Education Department could face ‘stronger and new challenges’ after Chevron, Moody’s says

The U.S. Department of Education is likely to face “stronger and new challenges” to regulation following a landmark U.S. Supreme Court decision striking down the Chevron doctrine, according to a report Thursday from Moody’s Investors Service.

Last month, the highest court overturned a 40-year-old precedent which deferred interpretation of unclear statutes to government agencies. Moody’s analysts said the ruling means courts “will have primary responsibility for interpreting regulations when congressional legislation is unclear,” weakening the authority of agencies like the Education Department.

Moreover, they believe regulators will not be able to respond to changes as quickly.

“Whether a future administration introduces new rules or repeals old ones, the path to that goal likely won’t be all that smooth,” they wrote.

Moody’s analysts have identified several regulations that could be at risk at the Education Department.

They contain the principle of gainful employmentthat requires career programs to demonstrate that their graduates earn enough to repay federal student loans and that at least half earn as much as those with a high school diploma. Colleges that fail to meet those standards risk losing access to federal funding.

“The ministry’s rules on gainful employment, which are intended to protect students from predatory programs, could be harder to enforce, affecting the quality of education and student debt levels,” the analysts wrote.

The rules went into effect July 1. Even before the ruling invalidating the Chevron rules, the Education Department was grappling with legal challenges related to the rules.

In one ongoing case, the American Association of Cosmetology Schools he claimed that the principle uses a flawed measure that doesn’t properly track the income of tipped workers. That’s why the association says its member colleges could be unfairly penalized.

AACS lawsuit has recently been consolidated with a similar legal challenge filed by Ogle School Management and Tricoci University of Beauty Culture. Before their complaint was consolidated with the AACS lawsuit, a federal judge he rejected Ogle and Tricoci’s request for the issuance of an interim injunction against the provisions on gainful employment.

Moody’s analysts said pending regulations could also be “delayed or scaled back.” Specifically for colleges, they could include Title IX regulations, which prohibit sex discrimination at colleges and schools that receive federal funding.

In April, the Biden administration released its new Title IX rulewhich extends the law’s protections to LGBTQI+ students. Although the law is set to go into effect on August 1, courts have temporarily blocked its implementation in at least 14 states.

The Education Department’s plans to forgive student debt are also in jeopardy.

The agency recently published draft regulations provide relief for certain groups of borrowers, such as those who started repaying more than 20 years ago. Department of Education plans to release the final decision will be made in October.

However, the Supreme Court ruling may make it difficult to implement these plans.

“Disputes over student debt relief are likely to intensify or worsen,” Moody’s analysts said.