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Proposed Rule2026-07666

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

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Published

April 20, 2026

Issuing agencies

Education Department

Abstract

The Secretary of Education (Secretary) proposes to amend the regulations governing institutional eligibility, general provisions regulations, 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). The proposed regulations would implement statutory changes to the title IV, HEA programs included in the One Big Beautiful Bill Act (OBBB), signed by President Trump on July 4, 2025. The OBBB made numerous changes to the HEA, including changes to program eligibility requirements for the Direct Loan program and the introduction of an earnings accountability framework that is intended to limit Direct Loan eligibility to programs whose graduates meet certain earnings benchmarks. This document proposes regulations, based on consensus reached during negotiated rulemaking, to implement the provisions of the OBBB 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).

Full Text

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<title>Federal Register, Volume 91 Issue 75 (Monday, April 20, 2026)</title>
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[Federal Register Volume 91, Number 75 (Monday, April 20, 2026)]
[Proposed Rules]
[Pages 21088-21205]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-07666]

[[Page 21087]]

Vol. 91

Monday,

No. 75

April 20, 2026

Part II

Department of Education

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34 CFR Parts 600, 668, and 685

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

Federal Register / Vol. 91, No. 75 / Monday, April 20, 2026 /
Proposed Rules

[[Page 21088]]

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DEPARTMENT OF EDUCATION

34 CFR Parts 600, 668, and 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: Notice of proposed rulemaking (NPRM).

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SUMMARY: The Secretary of Education (Secretary) proposes to amend the
regulations governing institutional eligibility, general provisions
regulations, 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). The proposed regulations would implement
statutory changes to the title IV, HEA programs included in the One Big
Beautiful Bill Act (OBBB), signed by President Trump on July 4, 2025.
The OBBB made numerous changes to the HEA, including changes to program
eligibility requirements for the Direct Loan program and the
introduction of an earnings accountability framework that is intended
to limit Direct Loan eligibility to programs whose graduates meet
certain earnings benchmarks. This document proposes regulations, based
on consensus reached during negotiated rulemaking, to implement the
provisions of the OBBB 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: We must receive your comments on or before May 20, 2026. For
information on anticipated effective dates for the proposed regulatory
changes, please see the discussion on the waiver of the HEA master
calendar requirements in the ``Authority for This Regulatory Action''
section below.

ADDRESSES: You may find a plain language summary of the proposed rule
and submit your comments through the Federal eRulemaking Portal at
<a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the instructions for sending
comments. The Department will not accept comments submitted by fax or
by email or comments submitted after the comment period closes. To
ensure that the Department does not receive duplicate copies, please
submit your comment only once. Additionally, please include the Docket
ID at the top of your comments.
Information on using <a href="http://Regulations.gov">Regulations.gov</a>, including instructions for
submitting comments, is available on the site under ``FAQ.'' If you
require an accommodation or cannot otherwise submit your comments via
<a href="http://Regulations.gov">Regulations.gov</a>, please contact <a href="/cdn-cgi/l/email-protection#31435456445d5045585e5f4259545d415554425a715642501f565e47">[email&#160;protected]</a> or by phone
at 1-866-498-2945. Include [docket number and/or RIN number] in the
subject line of the message. If you are deaf, hard of hearing, or have
a speech disability and wish to access telecommunications relay
services, please dial 7-1-1.
Privacy Note: The Department's policy is to make all comments
received from members of the public available for public viewing in
their entirety on the Federal eRulemaking at <a href="http://www.regulations.gov">www.regulations.gov</a>.
Therefore, commenters should include in their comments only information
that they wish to make publicly available. Additionally, commenters
should not include in their comments any personally identifiable
information (PII) in comments about other individuals. For example, if
your comment describes an experience of someone other than yourself,
please do not identify that individual or include any personal
information that identifies that individual. The Department reserves
the right to redact a portion of a comment or the entire comment at any
time any PII about other individuals is included.

FOR FURTHER INFORMATION CONTACT: Joe Massman, Office of Postsecondary
Education, 400 Maryland Ave. SW, Washington, DC 20202. Telephone: (202)
453-7771. Email: <a href="/cdn-cgi/l/email-protection#f3b99c96ddbe9280809e929db39697dd949c85">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

The Secretary proposes regulations to 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 would ensure
program integrity and protect students from low-earning outcomes,
aligning with Congressional objectives for higher education oversight.
The Department proposes to remove outdated definitions tied to D/E
metrics, introduce the term ``earnings,'' and revise several existing
definitions. The Student Tuition and Transparency System (``STATS'')
would apply to all programs qualifying for title IV, HEA assistance,
using the earnings premium measure as the new accountability standard.
Institutions would be required to report program-level data, including
tuition, fees, and financial aid details such as grants and
scholarships to the Department. This reporting would enable the
Department to provide enhanced informational disclosures of net program
cost to the public. A revised version of the earnings premium measure
would apply to both GE and non-GE programs; those failing the earnings
premium measure in two of three consecutive years would lose Direct
Loan eligibility, though limited extensions may be granted when an
orderly program closure described under Sec. 668.603(c)(4) is in
students' best interest. Institutions would 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. These proposed changes aim to incentivize
institutions in every sector of higher education to offer programs that
deliver economic value, enhance data accessibility for students, and
protect taxpayers and students through stricter oversight and
comprehensive disclosures on program outcomes.

II. Summary of the Major Provisions of This Regulatory Action

General Definitions

The proposed regulations would:
<bullet> Amend Sec. 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.''
<bullet> Amend Sec. 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.''

Subpart Q--Student Tuition and Transparency System (STATS)

The proposed regulations would:
<bullet> Amend several provisions in subpart Q to reflect new
numbering.
<bullet> Amend Sec. Sec. 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.
<bullet> Amend Sec. 668.401 to remove exclusions for institutions
located in the U.S. Territories or Freely Associated

[[Page 21089]]

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.
<bullet> Amend Sec. 668.402 to establish that if a program does
not have an earnings threshold for its State and 50 percent or more of
enrolled students are from that State, the Department would not
calculate the earnings premium measure but would make earnings data
publicly available.
<bullet> Amend Sec. 668.403(b) to establish that the Secretary
would 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 would
be obtained from a Federal agency and would include students who are
working and are not excluded from the earnings premium measure
calculation.
<bullet> Amend Sec. 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 would
only apply to students who completed or withdrew from the program
during the award year.

Subpart S--Earnings Accountability

The proposed regulations would:
<bullet> Amend Sec. Sec. 668.601, 668.602, 668.603, and 668.605 to
remove all references of the former D/E metric.
<bullet> Amend Sec. 668.601 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.
<bullet> Amend Sec. 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 Sec. 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 would end upon the completion of a termination
action of Direct Loan program eligibility under subpart G.
<bullet> Add Sec. 668.603(c)(4) to allow a program that has failed
to satisfy the requirements of Sec. 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 would be limited to 3 years
or the full-time duration of the program, whichever is less, and would
require the institution and the Secretary to agree to make certain
amendments to the institution's program participation agreement (PPA).
<bullet> Amend Sec. 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 would 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.
<bullet> Amend Sec. 668.605(c) to require an institution to
provide a student who is eligible for Pell Grant funds with an
indication 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.
<bullet> Amend Sec. 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

The proposed regulations would:
<bullet> Add Sec. 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 would
result in the institution's low earning outcome programs becoming
ineligible for title IV, HEA funds.
<bullet> Add Sec. 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.
<bullet> Amend Sec. 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.
<bullet> Amend Sec. 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.
<bullet> Amend Sec. 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.

Cost and Benefits

As further detailed in the Regulatory Impact Analysis (RIA), the
proposed regulations would 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 proposed regulation, while some undergraduate and graduate
certificate programs are expected to gain eligibility relative to
current regulations. 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 proposed
regulation prevents 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 proposed regulation. 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 current regulations
because the proposed regulation results in a net increase in the number
of students attending programs that will be eligible for title IV, HEA
funds.

