C's prohibition on maintaining a database of such information.

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Indeed, it's significant.

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Congress in 1015C made a choice to protect student privacy, and they did it in response to an earlier effort by the Department of Education to create such a database.

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So what the department says is, OK, 1015C is against this, but there is a grandfathering exception.

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So they're going to try and put themselves within the exception.

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But we litigated the exception of what the parties have come to call ASCII 2, in which the department basically said, OK.

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We agree there has to be an interpretation of that grandfathering exception such that the exception doesn't swallow the rule, as the court said in ASCII 2.

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So the limitation that they themselves adopted says that the new information has to fit within the purpose of the existing database.

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And the department simply hasn't demonstrated here that the private loan data fits within the overall purpose of the data system.

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It has never included private loan data in the system before.

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They make an argument based on 1092 BB3, but the language of that regulation shows that it's limited to research.

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And this is obviously not research.

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This is a punitive rule.

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And so the Department is seeking to do here what Congress forbade.

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They're going to collect individual data that the existing database

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collected only at the institutional level.

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So they're shifting the focus from the institution to the individual.

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Congress has said no.

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We want to protect privacy.

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I'll reserve the remainder of my time.

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I'm right, though, that there are no individuals who are being added to the database in this program, right?

[00:10:04] Speaker 04:
It's individuals who are already in the database.

[00:10:06] Speaker 05:
Well, no, Your Honor.

[00:10:07] Speaker 05:
As time goes forward, individuals who participate in the program in the future will be added.

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But they would be added anyway if they got federal loans.

[00:10:17] Speaker 04:
But additional information will be added.

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included about them.

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Right.

[00:10:21] Speaker 04:
So it's additional information about them, namely their private loans, but it's not additional people, which is the difference between this one and the other district.

[00:10:30] Speaker 05:
But it's also the case that the database focuses right now on institutional level statistics, not individuals.

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Thank you, Your Honor.

[00:10:55] Speaker 02:
May it please the court, my name is Joshua Waltman.

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I'm here from the Department of Justice representing the APOLE, the United States Department of Education.

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The department has reasonably construed the Gainful Employment Statute to require programs provide quality education and training to their students that lead to earnings that allow them to pay back their student loans.

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That understanding is consistent with the ordinary meaning of the terms, with the purpose and the context of the statute, its legislative history, this court's prior statement in the last case involving these parties, and the conclusions of three different district courts, including the one that addressed the issue below.

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The department's debt to earnings and debt to discretionary income ratios are also rational ways of determining whether students are earning sufficient money to pay back their student loans.

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They come from numerous studies, experts, and commonly adopted industry standards.

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The department examined the very same claims made in this case, that the ratios inadvertently measure things like demographics, or economic trends, or student choices, and found that the evidence just did not support those claims that they would unduly or irrationally skew the outcomes.

[00:12:13] Speaker 02:
Instead, the regulation has numerous features that are designed to counter and mitigate precisely those issues by using mean and median figures.

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By using numerous graduation years, by having a flexible transition period, a limited definition of debt, failing rates with built-in tolerance levels, and numerous years before a program would ever be ineligible, the department reasonably ensured that its ratios would in fact measure whether students are prepared for gainful employment rather than factors beyond its control.

[00:12:51] Speaker 01:
So is the response to the two schools argument that if you apply the rule, you'd have to have an extreme case?

[00:13:03] Speaker 01:
In other words, as counsel began talking about, you could have two schools doing exactly the same thing, and one would qualify and one wouldn't.

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And as I understand the rule, you'd have to have an extreme situation where school A is providing

[00:13:20] Speaker 01:
a curriculum and a high percentage of students are paying back the loans, and school B, which is doing something where the students are not, after all of these, what did you call them, measures to counter

[00:13:40] Speaker 01:
the concern about two schools doing the same thing and one qualifies and one doesn't.

[00:13:45] Speaker 01:
I think that's right, and it's important to remember in that respect that this is a facial challenge to the regulation, which is saying... I understand, but there's so many schools, et cetera, that the one that they mention, that's your response.

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You know, it's a facial challenge, so their burden is much higher.

[00:14:02] Speaker 01:
Just to try to understand how the rule would work

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in practice.

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It seemed to me that was a helpful example.

