Accountability in Higher Education and Access Through Demand- Driven Workforce Pell: Student Tuition and Transparency System (STATS) and Earnings Accountability

Federal RegisterJul 1, 2026

Ask Donna

What actually matters in this document.

Text

DEPARTMENT OF EDUCATION

34 CFR Parts 600, 668, 685

[Docket ID ED-2026-OPE-0100]

RIN 1840-AE06

Accountability in Higher Education and Access Through Demand-Driven Workforce Pell: Student Tuition and Transparency System (STATS) and Earnings Accountability

AGENCY:

Office of Postsecondary Education, Department of Education.

ACTION:

Final rule.

SUMMARY:

The Secretary of Education (Secretary) amends the regulations governing institutional eligibility, general provisions, and the William D. Ford Direct Loan (Direct Loan) Program under title IV of the Higher Education Act (HEA) of 1965, as amended (the title IV, HEA programs) to implement statutory changes to the title IV, HEA programs included in the Working Families Tax Cuts Act (WFTCA) signed into law by President Trump on July 4, 2025. These changes include revisions to program eligibility requirements for the Direct Loan program and the introduction of an earnings accountability framework that limits Direct Loan eligibility to programs whose graduates meet certain earnings benchmarks. This action finalizes regulations to implement the provisions of the WFTCA related to low-earning outcome programs and the Direct Loan program, and to harmonize those regulations with requirements for programs that are required to lead to gainful employment (GE programs).

DATES:

Effective dates:

This rule is effective July 1, 2027, except for instructions 13 and 14, which are effective August 31, 2026.

Implementation dates:

For the implementation dates of the regulatory provisions, see the Implementation Date of These Regulations in

SUPPLEMENTARY INFORMATION

FOR FURTHER INFORMATION CONTACT:

Joseph Massman, Office of Postsecondary Education, 400 Maryland Ave. SW, 5th Floor, Washington, DC 20202. Telephone: (202) 453-7771. Email:

Joe.Massman@ed.gov.

If you are deaf, hard of hearing, or have a speech disability and wish to access telecommunications relay services, please dial 7-1-1.

A brief summary of these final regulations is available at

www.regulations.gov/docket/ED-2026-OPE-0100.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Abbreviations

II. Executive Summary

1. Summary of Major Provisions

2. Summary of Costs and Benefits

III. Purpose of this Regulatory Action

IV. Background

V. Implementation Date of These Regulations

VI. Authority for the Regulatory Action

VII. Analysis of Public Comment and Changes

VIII. Regulatory Analyses

1. Regulatory Planning and Review Including Regulatory Impact Analysis

a. Need for Regulatory Action

b. Summary of Comments and Changes From the NPRM

c. Discussion of Costs, Benefits, and Transfers

d. Accounting Statement

e. Alternatives Considered

2. Regulatory Flexibility Act

3. Paperwork Reduction Act of 1995

4. Congressional Review Act

Intergovernmental Review

Assessment of Education Impact

Federalism

I. Abbreviations

AHEAD: Accountability in Higher Education and Access through Demand-driven Workforce Pell

ACS: American Community Survey

AGI: Adjusted Gross Income

APA: Administrative Procedures Act

BLS: Bureau of Labor Statistics

CFR: Code of Federal Regulations

CIP Code: Classification of Instructional Programs Code

CPI-U: Consumer Price Index for All Urban Consumers

CPS: Current Population Survey

D/E Rates: Debt-to-Earnings Rates

DEOA: Department of Education Organization Act

Department: United States Department of Education

DL: Federal Direct Loans

E.O.: Executive Order

EP: Earnings Premium

FAFSA: Free Application for Federal Student Aid

FSA: Federal Student Aid

FVT: Financial Value Transparency

GE: Gainful Employment

GEPA: General Education Provisions Act

HEA: Higher Education Act of 1965, as amended

IPEDS: Integrated Postsecondary Education Data System

NPRM: Notice of Proposed Rulemaking

OIRA: Office of Information and Regulatory Affairs

Pell Grant: Federal Pell Grant

PDF: Portable Document Format

PRA: Paperwork Reduction Act of 1995

PRCS: Puerto Rico Community Survey (PRCS)

RFA: Regulatory Flexibility Act

RFRA: Religious Freedom Restoration Act

RIA: Regulatory Impact Analysis

SOC: Standard Occupational Classification

Title IV, HEA Programs: Student financial assistance programs authorized under title IV of the HEA

rtf: Rich Text Format

SBREFA: Small Business Regulatory Enforcement Fairness Act of 1996

txt: Text format

UI: Unemployment Insurance

WFTCA: Public Law 119-21, also known as the Working Families Tax Cuts Act and the One Big Beautiful Bill Act

The Department previously referred to the Working Families Tax Cuts Act as the “One Big Beautiful Bill Act,” including in the Notice of Proposed Rulemaking published on April 20, 2026.

II. Executive Summary

The Secretary implements the amendments made to the HEA relating to earnings outcomes made by Public Law 119-21, the WFTCA, through these final regulations.

These regulations overhaul the accountability framework for the title IV, HEA programs by replacing the former debt-to-earnings (“D/E”) metric with a revised earnings premium measure, expanding transparency, and strengthening institutional compliance standards. Maintaining robust accountability measures will ensure program integrity and protect students from low-earning outcomes, aligning with Congressional objectives for higher education oversight. This rule removes outdated definitions tied to D/E metrics, introduces the term “earnings,” and revises several existing definitions. The Student Tuition and Transparency System (“STATS”) will apply to all programs qualifying for title IV, HEA assistance, using the earnings premium measure as the new accountability standard. Institutions will be required to report program-and certain student-level data, including tuition, fees, and financial aid awards such as grants and scholarships to the Department. This reporting will enable the Department to provide enhanced informational disclosures of net program cost to the public. A revised version of the earnings premium measure will apply to both GE and non-GE programs; those failing the earnings premium measure in two out of three consecutive years will lose Direct Loan eligibility, though limited extensions may be granted when an orderly program closure described under § 668.603(c)(4) is in the students' best interest. Institutions will be required to update Direct Loan-eligible program lists, issue warnings about program risk and Pell Grant lifetime limits, and meet a new administrative capability standard. This rule aims to incentivize institutions in every sector of higher education to offer programs that deliver economic value through a return on investment, enhance data accessibility for students, and protect taxpayers and students through stricter

oversight and comprehensive disclosures on program outcomes.

1. Summary of Major Provisions of This Regulatory Action General Definitions

These final regulations:

• Amend § 668.2 to remove the definitions of “annual debt-to-earnings rate,” “debt-to-earnings rates,” “discretionary debt-to-earnings rate,” “metropolitan statistical area,” “poverty guideline,” “qualifying graduate program,” and “substantially similar program.”

• Amend § 668.2 to add “earnings” and revise existing key terms, including “cohort period,” “earnings threshold,” “eligible non-GE program,” “Federal agency with earnings data,” and “institutional grants and scholarships.”

• Amend § 685.102 to add the terms “eligible non-GE program” and “gainful employment program (GE program).”

Subpart Q—Student Tuition and Transparency System (STATS)

These final regulations:

• Amend several provisions in subpart Q to reflect new numbering.

• Amend §§ 668.401, 668.402, 668.403, 668.404, and 668.405 to remove all references to the former D/E metric and use the earnings premium measure as the new accountability standard.

• Amend § 668.401 to remove exclusions for institutions located in the U.S. Territories or Freely Associated States, and to remove an exclusion for institutions with no groups of substantially similar programs that produced 30 or more total completers over the four most recently completed award years.

• Amend § 668.402(c)(3) to provide that if a program is designed to prepare a student for employment in an occupation that qualifies for a tax deduction of tip income, 50 percent or more of individuals in the occupation receive income from tips, and the earnings calculation would use graduate earnings data from 2025 or prior, the program will not be considered to have passed or failed the earnings premium measure but the Department will make earnings data and the earnings threshold that would have been used publicly available.

• Amend § 668.403(b) to establish that the Secretary will obtain the median annual earnings of students who completed a GE program or eligible non-GE program during the cohort period for the fourth tax year following program completion. The earnings data will be obtained from at least one Federal agency and will include students who are working and not enrolled during the calendar year in which earnings are measured.

• Amend § 668.405 to clarify that the Secretary will notify an institution that a low-earning outcome program will cease participation in the Direct Loan program in the same notice of determination that is used to notify the institution of the results of the earnings premium measure calculation.

• Amend § 668.406 to require an institution offering any GE program or eligible non-GE program to report the total amount of Federal, State, private, or other grants and scholarships each student received for their entire enrollment. This reporting requirement will only apply to students who completed or withdrew from the program during the award year.

Subpart S—Earnings Accountability

These final regulations:

• Amend §§ 668.601, 668.602, 668.603, and 668.605 to remove all references of the former D/E metric.

• Amend § 668.601(a) to establish that earnings accountability applies to an eligible non-GE program or a GE program offered by an eligible institution and the Secretary determines whether the program is eligible for Direct Loan program funds.

• Add § 668.601(b) to establish exemptions for programs at institutions that enroll only students with Specific Learning Disabilities and Autism Spectrum Disorder.

• Amend § 668.603(a) to establish that a low-earning outcome program is a GE program or eligible non-GE program that fails the earnings premium measure in § 668.402 in two out of any three consecutive award years for which the program's earnings premium measure is calculated. A low-earning outcome program's participation in the Direct Loan program will end upon the completion of a termination action of Direct Loan program eligibility under subpart G.

• Amend §§ 668.603(b) and (c) to provide the conditions for an institution to appeal the Secretary's determination that a program is a low-earning outcome program that will cease participation in the Direct Loan program. Institutions will have 30 days from receipt of a notification of determination indicating that a program is a low-earning outcome program to appeal the decision and may only appeal based on specific conditions explained in these subsections.

• Add § 668.603(d)(4) to allow a program that has failed to satisfy the requirements of § 668.402, but is not a low-earning outcome program, to continue participating in the Direct Loan program if the institution voluntarily agrees to conduct an orderly program closure, provided the Secretary determines that it is in the best interest of the students. This flexibility will be limited to three years or the full-time duration of the program, whichever is less, and will require the institution and the Secretary to agree to make certain amendments to the institution's program participation agreement (PPA).

• Add § 668.603(d)(5) to allow a program that has failed to satisfy the requirements of § 668.402, but is not a low-earning outcome program, to avoid a loss of title IV, HEA eligibility under the administrative capability requirements in § 668.16(t) if the institution voluntarily agrees to prevent students from borrowing Direct Loans in the program under § 685.203(m)(2) for at least five years. This flexibility will extend as long as the institution prevents Direct Loan borrowing in the program, and will require the institution and the Secretary to agree to make certain amendments to the institution's program participation agreement (PPA).

• Add § 668.603(d)(5) to clarify that the ending of a program's participation in the Direct Loan program under these regulations is not considered a limitation action under 34 CFR 668.94.

• Amend § 668.604 to remove the transitional certification requirements and require an institution to establish a program's eligibility for Direct Loan program funds by updating the list of the institution's Direct Loan-eligible programs maintained by the Department. An institution will be prohibited from including programs that share the same 4-digit Classification of Instructional Programs (CIP) code and any overlapping Standard Occupational Classification (SOC) codes as a failing program that was subjected to a two-year loss of eligibility.

• Amend § 668.605(c) to require an institution to provide a student who is eligible for Pell Grant funds with notice of their remaining lifetime eligibility for Pell Grant funds and an explanation that all Pell Grant funds received for enrollment in the program count against their future lifetime eligibility.

• Amend § 668.605(d) to require an institution to provide an enrolled student with information regarding their remaining Pell Grant eligibility at the time that the institution makes a disbursement of Pell Grant funds to them.

Standards for Participation in Title IV, HEA Programs

These final regulations:

• Add § 668.14(h)(1) to require institutions to be placed on provisional

status if they fail to comply with 34 CFR 668.16(t) in two out of any three consecutive award years, which will result in the institution's low-earning outcome programs becoming ineligible for title IV, HEA funds.

• Add § 668.14(h)(2) to allow an institution to appeal the Secretary's determination if they are found to have failed the conditions in 34 CFR 668.16(t) in two out of any three consecutive award years.

• Add § 668.14(h)(3) and (4) to provide an exception of automatic ineligibility for title IV, HEA funds if the institution does not participate in the Direct Loan program or agrees not to allow students to borrow in a low-earning outcome program.

• Amend § 668.16(t) to require an institution to demonstrate administrative capability by showing that at least half of the institution's recipients of title IV, HEA funds and at least half of the institution's total title IV, HEA funds are not from low-earning outcome programs under subpart S.

• Amend § 668.43(d)(1) to require that the program information website includes the median length of calendar time taken for full-time and less than full-time students to complete the program's academic requirements and obtain the degree or credential awarded by the program.

• Amend § 668.43(d)(2) to no longer require institutions to provide a prominent link to the website maintained by the Secretary on any web page containing academic information about the program or institution. The Secretary may require the institution to modify a web page if the information is not sufficiently prominent, readily accessible, clear, conspicuous, or direct.

• Amend § 685.300 to explain that a GE program or an eligible non-GE program must meet the student tuition and transparency system requirements under 34 CFR part 668, subpart Q, and the earnings accountability requirements under 34 CFR part 668, subpart S to participate in the Direct Loan program.

2. Summary of Costs and Benefits:

As further detailed in the

Regulatory Impact Analysis

(RIA), the Department estimates that the regulations will have significant impacts on students, educational institutions, and taxpayers. Certain degree programs are expected to lose eligibility for title IV, HEA funds under the earnings tests in the final regulations, while some undergraduate and graduate certificate programs are expected to gain eligibility relative to the prior Financial Value Transparency and Gainful Employment regulations enacted on July 10, 2023. Students will incur costs when the programs they attend lose eligibility for title IV, HEA funds, or if they enroll in low-earning certificate programs that gain access to title IV, HEA funds. Students will also benefit in cases where the regulations prevent them from attending low-earning and high-cost degree programs. Certain institutions (mainly public and private non-profit institutions) will incur costs when programs they offer lose access to title IV, HEA funds under the regulations. Other institutions (such as proprietary institutions) will benefit as more programs in this sector will remain eligible for title IV, HEA funds. Taxpayers will incur new budget costs via an increase in transfers of title IV, HEA funds to institutions relative to prior regulations because these regulations result in a net increase in the number of students attending programs that will be eligible for these funds.

III. Purpose of This Regulatory Action

This regulatory action seeks to effectuate regulations that address the statutory changes made by the WFTCA and to harmonize those regulations with requirements for programs that are required to lead to gainful employment (GE programs).