III. Directed Questions

General Definitions: Earnings (Sec. 668.2(b))

The Department seeks feedback from relevant stakeholders regarding
the proposed earnings definition. This definition was developed during
negotiated rulemaking to clearly identify the types of earnings income
that would be utilized in the earnings premium calculation. During
negotiations, several negotiators expressed concerns that the earnings
definition may not accurately capture

[[Page 21090]]

all of the appropriate earnings income necessary to properly compute an
earnings premium calculation. Some earned income elements mentioned by
negotiators as areas for concern included tipped income and the value
of untaxed housing benefits.
The Department contemplates using the Internal Revenue Service
(IRS) as the Federal agency with earnings data as specified under
current and proposed regulatory language. This use of data would be
consistent with the Department's previous and current processes,
including on the College Scorecard, simply with an adjustment for the
CIP level under which programs are grouped. Under this approach, the
Department would consider earned income sources from work as they are
reported on IRS forms attached to IRS Form 1040, some of which include
sources that are reported but not subject to Federal income tax. Tip
income generally is required to be reported to employers and included
in the wages reported in box 1 of IRS Form W-2 and additional tip
income not otherwise reported is required to be included with wage
income on the filer's tax form. As the Department explained in the
preamble to the most recent final rule on gainful employment,\1\
individuals are legally required to report their taxable earned income
to the IRS, including tipped income. The Department relies on this
reported income in the administration of title IV, HEA programs for
determinations of earnings for program eligibility and for calculating
payments under income-driven repayment plans. The Department's past
experiences with the earnings appeal processes under the 2014 GE
regulations did not demonstrate that substituted sources of data used
in appeals improved the quality of earnings information available to
determine program eligibility (see Low-earning outcome programs (Sec.
668.603) below for more information). No other form of survey or
reporting will result in greater accuracy than the income tax reporting
process, which has a built-in oversight and enforcement apparatus and
involves significant legal penalties for failing to accurately report
earned income. Moreover, a 2022 study \2\ showed that underreporting
tips among barbers in Texas makes up a small share of total income
that, even if accounted for, the difference would be insufficient to
cause programs to pass the earnings premium test. And while ministerial
housing allowances may not be subject to Federal income tax, they are
reported on the tax forms for determining self-employment tax and would
be available for use in median earnings calculations.
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\1\ 88 FR 70004.
\2\ Cellini, Stephanie Riegg & Blanchard, Kathryn J. (2022).
Hair and Taxes: Cosmetology Programs, Accountability Policy, and the
Problem of Underreported Income. Geo. Wash. Univ. (<a href="https://www.american.edu/spa/peer/upload/peer_hairtaxes-final.pdf">https://www.american.edu/spa/peer/upload/peer_hairtaxes-final.pdf</a>).
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The Department must use reliable data for all calculations and
believes that federal agencies use reliable methods for collecting
earnings data that will ensure that using such data to calculate
institutional cohorts will yield accurate results that reflect the
actual post-graduation earnings of graduates. This method will allow
for a consistent approach as we harmonize the implementation of the
OBBB with the existing Financial Value Transparency and Gainful
Employment (FVT/GE) regulatory framework.
As discussed below, the OBBB provides that the Secretary shall
establish an appeals process so that if a program is determined to be a
low-earning outcome program, the institution may appeal that
determination. The OBBB did not instruct the Secretary to allow
institutions to appeal at each step of the determination, including the
reliability of the data set as to that program. The OBBB leaves the
Department discretion to make a reasoned choice of the best available
data on which to make the low-earning outcome determination. See Hosp.
for Special Surgery v. Becerra, No. CV 22-2928 (JDB), 2023 WL 5448017,
at *9 (D.D.C. Aug. 24, 2023) (agency made a reasoned decision in
determining which classification to use in making determination);
Madison-Hughes v. Shalala, 80 F.3d 1121, 1127 (6th Cir. 1996)
(sufficiency of data collected left to agency discretion); State of
Conn. v. E.P.A., 696 F.2d 147, 159-60 (2d Cir. 1982) (agency's choice
of data set was rationally based and ``well within the Agency's
discretion'').
The Department also considered the difficulty in verifying
alternative data in a timely manner and does not believe that,
supposing it is accurate, alternative data is likely to have a
significant impact on the overall calculation. The Secretary declines
to allow such appeals for these reasons.
The Department seeks to understand whether this earnings data may
be subject to other limitations that the Department is not aware of,
such as if certain types of income are not captured in data held by the
federal government or are potentially subject to distorting factors.
Please ensure that any feedback provided includes the rationale for any
modifications to the definition or the Department's proposed process
for obtaining earnings data, details the specific earnings data the
Department should or should not factor in, and any relevant resources
that may help support any changes to the earnings definition. Please
also provide details for the broad applicability of any recommended
data source to most or all covered program graduates, such as
geographic or demographic limitations. The Department is specifically
seeking broadly applicable administrative data. The Department has
concerns that sources of data that vary across states may not be
comparable due to different data definitions, assumptions, and criteria
for inclusion. The Department also generally seeks to avoid any data
source that would create a significant reporting burden on
institutions. To maintain the Department's efforts to keep data as
comparable as possible between the earnings used for the program and
the comparison group used for the earnings threshold, please accompany
suggestions for additional programmatic earnings elements with an
explanation for why the importance of their inclusion would outweigh
any potential problems from those items being covered differently by
Census Bureau data in the American Community Survey (ACS).

Earnings Threshold (Sec. 668.2(b))

The Department seeks feedback on the process by which ``fields of
study'' are defined in Section 668.2(b) for the purposes of determining
earnings thresholds for graduate-level programs.
To calculate the earnings thresholds, the statute under HEA Section
454(c)(2), as revised by the OBBB, requires the Department to use data
from the Census Bureau. The Department contemplates using the Census
Bureau's ACS for this calculation, as it is the only dataset we are
aware of that is maintained by the Census Bureau that is nationally
representative, is annually updated, and contains all the data elements
needed to calculate the earnings threshold metrics specified under
Section 84001 of the OBBB.
However, there are some potential limitations with the ACS when
calculating one of the graduate-level earnings thresholds described in
Section 668.2(b). Specifically, in some instances, it may not be
possible for the Department to calculate the median earnings of working
adults aged 25-34 with a bachelor's degree in the same field of study
(defined using 2-digit or 4-digit CIP codes) in the state in which the
institution is located and who are not enrolled in college.
In some cases, especially in uncommon fields of study and in less-
populated states, the ACS may not

[[Page 21091]]

sample any individuals (or only a very small number of individuals) who
meet all of these criteria. As described in Section 668.2(b), for cases
where fewer than 30 individuals are sampled, the Department proposes
not calculating this measure. Instead, these graduate programs would be
compared to the lower of the other two thresholds described in Section
668.2(b). The Department is concerned that calculating an earnings
threshold using a small number of individuals could produce non-
representative values in which programs are judged against. This issue
is largest for cases where there are zero individuals sampled in the
ACS who meet the criteria for this metric.
As such, the Department seeks feedback on this approach and other
alternative approaches. For example, the Department seeks feedback on
whether this issue could be mitigated by grouping fields of study into
broader categories in the ACS. Alternatively, the Department seeks
feedback on whether there are other datasets maintained by the Census
Bureau, like the National Survey of College Students, as well as
datasets that can be supplemented with Census Bureau datasets, that
would allow the Department to calculate this metric when fields of
study are defined at the 2-digit or 4-digit CIP level, in a more
statistically reliable and accurate manner.

IV. Invitation To Comment

We invite you to submit comments regarding these proposed
regulations. For your comments to have maximum effect in developing the
final regulations, we urge you to clearly identify the specific section
or sections of the proposed regulations that each of your comments
addresses and to arrange your comments in the same order as the
proposed regulations. The Department will not accept comments submitted
after the comment period closes.
The following tips are meant to help you prepare your comments:
<bullet> Be concise but support your claims.
<bullet> Explain your views as clearly as possible and avoid using
profanity.
<bullet> Refer to specific sections and subsections of the proposed
regulations throughout your comments, particularly in any headings that
are used to organize your submission.
<bullet> Explain why you agree or disagree with the proposed
regulatory text and support these reasons with data-driven evidence,
including the depth and breadth of your personal or professional
experiences. We encourage commenters to include supporting facts,
research, and evidence in their comments. When doing so, commenters are
encouraged to provide citations to the published materials referenced,
including active hyperlinks. Likewise, commenters who reference
materials which have not been published are encouraged to upload
relevant data collection instruments, data sets, and detailed findings
as a part of their comment. Providing such citations and documentation
will assist us in analyzing the comments.
<bullet> Where you disagree with the proposed regulatory text,
suggest alternatives, including regulatory language, and your rationale
for the alternative suggestion.
<bullet> Submit your public comment only; do not submit comments on
the behalf of others.
<bullet> Do not include personally identifiable information (PII)
such as Social Security numbers or loan account numbers for yourself or
for others in your submission.
<bullet> Do not include any information that directly identifies or
could identify other individuals or that permits readers to identify
other individuals.
Mass Writing Campaigns: In instances where individual submissions
appear to be duplicates or near duplicates of comments prepared as part
of a writing campaign, the Department will post one representative
sample comment along with the total comment count for that campaign to
<a href="http://Regulations.gov">Regulations.gov</a>. The Department will consider these comments along with
all other comments received.
In instances where individual submissions are bundled together
(submitted as a single document or packaged together), the Department
will post all of the substantive comments included in the submissions
along with the total comment count for that document or package to
<a href="http://Regulations.gov">Regulations.gov</a>. A well-supported comment is more informative to the
agency than multiple form letters.
Public Comments: The Department invites you to submit comments on
all aspects of the proposed regulatory language specified in this NPRM,
and in the Regulatory Impact Analysis and Paperwork Reduction Act
sections.
The Department may, at its discretion, decide not to post or to
withdraw certain comments and other materials that contain promotion of
commercial services or products, and spam.
We may not address comments outside of the scope of these proposed
regulations in the final regulations. Comments that are outside of the
scope of these proposed regulations 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.
Comments that are submitted after the comment period closes will
not be posted to <a href="http://Regulations.gov">Regulations.gov</a> or addressed in the Final Rule.
We invite you to assist us in complying with the requirements of
Executive Orders 12866 and 13563 and their overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further ways we could reduce
potential costs or increase potential benefits while preserving the
effective and efficient administration of the Department's programs and
activities.
During and after the comment period, you may inspect public
comments about these proposed regulations by accessing <a href="http://Regulations.gov">Regulations.gov</a>.
Assistance to Individuals with Disabilities in Reviewing the
Rulemaking Record: On request, we will provide appropriate
accommodation or auxiliary aid to an individual with a disability who
needs assistance to review the comments or other documents in the
public rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of accommodation or auxiliary
aid, please contact the Information Technology Accessibility Program
Help Desk at <a href="/cdn-cgi/l/email-protection#c48d90859497b1b4b4abb6b084a1a0eaa3abb2">[email&#160;protected]</a> to help facilitate this request.