[00:14:10] Speaker 02:
Well, it's an example that I think posits the answer to its own problem, which is it posits and assumes that they're all training in exactly the same way, and therefore the reason for the different result must be something else.

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So they're already assuming the answer to the question.

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The fact is that the department examined precisely these things.

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For example, they say if two schools are coming to different results, it's because, for example, that one of them has a disproportionately high number of low-income students, and so it's really demographics.

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Now the department looked at exactly this question, and it did a regression analysis

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in its rulemaking controlling for low-income students and it found no evidence to support the fact that having a higher number of low-income students disproportionately affects the result.

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In fact, low-income students are distributed in roughly equal proportion

[00:15:03] Speaker 02:
in programs that were expected to fail, pass, and be in the zone.

[00:15:08] Speaker 02:
So they looked at this question and what the APA requires is a cogent explanation of why the agency exercises discretion in that way that's based on a rational examination of a fact.

[00:15:19] Speaker 02:
That's exactly what they did with respect to student demographics and they did the same thing with respect to whether people are going into fields that are traditionally lower paying jobs and all these other factors that they point to.

[00:15:31] Speaker 02:
And just to take a few other examples of what can happen.

[00:15:35] Speaker 02:
One of the complaints was, well, some students are going into the military and they get paid less, so they can't afford to pay back their loans.

[00:15:43] Speaker 02:
And as we pointed out in our response brief, well, if you get a military deferment, the rule excludes you.

[00:15:49] Speaker 02:
And the response was, well, students may forget or just decide not to apply for a military deferment.

[00:15:56] Speaker 02:
To which I would say, if we had a serve reply brief, I would say, well, maybe you want to be counseling these students and helping them fill out their military deferments.

[00:16:04] Speaker 02:
or if they say, well, students are borrowing more because they're spending all their money on fancy cars and clothes and not wisely managing their money, then you should provide some financial counseling to your students.

[00:16:16] Speaker 02:
If you're training them in excellent ways and they still don't find jobs that can pay their loans back,

[00:16:22] Speaker 02:
Maybe you ought to be doing better job placement or career counseling, which is part of what these programs, I think, ought to be doing to prepare their students.

[00:16:30] Speaker 02:
So this is not a question of, these are things beyond the school's control.

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And of course, remember, the largest factor here, which is student debt, is very much within the school's control.

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Because debt is defined only by things schools control, their tuition,

[00:16:45] Speaker 02:
and expenses and books and supplies and things like that doesn't include housing costs or meal costs even though those are part of what students often borrow they're not counted in the loan debt and so what the APA requires is a rational explanation of these types of issues and that's exactly what the department did at each and every turn in its rulemaking which is why it's not arbitrary either

[00:17:11] Speaker 02:
Facially, and frankly, I would find it hard to imagine a case where that would be so as applied.

[00:17:17] Speaker 02:
As for the statutory interpretation, I think you have to look, as this court frequently does, at the purpose and context, and not simply at the words in isolation, although I think the words in isolation still support the department's position.

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But the purpose here is Congress is lending

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billions of dollars a year.

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And it expects these loans to be paid back, because otherwise the cost is borne by the federal taxpayers.

[00:17:46] Speaker 02:
So the concern here is not just the students get trained and prepared to have any job, paying any amount, which would hardly require post-secondary education in the first place, but enough to pay back their loans, which is exactly what this court said in the last opinion it issued involving exactly the same parties.

[00:18:07] Speaker 02:
It said that these, this is the direct quote, these requirements, speaking of the ones entitled for eligibility, are intended to ensure that participating schools actually prepare their students for employees such that those students can repay their loans.

[00:18:23] Speaker 02:
That's what this court said, that's what three district courts concluded, and that's what the statutory purpose and context, including the explicit one addressed in the legislative history when this provision was originally enacted the year before it was merged into the Higher Education Act.

[00:18:40] Speaker 02:
The other statutory purpose is, of course, not just that Congress is loaning out its money with the expectation that it would be paid back.

[00:18:47] Speaker 02:
But these students are making an investment in their future, and they're not doing it so they can get any paying job at any amount.

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Everyone knows why students are going to school to improve their job prospects.

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And they need to be able to pay back their loans and then live afterwards.

[00:19:04] Speaker 02:
So it's important that they improve and make enough money to pay those loans back and have a living and not just get any minimum wage job, which is not the purpose.

