dissenting:

The majority’s conclusion that AACS’s lawsuit for declaratory relief is barred by the anti-injunction provision of 20 U.S.C. § 1082 (a)(2) is simply incorrect. The majority’s alternative holding, that this lawsuit cannot go forward even if § 1082(a)(2) does not apply because AACS failed to exhaust administrative appeals, was not raised below by the Secretary and was therefore waived. Moreover, that holding is contrary to this court’s established rule that exhaustion is not required when the agency’s procedures are alleged to be illegal or unconstitutional. Our rule is particularly applicable here, where the procedure under attack is the very procedure that would have to be exhausted. For these reasons, AACS should be allowed to proceed on the merits of its claim for declaratory relief.

I. The Anti-Injuntion Provision

The majority correctly concedes that the statute does not bar declaratory actions “as such,” but asserts — without citing a single case, piece of legislative history, or any other authority — that the correct test is whether the relief sought would have the effect of an injunction. If so, according to the majority, the suit is prohibited no matter what the plain language of the statute says. On the basis of its novel and unsupported theory, the majority asserts that the distinction between declaratory and injunctive relief is merely semantic and reads a prohibition on certain, undefined, actions for declaratory relief into the statute.

But a declaratory judgment is not an injunction, and the statute, by its plain language, restricts the latter and not the former. Had Congress intended to prohibit declaratory judgments, even those that might have a “coercive” effect, along with injunctions, it plainly could have done so. It chose not to, and “[w]e must presume that Congress acts with deliberation, not inadvertence, when it drafts a statute.” United States v. Motamedi, 767 F.2d 1403, 1406 (9th Cir.1985). The majority thus interprets § 1082(a)(2) in a manner not contemplated by Congress and not consistent with Congressional intent.

I note that the only other circuit to have considered the precise question presented by the instant litigation concluded that § 1082(a)(2) does not bar declaratory relief. See Thomas v. Bennett, 856 F.2d 1165, 1168 (8th Cir.1988). Several district courts have likewise held that declaratory relief does not fall within the ambit of § 1082(a)(2). See, e.g., Bank of America NT & SA v. Riley, 940 F.Supp. 348, 350-51 (D.D.C.1996) (concluding that declaratory relief is not precluded by HEA), aff'd, 132 F.3d 1480 (D.C.Cir.1997); Student Loan Marketing Ass’n v. Riley, 907 F.Supp. 464, 474 (D.D.C.1995) (collecting cases), aff'd, 104 F.3d 397 (D.C.Cir.), cert. denied, — U.S. -, 118 S.Ct. 295 , 139 L.Ed.2d 227 (1997); Pro Schools, Inc. v. Riley, 824 F.Supp. 1314, 1315-16 (E.D.Wis.1993) (dismissing claim for injunction but allowing claim for declaratory relief to proceed).

Other courts have elaborated on the differences between declaratory and injunctive remedies in analogous contexts. For example, the First Circuit, in Ulstein Maritime Ltd. v. United States, 833 F.2d 1052 (1st Cir.1987), held that a provision of the Small Business Act that is identical to § 1082(a)(2) did not bar declaratory relief. In rejecting the position adopted by the majority here, the First Circuit held that

Id. at 1055. See also Calise Beauty School, Inc. v. Riley, 941 F.Supp. 425, 430 (S.D.N.Y.1996) (noting that a declaratory judgment is not the equivalent of an injunction). In fact, no other federal court examining the issue has concluded, as the majority does here, that a declaratory judgment can be the functional equivalent of an injunction. Instead, courts have relied on the differences between the two types of relief and the ways in which they are distinct — ways, presumably, known to Congress. It is no doubt for that reason that the majority fails to cite a single case in support of its unique and unprecedented construction of the anti-injunction provision.

Even if the majority were correct that some declaratory judgments (those with so-called “coercive effect”) are barred by § 1082(a)(2), there is an exception to the “anti-injunction” rule that would allow AACS to go forward. This court recently held that where the plaintiff alleges that the Secretary has clearly exceeded his statutory authority in the execution of his duties, the court may grant injunctive relief notwithstanding § 1082(a)(2). California Cosmetology Coalition v. Riley, 110 F.3d 1454, 1461 (9th Cir.1997) (affirming a grant of preliminary in-junctive relief where the plaintiff alleged that the Secretary exceeded his authority in implementing and applying DOE regulations). Here the majority reaches a directly opposite result.

There is no meaningful distinction between the allegations in this case and in California Cosmetology, a case in which AACS was, not incidentally, also a plaintiff. In both cases, the plaintiffs were associations of beauty schools, complaining that the Secretary was illegally implementing and applying regulations promulgated pursuant to the HEA In both eases, the beauty schools alleged that the Secretary’s illegal action affected the ability of their students to obtain federal financial aid, and that these allegedly illegal restrictions threatened to put them out of business. California Cosmetology clearly stands for the proposition that injunctive relief is available in such situations, § 1082(a)(2) notwithstanding. Therefore, even if we construe AACS’s suit as one for injunctive relief, it still states a claim for which relief can be granted and dismissal is improper.