Clarity of the Regulations

Executive Order 12866 and the Presidential memorandum ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand. The Secretary invites comments
on how to make the regulation easier to understand, including answers
to questions such as the following:
<bullet> Are the requirements in the proposed regulations clearly
stated?
<bullet> Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
<bullet> Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing) aid or reduce its
clarity?
<bullet> Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 668.2 General definitions.)
<bullet> Could the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in
making the proposed regulations easier to understand? If so, how?

[[Page 21092]]

<bullet> What else could we do to make the proposed regulation
easier to understand?
To send any comments that concern how the Department could make
these proposed regulations easier to understand, see the instructions
in the ADDRESSES section.

V. 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 current FVT/GE accountability
framework. These regulations required the Department to calculate two
separate metrics for the vast majority of programs eligible for title
IV, HEA funds--a debt-to earnings (D/E) rate and an earnings premium--
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.

OBBB Earnings Accountability Framework

The OBBB, signed by 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 OBBB framework does not include D/E rates, and although the
earnings comparison metric largely resembles the earnings premium
measure under current 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 seeks to amend and simplify its existing FVT
and GE framework to harmonize with the accountability framework
required under the OBBB. This would result in the establishment of a
single metric that would be calculated for nearly all programs eligible
for title IV, HEA funds and that has the same program eligibility
consequences for failure of GE and eligible non-GE programs alike.
This NPRM complies with Section 492 of the HEA, which requires the
Secretary to obtain public input and conduct negotiated rulemaking
before issuing proposed regulations for the title IV, HEA programs. To
meet those requirements and implement the new statutory directives
provided for in the OBBB, the Department convened the Accountability in
Higher Education and Access through Demand-driven Workforce Pell
(AHEAD) negotiated rulemaking committee, which reached consensus
agreement on the entirety of the regulatory text included in this NPRM.

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 OBBB,
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 OBBB's waiver of the HEA's master calendar requirements for
some of the proposed regulations discussed in this NPRM.
The Secretary has broad powers to engage in rulemaking to
administer 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. v. 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. v. 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

[[Page 21093]]

authority to an agency' by leaving it with `flexibility' through terms
`such as `appropriate' or `reasonable' '' and that 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 OBBB. 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 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 at 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 OBBB. 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
a 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.\3\ 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.'' \4\ This would not
include, for example, ``baccalaureate degree[s] in liberal arts'' as
those programs are statutorily prohibited from being in most
instances.\5\
---------------------------------------------------------------------------

\3\ ``Gainful.'' <a href="http://Merriam-Webster.com">Merriam-Webster.com</a> Dictionary, <a href="https://www.merriam-webster.com/dictionary/gainful">https://www.merriam-webster.com/dictionary/gainful</a>. Accessed March 20, 2026.
\4\ Financial Value Transparency and Gainful Employment (GE), 88
FR 32,300, 32,342 (May 19, 2023).
\5\ 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
OBBB.
---------------------------------------------------------------------------

It is relevant to acknowledge that there is some degree of
ambiguity in the term ``gainful employment.'' See Ass'n of Priv.
Colleges & Universities v. 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 v. Duncan, 107
F. Supp. 3d 332, 359 (S.D.N.Y. 2015)

[[Page 21094]]

(quoting Ass'n of Priv. Colleges & Universities v. 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.'' \6\ 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. v. 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).
---------------------------------------------------------------------------

\6\ See ``Gainful Employment'', Cambridge Dictionary Online,
<a href="https://dictionary.cambridge.org/us/dictionary/english/gainful-employment">https://dictionary.cambridge.org/us/dictionary/english/gainful-employment</a>. 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) want 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 wants students to get 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 OBBB, but the Department believes that
the gainful employment statute calls for this type of accountability
independent from the amendments made by OBBB.
The Department's interpretation of the phrase ``gainful
employment'' aligns with the statute and is supported by case law
concerning Department's previous gainful employment regulations. In
Ass'n of Priv. Colleges & Universities v. 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.'' Id at 146.\7\ 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 unable to repay their loans. 2025 WL 4219345, at *5.
---------------------------------------------------------------------------

\7\ This conclusion was directly restated several years later in
Ass'n of Proprietary Colleges v. 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 v.
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 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 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 OBBB amends HEA Section 454 to create a new
accountability framework, including an earnings test under HEA Section

[[Page 21095]]

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 students
regarding at-risk programs.
Direct Loan Agreement Authority
Institutions that participate in the Direct Loan program must agree
to comply with the requirements set for in Section 454 of HEA. The
requirements in this section, which has been called the Direct Loan
Agreement, have been incorporated into the 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,\8\
but believes that the GE framework proposed herein is authorized by
this provision and is itself a quality assurance system.\9\
---------------------------------------------------------------------------

\8\ 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 <a href="https://www.brookings.edu/wp-content/uploads/2020/10/ES-10.13.20-Zibel-Ament.pdf">https://www.brookings.edu/wp-content/uploads/2020/10/ES-10.13.20-Zibel-Ament.pdf</a>.
\9\ 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
OBBB; 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.'' \10\ 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.''
\11\ 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.
---------------------------------------------------------------------------

\10\ Ziebel & Ament, supra note 8 at 14 (cleaned up).
\11\ 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 of these
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 guardrails to protect the
purpose of 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 gone to 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. 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 and the Secretary must terminate
eligibility. And 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 rulemaking the
Department is proposing the earnings premium measure to be 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 the quality assurance system in consultation with
institutions of higher education, which we have done as part of the
negotiated rulemaking process. In addition, institutions will have the
ability to comment on this proposed rule. The Department is required to
consider making changes in response to all substantive comments under
informal notice-and-comment rulemaking, and as such, we are effectively
consulting with institutions of higher education under the existing
rulemaking procedures because we are seeking and obtaining 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 loss of eligibility for Direct Loans
for such programs that fail the earnings premium, except when a large
number of an institution's programs fail, which is discussed in greater
length below. The Secretary has been given significant deference by
Congress in Section 454 in designing the quality assurance system, and
that

[[Page 21096]]

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
rulemaking, 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 to protect the interests
of the United States and promote the purposes of this part. As
explained above, the holding in Loper Bright does no work 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 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 GEPA. The Department believes that all of these
authorities work in tandem and authorize us, independent from the
amendments made by OBBB related to accountability, require an earnings
premium for such GE programs.
In practice, the proposed earnings premium under OBBB is the same
as the earnings premium under GE. The only type of program not covered
by the earnings premium under OBBB 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 students regarding programs that do not meet earnings measures
established by the Department; (3) Implement Direct Loan program
eligibility requirements pertaining to graduate earnings outcomes,
including an earnings premium metric 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. Where helpful and
appropriate, the Department will elaborate on the relevant statutory
authority in our overviews and section-by-section discussions below.

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 v. F.A.A.,
134 F.3d 393, 398 (D.C. Cir. 1998); Methodist Hospital of Sacramento v.
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 express 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, 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 OBBB contains provisions
with effective dates that cannot possibly be implemented in regulation
in accordance with the HEA's master calendar requirements, and as such,
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 those provisions. See Dorsey v. 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. v. United States, 208 U.S.
452, 465 (1908).
Here, the OBBB was enacted on July 4, 2025. The OBBB 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 OBBB. Congress gave

[[Page 21097]]

the Secretary discretion within the OBBB 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 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 OBBB, due to the fact that
there were 120 days from July 4, 2025, (the day the OBBB 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 OBBB by
July 1, 2026, which is the statutory effective date. Congress was aware
of this temporal impossibility when they passed the OBBB, 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 OBBB
implicitly waives the master calendar.
With important details unanswered by the plain text of the OBBB, it
is clear that the policy scheme set forth in the HEA made by the OBBB
cannot be implemented absent regulatory action by the Department. At
the same time, even though the requirements of negotiated rulemaking
are onerous, it is possible to undergo negotiated rulemaking and
publish a final rule at least 30 days prior to the effective date of
these OBBB provisions on July 1, 2026. Therefore, the OBBB does not
waive negotiated rulemaking nor any provision in the APA. For
provisions in the OBBB that become effective July 1, 2027, and beyond,
Congress did not implicitly repeal the master calendar 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
v. 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 v. 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 v. 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. v. 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'').