[00:19:13] Speaker 01:
So in a hypothetical of a school where just in a period of time, 90% of the students, the graduates, decide to go into the Peace Corps or something comparable,

[00:19:26] Speaker 01:
that's simply going to be a school that is not going to qualify for Title IV grants?

[00:19:31] Speaker 02:
No, I don't think that you can assume that because remember this is all about the ratio between earnings and debt.

[00:19:41] Speaker 02:
So what you would hope that would happen in a school like that is that they would make reasonable efforts to keep the

[00:19:48] Speaker 02:
the expenses of attending a school where you were being, I suppose, trained to go into very low-paying jobs, keep them to a minimum so that the ratio would be appropriate.

[00:19:59] Speaker 02:
And one of these, they didn't look at the Peace Corps example, but one of the examples that the department did explicitly look at were teachers and nurses and other jobs that were traditionally low-paying.

[00:20:09] Speaker 02:
And they said,

[00:20:10] Speaker 02:
Many of these programs, over 90% I think, were expected to pass.

[00:20:16] Speaker 02:
Because it's not about how much money you make, it's about the ratio between what you make and what you owe.

[00:20:24] Speaker 02:
So you can balance these things out in an appropriate way.

[00:20:28] Speaker 04:
What do you say about the El Moro case and a couple of other administrative adjudications which seem to look only at whether there's a job or not?

[00:20:40] Speaker 02:
I say a few things, Judge Garland.

[00:20:42] Speaker 02:
First is, of course, this rulemaking did not exist at the time.

[00:20:46] Speaker 02:
So the agency was not at all looking at this question of, could the statute be interpreted in this way?

[00:20:52] Speaker 02:
I think what the department would, what those cases represent at most is a view of, number one, if you weren't training them for any type of job, then you weren't passing the statute no matter what.

[00:21:05] Speaker 02:
But there's nothing reflected in there that said you couldn't, we read

[00:21:10] Speaker 02:
training for a job that pays any amount as the maximum of what Congress permitted under the statute.

[00:21:17] Speaker 02:
In other words, there was no question of could the agency elaborate further and add this additional requirement.

[00:21:24] Speaker 02:
They never took a position that said,

[00:21:27] Speaker 02:
The most the all that we can ever do is ask whether you get any paying job in any amount What level sort of in the department for those decisions made at they were administrative adjudications and can somebody appeal from that to the secretary

[00:21:41] Speaker 02:
I don't know the answer to that.

[00:21:44] Speaker 02:
But they certainly didn't reach judicial review.

[00:21:47] Speaker 02:
And I think it's also important to point out that first the agency doesn't view itself as changing its position as opposed to adding a new and additional requirement that never existed before.

[00:21:57] Speaker 02:
These very same cases were raised in comments of the rulemaking and were discussed in the agency rulemaking.

[00:22:03] Speaker 02:
And we said, we don't understand these two have taken a position that says we can't add these requirements.

[00:22:09] Speaker 02:
So we don't view ourselves as changing our position.

[00:22:11] Speaker 02:
But then as Judge Rogers pointed out, even if this

[00:22:14] Speaker 02:
if you thought it was, the agency had a very good reason for changing its position, which was it was noticing the mounting level of debt to income ratio for students under the GE programs, and they said a lot of these students

[00:22:31] Speaker 02:
an alarming number are not able to earn enough to pay back their debt.

[00:22:35] Speaker 02:
This is a new and growing problem, and they had a reason for adopting this rule.

[00:22:40] Speaker 02:
Now, the department didn't think that it was a change at all, because they had never addressed the question in adjudication, would the statute permit this type of requirement?

[00:22:50] Speaker 02:
So rather than being a change, it's just simply a new rule, like any other new rule.

[00:22:54] Speaker 02:
It just didn't exist before, and now it exists.

[00:22:56] Speaker 03:
So you say it was a new and growing problem as of when?

[00:22:59] Speaker 02:
I don't recall the exact date, but they were looking at relatively recent data leading up to, first it was to the rule that was set aside a number of years ago.

[00:23:08] Speaker 02:
So I think they began examining this problem around about 2008, 2009.

[00:23:11] Speaker 02:
It was far after these adjudications.

[00:23:15] Speaker 03:
And before the 2011 rule.

[00:23:17] Speaker 02:
Oh yeah, leading up to it.

