ED Reaches Consensus on Negotiated Rulemaking on Accountability

The Department of Education concluded its Accountability in Higher Education through Demand-driven Workforce Pell (AHEAD) negotiated rulemaking last week, reaching consensus on two major policy frameworks that will shape federal student aid going forward:1) the creation of a Workforce Pell Grant for short-term training programs (see NAICU analysis for more information); and 2) a new, cross-sector accountability system tied to program-level earnings outcomes (see data and resources from the Department).

For the private, nonprofit sector, these outcomes provide greater clarity about future accountability expectations while introducing new scrutiny at the program level that may influence institutional planning and program oversight. The AHEAD committee was convened to implement changes made with the passage of the One Big Beautiful Bill Act last year.

In last week’s rulemaking session, Department representatives discussed the new accountability framework with negotiators. Much of the structure for the earnings test was pre-determined by the statutory text, so most of the discussion focused on how the Department wanted to “harmonize” the Gainful Employment (GE) framework, which covers for-profit programs and non-degree programs at all other institutions, with the Do No Harm (DNH) framework, which covers degree programs. The Department had greater latitude to make changes to GE because it was created through regulatory processes and was more constrained in its construction of the DNH framework due to more explicit direction from Congress.

Other topics covered during the rulemaking session included certain disclosure and reporting requirements for institutions, and the program information website the Department is expected to create with program-level information on all institutions.

While NAICU is developing a complete summary of these provisions, below is an overview of the key components of the consensus agreement. (Draft consensus language is available.)

• Other than in name and the programs to which they apply, GE and DNH are identical accountability systems. In general, DNH is replacing the Financial Value Transparency (FVT) framework, and GE has been modified to match DNH.
  • The only exceptions to this are that the reporting and disclosure requirements for institutions under both FVT and GE remain, albeit with several changes.
• All institutions will now be required to report all their Title IV-eligible programs to the Department, as well as any changes to those programs within 10 days.
• The debt-to-earnings (D/E) test has been removed entirely.
• An earnings threshold test is the core accountability mechanism. Programs will be evaluated on whether program completers’ median earnings, four years after graduation, meet or exceed a defined comparison threshold.
  • For undergraduate programs, the comparison group consists of 25–34-year-old working adults in the institution’s state who hold a high school diploma.
  • Graduate programs are compared to bachelor’s degree recipients.
  • If an institution’s total enrollment for the year is more than half out-of-state, their programs will be compared to the national median earnings.
• Programs that fail this earnings test twice in three consecutive years lose eligibility for Direct Loans. Institutions will be notified of the Department’s annual earnings test outcomes near the beginning of the year, with the first set of results expected in early 2027. The first possible loss of Direct Loan eligibility can occur on July 1, 2028.
  • When a program fails the test the first time, it is considered a “failing program” and must notify enrolled and prospective students that their Direct Loan eligibility is at risk.
  • When a program fails the test the second time, it is considered a “low-earning program,” and students in the program lose Direct Loan access for at least two years.
  • If an institution has 50% or more of its Title IV recipients and Title IV revenue in failing programs, will be placed on provisional status, and their “low-earning" programs would lose eligibility for all Title IV funds. This is a new administrative capability requirement.
• Institutions may appeal against failing determinations, but their appeals will be limited to the Department’s calculation. The calculation is: Median Annual Earnings – Earnings Threshold = Earnings Result.
  • There are no alternative earnings appeals due to statutory constraints on where the Department can gather earnings data.
  • After the Department rules on an appeal, institutions can further appeal to an administrative law judge.
• If a program fails the earnings test once, the institution will have 120 days to decide whether to use a new teach-out option or voluntarily close the program. This option would require institutions to cease all new enrollments in the program, but allow enrolled students to maintain Direct Loan eligibility for up to three years or the normal full-time length to completion, regardless of how the program fares on the earnings test in those years.
  • Once enrolled students are finished with the program, or this period ends, the program would close and be subject to the standard two-year ban period.
• Regaining eligibility. After the two-year ban period, institutions may re-establish the program’s eligibility for Direct Loans by updating their list of eligible programs with the Department, pursuant to other requirements.
  • During the ban period, institutions will not be able to start a new program with the same 4-digit Classification of Instructional Programs (CIP) code and any overlapping Standard Occupational Classification (SOC) codes.
  • Institutions may start new programs with the same CIP code as a low-earning program if the credential level is different.
• The Department will publish a program-level information website, but how it will be presented and when it will be available has not been determined.
• Institutions will still be required to publish a link to this website, but only on pages containing cost, financial aid, or admissions information about a program or the institution. The requirement for links on academic pages was removed to reduce burden.
  • The information required to access this website will need to be provided to prospective and enrolled students.

Throughout negotiations, supporters of the Department’s initial proposal argued that it simplifies oversight and reduces regulatory fragmentation. Critics of the proposal noted that using a single earnings-based metric fails to capture the full value of higher education, and may disadvantage programs that have lower short-term wages, are in rural communities, or are mission-focused, such as religious or faith-based programs, or those that provide a societal good. The Department understood these concerns but was limited in what it could offer for relief given statutory constraints.

Timing

The final rule will take effect July 1, 2026, and the first application of the earnings test is anticipated in 2027, following the release of program-level earnings data to institutions. The first possible loss of Direct Loan eligibility is July 1, 2028.

Additionally, the Department has determined that the existing reporting requirements under FVT will remain in place for 2026, with the changes made in this rulemaking taking effect beginning in 2027.

Because the committee reached consensus, the Department’s forthcoming proposed regulations are expected to closely reflect the negotiated language. Given the separate sessions conducted for Workforce Pell and the accountability framework, it is possible that the Department publishes a separate proposed rule for each. In either case, institutions will have the opportunity to comment during this process, and the Department is authorized to make changes to its proposed rule based on those comments, even though the overall structure of the framework is largely set.

For more information, please contact:
Justin Monk