For-Profit College Lobbying Group Sues Obama Administration Over Regulations

More than a month after the Obama administration issued weaker-than-expected regulations aimed at reining in abuses at some for-profit colleges, a trade association for the industry filed a lawsuit on Wednesday seeking to strike down the new rules governing excessive student debt.

The lawsuit is a perplexing move for the for-profit college industry, which aggressively fought the Obama administration's crackdown for more than a year, and ultimately succeeded in getting final regulations last month that were universally regarded as being substantially weakened from those proposed a year earlier.

The market has signaled that investors approved of the measures: Since the Obama administration issued the "gainful employment" regulations in early June, the stocks at many publicly traded for-profit college companies have soared. Executives at for-profit college corporations, including University of Phoenix founder John G. Sperling, have cashed in on the rise by selling millions of dollars of worth of stocks since the rules were issued.

Yet despite the apparent victory by the industry's multi-million dollar lobbying and campaign finance efforts over the past year, the lawsuit from the Association of Private Sector Colleges and Universities calls out the Obama administration's Department of Education for writing "fatally flawed" regulations that will result in "massive disincentives on private sector schools that currently seek to educate low-income, minority, and other traditionally underserved student populations."

A spokesman for the association said he was unable to comment on why the lawsuit was filed despite the positive reception of the regulations from the stock market.

Department of Education spokesman Justin Hamilton said in a statement, "Our regulations offer students and taxpayers the protection they deserve. These student safeguards rest on a sound legal foundation."

Critics of the industry said they were surprised that the trade group would come out swinging after the markets signaled a total victory.