Lots Going On While the Government Is Shutdown Here’s What We Hope Is Useful Information
OverviewAs we enter the beginning of the first full week of the government shutdown we wanted to attempt to share with the community answers to some of the questions we have been receiving regarding the effects of a government shutdown on higher education in general and also more specific questions regarding efforts to contact various points of contact within the U.S. Department of Education (Department) while the government is operating on limited “essential” staffing. We also attempt to provide some key updates on several key events that took place last week too.
The Government Shutdown
Let’s start this email with a brief synopsis of what a government shutdown means for higher education from both the macro and micro perspectives. At the macro, big picture, perspective, a government shutdown is relatively benign given the student financial aid process, but the longer it lingers on the more impact it has on higher education. The Department published guidance on Wednesday, October 1st in the form of an Electronic Announcement entitled, “Government Lapse in Appropriations – Federal Student Aid Processing and Customer Service Guidance (Genera; -25-42).” (fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2025-10-01/government-lapse-appropriations-federal-student-aid-processing-and-customer-service-guidance)
It begins, “… we would like to remind the community that there is minimal impact on students, borrowers, schools, lenders, and guaranty agencies and their ability to participate in the Title IV programs. While our federal offices, including those located in the regional cities, are closed during a lapse in appropriations, the majority of our Federal Student Aid (FSA) processors, contact centers, and websites remain operational.”
That’s the good news. The not so good news is, as the EA goes on to explain, many of the resources that you as institutions need are not available during a government shutdown. Some key examples that CSPEN has already received requests for assistance on are open issues with the key contact centers such as School Participation, Eligibility, and Oversight. Embedded in the EA the under the heading “School Eligibility, Oversight, and Monitoring” it states—
“Schools can continue to submit eligibility actions using FSA Partner Connect (fsapartners.ed.gov/home/) . We will address all applications submitted during the closure after the government reopens. Schools that need assistance with system access or application submission should contact the FSA Partner and School Relations Center at 1-800-848-0978. The caseteams@ed.gov (mailto:caseteams@ed.gov) mailbox will not be monitored during the closure.
All schools currently on HCM2 may submit a reimbursement claim during the lapse in appropriations. However, the claim may not be processed until the government reopens.
Compliance audits and financial statements can be submitted through the eZ-Audit (ezaudit.ed.gov/) website.
Any program reviews scheduled during a lapse in appropriations will be rescheduled.”
And what about the Gainful Employment and Financial Value Transparency deadlines? The Department addresses this important compliance deadline as well stating:
“As a reminder (fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2025-07-09/reminder-fvt-ge-required-reporting-2025-cycle) , Oct. 1, 2025, is the deadline for reporting data to NSLDS for the Financial Value Transparency and Gainful Employment (FVT/GE) 2025 cycle. In addition, the deadline for the 2024 cycle for reporting and the evaluation of the Completers List was previously extended to Sept. 30, 2025. The draft Completers List for the 2025 cycle will be generated after the federal government reopens. Institutions will have at least 60 days to make any corrections to their data in NSLDS following receipt of the list. If you are experiencing issues accessing NSLDS, you may report FVT/GE data after the published deadline. Please contact the NSLDS Customer Support Center at 1-800-999-8219 to document your access issue.”
There is considerably more information contained in the EA, but CSPEN wanted to share these two important sections with you as we have been receiving questions related to these two critical compliance areas quite frequently since last week.
We don’t have much more to share than this, other than to urge your institution to document any issues that you have during the shutdown EXTENSIVELY. And, if you have truly urgent issues with the Department, reach out to CSPEN and we will do our best to attempt to share your circumstances with essential Department officials and seek their guidance on behalf of your students and your institution(s).
RISE Committee Negotiated Rulemaking – Week One Summary
Despite the federal government officially being closed beginning last Wednesday through Friday, the Department had planned in advance to keep some employees within the Federal Student Aid Office at work through the remainder of the week in order to conduct the rulemaking needed to meet the statutory deadlines required by H.R. 1 – The One Big Beautiful Bill (OB3) statute. This advanced planning enabled the Department not to have to pivot to an alternative plan to complete the first of two critical negotiated rulemakings and the time was well spent.
By weeks end, the Reimagining and Improving Student Education (RISE) Committee made considerable progress in the development of regulatory language implementing the myriad of student loan deletions, revisions and additions enacted under OB3, but there are a number of key areas where compromises have yet to be reached.
Among the largest sticking points are portions of Discussion Papers – Fixed Loan Repayment Plans Provisions (www.ed.gov/media/document/discussion-draft-and-proposed-amendatory-text-fixed-loan-repayment-plans-provisions-112318.pdf) and Loan Limit Provisions (www.ed.gov/media/document/discussion-draft-and-proposed-amendatory-text-loan-limit-provisions-and-definitions-112319.pdf) – but the issues intertwine with all five of the Discussion Papers. Some of the provisions which were the focus on considerable discussion and caucuses included:
- The process of winding down the existing loan programs and processes by June 30, 2028 while at the same time and implementing the new statute by the July 1, 2026 deadlines – which includes the establishment of the new Repayment Assistance Plan (RAP) and implementation of special ICR provisions between July 4, 2025 and June 20, 2028.