[00:23:19] Speaker 02:
And then they re-examined the problem again in the next round of rulemaking and found similar data supporting the reasons for making this rulemaking.

[00:23:29] Speaker 02:
And if in the few minutes remaining, I would just address the reporting requirement very briefly.

[00:23:35] Speaker 02:
All that the statute actually says, and we're speaking of 1015C, is that there's a prohibition, but then there's an exception.

[00:23:46] Speaker 02:
for information that's necessary for the operation of a Title IV program, which the collection of this data is, and was in use before 2008, which the system that we're talking about was, and there's no dispute about that.

[00:24:00] Speaker 02:
As Judge Garland pointed out before,

[00:24:02] Speaker 02:
even if you accepted some sort of statutory interpretation that required a limitation of some kind on what new data you could add, this is solely data for students who are receiving Title IV loans.

[00:24:19] Speaker 02:
This is very different from the last rulemaking where it looked for loan data from all students, and we accepted that limitation that the district court imposed,

[00:24:30] Speaker 02:
We narrowed our rulemaking in direct response to it and limited only to people who are receiving Title IV loans.

[00:24:39] Speaker 02:
And of course it's necessary to do that because if you want to figure out whether someone's going to pay back their Title IV loans, it's important to know what other loans they have to pay back as well.

[00:24:50] Speaker 02:
So we do think that it's necessary and we think it's well within the purpose of the system

[00:24:54] Speaker 02:
which, when authorized by Congress, explicitly said that it can concern information about other student financial assistance received by the borrower, including private loans.

[00:25:06] Speaker 02:
And that's in Section 109 to BB3.

[00:25:10] Speaker 03:
Is that a, is there a continuing obligation for the student to report private loans, or is it only private loans as of the time of the public loan?

[00:25:19] Speaker 02:
I think these are reported after the student graduates.

[00:25:22] Speaker 02:
So at that point, presumably, they would no longer be getting student loans after they've already graduated.

[00:25:28] Speaker 04:
These are only private student loans, not other kinds of loans.

[00:25:31] Speaker 02:
Well, they're also the Title IV loans.

[00:25:33] Speaker 04:
I understand, but it's only educational loans.

[00:25:36] Speaker 02:
That's right.

[00:25:37] Speaker 02:
And it's the kind of loan that you would get if you borrowed all your federal money and then you needed more.

[00:25:43] Speaker 02:
I mean, if your uncle lends you $10,000, that's not going to be reported.

[00:25:47] Speaker 02:
But then the last point I would make, and my final seconds, is that the regulation explicitly says that the portions of it are severable from each other.

[00:25:56] Speaker 02:
So if for some reason you found this reporting requirement

[00:25:58] Speaker 02:
impermissible, you could easily separate from the regulation and the reporting and the rulemaking would go on as usual.

[00:26:06] Speaker 02:
It's just that private loans would be reported as zero, which would only be down to the benefit of schools because the ratios would be more favorable to the school in those instances than it would be otherwise.

[00:26:18] Speaker 01:
But it's not limited to education loans.

[00:26:22] Speaker 02:
It's limited to loans are defined in the regulation as the tuition and books and supplies and things like that.

[00:26:28] Speaker 01:
No, what I mean is I'm a graduate and I incur various debts.

[00:26:35] Speaker 01:
I'm buying a house, I'm buying a car, I'm buying a boat, you know, all those things.

[00:26:41] Speaker 01:
That's all recorded.

[00:26:43] Speaker 02:
No, those are not part of student debt.

[00:26:44] Speaker 02:
If you buy a house, I mean, obviously you have to pay that money back.

[00:26:47] Speaker 01:
No, no, no.

[00:26:48] Speaker 01:
I'm talking about what's recorded as to my post-graduate debts.

[00:26:53] Speaker 01:
I had a student loan when I was in school under Title IV.

[00:26:58] Speaker 01:
And now I've graduated.

[00:27:00] Speaker 01:
And I've incurred, just hypothetically, a lot of personal debts.

[00:27:05] Speaker 01:
All that's going to be recorded, isn't it?

[00:27:07] Speaker 02:
No, it's not.

[00:27:08] Speaker 02:
The only thing that's recorded are your debts taken out, either federally or privately, that go to the items that are specified in the regulation.

