The Gainful Employment Rule, which requires that for-profit educators demonstrate that their graduates can pay their bills, has thus far weathered industry’s attempts to gut the rule. Now we’ll see if new Education Secretary Betsy DeVos will defend this rule against a legal challenge brought by a beauty school trade group.

Bloomberg reports that the American Association of Cosmetology Schools sued Secretary DeVos on Friday, claiming that the rules, which went into effect in June 2015, shouldn’t apply to cosmetology schools.

The lawsuit seeks an order barring the rule from being applied to the schools.

According to the lawsuit, the American Association of Cosmetology Schools claims that the schools are harmed more than others through the rule because graduates tend to underreport income from cash tips.

Under the Gainful Employment Rules, for-profit colleges are at risk of losing their federal aid should a typical graduate’s annual loan repayments exceed 20% of their discretionary income, or 8% of their total earnings.

Discretionary income is defined as above 150% of the poverty line and applies to what can be put towards non-necessities.

So for example, say the typical recent graduate of a career education program earns $25,000. That student would need to average annual student loan payments less than $2,000, or the school would be at risk for losing federal financial aid.

The group contends that beauticians’ tips are not counted toward the ratios, as many underreport the earnings in order to reduce their federal and state payroll tax.

This, the association says, puts beauty schools at a disadvantage in adhering to the rules.

The American Association of Cosmetology Schools claims the rule doesn’t just hurt the schools, but its students.

“A provision that is supposed to protect our students in fact hurts them badly,” Adam Nelson, executive director of the association, said in a statement to Bloomberg. “We trust that the Department of Education did not mean to create this crisis and we hope that under new leadership, they will remedy this flaw, or that the court will address our grievance.”

While the Association claims the rules unfairly punish beauty schools, some of these colleges have run into problems related to deceiving potential students.

In May 2016, the for-profit Marinello Schools of Beauty settled a whistleblower case that accused the school of engaging in various schemes to defraud the government of federal financial aid dollars. The settlement came just two months after the company abruptly closed its doors after losing access to federal student financial aid. It’s unclear if the school was part of the Association.

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