- Defining the term graduate student to mean a student enrolled in a program of study that awards a graduate credential (other than a professional degree) upon completion of the program.
- Defining the term professional student to mean a student enrolled in a program of study that awards a professional degree, as defined under § 668.2, upon completion of the program.
- Requiring loan amounts to be proportionally reduced for students enrolled less-than full-time.
CSPEN will be providing individual summaries and commentary on the status of each of the five Discussion Papers over the course of the next two weeks and working with the community on the development of proposals heading into the second, and final week of RISE Committee negotiations scheduled for November 3-7.
The Texas Judge’s Ruling on Gainful Employment Litigation
Last Thursday, October 2, 2025, Chief United States District Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas – Fort Worth Division (Fifth Circuit) issued a twenty-nine page order (storage.courtlistener.com/recap/gov.uscourts.txnd.384573/gov.uscourts.txnd.384573.77.0.pdf) denying the Plaintiff’s various Motions for Summary Judgement and other motions ruling, most notably, that the U.S. Department of Education did not engage in unlawful agency actions under the Administrative Procedures Act (APA) [Civil Action No. 4:23-cv-01267-O].
The order provides analysis in response to three counts against the 2023 Final Rule defining “gainful employment” that are the result of the consolidation of five counts originally filed in two separate sets of litigation brought forward by the American Association of Cosmetology Schools & DuVall’s School of Cosmetology, L.L.C. (AACS) and Ogle School Management, LLC – Tricoci University of Beauty Culture, LLC (Ogle)
Below are what CSPEN found to be the key statements from the ruling related to the three counts and key points within the three counts and the court’s conclusion.
Count I—Contrary to Law and in Excess of Statutory Authority
Key Statements:
“Plaintiffs claim the Final Rule is not in accordance with law and exceeds statutory limitations, requiring this Court to hold it unlawful and set it aside.23 However, this Court finds that the Higher Education Act does give Defendants the authority to issue the 2023 Final Rule.”
“Defendants claim that the best meaning of the term ‘gainful’ in the context of the Higher Education Act is that ‘gainful’ means profitable (emphasis added). Defendants have interpreted gainful employment in the instant rulemaking as requiring programs to ‘actually train and prepare postsecondary students for jobs that they would be less likely to obtain without that training and preparation.’ And that students are not prepared for gainful employment if a program is designed to leave its graduates financially worse off than when they started, and unable to repay their loans. The ordinary meaning analysis supports Defendants reading of gainful employment.”
Conclusion:
“Therefore, the Court finds that the 2023 Final Rule is not in excess of statutory authority.”
Count II—Arbitrary and Capricious
i. Reliance on Inaccurate Data and Rejection of Alternate Earnings Appeals
Key Statements:
”The Department reasonably chose reported earnings as the best available data, fully explained its view that underreporting is likely not as widespread as Plaintiffs claim (emphasis added), and it reasonably explained and responded to comments about its rejection of proposed alternatives. The Department reviewed and responded to comments about the reported earnings, the debt to earnings ratio, and the earnings premium. Further, it specifically cited studies indicating that underreporting of earnings is not widespread.”
“Defendants point to new research calling into question the reliability of allowing schools to appeal their earnings data. Alternate earnings appeals are particularly questionable after the Department was directed by a court to remove the limitations it imposed on the kind and quality of data that could be presented. On that point, a study also concluded that there were implausibly large increases in income that schools reported when allowed to appeal their data with no discretion over what data they chose to submit—around 82% higher than data received from the SSA. Meanwhile, a study concluded that in the same year cosmetologists unreported tipped income should have been around 8% of their annual income. And in the NFPR, the Department thoroughly explained why using school-sponsored surveys of graduates would not be a reliable alternative way to conduct earnings appeals.”
Conclusion:
“These considerations taken together lead the Court to conclude that the Department was not arbitrary and capricious in its choice of data, or rejection of alternate earnings appeals.”
ii. The Use of Inaccurate Debt-to-Earnings Thresholds
Key Statement:
“Ogle claims that the Department not only relies on flawed earnings data but also uses an unjustifiable threshold for the debt to earnings test. That is, Ogle would have this Court find that the Defendants’ have no reason to claim debts compared to earnings should not exceed the ratios of 8% for one test and 20% for another.54 The Court disagrees with Ogle.”