VII. Public Participation

Section 492 of the HEA, 20 U.S.C. 1098a, requires the Secretary to
obtain public involvement in the development of proposed regulations
affecting programs authorized by the title IV, HEA programs. Prior to
developing this NPRM, the Department obtained advice and
recommendations from individuals and representatives of groups involved
in the title IV, HEA programs. This outreach included a 30-day public
comment period, one day of public hearings, and five days of in-person
negotiated rulemaking on these proposed regulations at the Department's
headquarters in Washington, DC. Further details regarding these efforts
are provided below.
On July 25, 2025, the Department published in the Federal Register
(90 FR 35261) a notice of our intent to hold public hearings and to
establish two negotiated rulemaking committees to consider regulatory
changes to the title IV, HEA programs, with one committee addressing
topics including institutional and programmatic accountability and the
Pell Grant Program. The engagement included a 30-day written public
comment period, a public hearing on August 7, 2025, and five days of
negotiated rulemaking specific to this NPRM.

Public Comments and Hearings

We received 1,864 written comments in response to the Federal
Register notice. Additionally, we held a virtual public hearing on
August 7, 2025. A total of 57 individuals testified virtually at the
hearing.
You may view the written comments submitted in response to the July
29, 2025 ``Intent to Establish Negotiated Rulemaking Committees;
Correction'' correction notice (90 FR 35652), by visiting the Federal
eRulemaking Portal at <a href="http://Regulations.gov">Regulations.gov</a>, within docket ID ED-2025-OPE-
0151. Instructions for finding comments are also available on the site
under ``FAQ.''
Transcripts of the public hearings can be accessed at <a href="https://www.ed.gov/laws-and-policy/higher-education-laws-and-policy/higher-education-policy/negotiated-rulemaking-for-higher-education-2025-2026">https://www.ed.gov/laws-and-policy/higher-education-laws-and-policy/higher-education-policy/negotiated-rulemaking-for-higher-education-2025-2026</a>.

VIII. Negotiated Rulemaking

On July 25, 2025, we published the notice in the Federal Register
referenced earlier in the Public Participation section. That notice
also set forth a schedule for committee meetings and requested
nominations for individual negotiators to serve on the AHEAD Committee.
We chose members of the negotiated rulemaking committee from
individuals nominated by groups involved in the title IV, HEA programs.
We selected individuals with demonstrated expertise or experience with
the proposed topics. The negotiated rulemaking committee included the
following members, representing their respective constituencies:
<bullet> Students who are currently enrolled and receiving
assistance from the title IV, HEA programs: Eric Atchison, Arkansas
State University System, and

[[Page 21098]]

Magnus Noble (alternate), University of Illinois Springfield.
<bullet> Students who are veterans, U.S. military service members
or groups representing them: Matthew Feehan, Veterans Education
Project, and Julie Howell (alternate), Paralyzed Veterans of America.
<bullet> Employers and groups representing the business community,
including small, medium, and large businesses: David Kafafian, CLASP,
and Dennis Cariello (alternate), Hogan Marren Babbo & Rose.
<bullet> Legal assistance organizations that represent students and
borrowers, consumer advocates, and civil rights groups that represent
students: Tamar Hoffman, Community Legal Services of Philadelphia, and
Zoe Kemmerling (alternate), Legal Aid of the District of Columbia.
<bullet> Public institutions of higher education, including
institutions eligible to receive Federal assistance under Title III and
Title V of the HEA, Tribal Colleges and Universities, and Historically
Black Colleges and Universities: Kristin Hultquist, HCM Strategists,
and Tonjua Williams (alternate), St. Petersburg College.
<bullet> Private nonprofit institutions of higher education
including institutions eligible to receive Federal assistance under
title III and title V of the HEA, Tribal Colleges and Universities, and
Historically Black Colleges and Universities: Aaron Lacey, Thompson
Coburn LLP, and Joanna Roush (alternate), Liberty University.
<bullet> Proprietary institutions of higher education, as defined
in 34 CFR 600.5: Jeff Arthur, ECPI University, and Ryan Claybaugh
(alternate), Paul Mitchell Advanced Education.
<bullet> State workforce agencies and workforce development boards:
Rachael Stephens Parker, Maryland Governor's Workforce Development
Board, and Andrea DeSantis (alternate), North Carolina Department of
Commerce.
<bullet> State grant agencies, and other State and non-profit
higher education financing organizations: J. Ritchie Morrow, Nebraska
Coordinating Commission for Higher Education, and Elizabeth McCloud
(alternate), Pennsylvania Higher Education Assistance Agency.
<bullet> State higher education executive officers, State
authorizing agencies, and other State regulators: Randy Stamper,
Virginia Community College System, and Heather DeLange (alternate),
Colorado Department of Higher Education.
<bullet> Accrediting agencies recognized by the Secretary of
Education: Michale McComis, Accrediting Commission of Career Schools
and Colleges, and Gedalia (Gary) Litke (alternate), Association of
Advanced Rabbinical and Talmudic Schools.
<bullet> Organizations representing taxpayers and the public
interest: Preston Cooper, American Enterprise Institute, and Ethan
Pollack (alternate), Jobs for the Future.
After obtaining extensive advice and recommendations from the
public, the Secretary, as required by Section 492 of the HEA, 20 U.S.C.
1098a, prepared draft regulations and submitted them to a negotiated
rulemaking process. The Committee for these proposed regulations
convened on January 5, 2026, and concluded on January 9, 2026. The
Committee reviewed and discussed draft regulations prepared by the
Department, as well as alternative regulatory language and suggestions
proposed by Committee members. Additionally, during each negotiated
rulemaking meeting, some non-Federal negotiators shared feedback that
they had received from stakeholders in their respective constituencies.
This approach facilitated the inclusion of a wide array of ideas and
perspectives, which contributed to the development of the consensus
language.
Under the organizational protocols for negotiated rulemaking agreed
to by all members of the Committee, if the Committee reaches consensus
on the proposed regulations, the Department agrees to publish, without
substantive alteration, a defined group of regulations on which the
Committee reached consensus--unless the Secretary reopens the process
or provides a written explanation to the participants stating why she
has decided to depart from the agreement reached during negotiations.
In this instance, consensus is considered to be the absence of dissent
by any member of the negotiated rulemaking Committee (abstaining
members are not considered to be dissenting from the proposal). The
Committee reached consensus on the entirety of the draft regulations on
January 9, 2026. As a result, this NPRM reflects the consensus language
with minor technical and non-substantive corrections which are noted in
subsequent sections of this NPRM.
As part of this process, the Department engaged in extensive
consultation with institutions of higher education in accordance with
Section 454(a)(4) of the HEA. Institutions were represented on the
negotiated rulemaking committee, were able to comment at the August 7,
2025 hearing, and are able to submit comments in response to this
proposed rule.

IX. Significant Proposed Regulations

The Department discusses substantive issues under the sections of
the proposed regulations to which they pertain. Generally, we do not
address proposed regulatory provisions that are technical or otherwise
minor in effect.

General Definitions

Annual Debt-to-Earnings Rate (Annual D/E Rate) (Sec. 668.2(b))
Statute: See the ``Authority for This Regulatory Action'' section
of this NPRM.
Current Regulations: The current regulations provide that the
annual debt-to-earnings rate is the ratio of a program's annual loan
payment amount to the annual earnings of the students who completed the
program, expressed as a percentage.
Proposed Regulations: None.
Reasons: The Department is proposing to eliminate references to the
D/E rates that are not needed for calculation of the earnings premium
metric and is eliminating this definition accordingly. For a more
detailed explanation for and analysis of the removal of the D/E rates,
please see the discussion later under the section ``Sec. 668.402--
Student tuition and transparency system framework.''
Cohort Period (Sec. 668.2(b))
Statute: Section 454(c)(2) of the HEA, added by the OBBB Section
84001, specifies that the initial period used to evaluate program
completers is the academic year four years before the year of
determination. Section 454 (c)(4) provides a procedure to obtain
further data to reach the minimum threshold requirement.
Current Regulations: Initially, the Department uses completers from
the third and fourth award year prior to the calendar year for which
the most recent earnings data is available, constructing a two-year
cohort period. If the program does not have at least 30 completers who
can be matched with earnings data, completers from the fifth and sixth
award years prior to the calendar year for which the most recent
earnings data is available are added to the two-year cohort period,
constructing a four-year cohort period. If at least 30 completers in
the four-year cohort period cannot be matched, metrics will not be
calculated for the program for that award year.
If a program is a qualifying graduate program, the award years used
for graduation shift three years further into the past (sixth and
seventh award year prior for the two-year cohort, adding the eighth and
ninth award year prior for a four-year cohort if needed to reach an n-