II. Administrative Exhaustion

Ultimately, the majority offers an alternative holding as well, suggesting that AACS, and the member schools it represents, are required to exhaust administrative remedies before seeking relief in the courts. The majority contends that without a factual record showing the way in which the Secretary applies his procedures in individual cases, it would be difficult for the district court to determine the nature of the Secretary’s practices and whether they constitute a reasonable exercise of the agency’s discretion. I disagree.

First, this argument is raised for the first time on appeal. As a general rule, we do not consider an issue not presented below. Bolker v. Commissioner, 760 F.2d 1039, 1042 (9th Cir.1985). In this circuit, there are three recognized exceptions to this rule: we will consider issues not argued below in exceptional cases to prevent a miscarriage of justice or preserve the integrity of the judicial process, when a new issue arises while appeal is pending due to a change in the law, or when the issue is purely one of law and does not depend on the factual record. See United States v. Greger, 716 F.2d 1275, 1277 (9th Cir.1983); United States v. Whitten, 706 F.2d 1000, 1012 (9th Cir.1983); United States v. Patrin, 575 F.2d 708, 712 (9th Cir.1978). Unless one of these exceptions obtains, we do not consider an issue that was not properly raised. Bolker, 760 F.2d at 1042 .

In this case, the Secretary does not even assert that any of the three exceptions applies and offers no explanation or justification for his failure to raise the issue below. This is likely because there is none. In its haste" to affirm the district court’s erroneous ruling, the majority disregards our precedents and proceeds to resolve issues not raised below without offering any reason for *1258 doing so or acknowledging that it is ignoring our well-established rule.

Second, even if the exhaustion issue had not been waived, it is meritless. This is so because AACS challenges the entire administrative appeal process rather than a specific outcome in a particular case. In order to understand why exhaustion is not required, it is necessary to review briefly some of the facts of this case.

Every year, the Secretary calculates and publishes a cohort default rate for each school that participates in federally guaranteed student loan programs. The cohort default rate is an effort by the government to determine which schools have the highest rates of student loan defaults and to punish these schools when the defaults can reasonably be attributed to the school’s decision-making. Schools with the highest published cohort default rates are not eligible to participate in many of the government financial aid programs.

Most schools, particularly those serving disadvantaged, urban populations, cannot operate without the cash provided by these government programs; the calculation of the cohort default rate is thus critical to their survival. As might be imagined, then, the Secretary’s calculations are highly contested by schools that are threatened with the loss of eligibility. In particular, many schools complained that they were being held responsible for defaults which were actually caused by improper loan servicing and collections by lenders. Because of complaints about the Secretary's calculations, Congress amended the Higher Education Act in 1993 to allow schools to appeal the Secretary’s calculation. 20 U.S.C. § 1083 (a)(3), (m)(l)(B) (Supp.1997). In particular, the new law specified that the Secretary is required to exclude_ from the cohort default rate any loans defaulted as a result of improper loan servicing or collections.

The Secretary issued interim final regulations pursuant to the new legislation in April, 1994. 59 Fed.Reg. 22, 278 (April 29, 1994). These regulations set forth the procedures that institutions must follow when appealing the Secretary’s calculation of a cohort default rate. Pursuant to these regulations, schools challenging a calculation had to show that defaulted loans were incorrectly included in the school’s cohort default rate because improper servicing or collection caused the default. The regulations specified that a loan default is only caused by improper servicing or collection when there was no notice to the borrower that he must begin repayment. The regulations permitted schools to amend their appeals for past years to conform to the April regulations.

Then, in November, 1994, following the close of the “comment” period on the April regulations, the Secretary issued final regulations. 59 Fed.Reg. 61,192 (Nov. 29, 1994). These regulations provided a completely different standard for proving that a loan was defaulted as a result of improper servicing or collection. Under the November regulations, a loan default is only considered to have been “caused by” improper loan servicing or collections if the school can prove one or more of the following: (1) no letter was sent to the borrower; (2) no attempt was made to reach the borrower by phone; (3) the financial institution failed to request assistance from the guaranty agency; (4) a final demand letter was not sent to the borrower; and (5) skip tracing was not initiated if the borrower could not be located.

In the preamble to the November regulations, the Secretary stated that the reason for the change was that the test for whether a default was caused by improper servicing or collection specified in the April regulations made the adjudication of appeals too time-consuming for the Secretary. Moreover, the Secretary asserted that the new standard should make it easier for schools to show errors in a cohort default rate, but that he would apply “whichever standard would be more favorable to the institution.”

AACS contends, however, in Counts 1 and 2 of its complaint that the November standard is, in fact, more difficult — not easier— for schools to satisfy, and that the Secretary has refused to apply the more favorable of the two tests, and is instead applying only the November standard. AACS further argues that schools that initially amended their appeals for 1989-1991 (as the April regulations instructed them to do) were disadvantaged by the subsequent announcement of *1259 the November standard. According to AACS, the Secretary refused to allow these schools to further amend their appeals to conform with the November requirements.

