Case 1:11-cv-01314-RC Document 33 Filed 10/26/12 Page 1 of 29

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

ASSOCIATION OF PRIVATE SECTOR COLLEGES AND UNIVERSITIES, Plaintiff, v. ARNE DUNCAN, in his official capacity as Secretary of the Department of Education, and UNITED STATES DEPARTMENT OF EDUCATION, Defendants. Civil Action No. 1:11-cv-01314 (RC)

SUPPLEMENTAL MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS MOTION TO ALTER OR AMEND THE JUDGMENT

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TABLE OF CONTENTS Page INTRODUCTION ...........................................................................................................................1 BACKGROUND: THE HISTORY OF 20 U.S.C. 1015c ...........................................................2 RESPONSES TO THE COURTS QUESTIONS ...........................................................................4 QUESTION 1...................................................................................................................... 4 QUESTION 2...................................................................................................................... 9 QUESTION 3.................................................................................................................... 10 QUESTION 4.................................................................................................................... 13 QUESTION 5.................................................................................................................... 15 QUESTION 6.................................................................................................................... 16 QUESTION 7.................................................................................................................... 18 CONCLUSION ..............................................................................................................................23

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TABLE OF AUTHORITIES Page(s) Cases Batterton v. Marshall, 648 F.2d 694 (D.C. Cir. 1980) .......................................................................................... 21, 22 * Elec. Privacy Info. Ctr. v. Dept of Homeland Sec., 653 F.3d 1 (D.C. Cir. 2011) .................................................................................................... 21 * Farina v. Nokia Inc., 625 F.3d 97 (3d Cir. 2010)...................................................................................................... 13 * Intl Union, United Mine Workers of Am. v. Mine Safety & Health Admin., 407 F.3d 1250 (D.C. Cir. 2005) .............................................................................................. 19 Marseilles Homeowners Condo. Assn v. Fidelity Natl Ins. Co., 542 F.3d 1053 (5th Cir. 2008) .................................................................................................. 5 * Messina v. Krakower, 439 F.3d 755 (D.C. Cir. 2006) .................................................................................................. 1 Natl Tour Brokers Assn v. United States, 591 F.2d 896 (D.C. Cir. 1978) .................................................................................................. 8 Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997) ................................................................................................ 19 * Patton Boggs LLP v. Chevron Corp., 683 F.3d 397 (D.C. Cir. 2012) .................................................................................................. 5 Skidmore v. Swift & Co., 323 U.S. 134 (1944) ................................................................................................................ 13 U.S. Telecom Assn v. FCC, 400 F.3d 29 (D.C. Cir. 2005) .................................................................................................. 21 United States v. Mead Corp., 533 U.S. 218 (2001) ................................................................................................................ 13 * Wyeth v. Levine, 129 S. Ct. 1187 (2009) ............................................................................................................ 13 Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) ................................................................................................................ 19 Statutes 5 U.S.C. 553(b)(2) ....................................................................................................................... 8 15 U.S.C. 1650(a)(7).................................................................................................................... 7 20 U.S.C. 1015(f)(4) .................................................................................................................... 7 20 U.S.C. 1015c ..................................................................................................................... 3, 17 ii

Case 1:11-cv-01314-RC Document 33 Filed 10/26/12 Page 4 of 29 TABLE OF AUTHORITIES (Continued) Page(s) Statutes (Continued) 20 U.S.C. 1015c(a)....................................................................................................... 1, 3, 17, 18 20 U.S.C. 1015c(b) ...................................................................................................................... 4 20 U.S.C. 1015c(b)(1).................................................................................................................. 4 20 U.S.C. 1019d(a)(3)(C) ............................................................................................................ 7 20 U.S.C. 1092b ........................................................................................................................... 6 20 U.S.C. 1092b(b) ...................................................................................................................... 7 20 U.S.C. 1092b(b)(1) ................................................................................................................. 6 20 U.S.C. 1092b(b)(3) ................................................................................................................. 7 20 U.S.C. 1098 ............................................................................................................................. 7 20 U.S.C. 3474 ............................................................................................................................. 8 Pub. L. No. 110-315, Title I, 113 (Aug. 14, 2008) ...................................................................... 3 Pub. L. No. 110-315, Title I, 489 (Aug. 14, 2008) ...................................................................... 7 Pub. L. No. 112-141 (July 6, 2012) ................................................................................................ 8 Regulations 34 C.F.R. 668.6(a)(1)(i)(A)........................................................................................................ 17 34 C.F.R. 668.6(b)(1)(v) ............................................................................................................ 18 34 C.F.R. 668.7(a)(2) ................................................................................................................. 18 34 C.F.R. 668.7(e)...................................................................................................................... 20 34 C.F.R. 668.7(b)-(f) .............................................................................................................. 18 75 Fed. Reg. 54,331 (Sept. 7, 2010) ............................................................................................. 15 75 Fed. Reg. 66,832 (Oct. 29, 2010) ............................................................................................. 13 76 Fed. Reg. 37,095 (June 24, 2011) ............................................................................................ 15 Rules Fed. R. Civ. P. 59(e) ....................................................................................................................... 1 Legislative Reports H.R. Rep. No. 109-231 (2005) ............................................................................................ 3, 10, 17 H.R. Rep. No. 110-500 (2007) ........................................................................................................ 9 H.R. Rep. No. 110-803 (2008) ........................................................................................................ 9 iii

