Florida Coastal School of Law.
Florida Coastal School of Law. ()

Two law schools have landed on the U.S. Department of Education’s list of college programs with extremely high student loan debt compared with graduates’ earnings.

Florida Coastal School of Law and Charleston School of Law are identified as failing on the department’s “gainful employment list,” released Monday. Should those schools fail a second year in a row, they will lose access to federal student loans—a situation that is currently rocking the Charlotte School of Law as it struggles to remain open after losing federal loan access at the start of the year.

More than 800 institutions failed the gainful employment standard, according to the Education Department, with nearly all being for-profit. Florida Coastal and Charleston are for-profit, though leaders at Charleston have said they want to convert the school to a nonprofit. Florida Coastal Dean Scott DeVito also told students this week that the school has been working toward nonprofit status.

Charlotte, which Monday said it was delaying the start of its spring semester by a week while it scrambles to secure student loan funding, is among an additional three law schools with a so-called “zone” rating, meaning they were close to failing the department’s measure and are on notice that they must improve. Western State College of Law and Arizona Summit Law School are the other two in the zone. Those three schools must pass the gainful employment standard in one of the next four years in order to remain in good standing, according to Ben Miller, a higher education expert at the Center for American Progress.

The Education Department introduced the gainful employment rule in 2010 as a way to increase accountability in higher education and better police for-profit colleges. The rule generated extensive pushback from the for-profit college industry and underwent several iterations, with the new list marking the first time it’s being enforced. Previous versions of the list were solely informational.

Programs fail the gainful employment standard if graduates’ annual loan payments are more than 12 percent of their total earnings, or if those payments exceed 30 percent of their discretionary income. Failing schools are required to inform students of their status.

In a letter to Florida Coastal students this week, DeVito said the school has appealed the finding. He said that Northwest Florida is a “relatively low-wage region,” which hurts the school in the gainful employment calculation. Moreover, Florida Coastal has increased scholarships in a bid to lower the debt-to-income ratio. But DeVito also questioned the validity of the gainful employment rule.

“[The rule] is not about protecting students and taxpayers,” he wrote. “It is part of an anti-for-profit political agenda.” The school is holding a student town hall next week, he said.

Ed Bell, the controlling owner of the Charleston School of Law, did not immediately return calls for comment Wednesday. The for-profit consortium Infilaw Corp., owns Florida Coastal, Charlotte and Arizona Summit. Infilaw attempted to buy Charleston in 2013 but the deal eventually fell apart amid opposition from students, faculty and regulators. Local attorney Bell took over in 2015 with a goal of improving the school’s reputation.

Miller said it will be difficult for either Florida Coastal or Charleston to meet the rule in a year, given their earning and debt statistics. “They’ve performed very poorly,” he said. “They’re nowhere near passing. I’d be skeptical that they’re going to pull it off.”

Annual debt payments are 21 percent of median income at Florida Coastal, he noted, while that figure is 20 percent for Charleston—significantly larger than the less than 12 percent the Education Department wants to see. Both schools are closer to meeting the 30 percent of discretionary income measure, but that statistics is even harder to improve quickly, Miller noted.

The best chance for both schools is for the Trump administration to do away with the controversial rule, he said.

“The big question people have now is whether this rule will survive,” Miller said.