[[Page 21099]]

size of 30) to account for delayed earnings growth for mandatory post-
graduation training such as a residency program.
Proposed Regulations: Under the proposed regulations, the cohort of
students used to determine a program's median student earnings and
calculate the earnings premium metric under proposed 34 CFR 668 subpart
Q would begin with the program's graduates from a single award year
ending four years prior to the calendar year used to source earnings
data. For example, in 2027, earnings data from IRS records would be
available for calendar year 2025, and students who completed the
program in award year 2020-2021 would be included in this cohort.
If the single year cohort does not yield 30 completers or if a
sufficient number cannot be paired with earnings, the Department would
add completers from the fifth, sixth, seventh, and eighth award years
prior to the earnings year, one award year at a time, until a minimum
number of completers is reached. For example, if a program did not
yield enough completers from award year 2020-2021, students who
completed in award years 2019-2020, 2018-2019, 2017-2018, and 2016-2017
would be added as needed.
If the expanded cohort group still does not reach the minimum
number of completers, the cohort would continue to include the
completers from all five years (fourth through eighth award years prior
to the earnings year) at that six-digit CIP code and credential level.
Then, completers from programs at the same credential level sharing the
first four CIP code digits would be added one at a time, starting with
the fourth award year prior to the earnings year. Continuing with the
same example, the Department would keep completers at the six-digit
level for award years 2016-2017 through 2020-2021 and add 2020-2021
completers at the four-digit CIP level, then 2019-2020, and so on as
needed, stopping after adding completers from award year 2016-2017.
If adding completers from all five award years at the same
credential level sharing the same first four CIP code digits still does
not reach the minimum number of completers, the Department would keep
the completers at the six-digit and four-digit CIP levels and add
completers sharing the same credential level and first two digits of a
CIP code one award year at a time as needed, going from the fourth
award year through the eighth award year prior to the earnings year,
following the same pattern used to add completers at the four-digit CIP
level.
If cohort expansion proceeds through the addition of students who
completed a program in the fourth through eighth award years prior to
the earnings year at the six, four, and two-digit CIP levels and a
minimum number of completers still cannot be reached, the Department
would not publish median earnings or an earnings premium for the
program.
Reasons: The proposed regulatory language aligns with statutory
requirements in Sections 454(c)(2) and (4) of the HEA, added by Section
84001 of the OBBB, which requires the creation of a one-year cohort,
then aggregates additional years of programmatic data if needed, then
expands to add data from other similar educational programs. The
Department interprets the statutory phrase ``educational programs of
equivalent length'' used in Sections 454(c)(2) and (4) to refer to
programs offered at the same credential level.
Because the proposed framework only matches completers who are
working and who are not enrolled in an eligible institution during the
earnings year or subject to another exclusion, it is possible that a
cohort that meets the n-size of 30 will have too few matches to
earnings data for the federal agency with earnings data to meet their
own threshold to release what they consider to be statistically
reliable median earnings to the Department. In this case, it is
possible that further cohort expansion to additional steps in the
sequence would be required to obtain statistically reliable data.
Debt-to-Earnings Rates (D/E Rates) (Sec. 668.2(b))
Statute: See the ``Authority for This Regulatory Action'' section
of this NPRM.
Current Regulations: The current regulations define ``debt-to-
earnings rates'' as including discretionary debt-to-earnings rate and
annual debt-to-earnings rate as calculated under current Sec. 668.403.
Proposed Regulations: None.
Reasons: The Department is proposing to eliminate references and
requirements related to the current D/E rates that are not needed for
calculation of the earnings premium metric, and is eliminating this
definition accordingly. For a more detailed explanation for and
analysis of the removal of the D/E rates, please see the discussion
later under the section ``Sec. 668.402--Student tuition and
transparency system framework.''
Discretionary Debt-to-Earnings Rate (Discretionary D/E Rate) (Sec.
668.2(b))
Statute: See the ``Authority for This Regulatory Action'' section
of this NPRM.
Current Regulations: The current regulations define ``discretionary
debt-to-earnings rate'' as the percentage of a program's annual loan
payment compared to the discretionary earnings of the students who
completed the program, with discretionary earnings defined as the
median earnings for the program minus 150 percent of the poverty
guideline for a single person in the continental United States.
Proposed Regulations: None.
Reasons: Discretionary debt-to-earnings rates are one of the
components of debt-to-earnings rates, which would be eliminated under
the proposed consensus language.
Earnings (Sec. 668.2(b))
Statute: Section 454(c)(2) of the HEA, as amended by Section 84001
of the OBBB, specifies that the Secretary is to determine the earnings
of program completers.
Current Regulations: None.
Proposed Regulations: The Department proposes to define earnings
for the purposes of subparts Q and S of this part, as wages, and other
earned income as reported to the IRS, including net income reported
from self-employment. This does not include other forms of income
(whether taxed or untaxed).
Reasons: After discussions with negotiators, the Department
developed an earnings definition to provide clarity and transparency
regarding the types of earnings that would be included in the median
earnings used in the accountability metrics. Several negotiators raised
concerns regarding the types of income that would be included in or
excluded from the earnings metric, including unreported tips and the
value of certain housing allowances. The Department believes that the
proposed definition includes all relevant earnings sources for the
accountability metric; however, during negotiations, the Department
committed to asking a directed question on this topic to ensure that we
have considered all of the appropriate earnings from work and source
limitations in our definition. Please refer to the Directed Questions
section listed under the Supplementary Information section III for more
information.
Earnings Premium (Sec. 668.2(b))
Statute: Section 454(c)(2) of the HEA, added by Section 84001 of
the OBBB,

[[Page 21100]]

prescribes an accountability metric that compares the median earnings
for recipients of title IV, HEA program funds who completed a program
during a specific cohort period to the median earnings of a working
adult described in Section 454(c)(3). The statute stipulates that if
the program's median earnings are less than those of the comparison
group in two out of three award years, the program is a low-earning
outcome program. See also the ``Authority for This Regulatory Action''
section of this NPRM.
Current Regulations: The Department currently defines the term
``earnings premium'' as the amount by which the median annual earnings
of students who recently completed a program exceed the earnings
threshold, as calculated under current Sec. 668.404.
Proposed Regulations: The proposed regulatory language matches the
language in existing regulations but revises the citation from Sec.
668.404 to Sec. 668.403.
Reasons: The proposed change would update the regulatory citation
to align with the structure of the new proposed regulatory language.
Earnings Threshold (Sec. 668.2(b))
Statute: Section 454(c)(3) of the HEA, as amended by Section 84001
of the OBBB, specifies the populations used to develop the comparison
groups for the accountability metric under the OBBB.
Current Regulations: Median earnings are currently based on data
from the Census Bureau for working adults aged 25-34 with only a high
school diploma (or recognized equivalent), who were not currently
enrolled in an institution of higher education, and who either worked
during the year or indicated they were unemployed in the State in which
the institution is located. The median earnings would use national data
if fewer than 50 percent of the students in the program are from the
State where the institution is located or if the institution is a
foreign institution.
Proposed Regulations: The Department proposes to align the earnings
threshold definition with statutory requirements for both undergraduate
and graduate programs using the following methodology.
For undergraduate programs offered by an eligible institution
located in a State, the comparison group is based on data from the
Census Bureau, using the median earnings for working adults aged 25-34
with only a high school diploma (or recognized equivalent), who worked
and were not enrolled in an eligible institution. The Department uses
data for the State in which the institution is located, or national
data if fewer than 50 percent of the students enrolled in the
institution are from the State where the institution is located.
For graduate programs offered by an eligible institution located in
a State, the earnings threshold is based on data from the Census Bureau
for the median earnings of working adults aged 25-34 with only a
baccalaureate degree, who worked and were not enrolled in an eligible
institution at the time earnings were measured by the Census Bureau.
The median earnings used for the earnings threshold will be the lowest
of: (1) the median earnings of working adults in the State in which the
institution is located; (2) the median earnings of working adults in
the same field of study under the two-digit CIP or four-digit CIP code
in the State in which the institution is located; or (3) the median
earnings of working adults nationally in the same field of study under
the two-digit CIP or four-digit CIP code. If fewer than 50 percent of
the students enrolled in the institution are from the State where the
institution is located, the earnings threshold would use national data,
taking the lowest of the median earnings of working adults with a
baccalaureate degree, or the median earnings of working adults with a
baccalaureate degree in the same field of study under the two-digit CIP
or four-digit CIP code. For States and certain U.S. Territories, where
the Census Bureau data necessary to perform the calculations set forth
in subsections (1) and (2) is not available, there will be no earnings
threshold.
For eligible foreign institutions, the Department proposes using
different methodologies for undergraduate and graduate programs. For
undergraduate programs offered by eligible foreign institutions, the
comparison group would be based on data from the Census Bureau, which
provides the median earnings of working adults aged 25-34 in the United
States with only a high school diploma or recognized equivalent and who
were not enrolled in an eligible institution during the year of the
associated measured earnings. For graduate programs offered by eligible
foreign institutions the comparison group is based on data from the
Census Bureau, the median earnings of working adults aged 25-34 with
only a baccalaureate degree, who were not enrolled in an eligible
institution during the year of the associated measured earnings. The
median earnings will be the lowest of the median earnings of working
adults nationally in the United States; or nationally in the United
States in the same field of study under the two-digit CIP code or four-
digit CIP code.
Reasons: The Department's methodology for establishing the earnings
threshold is derived largely from Section 454(c)(3) of the HEA, as
amended by Section 84001 of the OBBB, with several exceptions described
below that are based on limitations on the Census Bureau data that the
law requires the Department to use.
Some negotiators raised questions about various elements of the
Census Bureau's ACS being used to determine the earnings threshold for
evaluation. The ACS is the only dataset maintained by the Census Bureau
that contains the data elements needed to compute the metric specified
in statute. During negotiated rulemaking, several negotiators indicated
concern about whether data for high school graduates might sometimes
include individuals with undergraduate certificates. The Department has
sought further clarification from the Census Bureau on how individuals
with undergraduate certificates are instructed to complete the
``highest educational attainment'' question on the ACS and will
incorporate these findings in the final regulations. We also encourage
commenters with insights into this data element to submit information
for the Department's consideration.
The law is prescriptive with regard to the exact manner in which
program earnings would be evaluated, specifying factors for comparison
such as age ranges, working status, education level, and geography.
Congress did not include a regional price parity adjustment in Section
84001, even though they included it elsewhere in the OBBB for value-
added earnings for eligible workforce programs. See Section 83002 of
the OBBB (adjusting median earnings based upon regional price parities
of the Bureau of Economic Analysis based on the location of the
program). In doing so, Congress demonstrated it knows how to require a
regional price adjustment when it wants to. Id.; see also Kimbrough v.
United States, 552 U.S. 85, 87 (2007) (reading implicit directives into
statues is disfavored where Congress has demonstrated it knows how and
has previously directed such practices in express terms). Here, it
omitted such an adjustment, and we assume it did so intentionally
because it did not want such an adjustment. Therefore, the Department
believes that it would be inconsistent with the statute for the program
earnings to be computed using a regional price adjustment.
Another negotiator submitted a suggestion to adjust the earnings
threshold for certificate programs having at least 75 percent of female

