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Big Victory For Obama Administration's Push To Regulate For-Profit Colleges

A federal judge has ruled in favor of regulations that punish colleges whose graduates have high levels of debt but low earnings.

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The Obama administration won a major victory Tuesday in its attempts to regulate the for-profit college industry, with a federal judge dismissing an industry lawsuit that threatened to stop the regulations in their tracks.

The judge's ruling over the so-called "gainful employment" regulations mean the rules will likely go into effect on July 1. The regulations punish programs at for-profit colleges that graduate students with high levels of debt but low earnings. Such programs can lose their access to federal financial aid, the lifeblood of for-profit schools.

The Obama administration has long sought to regulate the industry, which critics say too often mires students in debt but fails to provide them with a valued education, all while raking in billions of dollars in taxpayer money in the form of federal financial aid.

“Today’s decision is a win for America’s students and taxpayers," said Education Secretary Arne Duncan in a statement. "Far too often, so-called career colleges leave students burdened with debt they’ll never be able to repay and stick taxpayers with the bill."

The dismissal was a blow to the embattled industry, whose lobbying group, the Association of Private Sector Colleges and Universities, had thwarted the Obama administration's previous regulatory efforts once before, in 2012. After that victory, which essentially tossed out the rules on a technicality, the administration was forced to return to the drawing board, rewriting the rules to cut out a metric that measured a student loan default rates.

The judge's ruling today said that the administration had the statutory authority to regulate the industry, and that the regulations themselves were not improperly designed.

The regulations still face a threat in Congress, where several House Republicans have attempted several times — unsuccessfully — to defund the rules.

A spokesperson for the industry lobbying group said in a statement that it was "disappointed by today’s decision," and would be reviewing its options. "The primary impact of the regulation will be to deprive hundreds of thousands of students of access to higher education," the statement said. "That is inconsistent with the congressional plan under the Higher Education Act, unlawful, and bad policy.”

Molly Hensley-Clancy is a business reporter for BuzzFeed News and is based in Washington, DC. She covers the intersection of business and education.

Contact Molly Hensley-Clancy at molly.hensley-clancy@buzzfeed.com.

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