Case 1:11-cv-01314-RC Document 33 Filed 10/26/12 Page 5 of 29 TABLE OF AUTHORITIES (Continued) Page(s) Other Authorities Alisa Cunningham et al., Natl Ctr. For Educ. Statistics, Dept of Educ., Feasibility of a Student Unit Record System within the Integrated Postsecondary Education Data System (Mar. 2005), available at http://nces.ed.gov/ pubs2005/2005160.pdf.............................................................................................................. 2 Dept of Educ., A Test of Leadership: Charting the Future of U.S. Higher Education (Sept. 2006), available at http://www2.ed.gov/about/bdscomm/list/hiedfuture/ reports/pre-pub-report.pdf ......................................................................................................... 3 Natl Ctr. for Educ. Statistics, Student Financial Aid, Private Academic Reporters, https://surveys.nces.ed.gov/ipeds/VisInstructions.aspx?survey=7&id=498&show= all............................................................................................................................................. 10 Press Release, Rep. Virginia Foxx, Fox Amendment Protects Student Privacy, July 13, 2005, available at http://foxx.house.gov/common/popup/ popup.cfm?action=item.print&itemID=101 ........................................................................... 16 Russ Whitehurst, Director, Inst. of Educ. Sciences, Remarks at A National Dialogue: The Secretary of Educations Commission on the Future of Higher Education 29 (Dec. 8, 2005) (emphasis added), available at http://www2.ed.gov/about/ bdscomm/list/hiedfuture/2nd-meeting/transcripts-1.pdf ........................................................... 2 *Authorities upon which APSCU chiefly relies are marked with asterisks.

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INTRODUCTION The Departments supplemental brief gives short shrift to the questions posed by the Court in its Order of September 24, 2012. As the Court has recognized, 20 U.S.C. 1015c(a) restricts the Departments authority to create and maintain databases of personally identifiable student information. The Department, however, advocates a limitless exception to this prohibition that ignores the very abuse that Congress addressed in passing the statute. The Department also makes several concessions. Most notably, the Department concedes that the National Student Loan Data System (NSLDS), the database into which it proposes to incorporate the information, has never contained student-level information about non-federal, private borrowing, and that section 1015c resulted from Congressional concern about earlier Department proposals to collect this type of data. See Dept Supp. Mem. 7-9 (until the adoption of the Reporting regulations, the NSLDS did not contain information regarding students who had never participated in Title IV programs); id. at 4 (discussing proposals to transition the Integrated Postsecondary Education Data System (IPEDS) from an institutional-level database into a student-level database). Significantly, these errors and concessions take place within the context of the Departments pending motion to alter or amend the judgment under Rule 59a motion that requires the Department to demonstrate that the Court committed clear error. The Department plainly has not carried that burden; and as APSCU has explained, the Departments motion to amend the judgment is not a bona fide effort to correct any clear error in the Courts decision. Messina v. Krakower, 439 F.3d 755, 758-59 (D.C. Cir. 2006) (citing Fed. R. Civ. P. 59(e)). Instead, it represents a post-hoc effort to salvage some aspect of the Departments unlawful regulatory regime, based on a new theory divorced from both the underlying rulemaking and the issues at the core of this lawsuit. The Departments supplemental response does nothing to

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undermine that conclusion. The Court should reject the Departments effort to adopt new regulations through this litigation rather than through the notice and comment procedures required by the Administrative Procedure Act (APA). BACKGROUND: THE HISTORY OF 20 U.S.C. 1015c In 2005, the Department of Education published a feasibility study that examined the possibility of creating a database to track student-level data on persons enrolled in institutions of higher education. Alisa Cunningham et al., Natl Ctr. For Educ. Statistics, Dept of Educ., Feasibility of a Student Unit Record System within the Integrated Postsecondary Education Data System (Mar. 2005) (Feasibility Study), available at http://nces.ed.gov/pubs2005/2005160.pdf. The goal of the study was to assess the possibility of replacing IPEDS, which collects institutional-level data about students, with a new database that would contain student-level data. See id. at iii. Among other things, the proposed database would have tracked information on graduation and transfer rates, time to degree, net price persistence, transfer, and graduation for Pell grants[,] and loans by a variety of student characteristics. Russ Whitehurst, Director, Inst. of Educ. Sciences, Remarks at A National Dialogue: The Secretary of Educations Commission on the Future of Higher Education 29 (Dec. 8, 2005) (emphasis added), available at http://www2.ed.gov/about/bdscomm/list/hiedfuture/2nd-meeting/transcripts-1.pdf. At the time of the Feasibility Study, the Department also maintained the NSLDS, which containedand still containsstudent-level data related to students Title IV borrowing. The Departments proposal drew prompt criticism from Congress. In 2006, the House of Representatives passed H.R. 609, the College Access and Opportunity Act of 2005. H.R. 609 would have forbade the Department from creating or maintaining a nationwide database of personally identifiable information on individuals receiving assistance, attending institutions receiving assistance, or otherwise involved in any studies or other collections of data under [the 2

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Higher Education Act (HEA)], including a student unit record system, an education bar code system, or any other system that tracks individual students over time. The bill exempted from its database restriction loan obligation enforcement activities related to the creation and operation of the NSLDS. According to the House Committee on Education and the Workforce, the database restriction was adopted because students pursuing higher education have an expectation of basic privacy protections, students should not be forced to relinquish their fundamental privacy rights as a condition of attending an institution of higher education, and because the Committee disagreed with claims that the only means of assuring accountability in higher education is to collect and maintain a vast, Federal database of private, personally identifiable information about all students enrolled in higher education. H.R. Rep. No. 109231, at 162-63 (2005). The Committee concluded that accountability in higher education would be achieved by disclosuresnot by placing information about students into a massive new database that could compromise fundamental privacy protections. Id. at 163 (emphasis added). Notwithstanding that congressional reaction, the Department continued to pursue the creation of a large database of personally identifiable student information. See Dept of Educ., A Test of Leadership: Charting the Future of U.S. Higher Education 20-21 (Sept. 2006), available at http://www2.ed.gov/about/bdscomm/list/hiedfuture/reports/pre-pub-report.pdf. Congress responded by enacting the database restriction codified at 20 U.S.C. 1015c as part of the Higher Education Opportunity Act (HEOA). See Pub. L. No. 110-315, 113, 122 Stat. 3078, 3110-11 (Aug. 14, 2008). In section 1015c(a), Congress prohibited the Department from: develop[ing], implement[ing], or maint[aining] . . . a Federal database of personally identifiable information on individuals receiving assistance under this chapter . . . , attending institutions receiving assistance under this chapter . . . , or otherwise involved in any studies or other collections of data under this chapter . . . , including a student unit record system, an education bar code system, or any other system that tracks individual students over time.