IV. Background

Gainful Employment (GE) Prior Rules

Under Sections 101 and 102 of the HEA, there are two broad categories of title IV-eligible programs: degree programs offered by public and private nonprofit institutions, and programs required to lead to gainful employment in a recognized occupation (which include nondegree programs at any type of institution, and nearly all programs offered by proprietary institutions). The statute does not further elaborate on the gainful employment requirement.

The Department has issued four previous regulations on GE, most recently in 2023, as part of the FVT/GE accountability framework. These regulations required the Department to calculate two separate metrics for the vast majority of programs that were eligible for title IV, HEA funds—a debt-to-earnings (D/E) rate and an earnings premium measure—but did not impose program eligibility consequences for programs other than GE programs. The regulations also established a process by which the Department would disclose key information about academic programs to current and prospective students at a point when the information would be most useful for them.

WFTCA Earnings Accountability Framework

The WFTCA, signed into law by President Trump on July 4, 2025, amended the HEA to establish a new accountability framework for most postsecondary programs of study that participate in the Direct Loan program. Congress designed this framework to compare the median earnings of graduates to those of working adults, and it requires the Department to discontinue a program's Direct Loan program eligibility if its graduates earn less than the comparison group.

The WFTCA framework does not include D/E rates, and although the earnings comparison metric largely resembles the earnings premium measure under the FVT/GE regulations, there are differences in the populations of institutions and programs covered by the new framework, in the methodology by which the comparison must be performed, and in consequences for failing programs. To provide students, families, institutions, and the public with meaningful and comparable program information and to promote consistency in the treatment of programs across all credential levels and institutional sectors, the Department amends and simplifies its existing FVT and GE framework to harmonize with the accountability framework required under the WFTCA, establishing a single metric that will be calculated for nearly all programs eligible for title IV, HEA funds and including the same program eligibility consequences for failure of GE and eligible non-GE programs alike.

V. Implementation Date of These Regulations

Except for changes to 34 CFR part 685, these regulations are effective on July 1, 2027. The changes to 34 CFR part 685 are effective on August 31, 2026.

Section 482(c)(1) of the HEA requires that regulations affecting programs under title IV of the HEA be published in final form by November 1 prior to the start of the award year (July 1) to which they apply. HEA section 482(c)(2) also permits the Secretary to designate any regulation as one that an entity subject to the regulations may choose to implement earlier and outline the conditions for early implementation. For the reasons described in “Authority for This Regulatory Action” below, the Secretary is waiving the master calendar requirements for the provisions of these regulations in 34 CFR part 685 that require institutions to agree to be subject to the earnings accountability requirements established in the WFTCA and these regulations.

The Secretary is exercising her authority under HEA section 482(c) to designate certain regulatory changes to Part 668 in this document for early implementation beginning July 1, 2026. The Secretary has designated the elimination of all provisions pertaining to reduced institutional reporting requirements under 34 CFR 668.406 for early implementation, and will assume that any institution that chooses not to report items that have been removed has elected to implement the provisions early.

VI. Authority for This Regulatory Action

The Department's authority to engage in this rulemaking action and pursue a transparency and accountability framework for GE programs and eligible non-GE programs is derived primarily from seven categories of statutory enactments: (1) the Secretary's generally applicable rulemaking authority, which includes provisions regarding data collection and dissemination, and which applies in part to title IV, HEA; (2) authorizations and directives within title IV, HEA regarding the collection and dissemination of potentially useful information about higher education programs, as well as provisions regarding institutional eligibility to benefit from title IV; (3) the definition of institution of higher education under Section 102 of the HEA and other provisions within title IV of the HEA that address programs that prepare students for gainful employment; (4) the Secretary's authority to establish procedures and requirements relating to the administrative capacities of institutions of higher education; (5) recently enacted changes within title IV, HEA as a result of Section 84001 of the WFTCA, which establishes an accountability system limiting Direct Loan eligibility for programs that demonstrate low-earning outcomes; (6) the Secretary's authority to develop a quality assurance system under the Direct Loan Agreement; and (7) the Secretary's authority to include other provisions in the Direct Loan Agreement that she determines are necessary to protect the interests of the United States and to promote the purposes of the Direct Loan program. Finally, this section also addresses the WFTCA's waiver of the HEA's master calendar requirements for some of the regulations set forth in this final rule.

The Secretary has broad powers to engage in rulemaking to implement programs administered by the Department. Specifically, Section 410 of the General Education Provisions Act (GEPA) grants the Secretary authority “to make, promulgate, issue, rescind, and amend rules and regulations governing the manner of operation of, and governing the applicable programs administered by, the Department,” such as the title IV, HEA programs that provide Federal loans, grants, and other aid to students, to assist in pursuing either eligible non-GE programs or GE programs. 20 U.S.C. 1221e-3. Likewise, Section 414 of the Department of Education Organization Act (DEOA) authorizes the Secretary to “prescribe such rules and regulations as the Secretary determines necessary or appropriate to administer and manage the functions of the Secretary or the Department.” 20 U.S.C. 3474.

Loper Bright Enters.

Raimondo,

603 U.S. 369 (2024) brought about a sea change in administrative law by overturning

Chevron

deference; however,

Loper Bright

did not disrupt Congress's ability to provide “a degree of deference” to agencies in specific statutes. 603 U.S. 369, 394 (2024). Indeed, the Court directly acknowledged that Congress may “delegate . . . discretionary authority to any agency” by giving directions to agencies to promulgate rules that are “reasonable” or “appropriate.”

Id.

In a post-

Loper Bright

case challenging the 2023 FVT/GE rule, a lower Court specifically held that the Department has been explicitly granted such deference by Congress under the provisions of GEPA and the DEOA.

American Assoc. of Cosmetology Sch.

Dep't of Educ.,

2025 WL 4219345, at *5 (N.D. Tex. Oct. 2, 2025) (citing 20 U.S.C. 1221e-3); 20 U.S.C. 3474). The Court further stated that, through the HEA, the Congress had clearly granted the Secretary to promulgate rules necessary for the administration of the title IV, HEA programs: “the Supreme Court in

Loper Bright

recognized that Congress may `delegate[ ] particular discretionary authority to an agency' by leaving it with `flexibility' through terms `such as `appropriate' or `reasonable' ” and that the HEA confers such authority [on the Secretary] by including the additional specific direction to `prescribe such regulations as may be necessary to provide for . . . any matter the Secretary deems necessary to the sound administration of the financial aid programs[.]' ”

American Assoc. of Cosmetology Sch.

*6 (citing 20 U.S.C. 1094(c)(1)(B); 1099c).

Section 431 of the GEPA grants the Secretary additional authority to establish rules to require institutions to make data available to the public about the performance of Federally supported education programs and about students enrolled in those programs and to collect data and information on applicable programs for the purpose of obtaining objective measurements of the effectiveness of such programs in achieving their intended purposes. See 20 U.S.C. 1231a. This provision authorizes the reporting and disclosure requirements in the proposed rule, which would enable the Department to collect data and information for the purpose of developing objective measures of program performance. The reporting is not only for the Department's use in evaluating programs but also serves to inform the public—including enrolled students, prospective students, their families, institutions, and other stakeholders—about relevant information to those Federally supported programs.

The Secretary's authority to establish rules requiring institutions to provide information to the Department is further bolstered by the fact that certain provisions of the HEA would be rendered inoperable if such data was not provided. For example, without collecting data from institutions regarding students participating in title IV, HEA programs, the Department would have no ability to determine whether a program offered by that institution satisfies the earnings test set forth in HEA Section 454(c)(2), added by the WFTCA. Therefore, in any such case in which the HEA directs the Department to conduct analysis that requires information that an institution possesses, the Secretary is permitted to establish regulations regarding such data collection under the Secretary's broad authority to promulgate regulations necessary or appropriate for governing the applicable programs administered by the Department. See 20 U.S.C. 3474.

Furthermore, in the GE setting, the Department has not only a statutory basis for pursuing the effective dissemination of information to students about a range of GE program attributes and performance metrics, but also has the authority to use certain metrics to determine that an institution's program is not eligible to benefit from one or more of the title IV, HEA programs. When an institution's program is at risk of losing eligibility based on a given metric, there should be no real doubt that the Department may require the institution that operates the at-risk program to alert prospective and enrolled students that they may not be able to receive assistance from one or more title IV, HEA programs for the program in question. Without direct communication from the institution to prospective and enrolled students, the students themselves risk losing the

ability to make informed choices about their educational pursuits. Congress clearly intended to require institutions to provide this manner of direct communication to students, as plainly evidenced by the presence of the student notice requirements for at-risk degree programs under HEA Section 424(c)(7), as revised by the WFTCA. In keeping with the Department's effort to harmonize the accountability requirements for non-GE and GE programs, we believe it is appropriate to similarly require institutions to provide warnings to prospective and enrolled students regarding at-risk GE programs consistent with the warnings expressly required in statute for eligible non-GE programs and that the Secretary is authorized to do so under the Secretary's general authority to promulgate regulations that are necessary or appropriate to administer the title IV, HEA programs. See 20 U.S.C. 1221e-3; 20 U.S.C. 3474.

The data to be collected and analyzed by the Department will not violate the student unit record prohibition found in HEA Section 134. The Department does not propose creating any new databases of student records. It will collect from institutions individual title IV, HEA recipient data, including PII, and will securely transmit that data to at least one Federal agency with earnings data for matching. The metric calculation will only utilize median earnings data that does not include PII data from student recipients of title IV, HEA assistance. The proposed regulation is also supported by the Department's statutory responsibilities to observe eligibility limits in the HEA. Section 498 of the HEA requires institutions to establish eligibility to provide title IV, HEA funds to their students. 20 U.S.C. 1099c. Eligible institutions must also meet program eligibility requirements for students in those programs to receive title IV, HEA assistance.

One type of program for which certain types of institutions must establish program-level eligibility is “a program of training to prepare students for gainful employment in a recognized occupation.” 20 U.S.C. 1001(b)(1)(A)(i), (c)(1)(A). Section 481 of the HEA articulates this requirement by defining, an “eligible program,” in part, as a “program of training to prepare students for gainful employment in a recognized profession.” The HEA does not more specifically define the terms “training to prepare,” “gainful employment,” “recognized occupation,” or “recognized profession” for purposes of determining the eligibility of GE programs for participation in title IV, HEA programs. At the same time, the Secretary and the Department have a legal duty to interpret, implement, and apply those concepts in order to observe the statutory eligibility requirements in the HEA.

The Department has long interpreted the word “gainful” in this context to mean “profitable.” Program Integrity: Gainful Employment, 79 FR 64890, 64894 (Oct. 31, 2014);

American Assoc. of Cosmetology,

2025 WL 4219345, at *5.

And the Department has consistently interpreted the broader phrase “gainful employment” to mean that the program “actually train[s] and prepare postsecondary students for jobs that they would be less likely to obtain without that training and preparation.”

This would not include, for example, “baccalaureate degree[s] in liberal arts” as those programs are statutorily prohibited from being eligible for title IV, HEA assistance in most instances.

“Gainful.”

Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/gainful.

Accessed March 20, 2026.

Financial Value Transparency and Gainful Employment (GE), 88 FR 32,300, 32,342 (May 19, 2023).

Section 102(b)(1)(A)(ii) provides that baccalaureate degrees in liberal arts are no longer considered to be gainful employment programs, but Congress provided a grandfather clause to allow certain institutions that have offered such programs since January 1, 2009 to continue to offer such programs. Those baccalaureate degree programs are now covered by the accountability provisions in the WFTCA.

It is relevant to acknowledge that there is some degree of ambiguity in the term “gainful employment.” See

Ass'n of Priv. Colleges & Universities

Duncan,

870 F. Supp. 2d 133, 145 (D.D.C. 2012) (stating that “There is no unambiguous meaning of what makes employment `gainful' ”);

Ass'n of Proprietary Colleges

Duncan,

107 F. Supp. 3d 332, 359 (S.D.N.Y. 2015) (quoting

Ass'n of Priv. Colleges & Universities

Duncan,

870 F. Supp. 2d 133 at 145, and adopting its conclusion that “There is no unambiguous meaning of what makes employment `gainful' ”). Indeed, some dictionaries that define the whole phrase “gainful employment” define it as meaning “work that you get paid for.”

Under this definition, the only programs that do not prepare students for “gainful employment” would be programs that train students for unpaid volunteer positions or hobbies. But courts have warned about reading phrases in isolation like this, as the text of a statute must be construed as a whole. See

Kmart Corp.

Cartier, inc.

486 U.S. 281, 291 (1988) (per Kennedy, J.) (“In ascertaining the plain meaning of the statute, the court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole.” The interpretative canon, which is generally referred to as the Whole-Text Canon or the Whole Act Rule, provides that the context of the broader statutory scheme is the “primary determinant of meaning.” Scalia & Garner, Reading Law, 167 (2012).

See “Gainful Employment”, Cambridge Dictionary Online,

https://dictionary.cambridge.org/us/dictionary/english/gainful-employment.

Accessed March 22, 2026.

As we look to other parts of the statute, we find provisions that help provide clarity regarding the definition of gainful employment. In the first instance, Congress has created two definitions of “institution of higher education.” The first definition, which is in Section 101 of the HEA, authorizes non-profits and public institutions to participate in title IV student aid programs. 20 U.S.C. 1001. The definition in Section 101 does not include references to gainful employment, which is a notable omission and strongly suggests that Congress did intend to limit the universe of eligible programs when using that phrase elsewhere.

In Section 102, Congress provides its second definition of institution of higher education, this time defining it to mean proprietary institutions, vocational institutions, and foreign institutions. Here, Congress tells us that if a subset of these types of institutions (proprietary and vocational) wants to participate, they must provide “an eligible program of training to prepare students for gainful employment in a recognized occupation.” The broader phrase makes it clear that these programs “train” students for “a recognized occupation.” Further, we know that Congress does not think baccalaureate degree programs in liberal arts are gainful employment programs, because Congress says that proprietary institutions can offer (1) gainful employment programs, OR (2) programs leading to a baccalaureate degree in liberal arts if the program has been provided since January 1, 2009 and the institution is accredited by a certain type of accreditor. The disjunctive “or” in this context shows us that “gainful employment” does not mean liberal arts.

For the reasons above, it is clear that the operative purpose of Section 102(b)-(c) is to use taxpayer funds to help support students in their quest to obtain more training such that they may enter a recognized occupation. The Department thinks that this context is key in demonstrating that Congress only wants to fund programs that help make the student better off in their “gainful employment.” Gainful means

“profitable,” so Congress takes a common-sense approach where they want students to receive training that enables them to be more profitable than before they went to school. As such, the Department interprets the term “gainful employment” to mean that a program must, on average, make students better off financially than they would have been had they not attended the program. In other words, institutions must ensure that the median student in a gainful employment program earns a premium, compared to what they would have earned if they had never gone to school. This is the same earnings premium measure called for in the WFTCA, but the Department believes that the gainful employment statute calls for this type of accountability independent from the amendments made by the WFTCA.

