U.S. Department Of Education Finalizes New Earnings Accountability Rule For Title IV Programs

On July 1, 2026, the U.S. Department of Education (“ED”) issued a Final Rule implementing statutory changes to Title IV of the Higher Education Act included in the Working Families Tax Cuts Act (WFTCA)—also known as the One Big Beautiful Bill Act—signed into law on July 4, 2025. The Final Rule creates a new Student Tuition and Transparency System (“STATS”) and Earnings Accountability framework and harmonizes that framework with ED’s existing Financial Value Transparency and Gainful Employment (“FVT/GE”) regulations.

The rule affects institutions across credential levels and institutional sectors including public, private nonprofit, and proprietary institutions. Any academic programs that fail the new earnings accountability metric in two out of any three consecutive years will lose Direct Loan eligibility. Institutions with multiple failing programs may lose all Title IV eligibility, including Pell Grants, for those programs and be required to participate in Title IV for other programs on provisional status.

Most provisions take effect July 1, 2027. Certain changes take effect earlier, including changes relating to reporting obligations beginning July 1, 2026, and, effective August 31, 2026, amendments to program participation agreements to incorporate the STATS and Earnings Accountability framework as a condition of Direct Loan eligibility.

New accountability framework

The Final Rule replaces the prior FVT/GE accountability rules with a single earnings premium measure that applies to both gainful employment (“GE”) programs and Title IV-eligible non-GE programs. In doing so, the rule eliminates the prior debt-to-earnings (“D/E”) metric that focused on graduates’ debt loads relative to earnings. Under the new framework, ED will compare program completers’ median earnings against specified earnings thresholds, as explained below; repeated failure may result in loss of Direct Loan eligibility and, in some circumstances, broader Title IV consequences.

How ED will calculate the earnings premium measure

A program passes the earnings premium measure if, during the applicable cohort period, its completers’ median annual earnings meet or exceed the relevant earnings threshold.

ED generally begins with a one-year cohort of students from the fourth award year preceding the most recent available year of federal earnings data. If that cohort has fewer than thirty (30) students, ED adds additional award years to the cohort (up to the seventh prior). If necessary, ED expands the cohort to include students from all programs at the same credential level within the same 4-digit Classification of Instructional Programs (“CIP”) code. If the expanded cohort still has fewer than thirty (30) students, ED will not calculate the earnings premium measure for that year for the programs in the expanded cohort. Accordingly, institutions should evaluate not only individual programs, but also related programs that could be grouped for cohort-size purposes.

ED will also exclude individual students from the cohort when: (1) the student has received a total and permanent disability discharge, or ED is considering an application for discharge; (2) the student was enrolled in any other program at the institution or another institution; (3) an undergraduate student completed a higher credentialed undergraduate program; (4) a graduate student completed a higher credentialed graduate program; or (5) the student died.

The earnings threshold varies by program level:

• Undergraduate programs: median earnings of working adults ages 25–34 with only a high school diploma in the State where the institution is located (or nationally if fewer than fifty percent of students are from that State).
• Graduate programs: median earnings of working adults ages 25–34 with only a bachelor’s degree, determined by taking the lowest median earnings of working adults in the:
  • State (or nationally if fewer than fifty percent of students are from the institution’s State);
  • Same field of study (i.e., the 2-digit or 4-digit CIP code) in that State (unless fewer than fifty percent of students are from the institution’s State); or
  • Nationally in the same field of study.

If the required earnings data are unavailable, the earnings threshold defaults to $1, meaning that a program’s completers must have median earnings of at least $1 to pass. A program fails the earnings premium measure if the median annual earnings of its completers are below the earnings threshold.

Annual reporting to ED

Each year, institutions must report specified program-level and student-level data to ED. By October 1, 2026, institutions must report data for the two most recently completed award years. Thereafter, institutions must report data for the most recently completed award year by October 1.

Program-level reporting:

• Program name, CIP code, credential level, and length
• Whether the program is programmatically accredited and if so, accrediting agency
• Whether the program meets licensure requirements or prepares students to sit for a licensure exam
• A list of states where the program meets licensure requirements, as required to be disclosed to students under 34 CFR § 668.43(a)(5)(v) and as required by 34 CFR 668.14(b)(32)
• The total number of students enrolled in the most recently completed award year

Student-level reporting:

• Identifying information for the student and institution
• Enrollment date
• Cost of attendance (COA)
• Total tuition and fees assessed
• Student residency tuition status
• COA allowances for books, supplies, and equipment
• COA allowances for housing and food
• Institutional grants and scholarships disbursed
• Amount of other federal, state, tribal, or private grants
• Private education loans (to the extent known or reasonably knowable)

For students who completed or withdrew from the program, institutions also must report additional student-level data:

• Total private education loans the student received for the program (to the extent known or reasonably knowable)
• Total tuition and fees assessed the student for the program
• Total COA allowances for books, supplies, and equipment (or any higher amount assessed above the COA) for the student
• Total institutional grants and scholarships provided for the program to the student
• Total federal, state, private, or other grants and scholarships provided for the program to the student

Student warnings for failing programs

In any year where a program fails the earnings premium measure and ED notifies the institution that it may lose Direct Loan eligibility based on the next calculated earnings premium measure, the institution must provide a warning to current and prospective students. The warning must include:

