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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed April 23, 1996

No. 94-5270

CAREER COLLEGE ASSOCIATION, ET AL.,

APPELLANTS

v.

RICHARD W. RILEY,

SECRETARY OF THE UNITED STATES DEPARTMENT OF EDUCATION,

APPELLEE

On Petition for Rehearing

-

Before: SILBERMAN, GINSBURG, and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge: Career College Association petitions for rehearing of our

determination that the refund regulation, 34 C.F.R. 668.22(g) (1994), is a reasonable interpretation

of conflicting statutory mandates. The Association contends that there is no "tension" between 20

U.S.C. § 1091b(b) (1994) and 20 U.S.C. § 1092(a)(1)(F) (1994), and that the Secretary's prior

interpretation of § 1091b(b) did not result in a constructive refund to the student. It is also alleged

that the Secretary's explanation before us was an impermissible post-hoc rationalization. We deny

the petition.

The Association primarily repeats its argumentwhich we think unpersuasivethat under

Chevron I, § 1091b(b) completely definesthe appropriate refund,so there is no statutorytensionwith

§ 1092(a)(1)(F) that would allow the Secretary to fill an interpretive gap. However, petitioner also

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notesthat our assumption that Title IV funds are generally paid "up front" wasincorrect. Such funds

typically are paid in advance for the majority of students at four-year colleges and universities; aid

is calculated on a yearly basis, but the student's obligation to payand the disbursement of federal

fundsis by semester. (This timing is subject to the caveat that the first payment for first-time

students is delayed until 30 days after the start of classes. 34 C.F.R. § 668.165(c)(3) (1995).) In

contrast, trade schools often receive Title IV fundsin two installments during the term, but thisis due

largely to the common practice of having year-long or program-long terms, as opposed to semesters.

Be that as it may, our analysis remains unchanged. As the Secretary notes, the refund regulation's

calculation is not affected by any unpaid charges of the government; it looks only to the student's

unpaid charges. See 34 C.F.R. § 668.22(g)(2)(ii) (excluding "[a]ny amount scheduled to be paid by

Title IV, HEA" funds from the calculation of the "scheduled cash payment" that determines how

much an institution may retain). 

The Association also arguesin what in effect is a re-characterization of its "no tension"

theorythat there were no constructive refunds to the student under the prior regulation, so §

1092(a)(1)(F)'s refund crediting order was not implicated. This assertion turns on the student's

obligation to repay the full amount of the loan to the Title IV lender. In our example, see Career

College Ass'n v. Riley, 74 F.3d 1265, 1270 (1996), when students paid $1,000, $200, and $0, under

the prior regulation the refund to the government would be $4,000, $3,200, and $3,000, respectively.

We therefore concluded that the balance of the $1,000 owed by the student, which the institution

retained from Title IV funds, was a constructive refund. But the Association contends that this is not

a refund because the three students must now pay $0, $800, and $1,000, respectively, to the Title IV

lender. So each student, after paying off the loan, ultimately will be treated "equitably." This

argument, however, missesthe central purpose of § 1092(a)(1)(F). That the student must eventually

repay the government does not mean that there is no "refund" from the school to the student; §

1092(a)(1)(F) requiresthe school to pay the governmentfirstit does not allow the schoolto assume

that the government will be repaid indirectly via the student. The refund regulation thus functions

to ensure that the government is paid the full $4,000 first, regardless of the amount already

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contributed by the studentor in other words, that the institution earns money fromthe student first.

As the government admitsand the Association lamentsthis shifts the risk of noncollection from

Title IV lenders to the institution, which is better able to screen students. The Secretary concedes

that this may lead schools to require students to pay in advance, preventing some students from

enrolling, but finds this a perhaps inevitable effect of attempts to cure abuse, that in fact may be

beneficial if a student is a poor loan risk. Moreover, the Association itself has indicated that even

under the prior regulation, the student remained obligated to the lender for the full amount of funds,

so the main hardship would be one oftiming. But schools, competing for students and Title IV funds,

are free to decide how to approach this issue.

It is also argued that the Secretary's explanation is a post-hoc rationalization not entitled to

deference, since when the refund regulation was devised, §§ 1091b(b) and 1092(a)(1)(F) were not

yet enacted and therefore could not create statutory tension for the Secretary to resolve. But the

Secretaryhas consistentlyexplained the regulation as addressing the precise problemleft unanswered

bythe statutoryprovisionsthe treatment ofunpaid chargesinthe refund calculation. That Congress

chose not to resolve that issue by statute does not bar the Secretary from resolving it in the same

manner as before, particularly where there is nothing in the amendmentsto suggest the interpretation

is impermissible.

* * * *

Accordingly, the petition for rehearing is denied.

So ordered.

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