American Association of Cosmetology Schools v. U.S. Dept of Ed. and Ogle School Management v. U.S. Dept of Ed. (2024) Challenges Gainful Employment Rule

Description  

Two combined lawsuits were filed in the U.S. District Court for the Northern District of Texas, challenging the Department of Education’s new Gainful Employment Rule. The lawsuits claim that the Department went beyond its legal authority because Congress did not specify that “gainful employment” should be measured by the debt-to-earnings ratio in its Higher Education Act (HEA). 

The court originally paused (stayed) the litigation at the Department’s request, so the new Administration has time to review and consider its position on the case.  It is expected that negotiated rulemaking Winter 2025-2026 will revise this regulation specifically regarding “Accountability”.  

The Department delayed reporting requirements until September 30, 2025.

The Federal District Court ruled against the plaintiffs and in favor of the Department, leaving the rule in place.  The Court found the Department's interpretation of the term “gainful employment” to mean the Biden Rule’s debt to earnings and earnings premium measures “was the best [interpretation] considering the statutory language.” Additionally, the Court indicated that the Department did not engage in any unlawful agency action under the Administrative Procedures Act (APA).

Action to be taken

• Continue compliance and reporting following current GE rules.
• Document compliance actions.
• Inform relevant staff of reporting timeline updates.
• Follow Winter 2025-2026 rulemaking for any changes to the GE rules to coordinate with developing Accountability measures.

Ruling Date

• February 10, 2025 – Motion for Stay of Litigation - Granted
• October 2, 2025 - Final Judgment 

Resources

• American Association of Cosmetology Schools v. U.S. Department of Ed., No. 23-cv-01267 (N.D. Tex.) (Court Listener webpage to follow litigation in progress)
• Final Judgment granting Defendants’ United States Department of Education and Miguel Cardona (“Defendants”) motion for summary judgment against Plaintiffs, the American Association of Cosmetology Schools and DuVall’s School of Cosmetology, L.L.C. (“AACS”) and Plaintiffs Ogle School Management, LLC, Tricoci University of Beauty Culture, LLC’s (“Ogle”). (10/2/25)
• Court Order for Plaintiff's Motion for Summary Judgment Denied. (10/2/25)