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The only exception to this broad prohibition is for a system that is both necessary for the operation of certain student financial assistance programs and in use by the Secretary . . . as of the day before August 14, 2008. Id. 1015c(b). As shown below, the Department seeks to place itself within that exception; but the Department fails. RESPONSES TO THE COURTS QUESTIONS 1. Under 20 U.S.C. 1015c(b)(1), the Department cannot maintain a database of personally identifiable information about students at post-secondary institutions unless that system is necessary for the operation of programs authorized by Titles II, IV, or VII of the Higher Education Act. When the Department adds information to a pre-existing database, must the additional information be independently necessary for the operation of a covered program, or does that statutory requirement only apply to entire databases? The Department argues that 20 U.S.C. 1015c does not require each additional piece of data entered into an authorized database to be independently necessary for the operation of a Title IV program. Dept Supp. Mem. 1. That is not always true. Subsection (b)(1) of section 1015c clearly exempts existing system[s] that are necessary for the operation of certain HEA programs from subsection (a)s prohibition on creating or maintaining databases of personally identifiable information. Thus, APSCU does not dispute that the Department may collect, for instance, a students date of birth, which on its own may serv[e] no independent purpose for operating an HEA program, but [may] when combined with a full name, social security number, and address help the Department track the federal borrowing activities of an individual loan holder, if such tracking is necessary for the operation of a Title IV program. Dept Supp. Mem. 2. Yet even the Department does not contend that the existence of the NSLDS means that it may incorporate any piece of information it desiresregardless of the need for such information to operate a Title IV program. As the Departments own date of birth example illustrates, the new information that the Department wishes to maintain must, at the very least, work together 4

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with existing information in the NSLDS to serve the Title IV purposes for which that database was created. See id. The status of a particular databaselike the NSLDSas necessary for some aspect of the operation of Title IV is not a license for the Department to collect and maintain any information it desires in that database. Such an understanding would deprive section 1015c of meaning by making a database like the NSLDS infinitely expandable at the Departments discretion. In order to give effect to section 1015c, the Department must be prohibited from adding new types of information to its existing databases unless the new information is necessaryeither independently or in combination with other information in the databaseto the operation of a Title IV program. The Department maintains that the Court committed clear error by vacating the Reporting regulations, but has failed, through three successive rounds of briefing, to articulate a workable standard for determining whether the information it seeks to collect through the Reporting regulations and maintain in the NSLDS is necessary for the operation of Title IV programs and therefore consistent with section 1015c. The Department has said only that collecting personally identifiable information will enable it to impose disclosure obligations on schools that it believes are desirable. See Dept Supp. Mem. 3.1

This failure alone shows that the Department has not satisfied the strict standard for amending the Courts judgment. The Department has had ample opportunity to explain why the operation of Title IV programs depends on the collection of personally identifiable information regarding students private debts. See Pl.s Oppn 8-9. Notably, APSCU raised this issue during the summary judgment proceedings, and the Department failed to respond. Compare Pl.s Summ. J. Reply 45 with the later-filed Dept Summ. J. Reply 24-25. And the Court vacated the Reporting regulations because the Department failed to demonstrate that the information to be collected was necessary for the operation of any Title IV program other than the vacated Gainful Employment regulations. See Mem. Op. 33. The Departments failure to address an issue results in waiver, which cannot be the basis for post-judgment relief predicated on clear error. See, e.g., Patton Boggs LLP v. Chevron Corp., 683 F.3d 397, 403 (D.C. Cir. 2012); Marseilles Homeowners Condo. Assn v. Fidelity Natl Ins. Co., 542 F.3d 1053, 1058 (5th Cir. 2008).
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That position, which empowers the Department to collect personally identifiable information about students non-federal, private borrowing simply because it thinks it is useful to do so, does not satisfy any plausible reading of the statutes necessity standard. First, as APSCU has explained, accepting the Departments argument would eviscerate the prohibition in 20 U.S.C. 1015c. It would empower the Department to collect and maintain, in a database like the NSLDS, any personally identifiable information it desires, by the simple expedient of determining that studentsor perhaps even researchersshould have access to it. Pl.s Summ. J. Reply 45. It is implausible that Congress would have thought that its protection of students fundamental privacy rights in section 1015c could be so easily evaded. Second, the statute that establishes the NSLDSand sets out the parameters of information for inclusion in that databasemakes clear that the information the Department now seeks to collect and maintain is materially different in character from the information in the NSLDS as Congress has ever known it, and is therefore not necessary to the operation of the programs the NSLDS was intended to support. See 20 U.S.C. 1092b. That statute speaks to the Departments authority to create and maintain a database of information concerning Title IV loans; it makes no mention of information about non-federal, private loans or the income of schools former students. In fact, what the statute does say strongly cuts against the Departments argument. For example, 20 U.S.C. 1092b(b)(1) authorizes the Department to collect information concerning the income level of the borrowernot the graduateand his family and the extent of the borrowers need for student financial assistance for the limited purposes of research and policy analysis. Moreover, the statute requires the Department to collect such information from a statistically valid sample of borrowers, not all students. Id. 1092b(b). Similarly, 20 U.S.C.