The Department's interpretation of the phrase “gainful employment” aligns with the statute and is supported by case law concerning the Department's previous gainful employment regulations. In

Ass'n of Priv. Colleges & Universities

Duncan,

870 F. Supp. 2d 133, 146 (D.D.C. 2012), the court stated that term “gainful employment” must be understood in the context of the statutory command that “a given program `prepare students for gainful employment in a recognized occupation.' ” That court reasoned that the “real question, then, is not how much gain is enough but rather how much preparation is enough” and found that the Department's attempt to “answer that question by reference to the economic success of a program's former students” was not precluded by the HEA, as the HEA does not specifically state “how to determine which programs actually prepare their students and which programs do not.”

at 146.

Additionally, in a post-Loper Bright case,

American Assoc. of Cosmetology,

the Court stated that the ordinary meaning analysis supported the Department's conclusion that students are not prepared for gainful employment if a program is designed to leave its graduates financially worse off than when they started, and they are unable to repay their loans. 2025 WL 4219345, at *5.

This conclusion was directly restated several years later in

Ass'n of Proprietary Colleges

Duncan,

107 F. Supp. 3d 332, 359 (S.D.N.Y. 2015), which excerpted a considerable portion of the D.D.C.'s opinion in

Ass'n of Priv. Colleges & Universities

Duncan,

870 F. Supp. 2d 133, 146 (D.D.C. 2012).

Furthermore, the Secretary is authorized to establish and enforce administrative capability standards for institutions participating in title IV, HEA programs and to terminate the participation of any institution who the Secretary determines does not meet those standards. Section 498(a) of the HEA provides that, for purposes of qualifying institutions of higher education for participation in title IV, HEA programs, the Secretary shall determine the administrative capability of an institution of higher education.

Section 498(d)(1) authorizes the Secretary “to establish procedures and requirements relating to the administrative capacities of institutions of higher education” which can include “consideration of past performance of institutions.” Section 498(d)(2) further authorizes the Secretary to any other reasonable procedures necessary to ensure compliance with the administrative capability standard. Therefore, because of the broad authority conferred on the Secretary to establish such standards and procedures, as well as to consider the past practice of an institution in determining whether or not it satisfies the administrative capability standard, the Department believes that it is well within the Secretary's authority to establish a standard that would penalize an institution where at least half of the institution's recipients of title IV, HEA funds and at least half of the institution's total title IV, HEA funds are from low-earning outcome programs under subpart S (and have remained so for two out of three consecutive years) by terminating the overall title IV, HEA program eligibility of all such programs and requiring the institution to participate in title IV, HEA program on a provisional basis.

Section 84001 of the WFTCA amends HEA Section 454 to create a new accountability framework, including an earnings test under HEA Section 454(c)(2) for title IV, HEA programs that lead to an undergraduate degree, graduate or professional degree, or graduate certificate. It further specifies under HEA Section 454(c)(7) that such programs which fail the earnings test are ineligible for Direct Loan program participation for a period of not less than two years. HEA Section 454(c)(6) further requires institutions to provide warnings to each student enrolled regarding at-risk programs.

Direct Loan Agreement Authority

Institutions that participate in the Direct Loan program must agree to comply with the requirements set forth in Section 454 of the HEA. The requirements in this section, which has been called the Direct Loan Agreement, have been incorporated into the Program Participation Agreement (PPA) which covers other title IV programs, not just the Direct Loan program. As part of the Direct Loan Agreement, institutions must “provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with institutions of higher education, to ensure that the institution is complying with program requirements and meeting program objectives.” 20 U.S.C. 1087d(a)(4). The Department has never developed a formal quality assurance system before this rulemaking,

but believes that the GE framework proposed herein is authorized by this provision and is itself a quality assurance system.

See Dan Zibel & Aaron Ament, Protection and the unseen: How the US Department of Education's underdeveloped authorities can protect students and promote equity in higher education, Brookings Economic Studies, 13 (Oct. 2020) (noting that the quality assurance authority in Section 454(a)(4) has never been relied upon, but that `[n]evertheless, section 454(a)(4) of the HEA (the “QA authority”) unambiguously provides that the DLA” shall implement a quality assurance system”), available at

https://www.brookings.edu/wp-content/uploads/2020/10/ES-10.13.20-Zibel-Ament.pdf.

The Department has relied on its authority in Section 454(a)(7) to justify certain aspects of the 2016 Borrower Defense regulations, such as provisions prohibiting arbitration agreements in certain settings. See Student Assistance General Provisions, 81 FR 75926, 75932 (Nov. 1, 2026). These provisions were ultimately removed when the Department published 2019 borrower defense regulations, which are now in effect under Section 85001 of the WFTCA; however, the Department did not disclaim the authority to impose these provisions and made the change for policy reasons.

See

Student Assistance General Provisions, 84 FR 49788, (Sept. 23, 2019).

The quality assurance system authority requires the Secretary to ensure that the institution is complying with program requirements and meeting program objectives. As such, it is important to discuss the “program requirements and program objectives” referenced in HEA Section 454. 20 U.S.C. 1087d(a)(4). The legal scholars Dan Zibel and Aaron Ament have noted that “the HEA is silent as to what is meant by `quality assurance,' `program requirements,' and what it means for an institution to `meet[ ] program objectives.' In such situations, the law affords the Department ample discretion to fill these statutory voids, resolve statutory ambiguities, and ensure that institutions of higher education are serving students and taxpayers.”

Zibel and Ament have argued that “a core `program objective' of the Direct Loan program is to ensure not only that students have access to higher education, but also to ensure that Federally issued loans are repaid.”

The Department largely agrees with these assertions that we have broad

authority to provide details as to what the purpose of these programs are and that the Direct Loan program is designed to provide borrowers with capital to attend college and to repay their loans in most circumstances. However, certain subsets of programs within the HEA have additional purposes that are narrower in scope.

Zibel & Ament,

supra

note 8 at 14 (cleaned up).

Id.

Here, the Department believes that the gainful employment text in Section 102(b)-(c) of the HEA provides significant context as to what the program objectives are for proprietary and vocational institution programs as they participate in the Direct Loan program. Both types of institutions are required to provide “an eligible program of training to prepare students for gainful employment in a recognized occupation.” 20 U.S.C. 1002(b)-(c). As such, the purpose of these programs is to provide “gainful employment.” With that in mind, it is clear that the gainful employment authority operates in tandem with the quality assurance system authority, in that provisions intended to protect a GE program can be incorporated into a quality assurance system. As such, the Secretary is permitted to develop a quality assurance system on a curated basis for these specific GE programs that ensures quality in how these institutions are preparing students for gainful employment. As discussed above, the Department has determined that the gainful employment statute requires institutions to ensure that most graduates of a gainful employment program earn a premium compared to what they would have earned if they had never attended the program.

In sum, the Department has concurrent authority under Section 454(a)(4) along with Section 102(b)-(c) of the HEA to require institutions to comply with the earnings premium measure. Institutions that fail to comply with Section 102 fail to meet the definition of “institution of higher education” for the purposes of title IV, and are no longer eligible institutions, the Secretary must terminate eligibility. Institutions that fail to comply with the terms of the Direct Loan Agreement under Section 454 are not eligible to participate in the Direct Loan program. As such, as part of this final rule, the Department is establishing the earnings premium measure as a quality assurance system that establishes eligibility for all GE programs to participate only in the Direct Loan program, consistent with the scope of Section 454, which only applies to Direct Loans.

The quality assurance system authority also requires the Department to develop a quality assurance system in consultation with institutions of higher education, which we have done as part of the negotiated rulemaking process. In addition, institutions had the ability to comment on the proposed rule. The Department was required to consider making changes in response to all substantive comments under informal notice-and-comment rulemaking, and as such, we effectively consulted with institutions of higher education under the existing rulemaking procedures because we sought and obtained advice from institutions. 5 U.S.C. 553; 20 U.S.C. 1098a.

Institutions must also comply with “other provisions as the Secretary determines are necessary to protect the interests of the United States and to promote the purposes of this part.” 20 U.S.C. 1087d(a)(7). Failure to abide by the terms of the Direct Loan Agreement results in disqualification from participating in the Direct Loan program, but not necessarily other title IV, HEA programs.

The Department believes that it has authority under these provisions in Section 454 of the HEA, as well as the GE provisions in Section 102, to require GE programs to comply with the earnings premium standard. However, the Department believes that the appropriate remedy for programmatic noncompliance is the loss of eligibility for Direct Loans for such programs that fail the earnings premium measure, except when a large number of an institution's programs fail, which is discussed in greater detail below. The Secretary has been given significant deference by Congress in Section 454 in designing a quality assurance system, and that includes the option to tailor the remedy for noncompliance to a program-by-program basis to protect the interests of the United States. Indeed, it would not be in the interest of the United States to disqualify all programs at an institution if only one or a few programs are not performing because students in high performing programs would also lose access to programs that are adding value.

The Department also has authority under Section 454(a)(7) for this final rule, which authorizes the Secretary to include in the Direct Loan Agreement (which is incorporated into the PPA) “such other provisions as the Secretary determines are necessary to protect the interests of the United States and to promote the purposes of this part.” 20 U.S.C. 1087d(a)(7).

Indeed, this broad grant of deference to the Secretary gives the Department significant latitude in designing a quality assurance system necessary to protect the interests of the United States and promote the purposes of this part. As explained above, the holding in

Loper Bright

does nothing to disrupt deference provided to the Department in broad statutory grants of authority like we have here.

Loper Bright,

603 U.S. at 394-95.

As stated above, the purpose of authorizing proprietary institutions and vocational institutions to participate in title IV, HEA programs is to provide students opportunities for training designed to ensure that they may become gainfully employed in a recognized occupation. As such, the Department believes that Section 454(a)(7) provides additional authority for the Department to require the earnings premium measure, because doing so advances the purposes of the Direct Loan program through institutional eligibility under Section 102(b)-(c).

In sum, the Department has overlapping and concurrent authority to require an earnings premium measure for GE programs under the gainful employment authority in Section 102(b)-(c), the quality assurance system authority in Section 454(a)(4), the “protect” and “promote” authority in Section 454(a)(7), and our broad authority to regulate Section 410 of the GEPA. The Department believes that all of these authorities work in tandem and authorize us, independent from the amendments made by the WFTCA related to accountability, require an earnings premium measure for such GE programs.

In practice, the proposed earnings premium measure under the WFTCA is the same as the earnings premium measure under GE. The only type of program not covered by the earnings premium measure under the WFTCA are certificate programs, which are covered by GE. As such, if a court disagrees with our assessment of the robust legal authority we have, the accountability provisions relating to GE are severable and would only have a practical impact on certificate programs.

Summary of Authorities

The above authorities collectively empower the Secretary to promulgate regulations to (1) require institutions to report information about GE programs and eligible non-GE programs to the Secretary; (2) require institutions to provide disclosures or warnings to prospective and enrolled students regarding programs that do not meet earnings premium measures established by the Department; (3) implement Direct Loan program eligibility requirements pertaining to graduate earnings outcomes, including an earnings

premium measure and associated reporting, certification, and warning processes; and (4) define the GE requirement in the HEA by establishing similar measures to determine the eligibility of GE programs for participation in the Direct Loan program, which also is supported by the overlapping authority the Department has to create a quality assurance system for institutions participating in the Direct Loan program.

Waiver of HEA Master Calendar Requirements

Congress may waive, modify, or rescind requirements in the HEA and Administrative Procedure Act (APA) that require the Department to follow certain processes and procedures when engaging in informal notice-and-comment rulemaking. See,

e.g., Asiana Airlines

F.A.A.,

134 F.3d 393, 398 (D.C. Cir. 1998);

Methodist Hospital of Sacramento

Shalala,

38 F.3d 1225, 1237 (D.C. Cir. 1998) (finding that certain parts of the APA procedural framework had been waived when Congress gave an agency direction that conflicts with and is irreconcilable with the APA).

At the same time, the court in

Asiana Airlines

made clear that the APA requires “clear intent” from Congress to justify a departure from the procedural requirements in the APA, noting that 5 U.S.C. 559 requires an explicit waiver of APA procedural requirements. Here, the Department is complying with all of the requirements for informal notice-and-comment rulemaking in 5 U.S.C. 553, so an explicit waiver is not needed. The explicit waiver standard in 5 U.S.C. 559 only applies to the procedural requirement of the APA, and does not apply to the Master Calendar provision in Section 482(c) the HEA. Had Congress wished for the HEA Master Calendar provision to have the same rule of construction as it does for procedural requirements of the APA, we would have expected that Congress would either cross reference and incorporate 5 U.S.C. 559 into the HEA or use similar language to 5 U.S.C. 559 within Section 482(c) of the HEA. Congress knows how to create these types of special rules of construction when they want to, and they declined to do so in Section 482(c) of the HEA.

Absent an explicit rule of construction in the HEA, we rely on the ordinary tools of statutory interpretation to glean the meaning of the statute. The Harmonious-Reading Canon provides that statutes should, when possible, be interpreted in a way that renders them compatible, not contradictory, but such an approach is not always possible if context and other considerations (including the application of other canons) make it impossible to do so, and another approach to statutory interpretation, such as the General/Specific Canon must be applied. See Scalia & Garner,

Reading Law,

155 (2012). The General/Specific Canon dictates that, in cases where a general prohibition is contradicted by a specific permission or a general permission that is contradicted by a specific prohibition, the more specific of the two provisions controls.

Id.

at 158. Because, as discussed below, the WFTCA contains provisions with effective dates that cannot possibly be implemented in regulation in accordance with the HEA's Master Calendar provision, the WFTCA implicitly provides a limited waiver of the HEA's Master Calendar provision, so far as it is necessary to promulgate regulations that give effect to those provisions.

See Dorsey

United States,

567 U.S. 260, 274 (2012) (stating that an agency's compliance with an existing statute “cannot justify a disregard of the will of Congress as manifested either expressly or by necessary implication in a subsequent enactment” (quoting

Great Northern R. Co.

United States,

208 U.S. 452, 465 (1908)).

Here, the WFTCA was enacted on July 4, 2025. The WFTCA directs the Department to implement roughly a dozen provisions by July 1, 2026. Many of these provisions are not self-executing and could not be implemented absent the Department promulgating regulations to provide details for institutions on how to comply with the WFTCA. Congress gave the Secretary discretion within the WFTCA to implement the provisions impacting the title IV, HEA programs and knew that its commands were not self-executing when directing the Secretary to take action. Congress expected the Secretary to act via rulemaking before July 1, 2026, to enable these provisions to actually go into effect.