[00:27:18] Speaker 01:
So if I don't understand how that works, just walk me through it, if you will.

[00:27:23] Speaker 01:
I graduate with $100,000 in student loan debts.

[00:27:30] Speaker 01:
then the only thing that's to be recorded is if I borrow money to pay back that $100,000.

[00:27:38] Speaker 02:
Well, I think the way it works is normally when you're in school and you're receiving, that's just restricted to Title IV loans for the moment, and you're receiving your Title IV loan check, and I think it's made out to you and to the program, and you both co-sign it and it gets deposited, and some portion of that goes to tuition and all those other expenses.

[00:27:57] Speaker 02:
That type of thing is recorded, but if you are a student and you decide you want to buy a car separately or a house, and you get a mortgage, that's not part of the system.

[00:28:07] Speaker 02:
your debt.

[00:28:08] Speaker 02:
Maybe I'm misunderstanding your question.

[00:28:10] Speaker 01:
Well, I thought one of the metrics was trying to evaluate whether I was using my education in an appropriate way so I could pay back this loan.

[00:28:25] Speaker 01:
And one of the things that was of interest is

[00:28:31] Speaker 01:
you know, am I incurring all kinds of other financial obligations that are making it difficult, if not impossible, for me to repay my loan?

[00:28:41] Speaker 02:
Right.

[00:28:41] Speaker 02:
I think I understand your question now.

[00:28:43] Speaker 02:
And this is part of the 8% and the 12%, which assume that you're going to have other private, other loans and other debt, like buying a house and buying a car and other things.

[00:28:54] Speaker 02:
And the reason the 8% is set

[00:28:57] Speaker 02:
Where it is precisely because they recognize that at some point in your life You're likely to buy a car buy a house and buy a car and you need other money.

[00:29:04] Speaker 02:
So for example one of the common Underwriting standards is that you want about a 40 no more than 40 percent I think is the number of your income and around 30 percent is usually attributed to housing and so that leaves about 10 12 percent for other debt and

[00:29:22] Speaker 02:
And 8% is usually the figure that these underwriters say is what's appropriate when it comes to your student loans, which is where that number comes from.

[00:29:29] Speaker 02:
But that number assumes that student debt is not going to be the only debt in your life.

[00:29:35] Speaker 02:
But there's room left in these underwriting standards for other debt in your life.

[00:29:39] Speaker 04:
But in terms of recording it in this system, the only thing that gets into the system is your federal loans for school and any private loans, like from a bank, for going to school.

[00:29:51] Speaker 02:
That's correct.

[00:29:52] Speaker 02:
And my understanding is it's slightly even narrower.

[00:29:54] Speaker 02:
What the rule actually uses is only that portion of what you borrow that goes to tuition and other things.

[00:30:00] Speaker 02:
If you borrow some portion of it for housing or food, that's not counted under the regulation.

[00:30:06] Speaker 02:
If there are no further questions, I'd ask the court to affirm.

[00:30:09] Speaker 02:
Thank you.

[00:30:13] Speaker 04:
Does Mr. Cox have any more time?

[00:30:18] Speaker 05:
Thank you, your honor.

[00:30:19] Speaker 05:
I'll go very quickly.

[00:30:21] Speaker 05:
Let me start with their defense of the rationality.

[00:30:23] Speaker 05:
It's an odd defense.

[00:30:24] Speaker 05:
They say, yeah, there are all these things in the rule that are irrational, but we've mitigated them.

[00:30:31] Speaker 05:
That's a very odd defense.

[00:30:33] Speaker 05:
And when you actually look at the way the rule works, they don't work to mitigate.

[00:30:37] Speaker 05:
Let's take something that even the department admits is outside of school's control, recessions.

[00:30:43] Speaker 05:
They say, well, we've mitigated for that because you've got four years.

[00:30:46] Speaker 05:
But that isn't so.

[00:30:48] Speaker 05:
If the recession means that in a given year your students have bad employment experiences, you then have to give a warning immediately that says they may in future lose Title IV eligibility.

[00:31:01] Speaker 05:
The department itself admits that those types of warnings can be a death sentence.

[00:31:06] Speaker 05:
ACICS, not a school, but an accreditor recognized by the department says they're a death sentence.

[00:31:13] Speaker 05:
The department says, in the rule, a program's raves may be atypical in any given year.