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1092b(b)(3) empowers the Department to collect information concerning other student financial assistance received by the borrower. As the HEA makes clear, however, student financial assistance does not include non-federal, private loans. See, e.g., 20 U.S.C. 1015(f)(4) (defining Federal and State student financial assistance as any grant, loan, work assistance, tuition assistance, scholarship, fellowship, or other form of financial aid . . . that is administered, sponsored, or supported by the Department of Education, the Department of Defense, the Department of Veterans Affairs, or a State . . . .).2 Further, the Department must collect information concerning other student financial assistance from a statistically valid sample of borrowers, and may use that information only for the limited purposes of research and policy analysis. 20 U.S.C. 1092b(b).3 All of these requirements are absent from the Departments litigation-driven proposal. Third, disclosures that are merely desirable, by definition, fail the test of necessity. An example from the Departments supplemental memorandum illustrates this distinction: Congress has provided that students may not obtain certain Title IV financial assistance if they persist in a program for more than 150 percent of the stated length of that program. See Pub. L. No. 1122

See also 20 U.S.C. 1019d(a)(3)(C) (describing disclosures to inform students that taking out private education loan[s] may affect [their] eligibility for free or low-cost Federal, State or institutional student financial assistance); id. 1098(a)(2)(A) (establishing an advisory committee on Student Financial Assistance to provide extensive knowledge and understanding of the Federal, State, and institutional programs of postsecondary student assistance); 15 U.S.C. 1650(a)(7) (defining private education loan as a loan for financing postsecondary education that is not made, insured, or guaranteed under Title IV). As these provisions make clear, the HEA also distinguishes institutional aid, which students may receive from institutions of higher education, from private education loans, which students may receive from non-educational financial institutions. Non-federal, private loans are not within the scope of the term student financial assistance.

Notably, Congress amended 20 U.S.C. 1092b in 2008 in the same law that created 20 U.S.C. 1015c. Pub. L. No. 110-315, 489, 122 Stat. at 3303-05. The amendments to section 1092b focus on ensuring the NSLDS protects students privacy and reveal no congressional intent to condone expansion of that database to new types of data.
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141, 126 Stat. 405 (July 6, 2012). To ensure that this feature of Title IV can be enforced, the Department plausibly may need to track information about the program enrollment, program length, and rate of progression for students enrolled in eligible Title IV programs. Dept Supp. Mem. 2. By contrast, no aspect of the operation of Title IVor any other provision of the HEAis jeopardized by the Departments inability to force schools to make the very different disclosures at issue on this motion to amend the judgment. Even if the Department had adopted regulations that require schools to disclose how they fare on the vacated Gainful Employment regulationsand as APSCU has shown, the Department never adopted any such regulations, Pl.s Oppn 1, 6-7the Department has not established that such disclosures are necessary to the operation of a Title IV program. The Department asserts that the disclosures are authorized by 20 U.S.C. 3474, which empowers it to prescribe . . . regulations that are necessary or appropriate to administer and manage Title IV programs. (emphasis added). Yet the Department has never shown that it adopted any requirement that schools disclose their performance on the vacated metrics under its authority to adopt necessary regulations, as opposed to its authority to adopt appropriate regulations.4 As APSCU has maintained throughout this litigation, the Departments belated reliance on 20 U.S.C. 3474 as authority for the Disclosure regulations is unlawful. See Pl.s Oppn 8 n.3; Pl.s Summ. J. Reply 44. Both the APA and controlling precedent require that the Department reference . . . the legal authority under which [a] rule is proposed in the Notice of Proposed Rulemaking. 5 U.S.C. 553(b)(2); Natl Tour Brokers Assn v. United States, 591 F.2d 896, 899-900 (D.C. Cir. 1978). In National Tour Brokers, the Court vacated the challenged regulations because the [Commission] failed to comply with the notice requirements of the Administrative Procedure Act, by, among other things, failing to set forth the statutory basis for its rulemaking in its notice of proposed rulemaking. 591 F.2d at 899.
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The Departments shifting foundation for its regulatory authority is not harmless. The Departments publicly stated reliance on sections 1001 and 1002, rather than section 3474, did not provide interested parties with notice that the Department was considering a standalone disclosure regime rather than a regime ancillary to the unlawful Gainful Employment regulations. Had the Department cited section 3474 instead of sections 1001 and 1002 as authority for the Disclosure regulations, commenters would at least have had a signal that the 8

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Fourth, the legislative history of 20 U.S.C. 1015c demonstrates that collection and maintenance of information about students non-federal, private loans is not necessary to the operation of a Title IV program. As the Conference Report accompanying section 1015c states, the exception for necessary databases was meant to preserve the Departments ability to conduct surveys like the National Postsecondary Student Aid Survey (NPSAS). H.R. Rep. No. 110-803, at 459 (2008) (Conf. Rep.). Notably, although the NPSAS collects information on students non-federal, private education loans, it does so through the voluntary participation of samples of students rather than the collection of extensive, personally identifiable data on all students. H.R. Rep. No. 110-500, at 238 (2007) (emphasis added). The Department now asks this Court to amend its judgment so that the Department may collect extensive, personally identifiable data on all studentsexactly what 20 U.S.C. 1015c was intended to prohibit. The Department has failed to show that the information it seeks to collect through the Reporting requirements is consistent with the prohibition in section 1015c. 2. Congress has prohibited the creation of a new student unit record system or education bar code system. 20 U.S.C. 1015c(a). What do those terms mean? Do they refer to proposals put forward by the Department of Education in the middle of the last decade? The parties agree that a student unit record system refers generally to a system of records containing data on individual students; that an education bar code system is a method of tracking such information by using bar codes rather than individually identifiable information; and that the NSLDS is an example of a student unit record system. Dept Supp. Mem. 3. The parties further agree that 20 U.S.C. 1015c was a direct response to proposals explored by the Department in 2005 and 2006 to create a student unit record system that would replace certain aspects of IPEDS and, presumably, operate alongside an existing student unit record system, the Disclosure regulations might persist, even if the Gainful Employment regulations were ultimately invalidated due to one or more of their many flaws. 9