The Master Calendar provision in the HEA provides that regulatory changes initiated by the Secretary affecting the title IV, HEA programs must be published in final form by November 1st in order for them to go into effect by July 1st of the following year. 20 U.S.C. 1089(c)(1). Section 492 of the HEA requires the Department to undertake negotiated rulemaking as part of any regulation under title IV of the HEA. In order to conduct negotiated rulemaking and meet APA requirements, the Department must have a public hearing (providing notice to the public), solicit nominations from the public to serve on a negotiated rulemaking committee, select non-Federal negotiators, hold negotiations, develop an NPRM, publish an NPRM (with at least a 30-day comment period), and then publish a final rule that responds to any substantive comments received. The fastest possible timeframe in which the negotiated rulemaking process for the rulemaking packages assigned to the AHEAD Committee could have occurred is 149 days, which is irreconcilable with the timeline allowed by the enactment of the WFTCA, due to the fact that there were 120 days from July 4, 2025, (the day the WFTCA was enacted), through and including November 1, 2025, (the publication date of the final rule required by the Master Calendar).

It would not have been possible for the Department to undertake every step of the negotiated rulemaking process by November 1, 2025, in order to implement the provisions that become effective in the WFTCA by July 1, 2026, which is the statutory effective date. Congress was aware of this temporal impossibility when they passed the WFTCA, yet Congress decided that these provisions would still go into effect on July 1, 2026. Because these provisions are not self-implementing and cannot go into effect unless the Department promulgates a final rule, the WFTCA implicitly waives the Master Calendar provision.

With important details unanswered by the plain text of the WFTCA, it is clear that the policy scheme set forth in the HEA made by the WFTCA cannot be implemented absent regulatory action by the Department. The Department was not able to comply with the master calendar requirements and Congress's statutory deadlines. Furthermore, the Office of Management and Budget has determined this is a major rule under the Congressional Review Act, and because major rules cannot go into effect until 60 days after publication, the effective date for the WFTCA provisions is August 31, 2026. Therefore, the WFTCA does not waive negotiated rulemaking nor any provision in the APA. For provisions in the WFTCA that become effective July 1, 2027, and beyond, Congress did not implicitly repeal the Master Calendar provision because it is possible for the Department to publish a final rule that complies with the Master Calendar to implement those provisions.

Severability

“It is axiomatic” that a regulation may be invalid in part but not in whole or as applied to one set of facts but not another.

Ayotte

Planned Parenthood of N. New England,

546 U.S. 320, 329 (2006). If a court finds one part of a

regulation is unlawful, the “normal rule” is to enjoin only that part.

Id.

(quoting

Brockett

Spokane Arcades, Inc.,

472 U.S. 491, 504 (1985).

It is the Department's intent that if any provision of this subpart or its application to any person, act, or practice is held invalid, the remainder of the subpart or the application of its provisions to any person, act, or practice shall not be affected thereby.

Statutes and regulations are severable if the separate provisions are “wholly independent of each other” and can operate independently.

Brockett

Spokane Arcades, Inc.,

472 U.S. 491, 502 (1985). That is the case here. No part herein will be affected if another part is found to be unlawful. Nor does the Department believe courts or regulated parties would be unable to apply the rule if one part is held invalid.

C.f. Dep't of Educ.

Louisiana,

603 U.S. 866, 868 (2024) (per curiam) (denying the government's request to stay a preliminary injunction against an entire rule where only parts were found to be invalid because “schools would face in determining how to apply the rule for a temporary period with some provisions in effect and some enjoined”).

While the Department's goal with these proposed regulations is to establish a universal earnings accountability framework that is applied evenly across all sectors and credential levels, because of the multiple bases of statutory authority the Department is relying upon for this regulatory action, the Department believes that it crucial to clarify that the provisions of this rule applicable to GE programs and non-GE programs are wholly independent of each other and can operate independently. The Department believes the application of a universal earnings accountability framework to GE programs and non-GE programs is severable, because while the standard applied to GE programs and non-GE programs will be the same, as discussed previously within this section, the Department is not relying on the same statutory authority to impose this unified framework. Likewise, the earnings accountability framework could be applied to only one category of programs without an issue operationally.

Relatedly, as explained in detail in this rule, the Department believes that the application of the earnings accountability framework to all programs, irrespective of whether a program is religious in nature or is offered by a religious institution, does not place a substantial burden on the exercise of religion, in violation of the Religious Freedom Restoration Act (“RFRA”). However, should a court disagree with the Department's conclusion, the Department intends for the earnings accountability framework to continue to survive and remain in effect for all other programs.

Relationship to Other Federal Agencies

Earnings measures supplied by another Federal agency are statistical inputs to the Department's administration of the statutory accountability framework. The provision of such statistical products does not constitute the supplying agency's participation in, endorsement of, validation of, or responsibility for any Department eligibility, accountability, enforcement, or appeal determination. Any administrative appeal or litigation concerning a program's status under these regulations concerns the Department's application of statutory and regulatory standards, not a determination by the agency that supplied the statistical product.

VII. Analysis of Public Comment and Changes

On April 20, 2026, the Secretary published an NPRM for these regulations in the

Federal Register

(91 FR 21088) (April 20, 2026). The Department received 9,994 comments on the proposed regulations. The Department has grouped the comments by functional topics and by similar themes. We discuss substantive issues under the sections of the regulations to which they pertain. In instances where individual submissions appeared to be duplicates or near-duplicates of comments prepared as part of a write-in campaign, the Department posted one representative sample comment along with the total comment count for that campaign to

www.Regulations.gov,

which continues to be our standard practice. We considered these comments along with all the other comments received. In instances where individual submissions were bundled together (submitted as a single document or packaged together), the Department posted all the substantive comments included in the submissions along with the total comment count for that document or package to

www.Regulations.gov.

Generally, we do not address minor, non-substantive changes (such as renumbering paragraphs, adding a word, or typographical errors) within this final rule. Additionally, we generally do not address changes or comments recommended by commenters that the statute does not authorize the Secretary to make (such as forgiving all student loans), or comments pertaining to operational processes. Analysis of the comments and of any changes in the regulations since publication of the NPRM (91 FR 21088) follows.

Process for Out-of-Scope Comments

The Department does not typically address comments that are out of scope. For purposes of this final rule, out-of-scope comments are those that are not addressed in the NPRM (91 FR 21088) altogether. Generally, comments that are outside of the scope of the NPRM (91 FR 21088) are comments that do not discuss the content or impact of the proposed regulations or the Department's evidence or reasons for the proposed regulations.

General Comments

Negotiated Rulemaking and Public Input

Comments:

Several commenters argued that the Department failed to provide sufficient time for meaningful negotiated rulemaking and public comment. Some commenters requested the Department delay implementation until July 1, 2027, or later to allow for further study, stakeholder input, and adjustment.

Discussion:

As mentioned in the Implementation Date of These Regulations section, except for changes to 34 CFR part 685, these regulations are effective on July 1, 2027. The changes to 34 CFR part 685 are effective on August 31, 2026. However, we note that one of the provisions that the Department is changing in section “Earnings of Program Completers—Use of IRS Data” would have the effect of delaying the application of program eligibility consequences for programs in certain fields associated with tip income. Please see that section for more information.

The Department is committed to conducting rulemaking in accordance with all statutory and regulatory requirements. For this rulemaking, we followed the procedures outlined in the HEA and the APA, including convening a negotiated rulemaking committee with representatives from a broad range of stakeholders and providing a public comment period consistent with Federal requirements. While we understand the desire for extended deliberation, the Department has a responsibility to implement timely reforms that protect students and taxpayers.

Changes:

None.

Comments:

One commenter urged the Department to engage in additional profession-specific outreach and operational consultation with institutions, accreditors, certifying organizations, and professional

stakeholders within the acupuncture and herbal medicine community before finalizing any earnings accountability framework that could significantly affect student access to graduate healthcare education and professional workforce entry within this field.

Discussion:

The Department declines this suggestion. The Department strives to select negotiators with the goal of ensuring balanced representation across the communities most affected by the regulations. We will continue to apply this principle in future rulemakings.

Changes:

None.

Comments:

One commenter stated that the Department has already placed “lower earnings” warning labels on the Free Application for Federal Student Aid (FAFSA) form. They believed the warnings are premature since the rulemaking process is ongoing.

Discussion:

The Department has provided these disclosures for transparent information about program outcomes as students and families make important decisions about their education. The warning labels are based on currently available data and are intended to inform, not to presume the outcome of this rulemaking process.

Changes:

None.

General Agreement With the Regulations

Comments:

Dozens of commenters including students, graduates, instructors, beauty and massage industry professionals, educators, and program owners support the overall goal of protecting students from predatory programs, ensuring programs lead to meaningful economic outcomes, and improving transparency. Commenters shared personal experiences of debt burdens, poor instruction, unsafe or inadequate equipment, and misleading job placement claims. A few commenters also raised concerns about the cosmetology sector specifically and urged the Department not to grant exemptions for programs or institutions represented by the American Association of Cosmetology Schools (AACS). These commenters asserted that accountability is necessary in this field and expressed concern that certain stakeholders are seeking relief from regulations designed to ensure program value.

Discussion:

We thank commenters for their support. The Department agrees with commenters that the earnings accountability framework in this regulation will help protect students from low-earning outcome programs. We agree with commenters who suggested that the rule may result in improved program quality, affordability, and outcomes. As explained in the “Earnings of Program Completers—Use of IRS Data” section, the Department also agrees that the earnings accountability framework must include cosmetology programs. The Department does not find a basis for providing the cosmetology sector with a blanket exemption to the rule; the intent of the rule is to ensure that all programs receiving title IV, HEA funds demonstrate that their graduates achieve earnings sufficient to support their educational investment.

Changes:

None.

General Opposition to the Regulations

Comments:

Thousands of commenters are concerned that this rule will reduce Federal student financial assistance for beauty, wellness, early childhood, drama/theater programs, music programs, fine arts programs, and other fields. Commenters, including cosmetologists, estheticians, massage therapists, beauty school owners, parents, and students shared personal stories about how financial aid enabled them to attend school, pursue a career, achieve financial independence, support their families, and contribute to their communities. Many commenters stated they would not have been able to attend school or enter their profession without Federal student aid, and they are concerned that the earnings test would reduce economic activity and growth generally because it would lead to fewer educational opportunities as programs and colleges would be forced to close.

Many commenters noted the high graduation rates and job placement rates of cosmetology programs, suggesting that they are high-quality programs based on these measures. Commenters also noted that the Department's data suggested that approximately 93% of cosmetology programs would fail the proposed rule. Some commenters stated that protecting the cosmetology sector is essential because these workers provide critical services for weddings, graduations, job interviews, and other celebrations. Other commenters stated that cosmetology programs provide critical preventative health services that, without them, would have adverse consequences for society.

Many commenters also noted that this final rule could cause workforce shortages in essential service industries and create negative ripple effects on small businesses, local economies, and community services due to a shrinking pipeline of licensed professionals. Commenters further cited the effects of cosmetology program closure on unemployment and local communities and emphasized the inability of businesses to fill in-demand jobs if cosmetology and massage therapy programs and programs close. They also indicated that unemployment would increase from students who would otherwise have found jobs after attending these programs and because employees from these schools would lose their jobs. Commenters expressed the importance of protecting these programs and personal anecdotes about the success they have achieved by attending a cosmetology program.

Discussion:

The Department appreciates the extensive feedback from commenters regarding the importance of Federal student financial assistance. The Department's intent is not to reduce access to high-quality programs and career pathways. The purpose of the earnings premium measure is to ensure that students are not left worse off financially after completing a program. Students who attend programs that do not support improved earnings are often stuck with debt and little ability to pay it off, resulting in long-term financial challenges for those students.

The Department has estimated the effects of the final rule on all types of programs, including specific analyses on the estimated impacts on cosmetology programs. Overall, we note that fewer students are anticipated to attend failing programs under this regulation relative to the current gainful employment regulation (Table 5.12). Regarding cosmetology programs, we note that compared with the current regulation, fewer cosmetology and massage therapy programs will fail the earnings test under the final rule (Tables 5.17, 5.18, 5.19, 5.20, and 5.28). Fewer of these programs are expected to fail the earnings test under the final rule because it measures earnings a year later than the current rule (4th year instead of 3rd year after completion) and it measures the median earnings of working individuals only (whereas the current rule measures the earnings of all completers regardless of whether they are working).

As described in the “Earnings of Program Completers—Use of IRS Data”, “Department Authority (Including GE and Quality Assurance Authority)”, and “Orderly Program Closure” sections, the Department has included certain provisions to mitigate the disproportionate impact the rule has on certain types of programs. First, the final rule amends the accountability framework so that certain programs are exempt from the earnings test if they did not receive Federal student loans for the five award years prior to the earnings premium calculation. Many types of

programs, including certain cosmetology programs, will be exempt from the earnings test due to this exemption (Table 5.27). Second, the final rule includes a new provision that allows failing programs to voluntarily remove themselves from the Federal student loan program after the first year they fail the accountability framework. In return, these programs preserve their Pell Grant eligibility in future years. Third, we amend the final rule to include a provision that delays the accountability framework for certain types of programs that are linked to predominantly tipped occupations.

Furthermore, as discussed in the Regulatory Impact Analysis, this regulation is estimated to cost $1.5 billion in Direct Loan cohorts 2027 to 2036 and $8.8 billion in Pell Grants in FYs 2027 to 2036 due to the higher amount of financial aid that will be available to students as a result of this regulation. Commenters mistakenly believe the regulation is removing financial aid from programs, when in reality, certain types of programs will receive a much greater amount of financial aid as a result of this regulation.

Ultimately, the Department's analysis and these included provisions suggests that the commenters' assertions about the harmful effects of this regulation are misguided: they incorrectly believe the rule is harming certain types of programs—including cosmetology programs, religious studies programs, and others—when in reality, this rule is often beneficial to those programs because fewer are expected to fail relative to the baseline policy. That said, the rule continues to hold all types of programs accountable, regardless of sector or credential level, to a fair and consistent accountability framework. The Department views this as critical because this framework helps protect students from programs that consistently deliver low-earning outcomes for their students.

In response to the many commenters who expressed concern about the rule's specific impact on the cosmetology sector, the Department clarifies that the final regulation only impacts cosmetology programs that participate in the Federal student loan program. Many cosmetology programs will not be impacted by the rule because they operate outside of the Federal student loan program. While precise data on the number of these programs is scarce, one study found that approximately 86 percent of cosmetology programs in Texas operated outside of the Federal student loan program.