[00:31:19] Speaker 05:
That means they can be a fluke.

[00:31:21] Speaker 05:
And if in a given year they're a fluke, you then have to give the warning

[00:31:25] Speaker 05:
It's a death sentence.

[00:31:27] Speaker 05:
Even the department says that slight statistical imprecision can lead to mischaracterizing the program as zone or failing, which precipitates substantial negative consequences.

[00:31:39] Speaker 05:
That's at 64.946.

[00:31:41] Speaker 05:
So I don't think it is rational.

[00:31:44] Speaker 05:
In terms of the debate we've been having about El Moros and the statutory text.

[00:31:50] Speaker 04:
I'm going to ask the additional statutory provisions about defaults.

[00:31:55] Speaker 04:
about the institution, not the program level.

[00:31:58] Speaker 04:
For what period are those run?

[00:32:01] Speaker 05:
I don't know what period those are, but you're right.

[00:32:04] Speaker 05:
They run at the institutional level.

[00:32:06] Speaker 05:
That's where Congress put it.

[00:32:07] Speaker 04:
Right.

[00:32:07] Speaker 04:
But that could have the same problem, right?

[00:32:09] Speaker 04:
If there's a four-year recession,

[00:32:16] Speaker 04:
There could be a lot of defaults.

[00:32:17] Speaker 04:
The institution would have to give warnings or whatever it is it has to give as a consequence of the defaults.

[00:32:23] Speaker 04:
Congress seems to have assumed that there is a problem.

[00:32:26] Speaker 04:
Otherwise, you wouldn't be able to control this at all.

[00:32:28] Speaker 05:
Well, no, Your Honor, several things.

[00:32:29] Speaker 05:
For starters, in that case, Congress has spoken specifically.

[00:32:32] Speaker 05:
They're speaking at the institutional level.

[00:32:35] Speaker 05:
And the default rate that they're prepared to recognize is 30%.

[00:32:41] Speaker 05:
So I do think that that provision is relevant, your honor, because what it says is Congress has struck a balance between protecting the public fisc and the purpose of the Higher Education Act and 1070A about giving access to people.

[00:32:56] Speaker 05:
We don't need to have Title IV at all, but Congress decided we want to give people a chance.

[00:33:02] Speaker 04:
But Congress doesn't provide any, in that provision, Congress didn't provide any escape hatch for what happens if there's a recession or anything like that.

[00:33:09] Speaker 05:
No, Your Honor.

[00:33:10] Speaker 05:
But again, at the programmatic level, and they tolerate a very high rate of default.

[00:33:16] Speaker 05:
It's a very different rule than the one you have in front of you.

[00:33:19] Speaker 05:
You mean at the institutional level?

[00:33:20] Speaker 05:
Yeah, I'm sorry.

[00:33:21] Speaker 05:
At the institutional level, yes.

[00:33:22] Speaker 05:
Thank you, Your Honor.

[00:33:25] Speaker 05:
One of the things we just heard from my colleague was that the school should be giving financial counseling to their students.

[00:33:30] Speaker 05:
The department has spoken authoritatively on that.

[00:33:32] Speaker 05:
And given schools the instruction, they cannot provide that kind of financial counseling.

[00:33:36] Speaker 05:
So I don't think that gets them over the hump.

[00:33:40] Speaker 05:
With respect to the debate we had earlier on, the discussion about Bunty Brothers, I think it's significant, Your Honor, that for 50 years the Department never asserted it had this power, and that under Bunty Brothers you should look at that with a bit of skepticism.

[00:33:56] Speaker 05:
Their argument about severing, Your Honor, they say, well, we can sever here because it helps the schools.

[00:34:02] Speaker 05:
But the significance of the severing here is they would be taking out of the mix a key data element, and that it would be randomizing results.

[00:34:11] Speaker 05:
It would be changing the rule that they adopted.

[00:34:14] Speaker 05:
It would be undercutting the purposes they say they want to serve.

[00:34:18] Speaker 05:
So it would be even more irrational.

[00:34:21] Speaker 05:
Thank you, Your Honor.

[00:34:23] Speaker 05:
OK, thank you.

[00:34:23] Speaker 05:
Other questions?

[00:34:24] Speaker 04:
We'll take the matter under advisement and you guys should try to go home as soon as you can.