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NSLDS. Id. at 4-5. Finally, the parties also agree that Congress reacted to these proposals by determining that accountability in higher education should not be achieved by placing information about students into a massive new database that could compromise fundamental privacy protections. Id. at 5 (quoting H.R. Rep. No. 109-231, at 162-63). Those facts confirm that 20 U.S.C. 1015c prevents the implementation of the Reporting regulations. First, as APSCU has explained, the adoption of section 1015c at a time when the NSLDS was limited to information related to federal lending is strong evidence that the Reporting regulations attempt to expand that database to collect information related to nonfederal, private lending is unlawful. Pl.s Oppn 11-12. Second, IPEDS maintains information about students non-federal, private lending at the institutional level and not the student level.5 Notably, it was the Departments proposal to convert IPEDS from an institutional-level database to a student-level database that prompted Congress to enact 20 U.S.C. 1015c. In other words, the Department now seeks to use the Reporting regulations to collect and maintain the same type of information it intended to collect had section 1015c not prevented its efforts to reconfigure IPEDS. 3. In 20 U.S.C. 1015c(b)(2), Congress also prohibited the Department from maintaining any database of personally identifiable information about students at post-secondary institutions, unless that database was in use by the Secretary, directly or through a contractor, as of the day before August 14, 2008. Does this provision place any limit on the Departments ability to alter or expand an existing database? If so, how should a reviewing court determine whether additions or alterations have transformed an existing database into one which effectively was not in use by August 13, 2008? Should the ban on new student unit record systems inform this analysisand if so, how? According to the Department, it may add information to an existing database anytime (i) it has a legitimate need to do so; (ii) the new information fits within the overall purpose of
5

See Student Financial Aid, Private Academic Reporters, Natl Ctr. for Educ. Statistics, https://surveys.nces.ed.gov/ipeds/VisInstructions.aspx?survey=7&id=498&show=all (institutionally- and privately-sponsored loans are included in IPEDS). 10

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the existing database; and (iii) the new information is necessary to operate a Title IV program. Dept Supp. Mem. 5-6. There are a number of problems with these assertions. The Department has invented very weak prongs in an effort to make its test appear more rigorous than it is. The first prong of the Departments test is completely subsumed within the third prong. Presumably, the Department would have a legitimate need to add information to an existing database whenever that information is necessary to the operation of a Title IV program. As for the Departments second prongthe databases overall purposethe Departments brief shows that it would use that to claim essentially limitless authority. Indeed, if the overall purpose of a database is defined to include the operation of Title IV programs, then the second prong of the Departments test is simply a restatement of the already redundant first and third prongs. Moreover, in its motion to alter or amend the judgment, the Department alleged that Congress authorized the NSLDS for the purpose of collecting information on student loan borrowers. Dept Mot. to Alter or Amend J. 13. But to define the overall purpose of the NSLDS at such a high level of generalitywithout reference, for example, to the type of information to be collected or the specific purposes served by collecting such information would be to authorize the Department to collect any information on student loan borrowers the Department itself deems necessary for the operation of Title IV. That is precisely what 20 U.S.C. 1015c prohibits. Even if the Departments testarticulated for the first time in response to the Courts Orderwere meaningful, the Department fails to offer any guidance as to how a reviewing court could apply it. The Department does not explain, for example, how a court should determine whether the Department has a legitimate need to maintain the information or, as explained above, whether the information is necessary to the operation of any Title IV programs. The

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Departments failure to answer these questions, which the Court specifically posed in its Order, speaks volumes. See also infra pp. 15-16. APSCU contends that the Court should look to the text, structure, and history of 20 U.S.C. 1015c to discern its scope. APSCUs responses to Questions 1 and 2 identified some of the factors a court should consider before permitting the Department to add personally identifiable information to an existing database. For example: A court must ensure that proposed expansions of a database are not justified on a basis that would permit indefinite expansion. Thus, for example, a court must reject bare assertions of a need to collect information on student loan borrowers. Dept Mot. to Alter or Amend J. 13. A court must ensure that the new data is not collected and maintained simply because the Department believes it is desirable to do so. If, for example, the Department wishes to collect personally identifiable information in order to formulate certain disclosures, it must show how necessary Title IV operations will be materially impaired by the lack of such disclosures. By repeatedly failing to offer any such explanation in this case, the Department has waived its opportunity to satisfy this standard. A court must ensure the new data is not of the type that the text of 20 U.S.C. 1015c, supported by legislative history, strongly indicates the Department should not be permitted to collect and maintain. For example, section 1015c was a reaction to a proposal to transition IPEDS from an institutional-level database to a student-level database; accordingly the Department should be prohibited from collecting and maintaining individual-level data if such data is already in IPEDS at the institutional level. Similarly, in adopting 1015c, Congress blessed the voluntary collection of studentlevel data regarding non-federal, private borrowing through the National Postsecondary Student Aid Survey; accordingly, the Department should be prohibited from forcibly collecting such information. A court must ensure that the new data is of the same type as the data the Department is statutorily authorized to collect. Thus, for example, it is not permissible for the Department to expand the NSLDS to cover non-federal, private education loans, particularly when the expansion is not accomplished through statistical sampling or done for the purpose of research. As explained in APSCUs previous answers, the Departments proposal to expand the NSLDS with data collected through the Reporting regulations fails to satisfy any of those factors,

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and the Department has failed to set forth any meaningful considerations of its own to guide the Courts analysis. 4. How much deference, if any, should the Department receive for its interpretation of 20 U.S.C. 1015c? The Department asserts that its interpretation of 20 U.S.C 1015c is entitled to Chevron deference. Not so. An agency is entitled to Chevron deference only when it interprets a statute in a manner carrying the force of law. See United States v. Mead Corp., 533 U.S. 218, 226-27 (2001). Here, the Department has never authoritatively interpreted section 1015cwith the force of lawto permit it to add new data on students non-federal, private education loans to the existing Title IV loan information in the NSLDS. The Department contends that it interpreted section 1015c authoritatively in the rulemaking adopting the Reporting regulations, when it stated, in the regulatory preamble, that [i]nstitutions reporting that students have started or completed a program for which those students received title IV, HEA program funds will augment the existing information in the Departments systems that are used to monitor and maintain the operations of title IV, HEA programs. Dept Supp. Mem. 6-7 (quoting 75 Fed. Reg. 66,832, 66,842 (Oct. 29, 2010)) (alteration in original). This statement cannot be afforded Chevron deference for several reasons. First, it is found only in the regulatory preamble; accordingly it should receive deference only depend[ing] on [its] thoroughness, consistency, and persuasiveness. Wyeth v. Levine, 129 S. Ct. 1187, 1201 (2009) (citing Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)); see also Farina v. Nokia Inc., 625 F.3d 97, 127 n.27 (3d Cir. 2010). Second, it is descriptive, not interpretive. See Mead, 533 U.S. at 227 (Chevron deference applies only to agency interpretation[s]). The statement explains how the reporting requirements will function (to augment an existing database); it does not explain why those augmentations do not violate