While this analysis is for a single State, it provides suggestive evidence that many cosmetology programs will be unaffected by the rule. Given this, the Department does not believe the commenters' assertions about the rule may result in workforce shortages in the cosmetology sector.

Cellini, S.R., & Onwukwe, B., (2022). Cosmetology Schools Everywhere: Most Cosmetology Schools Exist Outside the Federal Student Aid System. Washington, DC: PEER Center.

www.american.edu/spa/peer/upload/peer_cosmetology_b.pdf.

Changes:

None.

Comments:

Hundreds of commenters noted that the final rule's earnings test will have a large impact on religious studies and theology programs. Commenters pointed to the Department's analysis (Table 3.16 from the NPRM) showing that a large share of religious studies programs are estimated to fail the earnings test. Commenters argue that it is inappropriate to measure these programs based on their graduates' earnings because they are not intended to provide high earnings for their graduates but rather aim to achieve important spiritual and societal benefits. Some commenters requested that programs in religion, theology, and ministry studies be entirely excluded from the earnings premium measure.

The commenters argued that the income levels for religious programs are relatively low, at least during the first few years after graduation, but students enter faith-based programs knowing that they are accepting lower financial compensation in order to pursue religious service. One commenter pointed out that yeshivas do not participate in the Direct Loan program and therefore do not contribute to the problem of unsustainable student debt, which is the problem that the WFTCA was intended to address. The commenter further argued that the concern for such institutions is not the loss of Direct Loan program access, but rather the loss of Pell Grant funds.

Some commenters noted that many theology and religious studies programs only receive Federal Pell Grants and do not participate in the Federal student loan program. These commenters argued that it would be unfair to remove these programs' eligibility for Pell Grants because they do not participate in the Federal student loan program.

Discussion:

The Department acknowledges the rule proposed in the NPRM would have had a significant impact on religious programs. However, as described in the “Department Authority (Including GE and Quality Assurance Authority)” section below, the Department is amending its regulations to exempt an institution's programs from the administrative capability penalty if the institution has not participated in the Direct Loan program for the five most recently completed award years, and to similarly exempt a program if an institution voluntarily agrees to forego disbursing Direct Loans to students in that program for at least five years. This provision will allow low-earning outcome programs to continue receiving Federal Pell Grants while preventing students in those programs from borrowing Direct Loan funds that they would likely experience difficulty repaying.

Many institutions with religious missions do not participate in the Direct Loan program, and the Department's estimates show that this provision will likely reduce the regulation's impact on undergraduate students attending such institutions and programs. Specifically, the Department estimates that the final rule will have roughly half the impact on students and title IV, HEA program funds disbursed to religious programs relative to the impact of the current regulation (Table 5.18 and 5.19). Ultimately, the final rule is expected to benefit the religious sector, as fewer students in religious programs will be negatively impacted by the final rule relative to the current baseline.

Changes:

None.

Comments:

Hundreds of commenters urged the Department to allow institutions to demonstrate a program's value based on a broad set of factors rather than solely relying on graduates' earnings. Commenters recommended a variety of alternative metrics, such as program completion rates, transfer rates, job placement rates, employment rates, loan repayment rates, long-term earnings growth, business ownership rates, licensure pass rates, default rates, debt-to-earnings ratios, and levels of student satisfaction.

Discussion:

The Department declines the suggested proposals. The Department believes the accountability framework should rely on metrics that are standardized, consistently available across all programs, and derived from reliable administrative data sources. At present, nationally consistent data on long-term career progression, transfer outcomes, business ownership among graduates, student satisfaction, patient outcome measures, and lifetime earnings are not uniformly available across institutions or programs.

Furthermore, the Department agrees that many of the alternative metrics cited by commenters, including debt and repayment measures, completion rates, and licensure attainment, all

provide meaningful information on program quality. The Department intends to continue publishing this type of data through the STATS collection, which will provide important information for prospective students as they consider enrolling in higher education. However, the WFTCA specifically requires the Department to consider the earnings outcomes of degree and graduate programs. Congress did not include other metrics, such as job placement rates or licensure pass rates, in the accountability framework authorized under the WFTCA.

Changes:

None.

Comments:

Many commenters expressed concern that the earnings test will penalize programs that have low earnings but are in valuable fields. Commenters specifically pointed out the social value provided by early childhood education programs, K-12 education programs, special education programs, social work programs, counseling programs, museum and library science programs, religion/religious studies programs, health care programs, career & technical education programs, fine arts programs, and other types of programs.

Commenters expressed that these fields provide value to students beyond their earnings that benefit society through the “social returns” these programs offer. Commenters recommended the Department exempt these fields of study from the earnings test or that the Department create “field specific benchmarks” that would lower the earnings test threshold for certain fields that provide higher levels of social returns. Commenters also highlighted that many of these socially valuable fields are already facing worker shortages, and that the proposed regulation would worsen these conditions.

A few other commenters argued that a student may obtain a degree in one field and use it for a job in a different field. These commenters emphasized the broader value of higher education, noting that degrees can open doors to various career paths and that the skills and experiences gained are often transferable across industries.

Discussion:

The Department recognizes that postsecondary education can create benefits beyond higher earnings and that some programs that will be heavily impacted by the earnings test may face worker shortages. The Department also notes, however, that students need sufficient earnings to afford and repay their Title IV student loans, which makes the earnings test in the final rule an appropriate policy for student loan access. While the loss of title IV, HEA program assistance may lead to closure of programs in high demand fields or those that face workforce shortages, the Department is concerned that these fields and credentials do not produce adequate earnings to support the growing student debt. The Department believes that institutions of higher education, employers, and State and local policymakers have the opportunity to respond to the effects of the earnings premium measure by creating or modifying programs so that they lead to higher earnings, or by reforming employee pay policies or credentialing requirements.

The Department is aware that the proposed earnings test will have a larger impact on certain fields and has provided an extensive analysis in the RIA (Tables 5.17, 5.18, 5.19, and 5.20) of which fields may be most affected. The Department's analysis shows that bachelor's degrees in the fine arts are estimated to fail the earnings test at relatively high rates. However, as many commenters noted, undergraduate students enrolled in Business/Management, Health, Vocational, and Technical programs all have lower fail rates (student-weighted) relative to the baseline policy (Table 5.18).

Furthermore, the commenters who argued that the Department should measure the “social returns” of programs provided no basis, data, or recommendation for how the social returns could be fairly and consistently measured. Lacking the data and methodology necessary to perform such an evaluation, the Department notes that any attempt to classify the social returns of programs would be arbitrary. For example, the Department does not have the ability to determine if electrical engineers have more or less “social value” in society than musicians.

Lastly, the Department does not have the statutory authority to set lower or different earnings benchmarks for the programs that commenters mentioned based on the potential social returns that these programs may offer. Congress provided specific statutory language on the way program earnings outcomes would be used to determine eligibility to title IV, HEA student loan programs. Congress did not provide any indication that the Department should also consider other factors, such as the “social value” of certain programs.

Regarding commenters' assertion that programs can often set up an individual for a variety of different career paths, we agree that this can also be a source of value for graduates. This point has long been acknowledged in the Department's CIP-SOC crosswalk, where many programs are linked with a variety of different occupations and career paths. The Department also acknowledges that some occupations and career paths may have higher earnings outcomes than others, despite those occupations being linked to the same program. However, the Department contends that the commenters' concern is already addressed in the regulation. The earning premium metric includes all program graduates, regardless of the particular career path they enter. Then, the Department calculates each program's earnings value based on the median earnings of its graduates, thereby reducing the extent that outliers in high-paying or low-paying career paths have on the overall median earnings value. If programs are routinely leading students to enter into occupations that are unrelated to their field of study, the Department is concerned about the potential value of these programs and wants to ensure those graduates are included in the program's median earnings measure.

Changes:

None.

Comments:

Commenters expressed concern that the earnings test would result in programs being judged during anomalous economic periods, like during the COVID-19 pandemic, when wages were unusually low. Some commenters expressed that this would particularly harm cosmetology programs, music programs, and theater programs. This is because many barber shops, massage therapy centers, theaters, and performing arts centers were forced to close or suspend services during COVID-19, negatively impacting the earnings of their graduates. Ultimately, commenters expressed concern that the regulation would unfairly penalize certain types of programs for factors that were outside of the institution's control.

Discussion:

The earnings test in this final rule includes several features that will mitigate the effects the commenters raised. First, programs lose eligibility if they fail in two out of three consecutive years, which reduces the significance of a single year in the test. Second, the high school and bachelor's degree earnings threshold is aligned with the year that program graduates' earnings are measured. If earnings are depressed across the economy, then the earnings used to calculate median earnings for the test and the earnings of programs completers will similarly be depressed. Third, for small programs, the earnings of program graduates are based on completers from multiple years (see the cohort aggregation process described in the “Minimum Number of Completers, Privacy, and Statistical Reliability”

section). Because many cosmetology and music programs are small, the earnings premium measure may be based on the earnings of graduates from multiple different years, smoothing the effect that one anomalous year has on the overall earnings measure. Fourth, the first year of the earnings test will primarily be based on completers who graduated during the 2021 award year, with earnings measured during the 2025 calendar year. Thus, the earnings period used to evaluate programs often occurred well after the conclusion of the COVID-19 pandemic. Collectively, these features will likely prevent programs from failing the earnings premium metric due to one year of anomalous data, similar to what occurred during the COVID-19 pandemic.

Changes:

None.

Other General Comments

Comments:

A few commenters argued that low wages in fields like massage therapy, cosmetology, and other skilled trades are primarily the result of employer pay practices, not the quality of educational programs. The commenters suggested that the Department should focus on why employers underpay skilled workers, rather than penalizing educational institutions or restricting student access to financial aid.

Discussion:

The Department's regulatory scope is limited to educational institutions and the administration of Federal student financial assistance. The Department does not have authority over private sector wage-setting or employer compensation practices and therefore cannot adopt the commenters' suggestion.

Changes:

None.

Comments:

Some commenters argued that accountability rules should focus on fixing structural barriers that limit students' employment outcomes rather than penalizing academic programs for factors beyond their control. The commenters recommended a variety of things, including requiring universities to establish formal workforce agreements with government agencies, maintain dedicated staff responsible for securing paid public sector internships, and provide transparent data showing the different career pathways and job placement processes for career changers compared with students who enter programs with existing professional networks.

Discussion:

The Department does not adopt these recommendations. These proposals extend beyond the Department's current statutory authority and the scope of this final rule.

Changes:

None.

Comments:

A few commenters argued that a person may obtain a degree in one field and use it for a job in a different field. Commenters emphasized the broader value of higher education, noting that degrees can open doors to various career paths and that the skills and experiences gained are often transferable across industries.

Discussion:

Programs can often set up an individual for a variety of different career paths. As discussed above, the Department of Labor's CIP-SOC crosswalk specifically links academic programs with occupations, and in many cases links several occupations to a single program type. While students from the same program may choose different career paths, the Department believes that including all students in the program earnings calculation is necessary to appropriately determine program value. The Department is concerned that excluding certain students from program completers list based on the career path they enter into could result in gamesmanship by colleges, as they could potentially skirt the accountability framework by directing students into certain career pathways. Furthermore, if programs are routinely leading students to enter into occupations that are unrelated to their field of study, the Department is concerned about the potential value of these programs. Ultimately, the Department believes the commenters' suggestions would leave students unprotected from programs with low-earning outcomes.

Changes:

None.

Comments:

Several commenters suggested the Department compare a student's earnings before and after completion of a program to assess whether the program has provided economic value. Commenters argue that programs that improve their students' earnings outcomes relative to their pre-enrollment earnings should be exempt from the accountability framework regardless of whether the median earnings of program graduates exceeds the earnings threshold for the program. These commenters argue that this is a more appropriate comparison than between program graduates and the individuals surveyed on the ACS.

Discussion:

The Department declines to adopt this approach for several reasons. The first reason is feasibility: Not all students have pre-enrollment earnings. For example, many traditional college students, especially dependents who recently graduated from high school, do not have pre-enrollment earnings. Second, for the subset of these students who do have pre-enrollment earnings, it is likely that these earnings occurred while the student was enrolled in high school, which would greatly bias the measure of pre-enrollment earnings. Third, a significant body of economic research finds that students' earnings in the years leading up to college enrollment are downwardly biased (

i.e.,

“Ashenfelter's Dip”

), providing an improper counterfactual to judge graduates' post-enrollment outcomes. Fourth, this proposal is not aligned with what Congress requires in the WFTCA. Congress instructed the Department to use earnings benchmarks based on working high school and bachelor-degree holders from a certain age and in the same geography; Congress did not contemplate pre-enrollment earnings as the benchmark. For these reasons, the Department rejects the commenters' proposal to use pre-enrollment earnings as the earnings benchmark.

Heckman, J.J., & Smith, J.A., (1999). The Pre-Program Earnings Dip and the Determinants of Participation in a Social Program: Implications for Simple Program Evaluation Strategies. NBER Working Paper No. 6983.

www.nber.org/system/files/working_papers/w6983/w6983.pdf.

Changes:

None.

Comments:

Several commenters called for greater accountability and transparency regarding tuition and program costs and urged the Department to address the root causes of rising education costs rather than restricting financial aid or access to programs.

Discussion:

With extremely limited exceptions,

the Department does not have the statutory authority to regulate tuition and program costs. The HEA stipulates the amount of title IV, HEA program funds an eligible student can receive, not how much an institution can charge.

In the “Workforce Pell” provisions of the WFTCA, Congress established a “value-added earnings” framework applicable only to eligible workforce programs that would limit the tuition and fees that could be charged for such programs based on the earnings of graduates.

See

91 FR 29254. Congress did not establish a similar framework for other programs.

Changes:

None.

Legal Authority/Department Authority

Department Authority (Including GE and Quality Assurance Authority)

Comments:

As described in the “Consequences for Failure to Demonstrate Administrative Capability” section below, many commenters objected to the loss of title IV, HEA eligibility for all of an institution's low-earning outcome programs if the institution fails the new administrative capability requirement at § 668.16(t),

arguing that the WFTCA specifically only pertains to participation in the Direct Loan program and does not reference eligibility for other title IV, HEA programs.

Additionally, several commenters expressed concern about the applicability of these regulations to programs or institutions that exclusively serve students with documented learning differences—Specific Learning Disabilities and Autism Spectrum Disorder (ASD)—all of which are considered disabilities under Section 504 of the Rehabilitation Act of 1973. The commenters pointed to well-documented differences in labor market outcomes for individuals with disabilities versus those without such disabilities. The commenters also noted that as a result of these documented earnings gaps, the proposed accountability framework may negatively impact the students who enroll in such programs and institutions solely on the basis of the students' disabilities. The commenters requested that if a program is offered by an institution that enrolls 100 percent of its students with such disabilities, the Department should exclude such programs offered by those institutions from the accountability framework.