AACS also complains in Counts 4 and 5 that the erroneous data appeals process does not give schools an adequate opportunity to review data and loan servicing records in order to identify any mistakes in the calculation of the schools’ cohort default rate. Count 4 alleges that this practice violates both the Higher Education Act and the APA and Count 5 alleges that it violates due process. AACS furthermore contends that the Secretary has stated, in “Enclosure One” to his recent appeal decision letters, that he will not consider any arguments about this practice in the context of administrative appeals.

In addition to these complaints about the appeals process itself, AACS asserts in Count 3 that the Secretary’s practice of determining when a loan enters repayment violates the plain meaning of the statute governing such calculations. AACS contends that the statute and regulations require the Secretary to make a day-specific determination: a loan enters repayment on the first day after the expiration of a six-month grace period. AACS is correct. The statute clearly provides that “the repayment period ... shall begin (i) the day after 6 months after the student” is no longer in school on at least a one-half time basis. 29 U.S.C. § 1078 (b)(7). Despite that unambiguous directive from Congress, AACS asserts that the Secretary has allowed lenders to make a “month specific” calculation that results in a different cohort default rate. AACS further points out that the Secretary admitted in a 1996 “Dear Colleague” interpretive guidance letter that it is using the allegedly illegal procedure and that it intends to continue that practice.

In view of these facts, it is clear that all of AACS’s claims may properly be brought directly in federal court and that no administrative hearing is necessary or even appropriate. It appears that the majority misapprehends the purpose of administrative exhaustion, which is to allow agencies to adjudicate “complex, fact bound, discretionary determinations” within the particular competence of the agency. Gete v. Immigration and Naturalization Serv., 121 F.3d 1285, 1292 (9th Cir.1997). This is not such a case.

In Gete , aliens whose cars were seized by the INS brought a constitutional challenge to the agency’s forfeiture process. The INS, like the majority here, contended that the court lacked jurisdiction to consider the claims because the claimants had not exhausted their administrative remedies. This court found that there was jurisdiction, pointing to the difference between “review of the merits of an agency decision [to seize a particular car] and review of an administrative procedure.” Id. (citing Marozsan v. United States, 852 F.2d 1469, 1477 (7th Cir.1988)).

Similarly, this lawsuit challenges the Secretary’s procedures and the appeal process itself, rather than a specific outcome in a particular case. Without acknowledging it, the majority overrules the district court on this point. In fact, the majority’s alternative holding directly contravenes the district court’s conclusion. In determining that AACS met the requirements for associational standing, the district court held:

(emphasis added). The district court concluded that “[s]ueh declaratory relief can be awarded without individual participation of plaintiffs members.” I agree with the district court, and for similar reasons, conclude *1260 that there is no need for AACS and its members to pursue administrative appeals.

The federal courts universally dispense with the exhaustion requirement in situations where the very administrative procedure under attack is the one that the agency says must be exhausted. Barry v. Barchi, 443 U.S. 55 , 65 n. 10, 99 S.Ct. 2642 , 61 L.Ed.2d 365 (1979) (“exhaustion of administrative remedies is not required when ‘the question of the adequacy of the administrative remedy ... [is] for all practical purposes identical with the merits of [the plaintiffs] lawsuit.’ ”); Gete v. Immigration and Naturalization Serv., 121 F.3d 1285, 1291 (9th Cir.1997); accord, Finnerty v. Cowen, 508 F.2d 979, 983 (2d Cir.1974) (collecting cases). Neither is exhaustion required where it would be futile. Aleknagik Natives Ltd. v. Andrus, 648 F.2d 496, 500 (9th Cir.1981) (holding that no administrative exhaustion was required where it would be “meaningless as a practical matter.”). AACS’s challenge is to the appeals process itself — a process that no administrative law judge has the power to review or invalidate. Obviously, administrative review of these claims would be entirely pointless.

Because this issue was raised for the first time on appeal, the district court has not yet had the opportunity to consider the specific question whether exhaustion of individual claims is necessary with respect to any of AACS’s claims, though the district court’s treatment of the associational standing question sheds substantial light on the way it would view the exhaustion question. Even if the district court were to determine, however, that a factual record is required before it could decide certain claims, jurisdiction still exists to hear the remainder of the complaint. In Aleknagik, an association of native village corporations sued to enjoin the Secretary of the Interior from using allegedly illegal procedures for allocating public lands to non-natives. The Interior Secretary asserted that some of the natives’ claims were fact-intensive and required the development of an administrative record. We concluded that any factual claims were subsidiary to the natives’ primary challenge to the procedures themselves. Instead of dismissing the entire matter, we remanded the case to permit the district court to determine whether exhaustion was required on the specific factual claims, while ordering it to exercise its jurisdiction regarding the overall challenge to the procedures. That is, at very least, the course we should follow here — although in my view there is no applicable exhaustion requirement at all and the case should proceed on all five counts.

Accordingly, I would reverse the grant of summary judgment and remand the case for further proceedings consistent with the analysis set forth above.