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section 1015cs prohibition on new databases. Third, to the extent that the Departments statement suggests that section 1015c authorizes it to make unlimited additions to an existing database, that interpretation is plainly unreasonable because it would eviscerate the statute.6 The only statement in the Departments prior rulemaking that might be said to interpret section 1015c appears directly before the Departments quoted excerpt. It reads: In this case, the information being reported is already a part of the information that is maintained by institutions in their student financial aid and academic records, and is subject to compliance and program reviews. 75 Fed. Reg. at 66,842. This interpretation of section 1015capparently authorizing the Department to add to an existing database any information that schools already possess and that is already regulated is also not entitled to Chevron deference, for substantially the same reasons the interpretation offered in the Departments supplemental memorandum is not entitled to such deference. First, it also appears only in the regulatory preamble. And second, it is not a reasonable interpretation of the statute. As APSCU has previously explained, the fact that schools have already collected the personal information that the Department now seeks does not make that information necessary or part of an existing system in use by the Secretary as of August 13, 2008. See Pl.s Mot. for Summ. J. 40. If section 1015c were interpreted to authorize the Department to collect any information that schools already possess, the Department would be able to collect information about students citizenship, residency status, and participation in varsity sports exactly the sort of personal information that section 1015c was enacted to prevent the

The statement identified by the Department also does not interpret section 1015c to authorize the collection of information about students non-federal, private borrowing. Rather, it discusses the collection of information about when students started and completed a program for which they received Title IV funds. 14

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Department from collecting. See Dept Supp. Mem. 9 (describing the information in the proposed student unit record system that Congress rejected with section 1015c). 5. Prior to the reporting requirements, did the NSLDS contain personally identifiable information about students who had never participated in any Title IV program? Did the reporting requirements add to the NSLDS personally identifiable information about all students who were enrolled in a gainful employment program, including those who had not received any Title IV aid? Does the administrative record contain this information? The Department concedes that before the Reporting regulations briefly took effect, the NSLDS did not contain personal information on students who never participated in any Title IV program. Dept Supp. Mem. 7-9; see also 75 Fed. Reg. 54,331, 54,332 (Sept. 7, 2010) (This system contains records on borrowers under the Title IV, HEA loan programs.). From its inception until the time the unlawful regulations took effect, the Department used the NSLDS only to track students who received or applied for Title IV loans. This concession demonstrates that Congress has only ever known the NSLDS to track students public borrowing activity. The Department further admits that the NSLDS now contains some information regarding students non-federal, private loans, only because the Reporting regulations were effective from July 1, 2011 until the Court vacated them on June 30, 2012. Dept Supp. Mem. 8. Specifically, the NSLDS now contains information about the amount of the students private educational loan debt, the amount of institutionally provided financing owed by the student, . . . and the median loan debt incurred by students who completed the gainful employment program. 76 Fed. Reg. 37,095, 37,097 (June 24, 2011). The Departments response to the Courts question shows that the Reporting regulations materially altered the type of information historically maintained in the NSLDS. The Department has not offered any valid justification for its claimed authority to expand the NSLDS

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in this manner. Indeed, as explained above, all statutory and legislative authorities demonstrate that the Department lacks any such authority.7 6. Aside from its limitation to students enrolled in gainful employment programs, what, if anything, distinguishes the information collected by the reporting requirements from the information that would have been stored in a student unit record system? The Department states that the only difference between the information to be collected by the Reporting regulations and the information that would have been stored in the type of student unit record system that Congress expressly prohibited by enacting 20 U.S.C. 1015c is one of scope. Dept Supp. Mem. 9-10. In other words, the Department proposes to collect precisely the same type of information that prompted Congress to enact section 1015c, it just proposes to collect less of it, at least for now. Notably, the Departments sole authority for its argument that it may collect some of the types of information that section 1015c was intended to deny to it, so long as it does not collect all possible types of such information, is a press release from a single Member of Congress, commending Congress for adopting legislation that would prohibit the Department of Education from creating a federal database of information on nearly every facet of college students lives. Press Release, Rep. Virginia Foxx, Fox Amendment Protects Student Privacy (July 13, 2005), available at http://foxx.house.gov/common/popup/popup.cfm?action= item.print&itemID=101. It is absurd to read that statement to endorse the Departments efforts to create a federal database of information on only some aspects of students lives, particularly when the information the Department wants to collect concerns the intensely private matter of students personal finances. The Department also admits that the administrative record in this case does not contain any explanation that the Reporting regulations would result in a significant alteration in the type of data the Department would maintain in the NSLDS. Dept Supp. Mem. 8. The Department omitted that crucial fact until it published a System of Records Notice, which is not part of the administrative record in this case, in the Federal Register on June 24, 2011, nearly eight months after it adopted the Reporting regulations and only days before those regulations took effect.
7

