Navigating New Department of Education Guidance Amid Shifting Judicial Precedents

By Bill Ojile, Carrie Schaffer, and Kristen N. Iteen

In its final days, the Biden Department of Education issued a Dear Colleague Letter regarding misrepresentations made by third‐party service providers engaged by institutions of higher education. This new guidance, published on January 16, 2025, aims to clarify the standards for transparency and accuracy that colleges and universities must enforce when partnering with external service providers. However, as institutions work to navigate new requirements, recent judicial decisions — most notably a district court ruling regarding the statutory language of Title IX, an Eighth Circuit ruling blocking aspects of the Biden student loan save plan, and a Supreme Court decision curtailing the longstanding Chevron deference — suggest that the legal authority underpinning this directive may soon be subject to scrutiny.

Key Provisions of the Dear Colleague Letter:

The Department’s January 16th letter outlines expectations for higher education institutions to carefully vet third‐party service providers and ensure that any representations made on the institution’s behalf are not misleading. The notice identifies three types of statements that, when made by either an institution or its external service provider, are likely to constitute a “substantial misrepresentation”:

1. False Attribution of Employment: Identifying an employee of an external service provider (such as an Online Program Manager) as an employee of the institution. Examples include using institution-affiliated email addresses or signatures that imply direct employment by the institution.

2. Misrepresentation of Recruitment Roles: Portraying admissions employees as “academic counselors” or “advisors.”

3. False Equivalency Between Program Formats: Claiming that a program delivered largely by an external service provider is “the same as,” or equivalent to, a campus-based version when there are substantial differences in curriculum, faculty, and resources.

The Department’s guidance is anchored in the statutory authority of Section 487(c)(3)(A) of the Higher Education Act, which permits the suspension or termination of Title IV funds if an institution is found to have engaged in “substantial misrepresentation of the nature of its educational program, its financial charges, or the employability of its graduates.” The Department’s regulations under subpart F of 34 C.F.R. Part 668 further defines substantial misrepresentation to include both overtly false statements and omissions that lead to an overall misleading impression. The Department noted that each of these substantial “misrepresentations,” if relied upon by prospective or enrolled students to their detriment, could trigger significant enforcement actions such as limiting, suspending, or terminating an institution’s Title IV funds.

The notice underscores that:

Judicial Developments and Their Impact:

Despite the clarity the Department seeks to provide through this guidance, recent judicial decisions cast uncertainty over the durability of the Department’s regulatory approach. Recent judicial actions reflect a reluctance to fully endorse expansive regulatory measures by federal agencies, particularly when these measures disrupt established statutory frameworks:

In Career Colleges & Sch. of Texas v. United States Dep’t of Educ. 98 F.4th 220 (5th Cir. 2024), the Court of Appeals for the Fifth Circuit blocked the Department’s Borrower Defense to Repayment program, which created a process by which the Department could grant individual and mass federal student loan forgiveness for student borrowers who were allegedly defrauded by higher education institutions. Granting a preliminary injunction, the Fifth Circuit held that the Department’s proposed rule would irreparably harm Career Colleges and Schools of Texas by increasing compliance costs, altering business operations, and forcing unlawful adjudication proceedings. Id. at 234-239.¹

In Tennessee v. Cardona, No. CV 2:24-072-DCR, (E.D. Ky. Jan. 9, 2025), the U.S. District Court for the Eastern District of Kentucky vacated the Department’s Final Rule, entitled “Nondiscrimination on the Basis of Sex in Education Programs or Activities Receiving Federal Financial Assistance,” which aimed to clarify that for purposes of Title IX, “discrimination on the basis of sex included discrimination on the basis of sex stereotypes, sex characteristics, pregnancy or related conditions, sexual orientation, and gender identity.” The Court held that the Department exceeded its authority in issuing the Final Rule and stated, “expanding the meaning of ‘on the basis of sex’ to include ‘gender identity’ turns Title IX on its head.” Id. at 3.

In Missouri v. Trump, No. 24-2332, (8th Cir. Feb. 18, 2025), the Court of Appeals for the Eighth Circuit halted key components of the Biden administration’s student loan save plan, which sought to forgive millions of dollars of loans made to borrowers. The Eighth Circuit upheld the lower courts preliminary injunction, stating “rather than implying by omission or other ambiguities, Congress has spoken clearly when creating a repayment plan with loan forgiveness or otherwise authorizing it – explicitly stating the Secretary should cancel, discharge, repay, or assume the remaining unpaid balances” and that “the statutory text enabling the creation of [the Biden Plan] . . . provides no comparable language.” Id. at 9.

Other than the Fifth Circuit’s preliminary injunction, which was decided prior to the Supreme Court’s landmark ruling in Loper Bright Enterprises v. Raimondo, 602 U.S. 369, (2024), the two most recent judicial decisions regarding the Department’s regulatory authority arise in a post Chevron doctrine era. With new limitations in place, federal regulatory actions — including the latest Dear Colleague Letter — may now face heightened judicial scrutiny over their statutory foundations, despite agencies historically having broad discretion in interpreting ambiguous statutes and in fashioning regulations that push the boundaries of statutory provisions. The recent judicial decisions do not excuse institutions from following Department guidance but suggest potential challenges that could affect the enforceability of the Department’s directives considered outside its regulatory authorization.

Implications for Higher Education Institutions:

As institutions navigate this evolving regulatory and judicial landscape, several strategic considerations emerge:

1. Balancing Compliance and Uncertainty: While the new Dear Colleague Letter offers critical guidance on managing third-party relationships, institutions should remain alert to the fact that recent judicial rulings could provide a basis on which to challenge the guidance or defend against an enforcement action.

2. Proactive Legal and Regulatory Strategies: Institutions are encouraged to regularly review and update their policies and procedures. Engaging legal counsel can help ensure that practices not only comply with current directives but are also robust enough to withstand potential judicial revisions.

3. Ongoing Monitoring and Adaptation: With the current judicial trend leaning toward a more restrained view of federal agency powers, higher education institutions should continue to monitor both regulatory updates and court decisions closely. This vigilance is essential to adapt compliance strategies as necessary.

By balancing how to ensure compliance with the January 16, 2025, Dear Colleague Letter and practical strategic legal planning, colleges and universities can help ensure that their practices remain both effective and resilient in a changing legal environment.

**Any opinions expressed are those of the authors, and not of the firm or their colleagues.