American Association of Cosmetology Schools » Ruling in AACS v. Department of Education

American Association of Cosmetology Schools
U.S. Department of Education

U.S. Department of Education Rescinds
Gainful Employment Rule

August 14, 2018

AACS Schools Declare Victory as U.S. Department of Education Rescinds Gainful Employment (GE) Rule

What Members are Saying

"Thank you for all the hard work and effort - and for standing up for the right reasons to help protect our industry. Much appreciated."
Nick Arrojo
Arrojo Cosmetology School
"Thank you so much AACS for your vision of what could be possible for all of us. We will always be grateful for all of your hard work, personal effort and time that you put in to help us and our industry."
Cari Eisele
Career Academy of Beauty

Become a Member Today

Update : August 14, 2018

U.S. Department of Education Rescinds Gainful Employment Rule

After unofficially releasing a proposal to eliminate Gainful Employment rules on Friday, August 10, 2018 the U.S. Department of Education officially published its notice to rescind the GE rule today, Tuesday, August 14, 2018. In an 80-plus page explanation, the Department pointed to AACS and many of our talking points as valid reasoning for the ruling. The Department believes the GE rule to be unfair to certain programs and students who wish to attend those programs, citing Cosmetology programs specifically. The 30-day period for comments begins today and ends on September 13, 2018. We urge our member schools to submit comments in support of this truly historic and meaningful announcement from the Department. AACS will be sending out instructions on how to submit your comments in the coming days.

AACS’s lawsuit to overturn the Gainful Employment rule based on erroneous earnings data was cited as the premise for the Department to revisit and ultimately withdraw the rule as drafted by the previous administration. The Department specifically noted that unreported and underreported income in cosmetology and beauty-related fields led to unfair calculations resulting in hundreds of programs failing the GE metric.

Furthermore, the Department now believes that the amortization of repayment with respect to diploma programs being limited to 10 years did not take into consideration a more reasonable repayment period. Thus, the Department, again using arguments made by AACS, believes a 20-year amortization period is the correct amount of time for the calculation of annual debt repayment.

In an effort to provide more transparency to those students and their families seeking information about a post-secondary program the department will post debt to earnings metrics for all post-secondary programs on the College Scorecard. The information contained on the College Scorecard will be based on calculations from the Department. Schools will no longer be required to provide data for this information.

AACS and its member schools should be proud to know that all of your engagement, donations, and your membership made our almost 10-year campaign to overturn this regulation possible. The lawsuit and all of our efforts have paid off in a huge way as Gainful Employment will no longer be the anvil over our heads moving forward.

Now more than ever, is the time to engage with AACS. We look forward to celebrating with you at the 2018 AACS Annual Convention & Expo!

Update : January 16, 2018

Session 2 Summary Committee 1 – Borrower Defenses & Financial Responsibility

In an effort to consolidate the four days of deliberations into a “brief” summation, we have chosen to share the Department’s “Summary of Change” and highlights of the topics and takeaways for each of the eight Issue Papers.

We also focus on a key issue of importance regarding lease liability contained in the Financial Responsibility Subcommittee’s recommendations to the Committee.  AACS will be seeking additional information from many within our membership in order to help us formulate a response and additional recommendations prior to the Subcommittee’s final meeting in just a few weeks.

  • Issue Paper 1 – Federal Standard
  • Issue Paper 2 – Regulatory Framework
  • Issue Paper 3 – Financial Responsibility and Administrative Capability
  • Issue Paper 4 – Pre-dispute Arbitration Agreements, Class Action Waivers, & Internal Dispute Process
  • Issue Paper 5 – Closed School Discharge
  • Issue Paper 6 – False Certification
  • Issue Paper 7 – Guaranty Agency Collection Fees
  • Issue Paper 8 – Recalculation of Borrower’s Subsidized Usage Period and Interest Accrual
  • Financial Responsibility Subcommittee:
  • Issue Paper 2 – Financial Accounting Standards Board (FASB) Accounting Standards Update, ASU 2016-2, Leases (Topic 842), and the Department’s Financial Responsibility Standards

Click here to read the full summary on Borrower Defenses & Financial Responsibility.

Update : August 17, 2017

Gainful Employment Alternate Earnings Appeal – New Deadlines and Process Announced

Earlier today, the Department of Education announced changes to the Gainful Employment alternate earnings deadlines and appeal process.  The announcement was made in response to the Court Order in American Association of Cosmetology Schools v. DeVos that required the Department of Education to review the alternate earnings appeal requirements with respect to cosmetology programs.  