Discussion:

Commenters make a strong argument that Congress did not intend for such programs to lose eligibility for title IV, HEA programs other than the Direct Loan program. Therefore, Department finds their assertion compelling that the application of the administrative capability test under 34 CFR 668.16(t) to institutions that do not participate in the Direct Loan program is inappropriate. The Department's intent in adopting the administrative capability provision during negotiated rulemaking was to improve program integrity by addressing institutions whose results suggest a more systemic set of concerns which extend beyond outcomes for individual programs. However, this argument must be placed in relation to the intent of Congress, which chose to apply the earnings accountability metric to non-GE programs participating in the Direct Loan program, rather than institutions. As a result, the Department acknowledges the likely intent of Congress not to apply sanctions to institutions that have not participated in the Direct Loan program for an extended period of time and will exempt an institution from the administrative capability provision under 34 CFR 668.14(h) if it has not participated in the Direct Loan program for the five most recently completed award years prior to the year during which the earnings premium measure is calculated. Similarly, the Department will exempt a specific program from the administrative capability penalty if, shortly after the first time that program fails the earnings premium measure, the institution commits to preventing students from borrowing Direct Loan funds for the program for at least five years under 685.203(m)(2). The metric would still be calculated for programs in these situations, but the programs would not be subject to a loss of eligibility for title IV, HEA programs other than the Direct Loan program due to the new administrative capability test in 34 CFR 668.16(t). The Department chose a five-year period because that time period is longer than the published length of most postsecondary programs. Using a period of this length is intended to identify institutions that have made a long-term commitment to offering postsecondary programs without the support of the Direct Loan program, such that in most cases the most recent cohort of students in the institution's programs graduated without the ability to borrow. The Department seeks to avoid the possibility of institutions temporarily suspending Direct Loan participation for the purpose of avoiding the consequences of the administrative capability penalty.

We agree with the commenters that programs at institutions exclusively serving students with specific learning disabilities and related disabilities under Section 504 of the Rehabilitation Act of 1973 should be treated differently under this final rule. We believe that, without this change, the regulation could violate Section 504 of the Rehabilitation Act of 1973, which states that “no otherwise qualified individual with a disability in the United States . . . shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance.” Therefore, we will exempt programs at such institutions from the program eligibility consequences of these regulations if they only enroll students with a

Specific Learning Disability or Autism,

as defined under the Department's Individuals with Disabilities Education Act, or IDEA regulations. Similar to the treatment of institutions not participating in the Direct Loan program, the Department would still calculate the metric for programs at these institutions, but the programs would not lose eligibility for any title IV, HEA program as a result of the earnings premium measure.

For similar reasons, the Department notes that it already excludes from inclusion in the earnings premium measure, Comprehensive Transition and Postsecondary (CTP) programs that serve students with intellectual disabilities. These programs are approved by the Department to help students with intellectual disabilities continue their education, build independent living and career skills, and prepare for competitive employment. These final regulations do not change that exclusion.

Changes:

We have made two changes in response to the concerns described above. In 34 CFR 668.14(h) we added new paragraphs (3) and (4). In paragraph (3), we specify that a low-earning outcome program at an institution that is not participating in the Direct Loan program and that has not participated in the Direct Loan program for at least the five most recently completed award years shall not be subject to an automatic loss of title IV, HEA program eligibility. Additionally, we provided in that paragraph that a similar exception applies if the institution agrees not to permit students to borrow Direct Loan funds in that program under the provisions in 34 CFR 685.203(m)(2). In paragraph (4) we explain the conditions for such agreement, where an institution is required to agree within 120 days of the Secretary's determination that the program has failed for the first time, to add an amendment to the institution's program participation agreement disallowing borrowing in the program for at least five award years prospectively. The paragraph also explains that the exception will remain in effect for as long as the institution agrees to prevent Direct Loan borrowing in the program.

We also added a new paragraph (b) to § 668.601 that exempts institutions from the program eligibility consequences of 34 CFR Subpart S if they only enroll individuals with documented

Specific Learning Disability

Autism,

as defined under 34 CFR 300.8.

Master Calendar and Effective Dates

Comments:

Some commenters argued that the July 1, 2026, effective date of the final rule violates the HEA's master calendar requirements, due to the fact that the final rule was not published by November 1, 2025. Several of these commenters stated that, insofar as the WFTCA provides an implied waiver of the HEA's master calendar requirements, that this waiver does not extend to portions of the rule that impose the earnings accountability

framework on certificate programs below the graduate level, as such programs were not addressed in the WFTCA.

Discussion:

As discussed fully in the “Authority for this Regulatory Action” section, above, the WFTCA implicitly provides a limited waiver of the HEA's master calendar requirement, so far as it is necessary to promulgate regulations that give effect to provisions of the WFTCA that must take effect on July 1, 2026.

See Dorsey,

567 U.S. 260, 274 (stating that an agency's compliance with an existing statute “cannot justify a disregard of the will of Congress as manifested either expressly or by necessary implication in a subsequent enactment” (quoting

Great Northern R. Co.,

208 U.S. 452, 465).

The WFTCA was enacted on July 4, 2025, and directs the Department to implement roughly a dozen provisions by July 1, 2026. Many of these provisions are not self-executing and could not be implemented absent the Department promulgating regulations to provide details for institutions on how to comply with the WFTCA. Congress gave the Secretary discretion within the WFTCA to implement the provisions impacting the title IV, HEA programs and knew that its commands were not self-executing when directing the Secretary to take action. Congress expected the Secretary to act via rulemaking before July 1, 2026, to enable these provisions to actually go into effect. Therefore, Congress's command to implement certain provisions of WFTCA by July 1, 2026, functions as an implicit waiver of the HEA's master calendar requirements for rulemaking actions taken to implement those provisions in regulation.

The Department agrees with those commenters who stated that the WFTCA's implied waiver of the HEA's master calendar requirements does not extend to the regulations outside of those necessary to implement the provisions of WFTCA. Those provisions would normally take effect on July 1, 2027. However, the Secretary is designating such regulatory provisions as one that an entity subject to the provision may, in the entity's discretion, choose to implement prior to the July 1, 2027, effective date of such regulations.

Changes:

None.

First Amendment and Religious Freedom Restoration Act Concerns

Comments:

Several commenters stated that they believe that the application of the earnings accountability framework to religious degree programs violates the requirements of the First Amendment and the Religious Freedom Restoration Act (RFRA), with such commenters alleging that the application of the earnings accountability framework to religious degree programs will substantially burden the exercise of students seeking to pursue careers in religious fields, but will not be the least restrictive means of furthering a compelling government interest. These commenters stated that the application of the earnings accountability framework to religious degree programs will substantially burden the religious exercise of individuals seeking to pursue careers in religious fields by potentially precluding their ability to receive title IV, HEA funds to attend the programs necessary to prepare for such careers. Several commenters suggested that this burden will be substantial because of the many religious occupations that are generally low-paying in nature.

Some commenters further stated that the proposed requirement that as a component of administrative capability an institution must demonstrate that at least half of the institution's recipients of title IV, HEA funds and at least half of the institution's total title IV, HEA funds are not from low-earning outcome programs, constitutes an additional substantial burden on religious exercise. These commenters further state that, because of the low-paying nature of many religious occupations, institutions where a large percentage of students are enrolled in programs designed to prepare individuals for employment in religious occupations will be disproportionately likely to lose eligibility to participate in all title IV, HEA programs. These commenters stated that this will disincentivize institutions from offering programs that prepare individuals for employment in religious occupations, restrict the ability of individuals to obtain such employment, and harm religious organizations by reducing the number of individuals who are qualified to fill certain positions within those organizations.

Several commenters further argued that the Department has not adequately demonstrated that application of the earnings accountability framework for religious programs is the least restrictive means of furthering a compelling government interest. One commenter stated that the NPRM lacked sufficient analysis of the burden being imposed on the exercise of religion, despite acknowledging the substantial impact on religious programs that the rule would have. This commenter and others stated that they believed that the Department failed to adequately consider alternative earnings accountability measures for religious programs that they contend would impose a less severe burden on religious exercise, such as allowing alternative earnings appeals for religious programs.

Discussion:

The Department has considered the impact the Rule will have on religious institutions and programs and on religious exercise. Congress provided broad protection for religious liberty from the federal government through RFRA. 42 U.S.C. 2000bb

et seq.;

see also

Little Sisters of the Poor Saints Peter & Paul Home

Pennsylvania

, 591 U.S. 657, 680(2020). RFRA provides that the federal “Government shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability” unless the burden is “in furtherance of a compelling governmental interest and is the least restrictive means of furthering” that interest.” 42 U.S.C. 2000bb-1(a)-(b). A general rule of general applicability “substantially burdens” religious exercise when it forces someone to act in a way that violates his religious beliefs or denies him “`rights, benefits, and privileges enjoyed by other citizens'—even if `the challenged Government action would interfere significantly with private persons' ability to pursue spiritual fulfillment according to their own religious beliefs.”

Real Alternatives, Inc.

Sec'y Dep't of Health & Hum. Servs.

, 867 F.3d 338, 357 (3d Cir. 2017) (quoting

Lyng

Nw. Indian Cemetery Protective Ass'n

, 485 U.S. 439, 449 (1988)); accord

Hobby Lobby Stores, Inc.

Sebelius

, 723 F.3d 1114, 1138 (10th Cir. 2013) (the law substantially burdens religious exercise if it “(1) requires participation in an activity prohibited by a sincerely held religious belief, (2) prevents participation in conduct motivated by a sincerely held religious belief, or (3) places substantial pressure on an adherent . . . to engage in conduct contrary to a sincerely held religious belief.” (internal quotation marks omitted, alteration in original)), aff'd sub nom.

Burwell

Hobby Lobby Stores, Inc.

, 573 U.S. 682 (2014)).

The Department does not believe the Rule substantially burdens religious exercise. Applying the low earning outcome test to religious programs that accept Direct Loans does not require anyone to participate in an activity that violates or places substantial pressure on his or her religious beliefs. While many commenters pointed out that students who graduate from religious programs take jobs that often have lower salaries, none alleged it would violate a religious belief to accept a higher salary.

And even if “[t]raining [ ] to lead a congregation is an essentially religious endeavor,”

Locke

Davey

, 540 U.S. 712, 721 (2004), the government does not have to fund that training, see id. at 725. While the final rule may cause a small number of programs to become ineligible to receive federal student assistance—thus potentially making it more difficult or costly for some to enter these programs—it will not prevent students who are motived by religious belief to enter into religious programs from doing so. Students will be able to use Pell Grants to participate in many programs even if some lose Direct Loan eligibility.

To the extent that this could constitute a substantial burden on religious practice, the Department believes it is justified by a compelling governmental interest. As discussed, the federal government has a strong interest in ensuring that federal student aid goes to programs that result in students earning more than they would have without having attended the program. This is true regardless of the subject matter of the program or the religious or non-religious affiliation of the school.

Finally, the rule is narrowly tailored because it only applies to programs that accept Direct Loans, which as stated, many religious programs do not. This ensures that these programs can continue to operate as they have been, with accepting Pell Grant funds, while also ensuring that those programs that receive Direct Loans lead to higher earnings for their students. Commenters did not demonstrate that all religious programs would fail the accountability framework in the regulation. The Department's analysis suggests that fewer than 4 percent of undergraduate students in religious/theology programs will be impacted by our regulation, and this represents a large reduction in impact relative to the current regulation (3.9 percent vs. 7.8 percent) (Table 5.18). While the Department does acknowledge that graduate students in religious/theology programs will be slightly more impacted under this rule relative to the current baseline, only approximately 1 percent of such students are estimated to attend failing religious/theology graduate programs (Table 5.18) under the final rule.

The Department also considered the First Amendment implications of the rule on religious programs and institutions and does not believe the rule violates religious liberty. The First Amendment provides “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” U.S. Const. amend. 1. This amendment offers a more limited protection than RFRA. As discussed above, the Department does not believe the rule violates RFRA because it does not substantially burden religious exercise, and, even if it did, the rule advances a compelling government interest and is narrowly tailored to meet that interest.

The First Amendment does not require the Department to provide funding for devotional programs or religious degrees for ministry.

Locke

Davey

, 540 U.S. 712, 725 (2004). Rather, it prohibits the Department from denying funds to religious programs or institutions solely because of their religious nature.

Trinity Lutheran Church of Columbia, Inc.

Comer

, 582 U.S. 449, 462-63 (2017). Religious programs and institutions should be allowed to “compete on an equal footing” for a government benefit. Id. at 463.

That is exactly what the Rule allows. Religious and non-religious programs and institutions alike are eligible to participate in the title IV Program. All programs and institutions that participate in the title IV program are subject to the low-earnings test. Should a program fail the test and lose Federal student aid eligibility, it will not be because of its religious nature. It will be because the earnings of program graduates fail in the same way as a secular program that fails.

Changes:

None.

Comments:

Some commenters who raised religious liberty concerns (both under the First Amendment and RFRA) urged the Department to apply an alternate appeals process for religious institutions. They suggested that using ministry-related CIP codes and Bureau of Labor Statistics (BLS) wage data would more accurately and equitable reflect ministry programs while being consistent with Congressional intent and administratively feasible for the Department.

Discussion:

The Department declines to apply an alternate earnings appeal for religious programs or institutions. As discussed above, the Department includes a provision that will exempt any program that has not accepted Federal direct loans for at least five award years prior to the enactment of the WFTCA. The Department's analysis indicates that this will exempt approximately 600 religious programs from the earnings test, making an alternative appeals process unnecessary for many such programs. The Department also declines to create an alternative appeals process for the remaining programs for many of the reasons already discussed.

Changes:

None.

Loper Bright Concerns

Comments:

One commenter argues that the Department lacks statutory authority to apply the earnings accountability framework to all credential levels. The commenter states that the only statutory outcome requirements GE programs are completion and placement rates set forth in HEA Sec. 481(b) applicable to those short-term programs and that the WFTCA only explicitly applied the earnings accountability framework to for undergraduate degrees, graduate degrees, professional degrees, and graduate certificates and only intended for such programs to lose eligibility to participate in the Direct Loan Program. Therefore, the commenter asserts that the proposed regulations are in conflict with the Supreme Court's ruling in

Loper Bright

and are not entitled to deference by a reviewing court.

Discussion:

The Department disagrees with the commenter's contention that the Department lacks statutory authority to extend the earnings accountability framework to all sectors and credential levels, including undergraduate nondegree programs. The Department has clearly identified its statutory authority for the proposed regulations, more fully discussed in the “Authority for This Regulatory Action” section of this rule.

The Department further disagrees with the commenter's contention that the proposed regulations violate the standard established by

Loper Bright.