[[Page 21101]]

completers downward to 85 percent of the median earnings for the
comparison group to account for sex-based wage gaps. The Department
does not believe that it possesses the statutory authority to establish
different standards for completers of different sexes when analyzing
the outcomes of Title IV, HEA programs as the statute does not provide
any indication that Congress intended the Department to such
distinctions, either implicitly or explicitly.
Distinctions based upon sex are subject to intermediate scrutiny
under the Fifth Amendment to the Constitution. To survive such review,
the government must show ``at least that the challenged [sex-based]
classification serves important governmental objectives and that the
discriminatory means employed are substantially related to the
achievement of those objectives.'' See United States v. Virginia, 518
U.S. 515, 533 (1996) (quoting Mississippi Univ. for Women v. Hogan, 458
U.S. 718, 724 (1982), and Wengler v. Druggists Mut. Ins. Co., 446 U.S.
142, 150 (1980)) (cleaned up). To survive such review, the government
must demonstrate an ``exceedingly persuasive justification'' for that
action. Virginia, 518 U.S. at 531.
As stated previously, there is no clear statutory command in the
OBBB or the HEA more broadly directing the Department to create an
earnings variance based upon sex. Construing the statute to give us the
authority to create such a sex-based variance would create a
constitutional difficulty. Even if we assumed the statute was
ambiguous, the constitutional doubt canon would caution against reading
the statute to permit such a sex-based variance. Indeed, when an
ambiguous statute could be construed in either a constitutional manner
or a manner that creates constitutional difficulties, the
constitutional doubt canon directs the Department to construe the
statute ``to avoid the need even to address serious questions about
their constitutionality'' See United States v. Davis, 588 U.S. 445, 463
n. 7, (2019) (citing Rust v. Sullivan, 500 U.S. 173, 190-191(1991)).
Here, even if the statute could be read implicitly as giving us the
authority to create a sex-based variance, the constitutional doubt
canon requires us to avoid that constitutional difficulty by reading
the statute in a sex-neutral manner.
A sex-based variance could also raise problems with consistent
treatment of programs and could potentially lead to confusion.
Furthermore, a sex-based variance would conflict with Executive Branch
policy as required under Executive Order 14173's prohibition on
identity-based preferential treatment based on race, color, sex, sexual
preference, religion, or national origin.\12\
---------------------------------------------------------------------------

\12\ Exec. Order No. 14,173, Ending Illegal Discrimination and
Restoring Merit-Based Opportunity, 90 FR 8633 (January 21, 2025).
---------------------------------------------------------------------------

For the purposes of constructing the earnings threshold, a working
adult is an individual who earns a positive, non-zero income from
wages, salary, farm income, or self-employment and was not enrolled in
an eligible institution at the time earnings are measured by the Census
Bureau.
One negotiator submitted a proposal for incorporating SOC codes,
licensure-linked professional categories, predominant feeder bachelor's
degree fields, and two-digit, four-digit, and six-digit CIP codes into
the construction of the earnings threshold, with the Department using
whichever of the named categories has the lowest reliable median
earnings as a program's ``same field of study'' benchmark. When the
Department said that it did not currently have the data to support the
adoption of that proposal, the negotiator indicated a preference for
use of the four-digit CIP level instead of the two-digit level to
narrow interpretation of field of study around occupational field.
At this time, the Department believes the best data available for
matching field of study is the two-digit CIP data as recommended by the
statute. At this time, the ACS currently contains field of study
information that is only disaggregated at the 2-digit CIP level.
Further, the Department believes the two-digit CIP data is most
appropriate because it reasonably approximates earnings for similar
programs and is reliable. Should earnings data through ACS become
widely available and statistically reliable at the four-digit CIP level
at some point in the future, the Department would consider using such
data.
For graduate-level programs at institutions where at least 50
percent of enrollment is from the State in which the institution is
located, if statistically significant data (n-size of at least 30) for
working adults aged 25-34 in the same field of study in the same State
is unavailable, the Department proposes that the program will be
evaluated against the lower of median income for working adults with a
baccalaureate degree aged 25-34 in the same State and median income for
working adults aged 25-34 with a baccalaureate degree in the same field
of study nationally. The Department is concerned that calculating an
earnings threshold using less than 30 individuals could produce
arbitrary and non-representative values in which programs are judged
against. As described in the Directed Questions section above, the
Department is seeking feedback on this approach and possible
alternative approaches. Specifically, the Department is interested in
feedback related to the way that fields of study are defined. For
example, the Department is interested in feedback about grouping 2-
digit CIP codes into broader fields of study, which could reduce the
extent to which the Department is unable to calculate this median
earnings value. Further, the Department is interested in feedback about
other possible datasets maintained by the Census Bureau, and other
Federal agencies or external sources, that could be used for this
calculation. Please refer to the Directed Questions section listed
under the Supplementary Information section III for more information.
Eligible Non-GE Program (Sec. 668.2(b))
Statute: Section 431 of the GEPA grants the Secretary authority to
establish rules to require institutions to make data available to the
public about the performance of their programs and about students
enrolled in those programs. That section directs the Secretary 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, and also to inform the public
about Federally supported education programs.
Section 454(c)(2) of the HEA, as amended by Section 84001 of the
OBBB, establishes the accountability framework that makes programs with
low-earning outcomes ineligible for the Direct Loan program. This
section mentions the inclusion of undergraduate degrees, and graduate
and professional degrees, covering the scope of programs participating
in the title IV aid programs beyond merely gainful employment programs.
Current Regulations: The Department defines an eligible non-GE
program as an educational program other than a GE program offered by an
institution and included in the institution's participation in the
title IV, HEA programs, identified by a combination of the
institution's six-digit Office of Postsecondary Education ID (OPEID)
number, the program's six-digit CIP code as assigned by the institution
or determined by the Secretary, and the program's credential level.
Proposed Regulations: In the proposed regulation, the Department
provides a cross reference to HEA Section 454(c).