The Department undertook a comprehensive review of the process and chose to broadly apply the new requirements to all Gainful Employment programs subject to the GE regulations in 34 CFR 668. The guidance establishes new deadlines for submitting notices of intent to file alternate earnings appeals and for submitting alternate earnings appeals.  Further, the Department has modified the threshold requirements for the alternate earnings appeals.

  • Institutions that have already submitted a notice of intent to file an alternate earnings appeal, or an alternate earnings appeal, do not have to resubmit those items or amend their alternate earnings appeal in connection with the modified submission requirements described below.
  • Institutions that wish to supplement an alternate earnings appeal that has already been submitted may do so, and should contact Department staff to make those arrangements on or before October 6, 2017.
  • All institutions, including those that did not previously submit a notice of intent to file an alternate earnings appeal, may submit a notice of intent to appeal and an appeal.


New Deadlines
October 6, 2017 – Deadline to file a notice of intent to file an alternate earnings appeal
February 1, 2018 – Deadline to file an alternate earnings appeal

For alternate earnings appeals based on a graduate survey, the Department will not enforce §668.406(b)(3), or (c) to the extent these provisions require that a graduate survey contain responses from all students that are not exempted under §668.404(e), nor will the Department require a 50 percent threshold response rate.

In evaluating the alternate earnings appeal, the Department will evaluate all graduate surveys, regardless of response rate, provided the submissions include the number of responses, the response rate, and a nonresponse bias analysis, as well as any other information the Department requests.

For alternate earnings appeals based on data from State-sponsored data systems, the Department will consider the validity of appeals using State-sponsored data on a case-by-case basis, taking into account the response rate and other information requested by the Secretary. The Department will not require a 50 percent threshold be met, or the earnings of 30 students to be included, before the Department will consider the appeal.

Student Warnings
Institutions intending to file a notice of intent to appeal do not have to issue warnings to students unless they fail to timely submit an alternate earnings appeal or the appeal is resolved.

Certifications and Attestations
Institutions must still submit the certifications and attestations required by §668.406(c)(2) and (d)(3). §668.406(c)(2). §668.406(c)(2) requires a certification signed by the institution’s chief executive officer attesting that the survey was conducted in accordance with the survey standards in the Earnings Survey Form, and that the mean or median earnings used to recalculate the D/E rates was accurately determined from the survey results, and an attestation by an independent public accountant or independent governmental auditor. §668.406(d)(3) requires a certification signed by the institution’s chief executive officer attesting that it accurately used the State-provided earnings data to recalculate the D/E rates. 

The new guidelines provide all institutions an opportunity to appeal the earnings data for their GE programs. We recommend that all institutions with failing or zone programs file a notice of intent to appeal by the deadline.  The notice of intent to appeal stays the student warning requirements and allows institutions time to evaluate the new process and attempt to establish a qualified earnings appeal.

The Department also invites public comments on this action and notes that they will consider all comments in determining whether to take any future action in connection with the upcoming negotiated rulemaking. Comments may be submitted through the Federal eRulemaking Portal at or via U.S. mail, commercial delivery, or hand delivery to:

Scott Filter
U.S. Department of Education
400 Maryland Ave., SW., room 6W253
Washington, DC 20202

Comments should include the Docket ID ED-2017-OPE-0090.

Update : July 20, 2017

AACS Submits Recommendations on GE, BDR, and Audit Guidelines to the Department of Education

Last Wednesday, July 12th, 2017, in response to the U.S. Department of Education’s June 16th Federal Register Notice announcing their intention to establish two Federal Negotiated Rulemaking Committees, AACS submitted written testimony applauding the Department’s decision to revisit both the Gainful Employment and Borrower Defense to Repayment Regulations and offering comments and recommendations related to not only needed changes to these two harmful and overly restrictive regulations, but also the urgent need for immediate postponement and revision to the Proprietary School/Servicer Audit Guidelines (letter attached).  AACS GRC Committee Chairman Neal Heller also presented these concerns at the first of two regional field hearings held by the Department last week in Washington, D.C.