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In fact, the Reporting regulations raise even more concerns about student privacy than the proposed student unit record system that prompted Congress to enact 20 U.S.C. 1015c. In its 2006 proposal, the Department sought to create a student unit record system that would function while hiding students names and other identifying information. As the Department acknowledges, Congress enacted section 1015c [d]espite these privacy protections that would have been a feature of the planned database. Dept Supp. Mem. 5 (emphasis added). Yet under the Reporting regulations, the Department now proposes to collect both students privateborrowing information and [i]nformation needed to identify the student. 34 C.F.R. 668.6(a)(1)(i)(A) (emphasis added). The Reporting requirements thus would create a massive new database that is even more likely to compromise fundamental privacy protections than the one that Congress feared when it passed 20 U.S.C. 1015c. H.R. Rep. No. 109-231, at 163. The Departments evident frustration with Congresss decision to foreclose its ability to create and maintain a student unit record system of information regarding students non-federal, private borrowing cannot justify its efforts to evade that prohibition. Section 1015c is broadly worded: It does not prohibit only the vast, detailed record system that the Department previously advocated; it prohibits a student unit record systemof whatever sizeas well as any other system that tracks individual students over time. 20 U.S.C. 1015c(a) (emphases added). In order to calculate the metrics the Department seeks to force schools to disclose, the Department now proposes to expand the NSLDS in a way that accomplishes precisely what Congress sought to prohibit. The Departments authority to regulate institutions of higher education is not unlimited; the Court should enforce the limits Congress has imposed.8

The Department persists in its erroneous belief that it may collect and maintain students personally identifiable information in a database without violating section 1015c so long as it does not intend to use that information to track students. See, e.g., Dept Supp. Mem. 10. But 17

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7.

If the court amended its judgment to restore only the reporting requirements, would the Department have the authority to calculate a programs repayment rate and debt-to-income ratios by reference to the formulas contained in the vacated 34 C.F.R. 668.7(a)(2), (b)(f), and then to require that institutions disclose that information pursuant to 34 C.F.R. 668.6(b)(1)(v)? The Department does not answer the question that the Court posed to it, namely, whether

the Department could require that institutions disclose the Gainful Employment regulations metrics if the Court were to reinstate the Reporting regulations but not the formulas contained in 34 C.F.R. 668.7(a)(2), (b)-(f). Instead, the Department asserts only that under such a scenario, the Department would . . . have the authority to calculate a programs repayment rate and debt-to-income ratios for informational purposes. Dept Supp. Mem. 10-11. The Department makes no mention of 34 C.F.R. 668.6(b)(1)(v), so presumably the Department intends to publicize schools performance on the metrics itself. See id. at 11-12 (describing past disclosures by the Department). This outcome would represent the third distinct regulatory regime that the Department has asked the Court to bless: The Department has now asked the Court to sanction (i) its full Gainful Employment regulatory regime; (ii) a standalone disclosure regime that relies on a mishmash of provisions from the Gainful Employment regulations, the Reporting regulations, and the Disclosure regulations, in which schools are forced to disclose their performance on the Departments contrived and vacated Gainful Employment metrics; and

the statute does not contain an intended use exception. Rather, it broadly prevents the Department from maintaining any Federal database of personally identifiably information on individuals receiving Title IV financial aid, including . . . system[s] that trac[k] individual students over time. 20 U.S.C. 1015c(a) (emphasis added). In any event, to calculate the Gainful Employment regulations metrics, the Department must necessarily monitor individual students debt over the course of several years, see 34 C.F.R. 668.7(a)(2), (b)-(f); therefore, the Department would indisputably track students. 18

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now (iii) a standalone regime that relies solely on the Reporting regulations, in which the Department alone publicizes schools performance on those metrics.9 It is time to bring the Departments flawed effort to a halt. This Court has vacated the Gainful Employment and Reporting regulations; if the Department disagrees with that result, it can appeal the Courts decision, or engage in another rulemaking and attempt to address the regulatory shortcomings that the Court identified. Pursuing any other course of action risks a plain violation of the logical outgrowth doctrine. Intl Union, United Mine Workers of Am. v. Mine Safety & Health Admin., 407 F.3d 1250, 1259 (D.C. Cir. 2005). The Departments response is problematic for several additional reasons. First, the Department now argues that amendment of the Courts judgment to reinstate the Gainful Employment regulations metrics is not necessary to correct any alleged clear error in the Courts judgment. But in both its opening brief in support of its motion and its reply, the Department told the Court that reinstatement of the Gainful Employment regulations formulas was necessary to achieve that end. See Dept Mot. to Alter or Amend J. 5 ([C]ontrary to the

Any argument that the Department could force schools to disclose the Gainful Employment regulations metrics absent reinstatement of the formulas created by those regulations would fail for at least two reasons. First, such disclosures would be based on a limitless conception of 34 C.F.R. 668.6(b)(1)(v) that would entitle the Department to force schools to disclose anything the Department required of them. See Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579, 584 (D.C. Cir. 1997) (It is certainly not open to an agency to promulgate mush and then give it concrete form only through subsequent less formal interpretations.). Second, such disclosures would violate schools First Amendment rights against compelled speech. The Gainful Employment regulations metrics are constructs that reflect a number of non-factual value judgments. To state just two examples of many: The Department concluded that the repayment rate statistic should measure loan repayment (as defined by the Department) of both program graduates and students who left without graduating. Additionally, the debt-to-earnings ratios examine graduates earnings following the first few years of graduation, instead of longterm earnings. Those are subjective choices. Forced disclosure of such information, particularly in the absence of any regulatory backing, would unconstitutionally compel speech that is neither factual, uncontroversial, nor aimed to prevent consumer deception. See Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985).
9

