What’s AHEAD

Last month, the U.S. Department of Education negotiated new regulations that will cut off student aid eligibility for college programs that don’t improve students' financial prospects. This represents a win for those students who invest time and money into an education they bank on leading to better jobs and increased earnings. The regulations seek to implement a new system that holds college programs accountable for their outcomes which was passed in the One Big Beautiful Bill Act (OBBBA) that became law in July 2025.

The department developed the rules through a process called negotiated rulemaking, which brings together a committee of negotiators representing groups who would be affected by the regulatory changes. The end result in this case were rules that bolster accountability across the board–though there’s more accountability for some schools and less for others. Here’s a play-by-play of major developments that happened during negotiated rulemaking and a call for what Congress should do next.

The Education Department’s main goal during the rulemaking was trying to “harmonize” the accountability provisions between OBBBA and a current though yet to be enforced regulation called Gainful Employment (GE), which requires that programs lead to higher earnings than someone who had not attended at all and do not leave graduates with more debt than they can reasonably repay. While OBBBA requires that program graduates earn more than someone who had not attended at all, the legislation does not apply to undergraduate certificate programs, which can lead to some of the lowest earnings. In contrast, the department’s GE regulations do cover certificate programs, as well as programs at for-profit colleges.

The Education Department ultimately harmonized the two accountability frameworks by applying the OBBBA requirements to programs that the gainful employment regulation covers—and eliminating anything from GE that did not align. In some cases, the changes make sense, but collectively, they amount to a more lenient standard for GE programs than under current regulations. Earnings are measured over a longer time frame, the consequences of failure are lessened, and a measure accounting for unaffordable debt is no longer included.

The new earnings requirements apply to all programs, but vary by level:

• For undergraduate programs: Graduates’ median earnings must equal or exceed the median earnings for working adults aged 25-34 with a high school diploma located in the state the institution is located, or the median earnings nationally if less than 50 percent of the students enrolled are from the state the institution is located.
• For graduate programs: Median earnings must equal or exceed the lower of the median earnings for working adults aged 25-34 with a bachelor’s degree, or those in the same field of study in the state the institution is located in, or nationally, depending on the reliability of the data and whether students are primarily located in the same state as the institution.

Policy changes under OBBBA, which now apply to all programs, affect how graduate earnings are measured, including the comparison group, the timing of when they are measured, the consequences for failure, and the process for regaining eligibility.

One of the most contentious changes the department proposed was that programs that fail the accountability benchmarks in two of any three consecutive years lose eligibility for student loans, but not Pell Grants. This benefits institutions that offer low-earning undergraduate certificate and for-profit programs, because failing under the GE regulation would have resulted in full loss of aid eligibility, including grants and loans.

During the department’s negotiations, the representatives for taxpayers and the legal aid profession argued that gainful employment lies in a different section of statute that applies to all federal student aid, not just loans, and programs under GE therefore should lose access to all aid after failure. One negotiator noted students face significant consequences if they remain enrolled in a failing program because they burn through their Pell eligibility and may be unable to continue their education elsewhere. He also indicated that only losing loan eligibility might not have much of an impact because 40% of students in failing GE programs only use Pell grants to attend.

To address these concerns, the Education Department added a provision that would cause colleges to lose all student aid eligibility if either half of the institution’s financial aid recipients, or half of the institution’s federal financial aid funds, are in programs that fail the metric in a three-year period. This would most likely impact schools with significant failing programs or who offer a single type of program, but would still allow some of them to continue enrolling vulnerable students. The department also added a measure requiring the school to disclose to Pell recipients in failing programs how much grant aid they have remaining, and that staying enrolled in those programs would continue to drain that money. This information could help encourage some Pell recipients to take their dollars elsewhere and find a different program that will lead to better outcomes.

The Education Department also rejected a number of other proposed changes. For example, negotiators for colleges put forth numerous proposals to further weaken the measure applied to GE programs, such as lowering the earnings threshold overall or for specific programs, changing the comparison groups, and broadening the terms of appeals.

The other contentious issue was debate over whether to include a measure that accounts for unaffordable debt, as done under GE regulations. The department eliminated the measure in its initial proposal and rejected concerns raised by negotiators representing legal aid organizations and students about eliminating the debt-to-earnings (D/E) measure for GE programs, which measures whether a program leaves students with unaffordable debt relative to their earnings. The department argued that including D/E adds complexity while not capturing a significant number of additional programs. Eliminating D/E reduces accountability, particularly for high-debt graduate programs, according to research from the PEER Center at American University. The Education Department’s own data analysis also supported this finding, showing that half of programs that fail D/E are graduate and professional degrees. In research presented during negotiations, 14 percent of doctoral students and just over 9 percent of students enrolled in first professional degrees and graduate certificates are enrolled in programs that pass the earnings threshold and fail D/E. In total, the department estimated almost 40,000 students are enrolled in such programs that leave them with unaffordable debt and that would not be captured under the earnings measure.