While the Department agrees that Section 454(c) of the HEA, as added by the WFTCA, only explicitly applied the earnings accountability framework to undergraduate degrees, graduate degrees, professional degrees, and graduate certificates, the Department does not believe that this precludes the implementation of a universal earnings accountability framework across all credential levels, because it possesses separate statutory authority to apply this framework to programs that “lead to gainful employment in a recognized profession.”

As previously discussed, in challenge the Department's previous FVT/GE rule, a post-

Loper Bright

court stated that, through the HEA, the Congress had clearly granted the Secretary to promulgate rules necessary for the administration of the title IV, HEA programs: “the Supreme Court in

Loper Bright

Secretary] by including the additional specific direction to `prescribe such regulations as may be necessary to provide for . . . any matter the Secretary deems necessary to the sound administration of the financial aid programs[.]' ”

American Assoc. of Cosmetology Sch.

*6 (citing 20 U.S.C. 1094(c)(1)(B); 1099c).

Section 481(b) of the HEA provides that certain non-degree programs are eligible for title IV, HEA program funds if they “prepare students for gainful employment in a recognized profession.” However, nowhere in the HEA is the term “gainful employment” defined. In

Loper Bright

the Supreme Court held that when the “best reading of the statute is that it delegates discretionary authority to an agency,” then “the role of the reviewing court” is to “recogniz[e] constitutional delegations, fix[ ] the boundaries of the delegated authority, and ensur[e] the agency has engaged in `reasoned decision making' within those boundaries.”

Loper Bright

at 371. Because the term “gainful employment” is undefined, and because courts have found that the HEA confers upon the Secretary authority to promulgate regulations that Secretary deems necessary to the sound administration of the financial aid programs, the Department believes that the “best reading' of the HEA is that Congress intended to grant the Secretary discretion to promulgate regulations which interpret what “gainful employment” means and such definition is entitled to deference so long as the Secretary engages in “reasoned decision making.” The Department believes that that requirement has been more than satisfied, as the Department has offered a multitude of bases for imposing a universal earnings accountability framework, most importantly, ensuring that students who complete GE programs obtain employment that is truly “gainful,” insofar as it leads to such students obtaining better economic returns than similarly placed individuals who received no postsecondary education.

Changes:

None.

Title IX Exemption

Comments:

Some commentators urged the Department to create an exemption for religious programs or institutions similar to the Title IX exemption the Department provides for faith-based institutions. They claim that the Title IX exemption provides a workable model for the Department to create an exemption from the earnings test for religious institutions and programs.

Discussion:

The Department declines to adopt an exemption for religious institutions and programs similar to that provided by the Department's Title IX regulations. 34 CFR 106.12 provides that an “educational institution which is controlled by a religious organization” does not need to comply with Title IX to the extent doing so “would not be consistent with the religious tenets of such organization.” 34 CFR 106.12(a). This exemption applies when the organization submits to the Department a statement explaining precisely which provisions of Title IX conflict with a specific religious tenant.

Title IX's prohibition on sex discrimination, though, is different in kind than the rule's earnings outcome requirement. No specific provision of the rule compels any religious organization to violate its religious tenants in order to continue receiving title IV, HEA funding. The burden, if any, on religious exercise comes from the outcome of the earnings test, not from the complying with the test. For this reason, the Title IX exemption does not create a workable framework for an exemption under this rule.

Changes:

None.

Procedural Concerns

Comments:

A few commenters argued that the Department provided an insufficient amount of time to submit comments on the proposed rule. Several of these commenters argued that 30-day comment period did not allow institutions and other affected stakeholders a meaningful opportunity to analyze the proposal and provide informed feedback, with one commenter noting that some (but not all) previous rulemakings which dealt with gainful employment regulations utilized longer comment periods.

Additionally, a few commenters challenged the composition and conduct of the negotiated rulemaking committee. One commenter took issue with the qualifications of negotiators chosen to represent specific constituencies. Another commenter took issue with the fact that civil rights groups that represent students were not given a separate, dedicated place on the committee. Finally, two commenters argued that the negotiated rulemaking committee did not actually reach consensus, because one negotiator abstained from the final consensus vote and, with the commenters claiming that the negotiator stated that she was coerced to do so. Still another argued that no negotiator represented the cosmetology industry, which would be the industry most negatively affected by the proposed regulations.

Discussion:

The Department disagrees that the comment period following the NPRM offered stakeholders an insufficient amount of time to submit comments on the proposed rule. As discussed in the “Authority for this Regulatory Activity” section, above, the Congress imposed a very short window of time for the Department to implement those provisions of WFTCA which are required to be given effect beginning on July 1, 2026. Despite these time constraints, the Department has still provided the public opportunity to comment on the proposed regulations for just as long as it did during the 2018 and 2023 rulemakings dealing with accountability metrics and gainful employment issues. Furthermore, the Department notes that, in spite of these commenters' assertion that the comment period was insufficient, over 9,900 comments were submitted regarding the NPRM.

Regarding the composition of the negotiated rulemaking committee, the Department disagrees that any negotiator serving on the committee lacked the competence to do so. Negotiators were chosen by the Department from list of individuals nominated by groups involved in student financial assistance programs, in accordance with the requirements of Section 492(b)(1) of the HEA and all negotiators possessed demonstrated expertise or experience in the relevant topics proposed for negotiations. And, although there was no negotiator specifically from the cosmetology industry, that industry was represented by negotiators for for-profit institutions, and to a lesser extent, community colleges. These negotiators brought up concerns that were specific to the cosmetology industry on several occasions during negotiated rulemaking.

Furthermore, in regard to the composition of the negotiated rulemaking committee, the Department rejects the assertion that the Department acted improperly by not providing a dedicated seat at the table for civil rights groups that represent students. Section 492(b)(1) of the HEA does not require the Department to provide a dedicated seat for that constituency and believes that the interest of that constituency was ably represented by the negotiators who jointly represented both that constituency and legal assistance organizations that represent students.

Finally, the Department rejects commenters' contention that consensus was not reached because one negotiator abstained from the consensus vote. Prior to the vote, negotiators were very clearly informed about the effect of abstaining from the consensus vote.

See

Accountability in Higher Education and Access through Demand-Driven (AHEAD) Workforce Pell Committee, Session 2, Day 5, Afternoon, at 15 (statement of Ms. Mack)(Jan. 9, 2026)(“I would like to clarify that I will ask everyone to exhibit their thumb [in] show of consensus. If you are a thumbs up, this means you are in support of the text as we just reviewed. If you are a thumb down, that would mean that you are, in fact, blocking consensus. If you wish to give a sideways thumb, we are going to treat that as abstaining. So, it will not be in support of the text, but it will also not block consensus.”) Furthermore, the Department rejects commenters' assertion that the negotiator who chose to abstain from the consensus vote was the product of coercion. Contrary to commenters' claims, the negotiator who abstained did not state that her decision was coerced, merely that it was made clear that certain bargains for provisions and compromises would be lost if consensus was not reached.

See Id.

at 17 (statement of Ms. Hoffman). Rather than improper, the Department contends that this statement simply demonstrates the give-and-take nature of the negotiated rulemaking process.

Changes:

None.

Earnings and Earnings Threshold (Including Responses to Directed Questions)

Earnings of Program Completers—Use of IRS Data

Comments:

Many commenters asserted that the earnings calculation in the regulation would not be accurate for programs that are designed to train students for occupations that rely on tipped income, cash payments, or freelance work, all of which may go under-reported in Federal tax data. Many commenters argued that the Department should apply an earnings multiplier (whereby the Department increases the actual reported median earnings to account for unreported or under-reported income) to cosmetology programs and other programs where graduates often receive a significant portion of their earnings through tips, as a way to account for this potential under-reporting. Some commenters asserted that most tipped income was not included in Federal tax data at all, arguing that the earnings test would therefore be biased against cosmetology and other programs that prepare students for occupations that customarily and regularly receive tips.

Other commenters argued that cosmetology programs should not receive an earnings variance or exemption from the accountability framework. These commenters explained that all tipped income is required to be reported by law, and if any under-reporting occurs, based on past research, it is a relatively small percentage—usually around 8 percent of income, according to one study.

For those reasons, commenters argued that these programs should not be treated differently from other types of programs, stating that they should not receive an earnings multiplier, exemption, or any other special treatment.

Cellini, S.R., & Blanchard, K.J., (2022). Hair and Taxes: Cosmetology Programs, Accountability Policy, and the Problem of Underreported Income. Washington, DC: PEER Center.

www.american.edu/spa/peer/upload/peer_hairtaxes-final.pdf.

A few other commenters argued that tipped income may be more accurately reported by tax filers after the “No Tax on Tips” policy from the WFTCA is implemented. These commenters argued that many individuals working in occupations where workers customarily and regularly receive tips do not currently fully report their tipped income. They also acknowledged that the “No Tax on Tips” provision was passed in the same law as the earnings test, and it may likely change the way that tipped workers report their tips in the future. Other commenters recommended the Department consider a “more comprehensive and equitable evaluation method” for tipped workers, proposing a delay in the implementation of the accountability framework. Noting the challenges currently associated with the reporting of tipped income, commenters specifically requested the Department delay the rule until July 1, 2028, to allow for “sufficient time to address outstanding concerns.”

Discussion:

After considering the totality of feedback the Department received on the issue of unreported and under-reported tipped income, the Department has decided to delay the implementation of the accountability framework for certain programs that prepare students for employment in occupations where workers customarily and regularly receive a predominant percentage of their income through tips, in order to use earnings from the tax years when the “No Tax on Tips” policy is in effect, which began with the 2026 tax year.

The Department made this determination based on the following comments and feedback. First, commenters argued that Federal tax data may often not reflect amounts of tipped income customarily and regularly received by certain types of workers.

Conversely, other commenters argued that significant amounts of under-reported tipped income is rare and unlikely to make up a significant share of a tax-filer's total income. However, these commenters still acknowledged that unreported tips may comprise around 8 percent of individuals' total earnings in cosmetology and related occupations. Notwithstanding these issues identified by commenters, the Department continues to believe that the earnings data reported annually by tax-filers to the IRS are the most accurate and comprehensive information available to determine the earnings of individuals.

To address some of the situations identified by commenters and to increase the accuracy of the earnings calculations, the Department is adopting a solution suggested by some commenters: To delay the implementation of the accountability framework for certain programs that train individuals for occupations where workers customarily and regularly receive tips until the earnings of those individuals can be measured after the “No Tax on Tips” policy is in effect. Beginning in the 2026 tax year, the new policy removes the potential incentive that certain tax filers previously faced to under-report or not report tipped income. Because of this, the Department believes the accuracy of the earnings data for workers in tipped occupations is likely to increase starting in the 2026 tax year, further enhancing the precision of the IRS data.

To implement this, the Department determined the types of programs that prepare students for employment in occupations that customarily and regularly receive tipped income. For this determination, the Department used the list of occupations included in the IRS and Treasury final rule listing occupations that qualify for the “No Tax on Tips” policy.

We then limited those occupations to those where tipping is most predominant, meaning that 50 percent or more of tax filers in these occupations reported at least $100 in tipped income. The Treasury Department and the IRS identified occupations listed on the income tax returns (as reported on page 2 of Form 1040 next to the taxpayer's signature) described in the prior sentence as having customarily and regularly received tips based on the percentage of taxpayers who reported at least $100 in

annual tip income within a given occupation as reported on Form 1040. The Department used the threshold of 50 percent because it is unlikely that a program's median earnings value would be significantly affected by occupations where fewer than half of individuals receive tipped income. Then, the Department linked those occupations (defined by 6-digit SOC codes) to programs defined by 6-digit CIP codes.

26 CFR part 1. “Occupations That Customarily and Regularly Received Tips; Definition of Qualified Tips.” 91 FR 19026.

www.federalregister.gov/documents/2026/04/13/2026-07104/occupations-that-customarily-and-regularly-received-tips-definition-of-qualified-tips.

Ultimately, this process results in 20 fields that are associated with predominantly tipped occupations. These 20 fields are listed in Table 5.22. For programs in these 6-digit CIP codes, the Department will not apply the accountability framework in this regulation until the measurement year(s) for the earnings test includes only year(s) that the “No Tax on Tips” policy is in effect (2026 through at least 2028 under current law).

This change results in at least a one-year delay for affected eligible programs because the first cohort of students included in the earnings test are those who completed during the 2020-21 award year. These students will have their earnings measured under the regulations during tax year 2025—a year before the “No Tax on Tips” policy was in effect. During the second year the Department will calculate the earnings test, the single-year cohort covers students who graduated in the 2021-22 award year, and their earnings will be measured in tax year 2026. This year occurs after the “No Tax on Tips” policy is in effect, so programs with 6-digit CIPs matching those listed in Table 5.22 that have sufficient N-size for a single-year cohort will begin being counted as passing or failing the earnings test in the second round of calculations. However, if the program is small and requires cohort aggregation with prior years, those programs will take longer to reach a stage where their earnings premium metric can potentially lead to consequences for a failing result. For the smaller programs in this group, it may take several rounds of calculations until the program's aggregated cohort is fully comprised of completers from 2021-22 or later. These programs could potentially see up to four years with the earnings premium metric being published on an informational basis (after which point all cohorts with sufficient N-size to receive median earnings would consist of completers from award year 2021-22 or later).

The Department acknowledges that the “No Tax on Tips” policy is currently set to expire after tax year 2028. While it is likely that this provision would be extended or made permanent, should this policy expire at a future point, the Department will continue to apply the accountability framework to these programs and will revisit the issue of data quality. This is because, as stated above, the Department continues to believe that the income data maintained by the IRS is the most comprehensive information available on individual earnings. Additionally, the Department notes that tipped income is included in Federal tax data, as it is legally required to be reported under the tax code. The IRS directs employees to keep a daily tip record, to report all cash tips to the employer (unless tips are less than $20 per month), and to report all tips on the individual's Federal income tax return.

Therefore, the possibility of under-reported tipped income would only occur if program graduates were unlawfully not reporting tipped income

en masse,

which is why we continue to believe the issue of under-reported tipped income is likely to be much smaller than what some commenters suggested.

www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting.

The Department further clarifies that it will continue to measure and report the earnings outcomes for the programs listed in Table 5.22, though these will not be subject to the accountability framework during years where their graduates' earnings are measured in 2025 or before. The Department believes this provides important information to students about the possible earnings outcomes they may experience if they attend such programs, and furthermore, it provides colleges with information to help it gauge whether their particular programs may be likely to pass or fail the earnings premium measure once the program becomes subject to the penalties of the accountability framework during a future year.