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Courts understanding the . . . debt measure formulas are necessary to enable to Department to provide schools with information they must disclose under the disclosure requirements that the Court upheld.); Dept Reply Mem. 7 (claiming that the rulemaking record makes clear . . . that the debt measure formulas and procedures are necessary for the full implementation of the disclosure requirements). The shifting claims about what must be done to fix the Courts alleged clear error undermine the assertion that the Court committed any such error. Second, the Department states that one of the reasons it has asked the Court to restore provisions of the Gainful Employment regulations is to enable institutions to seek correction of the Departments calculations of the debt measures and to remove any doubt about the propriety of the Departments reliance on the formulas. Dept Supp. Mem. 12 (citing 34 C.F.R. 668.7(e)). But the Department admits that the avowed purpose of section 668.7(e) in rulemaking was to ensure accuracy before schools were sanctioned under the vacated Gainful Employment regulations. Id. at 12 n.7 (emphasis added). Now that very same provision is allegedly intended to serve the different purpose of ensuring accuracy in disclosures. Again, the Departments changing rationales undermine its clear error argument.10 Third, the Department argues that it may impose a disclosure regime in which the Department discloses schools performance on the Gainful Employment regulations metrics without notice-and-comment, because such a rule would be an interpretive rule and would therefore be exempt from the APAs notice-and-comment requirements. The Gainful Employment, Reporting, and Disclosure regulations that are the basis for the Departments Notably, a desire to preserve a process by which institutions can seek correction of the Departments calculations of the debt measures would justify restoration of only 34 C.F.R. 668.7(e). Further, even if section 668.7(e) were restored, schools and students could never have confidence in the Departments calculations because they can never know, let alone challenge, the income data on which the calculations are based. Pl.s Mot. for Summ. J. 37-38. So the entire correction justification is made up.
10

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motion, however, have already gone through notice-and-comment. If those regulations already require the disclosure of the Gainful Employment regulations metrics as the Department maintains, it should be unnecessary to invoke any exception to the APAs notice-and-comment requirement. That the Department does so in its briefing shows that it is attempting to adopt new regulations through its motion to amend the judgment. Further, the Department cannot justify such a disclosure regime as an interpretive rule. The Department has nowhere identified what statute or regulation such a rule would purport to interpret. See Batterton v. Marshall, 648 F.2d 694, 705 (D.C. Cir. 1980) (An interpretive rule is an agency statement interpreting an existing statute or rule.). In addition, the distinction between legislative and interpretive regulations is whether the new rule effects a substantive regulatory change to the statutory or regulatory regime. Elec. Privacy Info. Ctr. v. Dept of Homeland Sec., 653 F.3d 1, 6-7 (D.C. Cir. 2011) (quoting U.S. Telecom Assn v. FCC, 400 F.3d 29, 34-40 (D.C. Cir. 2005)). Requiring schools to report information to the Department is certainly a substantive change to the regulatory regime. Even if the Court were to consider only the disclosure aspect of the Departments proposal, the Court of Appeals for the D.C. Circuit has made clear that a rule can be substantive even if it does not impose any new substantive obligations upon those it regulates. Id. at 6. Thus for example, the Court classified the rule at issue in Electronic Privacy as substantive and not interpretive simply because it substantially change[d] the experience of those it regulated. Id. at 7 (emphasis added). So too here: although the Departments disclosure of schools performance on the Gainful Employment

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regulations metrics may not require schools to take any action, it would certainly alter the regulatory environment in which they operate.11 Fourth, if the Court reinstates only the Reporting regulations, the Department cannot identify any aspect of Title IV for which the information collected by the Reporting regulations is necessary. In this scenario, the collected information certainly cannot be needed to implement either the Disclosure regulationsbecause they do not discuss disclosures by the Departmentor the Gainful Employment regulationsbecause they are vacated. Thus, the Department cannot escape 20 U.S.C. 1015cs restrictions by simply publicizing schools performance on the Gainful Employment metrics itself, rather than forcing schools to do so.12 In short, the Department has not provided any authority for the proposition that it may calculate and disseminate schools performance on the Gainful Employment regulations metrics absent reinstatement of the Gainful Employment regulations themselves.

11

The Departments argument is not saved by its misleading citation to Batterton. Dept Supp. Mem. 11. Batterton did notas the Department implieshold that statistics created for informational purposes automatically qualify as interpretive rules exempt from notice-andcomment requirements. See id. Indeed, in Batterton, the D.C. Circuit stated that it was not persuaded . . . that the [Department of Labors] long standing practice of using a methodology for developing unemployment statisticseven for informational purposes without following rulemaking procedures, concludes the question of whether the function requires such procedures. 648 F.2d at 705 & n.57 (emphasis added). The Departments statement that the disclosures it envisions would have no legal effect and would be made solely for informational purposes amounts to a concession that collecting the information is at most desirable, and thus not necessary, to the operation of any Title IV program. See Dept Supp. Mem. 11; see also supra pp. 5, 8, 12. 22

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CONCLUSION The Department has not demonstrated that the Courts judgment was clearly erroneous. For that reason and for the additional reasons set forth in APSCUs opposition to the Departments motion to alter or amend the judgment, the Departments Rule 59 motion should be denied. Dated: October 26, 2012 Respectfully submitted, TIMOTHY J. HATCH, SBN 374694 THatch@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, California 90071-3197 Telephone: 213.229.7000 Facsimile: 213.229.7520 /s/ Douglas R. Cox DOUGLAS R. COX, SBN 459668 DCox@gibsondunn.com NIKESH JINDAL, SBN 492008 NJindal@gibsondunn.com DEREK S. LYONS, SBN 995720 DLyons@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 1050 Connecticut Avenue, NW Washington, District of Columbia 20036 Telephone: 202.955.8500 Facsimile: 202.467.0539

Attorneys for Plaintiff Association of Private Sector Colleges and Universities

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CERTIFICATE OF SERVICE I hereby certify that on this 26th day of October, 2012, a true and correct copy of the attached SUPPLEMENTAL MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS MOTION TO ALTER OR AMEND THE JUDGMENT was filed and served pursuant to the Courts electronic filing procedures using the Courts CM/ECF System. /s/ Derek S. Lyons DEREK S. LYONS, SBN 995720 DLyons@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 1050 Connecticut Avenue, NW Washington, District of Columbia 20036 Telephone: 202.955.8500 Facsimile: 202.467.0539 Attorney for Plaintiff