With this submission behind us, AACS now turns our attention to two additional opportunities to submit additional sets of comments and recommendations to Secretary DeVos and the Department.  First, in response to the July 5, 2017Federal Register Notice announcing additional time to comply with the GE Alternate Earnings Appeals deadlines – which were published in no small measure thanks to the Court’s Order in response to our lawsuit, AACS will be responding to requests for comment on the decision to delay implementation of the GE Disclosure Template requirements related to the inclusion of such information in institutions’ promotional materials and the presentation of GE program data to prospective students prior to any enrollment related actions on the part of the student.  AACS is currently drafting our favorable response to the Department’s decision and will be providing additional comments to the Department prior to the August 4th, 2017 deadline.

Second, in response to Secretary Devos June 22nd, 2017 request seeking any and all recommendations on how to streamline the current regulations and over 1,000 Office of Postsecondary Education , AACS will be providing a comprehensive list of proposals to revise or repeal overly prescriptive, duplicative, and redundant regulations and sub-regulatory guidance and interpretation prior to the August 21st, 2017 deadline.  Please be advised that next week AACS will be putting forth a Call to Action seeking your input in the development of a comprehensive list of proposals to submit to the Department.

All of this while we await the Department’s publication of new revised GE guidance in response to the AACS lawsuit which the Department has indicated would be forthcoming in early August.

Click here to read the letter as filed.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.

Update : June 30, 2017

U.S. Department of Education Announces Delay of Gainful Employment Requirements

On June 30, 2017, the U.S. Department of Education posted a special notice in the Federal Register announcing the temporary delay of major provisions of the Gainful Employment (GE) disclosure requirements. The announcement suspends the July 1, 2017, deadline for certain Gainful Employment Disclosures and extends the deadline for all GE programs to file alternate earnings appeals.

Specifically, pursuant to the Department’s Notice:

Institutions now have until July 1, 2018, to comply with GE disclosure requirements in 34 C.F.R. § 668.412(d), (e) that were originally due on July 1, 2017, regarding the distribution of gainful employment data directly to students and in promotional materials. This means that schools are not required beginning July 1, 2017, to distribute GE disclosures directly to students or include GE disclosures in their promotional material.  However, our interpretation of the Notice is that schools must nonetheless begin using the new GE disclosure template on their websites beginning on July 1, 2017.  It is our interpretation that this new guidance does not relieve non-AACS schools with failing programs who have not filed an appeal from providing the warnings required in the new template.

The deadline has been extended beyond July 1, 2017, for institutions to file alternate earnings appeals in light of the Court Order in American Association of Cosmetology Schools v. DeVos, Civil Action No. 17-0263, D.D.C. A Federal Register notice will be issued within the next 30 days to specifically implement the Court Order and will include information on establishing a new deadline for earnings appeals. It is our interpretation that this new guidance does not relieve non-AACS schools with failing programs who have not filed an appeal from providing the warnings required pursuant to 34 C.F.R. § 668.410(a).  However, additional guidance from the Department may address the existing ambiguity in the notice on this point.

For Further Information

If you have any questions related to this announcements or have questions about the GE regulations, please contact any of the attorneys in the Higher Education Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.

How AACS Members Reacted

"Thank you for all your hours and hours of work. You are very much appreciated by ALL AACS members! You are an awesome team!"
Sandy Dunham
Academy of Hair Design
"Big thank you to AACS. I feel like the organization is providing exceptional leadership and value to its membershipp. Today I am proud to be an AACSman."
Jeremy Federico
Federico Beauty Institute

Alternate Earnings Appeals

The order prohibits the Department from enforcing a requirement that AACS member schools must obtain at least a 50% response rate from graduate surveys of actual earnings before they can use that data in alternate earnings appeals.

Additional Flexibility

The Department of Education is ordered to provide AACS members with additional flexibility as to the students whose alternate earnings are measured in the appeal, and strikes from the rule any other “requirement that a particular number or percentage of students respond to institutional surveys for alternate earnings appeals.”

Extended Deadlines

The court ordered the Department to reasonably extend the deadline for AACS member schools to file alternate earning appeals, to reopen the alternate earnings appeal process for any AACS member schools who failed to timely submit notice of alternate earnings appeal

Warning Notices on Appeals

The order prohibits the Department from requiring AACS member schools who failed to timely submit notice of alternate earnings appeal to post warnings until the new deadline for alternate earnings appeal has passed.


Katherine Brodie and Robert Shapiro of Duane Morris LLP and Tom Netting of Akerman LLP conducted two webinars to explain the details of the ruling and explain what it means for your school. Click here to request PDF versions of their presentations.

Become a Member Today