Conclusion:
“… the Department points to studies which actually show that both the 8% threshold and the 20%, when combined, if anything, are too generous to gainful employment programs.59 The same study recognized the unlikeliness of these students to own homes, but finds that nevertheless students probably have car payments, rent payments, credit cards, and maybe even personal loans.60 This is why the study suggested a 20% benchmark would be a helpful counterbalance, because it was tied to income above the poverty level.61 Ogle focuses on each threshold separately, but when applied together, the Department reasonably concluded that they are more than reasonable for the debt to earnings metric, and this Court agrees.
iii. Penalizes School for Factors Beyond Their Control
Key Statement:
“AACS also points out that when the 2023 Final Rule goes into effect, the first measurements the Department will take will be based on earnings data in 2021 and 2022, when non-essential business where closed, and state licensing agencies were ‘six to eight months behind.’ “
Conclusion:
“First, the Department confirmed that the data in the administrative record reflected that ‘the pandemic did not lead to systematically lower measured median earnings for all or even most programs[.]’ The data concluded this by examining available earnings data from before and during the pandemic in the College Scorecard. Plaintiffs produced no contrary data.
Additionally, the Department points out that the ratios should still work effectively because closures due to COVID-19, and other macroeconomic trends, often affect everyone. In typical economic downturns, high school graduates’ earnings would also fall, maybe even more than earnings of workers with higher levels of education. This would generally result in lower earnings premium thresholds, creating a buffering impact on metric outcomes for programs producing college graduates. And as for future concerns, the Department also reserved the authority to waive or modify regulatory provisions in the future if needed to respond to exceptional circumstances.68 The 2023 Final Rule cannot be deemed arbitrary based on hypothetical future events. As for the pandemic, the Department reasonably concluded no delay, or other modification was warranted since its review of available data did not suggest a significant impact, and the Court agrees (emphasis added).”
iv. Illogical Cost and Benefit Analysis
Key Statements:
“Ogle argues that the 2023 Rule is arbitrary because the Department has displayed no rational connection between the costs it imposes on cosmetology programs and the benefits of the 2023 Rule.“
Conclusion:
“The Court agrees with the NFPR’s conclusion that the regulations will significantly benefit students ‘who otherwise would have low earnings’ by improving program quality and making ‘good information about program performance’ available. The Department also projected that these regulations will save nearly $14 billion in taxpayer funds. Furthermore, according to the Department’s projections, the compliance costs due will significantly decrease after the first year. Better-performing programs will increase their enrollments while poorly performing programs may incur costs from decreased enrollments or efforts to make improvements. Although this will change the future for many cosmetology schools, Plaintiffs fail to explain why this is irrational given Congress’s directives to the Department.
v. Arbitrarily Ignores Data on Demographics
Key Statements:
“Plaintiffs also suggest that the low earnings of cosmetology program graduates reflect their demographic characteristics rather than the quality of the programs they attend. Not only have other courts rejected this argument already, but the Department also concluded that demographics have an insufficient influence on program results to warrant an adjustment.”
“… there is no authority anyway which says that Title IV funding should disregard program quality because the program enrolls more students from historically disadvantaged groups.”
Conclusion:
“Therefore, the Court concludes that the 2023 Final Rule is not arbitrary and capricious under the APA.”
Count III—Equal Protection, Compelled Speech and Restraint on Speech, and Due Process and Statutory Hearing Violations
i. Equal Protection
Key Statement:
“Plaintiffs AACS also raised an equal protection argument in its original complaint. Ogle did not. Although all parties moved for summary judgment on all claims, AACS’ equal protection argument appears in no summary judgment briefing.”
Conclusion:
“The Court therefore agrees with Defendants that the equal protection argument is deemed abandoned under Fifth Circuit precedent.”
ii. Compelled Speech and Restraint on Speech
Key Statements:
“Plaintiffs do not dispute the Secretary’s authority to issue the FVT rule—which requires schools to give its students “warnings” about its failing rates—but Plaintiffs challenge it under the APA as a violation of free speech”
“AACS claims that the 2023 Rule’s FVT requirement is a form of unconstitutionally compelled speech.86 Schools are required to give current and prospective students a fair warning if the program they are slated to attend may lose Title IV eligibility the following award year. 34 C.F.R. § 668.605.”
Conclusion:
“The 2023 Final Rule does not unconstitutionally burden speech. This argument is foreclosed because courts have repeatedly rejected First Amendment challenges to federal funding conditions.”
“The Court is not convinced these standard warnings rise to the level of unconstitutional speech violations.”
iii. Due Process Violations and Statutory Hearing
Key Statements:
“AACS alleges that 34 C.F.R. § 668.603—the section in the 2023 Final Rule describing how and when a program’s participation in Title IV ends after failing the metrics two out of three consecutive award years—is in violation of 20 U.S.C. § 1094(c)(1)(F) and the Due Process Clause.”
Conclusion:
“AACS’s challenge to 34 C.F.R. § 668.603 fails. AACS cites 20 U.S.C. § 1094(c)(1)(F), which expressly directs the Secretary to ‘prescribe such regulations as may be necessary” to foster the termination of a school currently under a PPA. And, for the schools under a PPA, the Secretary provided such regulations in Subpart G. See 34 C.F.R. §§ 668.81. For all other situations, the specific hearing right AACS refers to that exists under Subpart G, does not apply. Therefore, AACS’ challenge under 20 U.S.C. § 1094(c)(1)(F) fails.”