• A statement that the program did not meet ED’s standards based on the earnings of program graduates
• A statement that the program could lose Direct Loans eligibility
• For an institution that has failed to comply with the new administrative capability requirement (described below), a statement that the program could also lose access to the other Title IV programs
• Information to access the program information website maintained by ED
• A requirement that the student acknowledge the warning before receiving any Title IV funds
• For Pell-eligible students, information about remaining lifetime eligibility and the effect of enrollment in the program on future lifetime eligibility

The warning must be provided to currently enrolled students within thirty days after ED issues a notice of determination for the program in writing by either hand delivery, mail, or electronic mail. The warning must be the only substantive content contained in the written communication. For prospective students, the warning must be provided at first contact and the institution must wait at least three business days before enrolling the student.

The institution cannot allow a current or prospective student to sign an enrollment agreement, complete registration, make a financial commitment to the institution, or receive Title IV funds until after such student acknowledges the warning. Because the warning must be delivered as a standalone substantive communication, institutions may wish to review admissions, enrollment, and financial aid workflows to avoid inadvertent noncompliance and to optimize processes in the event of a need to issue the warnings.

Program-level and institution-level consequences

If a program fails the earnings premium measure in two out of any three consecutive award years, it becomes a low-earning outcome program and loses eligibility to participate in the Direct Loan program. Institutions must wait at least two years before seeking to reestablish eligibility. During the period of ineligibility, institutions cannot establish new programs at the same credential level that share a 4-digit CIP code and overlapping Standard Occupational Classification codes with a failed program. These restrictions may affect program launches, teach-out planning, and program portfolio strategy, particularly for institutions with multiple programs in related fields.

The rule also introduces a new administrative capability standard that extends consequences for multiple low-earning programs beyond individual program Direct Loan eligibility. Institutions must demonstrate that at least half of their Title IV recipients and Title IV funds are not associated with low-earning outcome programs. Failing this administrative capability standard in two out of three consecutive years results in provisional status and automatic loss of Title IV eligibility (including Pell Grants) for low-earning outcome programs.

Certain institutions will receive a partial exemption from the administrative capability standard. An institution will not face an automatic loss of all Title IV if it (1) is not and has not participated in the Direct Loan program for the five most recent award years; or (2) agrees to prevent students in the program from borrowing Direct Loans for at least five years, subject to approval by ED. However, ED will still calculate and disclose the earnings premium measure for such programs, which means an institution will still need to provide the annual data report to ED.

Exemptions

The final rule exempts programs at institutions serving only students with specific learning disabilities or autism from all program eligibility consequences, including Direct Loan eligibility consequences. However, ED will still calculate the earnings premium measure for such programs.

In addition, ED will not calculate an earnings premium measure for prison education programs or comprehensive transition and postsecondary programs.

Delayed implementation for tipped occupations

Programs tied to occupations that predominantly receive tipped income will not be treated as passing or failing for years where the earnings premium calculation uses pre-2026 earnings data.

Orderly closure option

If a program has failed the earnings premium measure once but is not yet a low-earning outcome program, ED may allow the institution to conduct an orderly closure of the program and maintain Direct Loan eligibility for the lesser of three years or the program’s full-time length. Institutions selecting this option must:

• Stop enrolling new students in the program
• Engage in an orderly closure of the program
• Notify state authorizing agencies and accrediting agencies of the closure
• Provide student warnings
• Offer transfer or completion options to students
• Refrain from launching similar programs for at least two award years following the completion of the orderly closure

Appeals

Institutions may appeal a low-earning outcome determination within thirty (30) days. If an institution timely appeals a low-earning outcome determination, the program will remain Direct Loan eligible while ED considers the appeal. Appeals are limited to: (1) errors in the earnings premium calculation; (2) completers list inaccuracies; (3) incorrect earnings thresholds; and (4) other bases determined by ED.

Program information website

The Final Rule maintains the program information website established by the prior FVT/GE accountability rules. ED will publish program-level data, including:

• Program length and completion time
• Enrollment
• Total cost of attendance
• Borrowing rates, including Direct Loans and private loans
• The median loan debt and earnings of program completers
• Programmatic accreditation status
• Earnings premium measure

ED may also publish additional information, such as occupational outcomes of students, completion rates, net cost of attendance paid by students, and repayment rates.

Practical considerations for institutions

The Final Rule applies across all credential levels and all institutional sectors, including public, private nonprofit, and proprietary institutions. Key dates include:

• July 1, 2026: Early implementation of modified reporting obligations
• August 31, 2026: Program participate agreements will be amended to incorporate the STATS and Earnings Accountability framework as a condition of Direct Loan eligibility
• October 1, 2026: Initial reporting deadline
• July 1, 2027: All remaining provisions take effect
• 2027-2028: ED calculates first earnings premium measuresusing earnings data from 2025 for students who completed during the 2020-2021 award year

Institutions should consider the following actions to prepare for the new accountability framework:

Hogan Lovells Cadwalader’s Education practice is available to help institutions navigate the new STATS and Earnings Accountability framework. Please contact a member of our team with any questions.