[[Page 21102]]

Reasons: The proposed additional phrase referencing 454(c) of the
HEA would provide clarity as to the source of authority being used,
making it clear that change is being made in direct response to
accountability provisions established in such section by the OBBB.
Federal Agency With Earnings Data (Sec. 668.2(b))
Statute: Section 454(c)(2) of the HEA, as amended by Section 84001
of the OBBB, specifies that earnings used in the accountability metric
are derived by a process to be determined by the Secretary.
Current Regulations: The regulations define a Federal agency with
which the Department enters into an agreement to access earnings data
for the D/E rates and earnings threshold. This may include agencies
such as the Treasury Department (including the IRS), the Social
Security Administration, the Department of Health and Human Services,
and the Census Bureau.
Proposed Regulations: The proposed regulations continue to define
the term to mean a Federal agency with which the Department enters into
an agreement to access earnings data for the earnings threshold or
value-added earnings measure and provide several examples of agencies
the Department may work with. The only changes to the definition
include the removal of a reference to D/E rates and the inclusion of a
reference to value-added earnings pertaining to eligible workforce
programs.
Reasons: The meaning of ``Federal agency with earnings data''
remains essentially the same under the proposed regulatory language as
compared to the current regulations. The reference to D/E rates was
eliminated because the Department is proposing to eliminate that metric
from the regulations. The reference to value-added earnings was added
as a conforming change to align with other parts of the regulatory
scheme.
Institutional Grants and Scholarships (Sec. 668.2(b))
Statute: Section 431 of the GEPA grants the Secretary authority to
establish rules to require institutions to make data available to the
public about the performance of their programs and about students
enrolled in those programs. That section directs the Secretary 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, and also to inform the public
about Federally supported education programs.
Current Regulations: The Department defines institutional grants
and scholarships as assistance that the institution or its affiliate(s)
controls or directs to reduce or offset the original amount of a
student's institutional costs and that do not have to be repaid.
Typically, an institutional grant or scholarship includes a grant,
scholarship, fellowship, discount, or fee waiver.
Proposed Regulations: The Department proposes to expand the
definition to include grants or scholarships that could convert to
loans if students do not meet certain requirements, and also would
outline what is not considered institutional grants or scholarships,
including Federal education benefits; State, Tribal, local, or private
grants and scholarships that the institution does not control or
direct; the institutional share of Federal Campus-based programs; or
assistance that must be repaid.
Reasons: The proposed additions would provide further clarification
and resolve confusion among stakeholders for which data elements should
be included in this reporting category. In reporting under the FVT/GE
regulations, this was a data field that generated numerous questions
from institutions regarding which aid types were and were not included
as institutional grants or scholarships. The Department believes that
further clarification would improve data quality.
Metropolitan Statistical Area (Sec. 668.2(b))
Statute: See the ``Authority for This Regulatory Action'' section
of this NPRM.
Current Regulations: The Department defines a metropolitan
statistical area as a core area containing a substantial population
nucleus, together with adjacent communities having a high degree of
economic and social integration with that core.
Proposed Regulations: None.
Reasons: The current regulations require institutions to report
whether a program meets licensure requirements or prepares students to
sit for a licensure exam for all states in their metropolitan
statistical area. The Department originally proposed to eliminate the
related reporting requirement because it was burdensome to institutions
and was not specifically relevant to the development of a net price.
However, several non-federal negotiators argued that the information
would be valuable for consumer information purposes, and the
administrative burden associated with the reporting would be diminished
if the required reporting aligned with the existing licensure
disclosure requirements under 34 CFR 668.43(a)(5)(v). The Department
agreed, and amended the proposed regulations to require institutions to
report whether a program meets licensure requirements or prepares
students to sit for a licensure examination in any State, and a list of
all States where the institution has determined the program meets such
requirements. Thus, the metropolitan statistical area is no longer part
of the reporting requirements and the regulatory definition would no
longer be necessary. As such, the Department proposes to eliminate the
definition from the regulations.
Poverty Guideline (Sec. 668.2(b))
Statute: See the ``Authority for This Regulatory Action'' section
of this NPRM.
Current Regulations: In section 668.2(b), the Department defines
poverty guideline as the U.S. Department of Health and Human Services'
published poverty guideline for a single person in the continental
United States.
Proposed Regulations: None.
Reasons: The poverty guideline's role in 34 CFR 668 subpart Q was
to establish discretionary earnings for the calculation of
discretionary debt-to-earnings rates, with discretionary earnings equal
to earnings minus 150 percent of the poverty guideline. With the
proposed removal of discretionary debt-to-earnings rates, the
Department no longer needs a definition for poverty guideline in part
668 and proposes to eliminate it.
Qualifying Graduate Program (Sec. 668.2(b))
Statute: See the ``Authority for This Regulatory Action'' section
of this NPRM.
Current Regulations: The Department defines a qualifying graduate
program as one where at least half of the program's graduates obtain
licensure in a field where post-graduation training requirements apply,
in a degree field specified by the Department and published in the
Federal Register. For the first three years of rates, these programs
would be in the fields of medicine, osteopathy, dentistry, clinical
psychology, marriage and family counseling, clinical social work, and
clinical counseling.
Proposed Regulations: None.
Reasons: Under the current regulations, the distinction for
qualifying graduate programs was created to account for the fact that

[[Page 21103]]

graduates in required post-graduation training programs, such as
residency programs, have reduced earnings for a longer period of time
following graduation. The time frame prescribed by the OBBB uses the
same span between graduation and earnings measurement for all program
types, including undergraduate and graduate programs. Since the
framework in proposed 34 CFR 668 subpart Q uses the time span
prescribed by statute for graduates of all program types, creating a
separate distinction for qualifying graduate programs is no longer
necessary, and the Department therefore proposes to eliminate the
definition.
Substantially Similar Program (Sec. 668.2(b))
Statute: See the ``Authority for This Regulatory Action'' section
of this NPRM.
Current Regulations: The Department indicates that two programs are
deemed substantially similar if they share a 4-digit CIP code,
regardless of credential level.
Proposed Regulations: None.
Reasons: The concept of substantially similar programs as currently
described in the regulations does not comport with the Department's
proposed earnings accountability framework. The current definition uses
a different restriction on establishing new programs with subject
matter overlapping programs that were voluntarily discontinued or lost
eligibility following failing metrics under proposed 34 CFR
668.604(b)(2), but that restriction employs different criteria and
different terminology. The exemption from reporting for substantially
similar program groupings under FVT/GE did not have an equivalent
provision in the OBBB statute, nor was a similar provision added in
negotiated rulemaking. Therefore, due to changes in statute and
proposed regulatory changes related to the new accountability metric,
the Department determined that the substantially similar program
definition is no longer necessary and proposes to eliminate it.

Student Tuition and Transparency System (STATS)

Student Tuition and Transparency System Scope and Purpose (Sec.
668.401)
Statute: Section 431 of the GEPA requires the Secretary to prepare
and disseminate information about applicable programs to states, LEAs,
and institutions. The Secretary must also inform the public about
federally supported education programs. The Secretary is required to
collect data and information on applicable programs for the purpose of
obtaining objective measures of effectiveness of such programs to
achieve their intended purpose. In addition, Section 454(c)(2) of the
HEA, as amended by Section 84001 of the OBBB, establishes an
accountability framework that identifies low-earning program outcomes.
Current Regulations: The current regulations require institutions
to report information about a GE program or eligible non-GE program to
the Secretary. The Secretary evaluates the program's debt and earnings
outcomes for the programs. The regulations in part 668, subpart Q
generally exempt institutions located in U.S. Territories or Freely
Associated States, except for the reporting requirements under current
Sec. 668.408. In addition, the regulations also exempt institutions
that did not offer any groups of substantially similar programs,
meaning groups of programs with the same four-digit CIP code, that
produced fewer than 30 total completers within the last four award
years.
Proposed Regulations: The Department proposes to rename part 668,
subpart Q from Financial Value Transparency to Student Tuition and
Transparency System (STATS) to better reflect the subpart's focus on
students and transparency. The current version of this regulation does
not apply to institutions in the U.S. Territories and the Freely
Associated States, except that such institutions are required to report
data under current Sec. 668.408. The proposed regulations would update
the regulations to create a framework that applies to those
institutions. We further clarify that the STATS framework applies to
nearly all programs eligible for title IV, HEA funds, including both GE
programs and eligible non-GE programs offered by an eligible
institution.
Reasons: We believe it is necessary to update the language to
clearly affirm the removal of the exemptions for institutions located
in U.S. Territories or Freely Associated States and institutions with
no groups of substantially similar programs with a total of at least 30
completers over the four most recently completed award years. The OBBB
does not specifically exempt such programs and, in order to avoid
confusion, complexity, and additional burden to institutions, the
Department is proposing to harmonize the OBBB's earnings accountability
framework with requirements for GE programs. Additionally, given the
sequential expansion of cohorts provided under the OBBB explained in
the proposed changes to the definition of ``cohort period'' at Sec.
668.2, we anticipate few instances where the earnings premium measure
would not be calculated for a program.
The U.S. Territories and Freely Associated States are already
required to report data under the FVT framework. The Department
believes that modification of this regulation to include all eligible
institutions and a wider range of programs would benefit students and
the general public by providing useful and comparable information
across institutions and programs, regardless of where the institution
is located.
Student Tuition and Transparency System Framework (Sec. 668.402)
Statute: Section 454(c) of the HEA), as amended by Section 84001 of
the OBBB, describes a process whereby the Secretary determines the
Direct Loan eligibility for certain programs based on the calculation
of the median earnings of program completers. In addition, Section 431
of the GEPA requires the Secretary to collect and publish data on
applicable programs to obtain objective measurements of effectiveness
of such programs in achieving their intended purposes. See also the
``Authority for This Regulatory Action'' section of this NPRM.
Current Regulations: The current regulations at Sec. 668.402(b)
establish a framework through which the Secretary determines the debt
and earnings outcomes for a GE program or an eligible non-GE program
using debt-to-earnings rates and an earnings premium measure.
Currently, the debt-to-earnings rates are determined when the Secretary
calculates for each award year two D/E rates for an eligible program:
the discretionary debt-to-earnings rate, and the annual debt-to-
earnings rate. The discretionary D/E rate compares annual loan payments
for student debt to the borrower's total discretionary income above 150
percent of the Federal poverty line. The annual debt-to earning rate
compares annual loan payments for student debt to the borrower's total
annual income.
A program passes the D/E rates if its discretionary debt-to
earnings rate is less than or equal to 20 percent, if its annual debt-
to-earnings rate is less than or equal to 8 percent, or if the median
annual or discretionary earnings of either rate is zero and the median
debt payment amount is zero.
A program fails the D/E rates if it fails both parts of a two-prong
test. First a program fails the D/E rates test if its discretionary
debt-to-earnings rate is greater than 20 percent, or the income for the
median discretionary earnings is

