Part 2: American Association of Cosmetology Schools vs. Secretary of Education
By: Michael Fryar
When it comes to the American Association of Cosmetology Schools vs the Secretary of state the issue is that graduates of cosmetology schools may go into business for themselves or maintain a cash based businesses; why is this important? So while the intent, to make sure they have incomes, is valid, at the center of the issue is the way it is checked. Social security payments, normally deducted from paychecks, is the current standard; however, when a profession operates on a cash basis, there may be little to no social security record and using the current method, it looks like someone who is making a good living has no income at all.
The second issue is that schools that have failed the D/E ratio (see yesterday's post for information on this requirement) must post a warning to their students, which could result in an enrollment decline meaning an end to courses of study or programs, which will further skew data and could force a school to close before they could complete an appeal.
This was the case for AACS. They failed the gainful employment calculation using SSA data and under the appeal, proposed using the Bureau of Labor Statistics survey based data as an alternative. This was rejected by the Department of Education as it was too general. In addition, the Department of Education also noted that the argument that most graduates do not report income would be illegal, thus making the argument invalid.
It was at this point that the AACS sued under the Administrative Procedure Act, arguing that the decision by the DoE was arbitrary and capricious and failed to consider the real-world issue of unreported income.The court held that, while the DoE did have a rational argument in rejection the claim of AACS, it did not provide address the real world issue of unreported income. This also went to the issue of surveying students on their income. If they are not ready to report to the federal government, why would they report to the school?
The alternative appeal, where the schools could survey data was seen as positive but found that the required high response rate of 100% was an insurmountable barrier for some programs and schools. The court basically wiped the alternative earnings appeal requirement but “Given that no better data or methodology was presented during notice-and-comment and AACS has failed to show that it is DOE’s responsibility to come up with a better formula for each distinct type of program, it is incumbent on each school to provide better data or methodology—if it exists—during the appeal process.”
So cosmetology schools can appeal the SSA data finding of the DoE and, instead of following the requirements as set forth by the DoE, they can create their own data to support the alternative argument, but which will be subject to approval by the DoE. While this is a narrow decision with regard to cosmetology schools, it does have implications for other programs with careers that are heavily dependent on cash or tips with regard to reporting requirements that offer federal loans under the DoE.
Quincunx Consulting will keep providing information over the next few days as it comes available. We would love to hear your thoughts on this!
www.quincunxconsulting.org
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