The Department has broad authority to provide this delay under 20 U.S.C. 1221e-3, as well as from its express authority to establish and manage an appeals process for programs that do not meet the low-earnings requirements, 20 U.S.C. 1087d(c)(5). The Department anticipates if the programs included in Table 5.22 are not found to meet the low-earnings requirements, many would likely try to appeal the outcome on the basis that the 2026 tax year data does not accurately reflect the earnings of their graduates. By the time of such an appeal, the Department will have the benefit of the enhanced data brought about by tax filings made under the “No Tax on Tips” provisions, which, as stated, the Department anticipates will reflect higher earnings because more workers in these occupations will report more of their tipped income. Given the number of programs potentially affected, these avoidable appeals could prevent the Department from adjudicating appeals from other programs in a timely, efficient manner. And because the Department cannot end a program's participation in a title IV, HEA program while the appeals processes is ongoing, this could result in many programs that have failed to meet the low-earnings requirements, and whose data the Department has no reason to believe is inaccurate, continuing to use funds for an extended period. So, the Department has determined that the appeals process can be more efficient if the Department institutes the one-year delay for the programs listed in Table 5.22.

The Department disagrees with commenters who requested an earnings multiplier for cosmetology programs and other types of programs that prepare students to work in occupations where workers customarily and regularly receive tips. As we discussed in the NPRM, the Department specifically evaluated how an earnings multiplier for cosmetology programs would impact the extent that these programs fail the earnings test in the final rule (Table 8.2). The Department's analysis showed that an 8 percent earnings multiplier to income reported to the IRS by graduates of cosmetology programs would result in only a roughly 8-9 percentage point decline in the fail rates of cosmetology programs. Instead, we believe the approach discussed above more adequately addresses the concern about the accuracy of tipped income by tax-filers. Many cosmetology programs, approximately 77 percent, will qualify for at least a one-year delay in when the accountability framework first applies (Table 5.24). The Department believes this provision addresses the commenters' concerns about unreported tipped income while also maintaining a consistent earnings premium metric and protecting students from programs that regularly leave students with low earnings after attending.

To determine which programs are designed to prepare students for employment in occupations that predominantly receive tipped income, the Department will use the following process. First, we will use the list of occupations included in the final rule “Occupations That Customarily and Regularly Received Tips; Definition of Qualified Tips” from the Internal Revenue Service and Treasury (91 FR 19026). We will then narrow the list to the occupations where 50 percent or more of workers report tipped income to

the IRS. Then, we will use the Department's CIP-SOC crosswalk to link occupations (defined using 6-digit SOC codes) to programs (defined using 6-digit CIP codes).

Ultimately, twenty unique programs (defined using 6-digit CIP codes) will qualify for this provision. These CIP codes and program names are listed in Table 5.22. For these programs, the Department will continue to compute and publish median earnings information and the benchmark that the program would have been compared against. However, these programs will not be held accountable for the sanctions associated with failing the earnings premium metric until the program graduates are measured using earnings from the 2026 tax year or later.

Programs would not be held accountable for results occurring prior to consequences taking effect. For example, if a program had informational metrics in the first round of calculations that would have resulted in failing the earnings premium and passed the earnings premium metric in the second round when consequences first could take effect, it would be in the same position as a non-tipped program that had passed both of the first two rounds of calculations. The tipped program would not be subject to warnings based on informational results from before potential consequences took effect.

Changes:

The Department modifies § 668.402 to add a new paragraph (c)(4), which specifies that programs that are designed to prepare students for employment in certain occupations that predominantly receive tipped income, as defined under IRS regulations in 26 CFR 1.224-1(h), and in which the IRS has determined that 50 percent or more of the individuals in the occupation receive income from tips, will not be considered to have passed or failed the earnings premium measure for any award year in which the Secretary evaluates earnings data from the 2025 tax year or prior. We also specify that we will make earnings data and the earnings threshold used to calculate the earnings premium measure available to the public.

Comments:

Commenters raised several concerns about how income from self-employment and independent contractors is treated in the earnings test. These include concerns that the earnings data used to assess programs does not include self-employment income, and that individuals working in certain careers (including individuals who conduct acupuncture, chiropractors, cosmetologists, massage therapists, and the fine arts) earn significant amounts of their income from self-employment. Some commenters also noted that self-employment earnings only include earnings after business deductions, which would therefore undercount the true earnings of program graduates who earn a significant share of their income through self-employment.

A few commenters stated that the methodology explained in the NPRM would fail to capture partnership income as reported on IRS Form K-1 and the business distribution portion of earned income arising from an S-corp. Other commenters voiced concern that graduates working in gig-style employment involving cobbling together many engagements, most if not all of which fall under the reporting threshold, would show up with inaccurately low income.

One commenter indicated that they understood the Department's emphasis on maintaining comparability with ACS and were not proposing a change in the data source, but instead requested that the Department apply a methodology-based correction factor, grounded in the IRS's own tax gap research, for fields in which freelance work is the predominant employment outcome. The commenter argued that this approach would preserve consistency with ACS thresholds while addressing a known and measurable bias.

Discussion:

Earnings data available to the Department through the IRS includes self-employment income from IRS Form 1040-SE records. This data includes “the sum of wages and deferred compensation from all non-duplicate W-2 forms and positive self-employment earnings from IRS Form 1040 Schedule SE (Self-Employment Tax) for each student measured.”

The IRS form 1040 Schedule SE captures self-employment income earned from a partnership and reported on form 1065 Schedule K-1, and it captures self-employment income from a sole proprietorship reported on form 1040 Schedule C. The Department acknowledges that the 1040 Schedule SE captures the net profit or loss from a business or self-employment and therefore reports income that is the net of certain business-related deductions that individuals claim.

https://collegescorecard.ed.gov/files/InstitutionDataDocumentation.pdf.

The Department believes that the claimed possibility that some types of earnings, like earnings from partnerships and business distributions, may be missing from Federal tax data is unlikely to have an impact on median program earnings values. First, the commenter did not provide data or evidence on the extent of this potential problem, and the Department is not independently aware of data demonstrating either that people underreport earnings from partnerships and business distributions or, if there is such underreporting, the scope of the underreporting. Even if there is underreporting, the Department believes that many individuals from the same program—usually more than half—would need to have unobserved income from partnerships and business distributions for this to influence the median value, which the Department has no evidence to support and views as unlikely.

Furthermore, the Department believes the income data that are available from Federal administrative sources are well-suited for the purposes of these regulations. Only Federal administrative sources, such as earnings records maintained by the IRS, contain such a comprehensive view of earned income. As discussed in prior versions of the Gainful Employment regulations (such as the 2014 and 2023 prior rules), earnings data reported though other channels—such as by self-reported survey data collected by colleges—are implausibly high. Issues such as recall and selection bias likely contributed to inflated earnings measures when colleges conducted surveys to gather self-reported income information. Therefore, the Department believes that if it allowed colleges to supplement earnings data through self-reported surveys to account for sources of potentially unobserved income, as the commenters requested, it would introduce another larger problem that the earnings data would likely be arbitrarily inflated due to the issues of recall and selection bias.

Additionally, while self-employment income reflects income after business deductions, the Department believes that this measure is appropriate because it more accurately reflects the income the individual has available to pay a loan, and because measures self-employment income prior to business deductions are not accurately capturing the actual income that the individual has available.

For all the reasons described above, the Department also believes that applying adjustments to earnings is unnecessary, and moreover would violate the statute's requirements. Regarding the request by one commenter to specifically make such an adjustment for individuals engaged in freelance work, we are concerned that the nature of freelance work varies greatly by profession, so applying a one-size-fits-all “correction factor” would

likely result in large-scale distortion. Therefore, we decline to adopt that commenter's recommendation.

Changes:

None.

Comments:

Some commenters suggested that the Department should use earnings data from BLS rather than the IRS to determine whether programs would remain eligible for Federal student financial assistance. Under the proposed approach, a program would pass the earnings test if BLS data showed that a worker with a specific credential earns above the high-school or bachelor's degree tests. Similarly, other commenters noted that BLS data show that earnings for certain fields of study are higher than those the Department has cited and reported using data from the IRS.

Discussion:

The Department does not have the statutory authority to use earnings data from the BLS when measuring earnings for degree programs as the commenters requested. The earnings data from the BLS are based on the earnings of all individuals who have a certain level of educational attainment and who work in a certain industry. However, the statute clearly requires that the earnings data be based on individuals who graduate from specific degree programs. Therefore, data from the BLS do not satisfy the statutory requirements to determine the median earnings measure of graduates from each program as outlined in Section 84001 of the WFTCA.

The Department further notes that the observed differences between the earnings data in the PPD:2026 data that the Department released and the BLS data stem from a difference in what these two sources attempt to measure. Whereas the PPD:2026 data measure earnings for all individuals who graduate from specific programs, regardless of the industry they enter four years after completion, the BLS data cited by the commenters measures the distribution of earnings for individuals who successfully work in a given industry, irrespective of their path into the industry or the stage of their career. We do not believe it is appropriate to evaluate a postsecondary program on the basis of the earnings of individuals who were not enrolled in that program and who are successfully employed, as this would not recognize any impact by the postsecondary institution on the student's employment success.

Changes:

None.

Comments:

One commenter requested the Department incorporate safeguards or complementary measures that account for variability in earnings realization and reporting to improve the accuracy and fairness of the framework while maintaining administrative flexibility.

Discussion:

The Department thanks the commenter for their feedback, but without a concrete suggestion, it is difficult to come up with further ideas for what those improvements might be. We would note, however, that the statutory framework's use of two failures in three consecutive calculations for a program to reach the low-earning outcome designation would protect programs having uncharacteristic outcomes occurring in a single year.

Changes:

None.

Comments:

One commenter suggested supplementing IRS data with payroll-based sources such as the National Directory of New Hires or State Unemployment Insurance (UI) wage records, where data-sharing agreements are permitted. The commenter felt the alternative payroll data captured earnings closer to real time and with greater accuracy for wage earners than annual tax filings.

Discussion:

The Department thanks the commenter for their suggestion, but we believe that data from the IRS is currently the best available data for these purposes. The data is measured after sufficient time has passed for the IRS records to be compiled and validated, so the use of prior real-time data would not provide the enhancement that the commenter describes. Requiring earnings data from a Federal source is consistent with prior approaches and provides both statistical reliability and the option to use a different Federal source in the future should operational needs arise. Furthermore, the Department is concerned that supplementing the earnings data from the IRS with other sources of income, such as State UI data, will create a significant burden on the Department and would likely be infeasible given the privacy protocols of other agencies.

Changes:

None.

Comments:

Several commenters stressed concern with which income or tax return line items would be used when calculating median earnings and the real differences that can exist when reporting income for different comparison groups due to occupational variances. As an example, if using the adjusted gross income (AGI) as a measure of income, there are several occupations that due to self-employment or freelance work, are able to claim legitimate deductions that will reduce taxable income thus reducing the formal AGI reported.

Several commenters noted that for the creative workforce, disproportionately composed of sole proprietorships and independent contractors, income would be drawn from Schedule C after legitimate business expenses have been deducted. These commenters believed that this would be an unfair net profit vs. gross income penalty since an artist's direct receipts would be reduced by the costs associated with inputs such as rent, materials, and equipment.

Discussion:

The Department will not be directly using AGI because that number is shaped by household choices, such as directing funds to a tax-advantaged retirement account or to a health savings account, but the Department will be sourcing reported earnings from IRS data.

While self-employed individuals have some amount of discretion in how to allocate funds that employees do not, such as moving to a less expensive office to free up more funds for household income or accepting lower household income to cover investment in new equipment, funds allocated to business expenses are not available to cover household expenditures or savings. These expenses are not considered income.

Change:

None.

Comments:

One commenter requested that the definition of earnings be revised to include self-employment and gross business revenue. Their proposed language would change § 668.2(b)'s definition of earnings to read “For the purposes of Subparts Q and S of this part, wages, income as reported to the Internal Revenue Service, and other earned income, including self-employment and gross business revenue.”

Discussion:

The Department declines to adopt this definition, and notes that using gross business revenue would result in a massive distortion of an individual's earnings and funds available for living expenses, debt repayment, and other expenses, and would certainly not represent an earnings boost from an educational credential. Gross business revenue includes the prices of any inventory sold, or costs of other inputs, and counting this as part of an individual's income could have a drastically misrepresentative multiplicative effect on the amount stated. For example, if an individual sold goods purchased for $950,000 at a markup, receiving $1,000,000, their gross revenue would be $1,000,000 and their profit would be $50,000 (minus any additional expenses); claiming the $1,000,000 as income would be inappropriate.

Changes:

None.

Comments:

Several commenters expressed concerns that occupations compensated with housing allowances, such as many ministerial vocations, will not have their full earnings factored in when evaluating IRS income data because, though listed on W-2s, housing allowances are not reported as part of taxable income since they are excluded before the IRS calculates taxable income. One commenter also requested an alternative earnings metric covering all elements of the compensation structure for clergy and religious workers, including housing allowances, in-kind benefits, and stipend arrangements.

One commenter mentioned that it is a common experience for early career artists to work in residencies that provide room and board which can last from two weeks to a full year. This commenter indicated that these benefits dramatically impact the income required by an artist to live and create that gets reported to the IRS.

One commenter recommended including all earned income regardless of whether such compensation is taxed, including non-monetary or in-kind compensation from the employer such as food, lodging, use of a company car, etc.

A couple of commenters also requested that the Department clarify if, or how, certain types of compensation for physician residencies such as housing stipends, meals or education will be factored into the earnings measurement to ensure all appropriate income is fully captured. The commenters indicated that these issues highlight concerns that certain program completers will not have their full income compensation used when comparing earnings to the benchmark earnings causing potential discrepancies.

Discussion:

The Department carefully considered possibilities recommended by commenters and reached the decision to limit earnings to forms of monetary compensation, as these are fungible earnings available to cover household expenses and loan repayments and to otherwise be directed by the recipient.

Housing stipends are unlikely to be observed in Federal tax data used by the IRS to compute program earnings. However, the Department believes these data are still the best available data to determine program earnings. While the Department acknowledges that occupations where non-taxable allowances are common may affect how earnings appear for individuals, developing or mandating new data collections would be burdensome for institutions and would introduce significant variation that could undermine comparability across programs. Furthermore, for the reasons discussed in prior comments about tipped and self-employment income, the Department views administrative data from Federal agencies with earnings data as the highest quality data that currently exist that could be utilized to fulfill the statutory requirements. Alternative sources of income data, such as data collected through self-reported surveys conducted by colleges, would likely produce inflated earnings values due to issues of selection bias and recall bias.

Changes:

None.

Comments:

One commenter stated that they believed the description in the regulatory text was inconsistent with the discussion in the NPRM's preamble guidance as to how earnings would be

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.