Despite requirements that the accountability provisions under OBBBA become effective July 1, 2026, actual eligibility loss would not kick in until 2028. Under the timeline, institutions will submit reporting to the department this fall. The department will calculate the first earnings test in early 2027 and notify colleges of failures by July 1, 2027. New data reporting requirements will apply in 2027 and schools will be notified by July 1, 2028 of failures. This will be the first year that institutions may be subject to loss of loan eligibility if their program failed both years. Based on the compromise around loss of all financial aid, programs that fail and meet the new thresholds for 50 percent of Title IV students or 50 percent of Title IV revenue in failing programs would face loss of all aid eligibility in 2029.

The department also included in its rule a new provision that allows failing programs to keep students enrolled until they graduate. This was in response to negotiators raising concerns about students being able complete their education. An initial proposal would have allowed a program that failed the earnings threshold to voluntarily agree to stop enrolling new students and allow current ones to finish the existing program. But legal aid negotiators raised concerns that the proposal functioned as an out for failing programs, not an off-ramp to students. That’s because it would not have provided students options to continue their education elsewhere, and would have allowed colleges to design a program that looked substantially similar to the failing one, thereby allowing them to escape accountability.

Eventually, the department agreed to allow failing programs to continue for no more than three years for students who want to remain enrolled while the program winds down. It also required the institution to provide students with options for transfer and limited the creation of similar programs until at least two years after the teach-out is completed. Students will have the option to either complete their education in a failing program, pursue an option to transfer to another program, or complete their education elsewhere.

As part of its effort to reach consensus, the department also required institutions to issue disclosures if their programs failed. One would be for students—a program that fails the earnings metrics must warn prospective and current students of this fact, and offer a subsequent warning in the event the student initially received a warning but delayed enrollment. The second disclosure would involve information on program websites. Colleges must post a link to an Education Department’s website on their own webpages, which would lead students to in-depth information about program costs and outcomes.

The department had tried to weaken these provisions, initially proposing to strike the website requirement, and the requirement for subsequent warnings to students who do not enroll for up to a year, pieces that currently exist under GE regulations. This helps ensure students who delay their decision to enroll or reenroll are aware of this information.

The Education Department largely kept intact the current Financial Value Transparency (FVT) framework, a data reporting framework that will provide the most comprehensive set of data to date on program costs and outcomes, but renamed it to the Student Tuition and Transparency System (STATS). Maintaining this system is critical for providing information to students and the public.

However, the department also eliminated a few key pieces of required reporting that would be important for students going forward. This includes removing information on D/E metrics. The Education Department provided a rationale for eliminating the measure for holding GE programs accountable using the measure because it did not align with the metrics in OBBBA. However, it did not explain a rationale for failing to keep it as a transparency metric. As calculated under current FVT regulations, the department calculates and provides the measure for all programs. Keeping it would provide important information for students going forward, especially since some programs would pass the earnings threshold but fail D/E, and debt levels could change going forward as programs begin to offer private debt as a result of reductions to student loans under OBBBA. The department also eliminated a requirement that colleges report students' institutional debts, which captures outstanding balances after a student drops out and does not complete. Education Department officials reasoned that capturing the data is a challenge for smaller institutions, and it wanted to reduce institutional burden. However, eliminating it entirely does not provide a picture of students failing to finish their education with unpaid balances.

In the next few months, the Education Department will release a Notice of Proposed Rulemaking laying out the language agreed to by negotiators and seek public comment, which could result in further changes to the rules. During negotiations, the department indicated to different negotiators both that it could get rid of the rules that apply to GE programs entirely or keep the more stringent rules that exist today. Whether the Education Department officials maintain the language agreed to by negotiators and the same standard for all programs will be the key question. It will certainly hear from institutions on different ways to further reduce the impact of the earnings measure for GE programs, and will also likely hear calls for delaying data collection and implementation of the metrics. And it will hear from others about the negative impacts of eliminating the D/E measure.

Over the long term, Congress will need to make a number of changes to ensure programs and institutions are held accountable. First, there is no guarantee that GE programs will continue to be held to the same standard as other programs because OBBBA does not require that the earnings test apply to undergraduate certificate programs. GE regulations have been continuously subject to lawsuits over time, and any new regulation could be similarly challenged in court. The regulations could also be significantly changed or eliminated altogether without clear requirements in law. Second, policy must account for programs that are unaffordable and leave students with too much debt. According to data presented by the department, the new accountability measure captures very few programs. In total, about 6 percent of programs fail the measure, and only about 5 percent of Title IV students are in failing programs. The department itself continues to raise concerns about high-debt programs, low repayment, and student default, situations that are unlikely to change and may get worse before they get better. Congress too, has considered various ways of holding institutions accountable for unpaid debt, limiting costs, and providing students with greater price transparency. While the earnings standard is an important first step, it tackles only part of the problem and impacts too few. Programs should be judged not just for what students earn, but by what they pay for to address the issue of cost but that will require more work from Congress. And finally, programs that do not leave students better off should lose access to all aid, not allowed to continue to enroll the lowest income students who rely on the Pell grant to pay for college.