[[Page 21104]]

negative or zero and the median debt payment amount is positive.
Second, a program fails the D/E rates if its annual debt-to-earnings
rate is greater than 8 percent or the median annual earnings is zero
and the median debt payment amount is positive.
The Secretary also calculates the earnings premium measure for an
eligible program for each award year. A program passes the earnings
premium measure if the median annual earnings of the students who
completed the program exceed the earnings threshold, which represents
the median annual earnings of those who did not attend postsecondary
education. A program fails the earnings premium measure if the median
annual earnings of the students who completed the program are equal to
or less than the earnings threshold.
Proposed Regulations: The current FVT/GE framework includes two
tests: the earnings premium measure test and the debt-to-earnings rate
test. Under the existing regulations under part 668, subpart S, GE
programs that fail the same test in two out of three consecutive years
for which rates were calculated lose all title IV, HEA program
eligibility. The Department proposes to remove the D/E rate metric and
use only an earnings premium measure.
For programs in States where an earnings threshold cannot be
determined, an earnings premium would only be calculated if at least 50
percent of the students enrolled in the institution are from locations
other than that State. If, during the award year in which the
calculations are performed, 50 percent or more of the students enrolled
in the institution are from the State, no earnings premium measure
would be calculated; the Department would, however, make the earnings
data for these programs available to the public.
Reasons: We believe the proposed revision to remove D/E rates is
consistent with the statute, which provides for an earnings premium and
does not establish a D/E rate. The Department recognizes and
acknowledges that it is changing its position on this issue. The
Department has previously issued regulations on these issues four
times. This includes the 2011 Prior Rule (76 FR 34385), the 2014 Prior
Rule (79 FR 64889), and the 2019 Prior Rule (84 FR 31392), which
rescinded the 2014 Prior Rule, and the 2023 Prior Rule, which restored
and revised major aspects of the 2014 Major Rule.
The 2011 Prior Rule (which was vacated in federal court), the 2014
Prior Rule, and the 2023 Prior Rule all asserted that the gainful
employment statute authorized a D/E eligibility test. The 2019 Prior
Rule repealed the D/E eligibility test, arguing that had ``the
Department believes that the GE regulations do not align with the
authority granted by section 431 of the Department of Education
Organization Act since the D/E rates measure that underpins the GE
regulations does not provide an objective measure of the effectiveness
of such programs.'' 84 FR 31395.
The Department did not take the position in the 2019 Prior Rule
that Section 102 of the HEA did not permit it to establish an earnings
outcome measure under the gainful employment authority. Rather, the
Department abandoned the D/E rate because it viewed it as a ``flawed
metric that inflates a borrower's monthly or annual repayment
obligation above that which is required by the law and does not
accurately distinguish between high-quality and low-quality programs.''
84 FR 31434. The Department is changing its position here because the
Department agrees with the 2019 rule that D/E metric does not
accurately distinguish between high-quality and low-quality programs
and for other reasons discussed below.
The Department also proposes to harmonize the requirements for GE
programs, including undergraduate certificate programs, with the
requirements of the OBBB for all other programs, reducing complexity,
taxpayer cost, and burden on institutions. During negotiated
rulemaking, some negotiators agreed from the outset with the
Department's proposed changes to eliminate the D/E rate calculation.
They noted that the Department's effort to implement the accountability
framework enacted in the OBBB would be coherent, administrable, and
applied consistently across proprietary, nonprofit, and public
institutions. They acknowledged that the proposed elimination of the
debt-to-earnings metric reduces unnecessary complexity while preserving
meaningful accountability. These negotiators believed the shift
reflects statutory intent and promotes regulatory durability. On the
other hand, other negotiators initially believed that the D/E test
should continue to apply to all GE programs because it is an important
accountability measure to ensure the Department does not waste valuable
resources funding programs that may leave students in a position where
they are unable to pay their debt. They argued that the D/E metric
protects students from spending their time, money, and resources on
programs that could leave them in a position where they are unable to
afford their student loan payment relative to their earnings. These
negotiators also stressed their belief that the D/E metric would remain
important in the years to come as policy shifts. They opined that the
new loan limits established by the OBBB will cause an uptick in private
lending which may leave students vulnerable to predatory lending, high
interest, and unable to repay their loans. Although these negotiators
were initially reluctant to eliminate the D/E metric, they ultimately
voted to do so.
The Department agrees with the negotiators who supported removing
the D/E rates. Calculation of D/E rates requires the use of a
significant amount of data reported by institutions to the Department
beyond what is normally necessary to administer the title IV, HEA
programs. During the implementation of the current FVT regulations,
many institutions expressed confusion with the reporting requirements,
which may have resulted in reporting of inaccurate data. The
Department's proposed approach would dramatically reduce complexity for
institutions because the earnings premium test relies on administrative
enrollment data that institutions have become accustomed to reporting
for more than 10 years.
Furthermore, the Department's analysis of data obtained for the
College Scorecard revealed that it is likely that including a D/E test
for GE programs would not result in a substantial number of additional
programs failing the metric. The Department estimates that, after
accounting for the programs that fail the earnings premium measure,
maintaining the D/E metric would result in a 0.2 percentage point
increase in the share of all programs that would, and that share would
likely be even smaller once pending changes to loan limits \13\ under
the OBBB are implemented (see Table 6.1 in the ``Alternatives
Considered'' section, below). In the Department's view, this amounts to
a de minimis number of impacted programs. The Department notes that the
estimated net budget impact for the proposed regulation reflects a
larger effect from removing the D/E metric than the Department's
separate analysis that identifies additional failing programs used for
research purposes.\14\
---------------------------------------------------------------------------

\13\ The OBBB establishes new loan limits for students enrolled
in graduate programs that will become effective July 1, 2026. For
more information, see 91 FR 4254.
\14\ The 0.2 percentage point increase in failing programs that
would occur if a D/E metric were added to the accountability
framework is estimated using data from a more recent cohort of
students than those used to estimate fail rates in the budget
baseline. The more recent cohort has higher earnings than the older
cohort, partly because the older cohort earnings were measured
during the COVID-19 pandemic. Additionally, the D/E metric in the
budget baseline uses a different earnings metric that produces lower
earnings and therefore higher fail rates under the D/E metric than
in the count of failing programs.

---------------------------------------------------------------------------

[[Page 21105]]

The Department seeks to reduce unnecessary regulatory burden on
institutions as part of our broader effort to implement Executive Order
14192, entitled ``Unleashing Prosperity Through Deregulation.'' 90 FR
9065. After considering the de minimis impact that continuing to use
the D/E rates would have on eligibility, the Department believes that
the value-added earnings premium test would have virtually the same
substantive effect in providing quality assurance that programs lead to
gainful employment while substantially reducing the burden on
institutions. Given the significant reduction in regulatory burden and
the de minimis effect on program eligibility, the Department has
determined that deregulating by eliminating the D/E rates is
appropriate and advances the Executive Branch's policy to deregulate
under Executive Order 14192. In sum, the Department believes
eliminating the D/E metric would be fairer to institutions, more
consistent across sectors and program types, and would provide useful
and comparable information to students and the general public when
comparing all types of programs.
The Department has considered reliance interests relating to the
current D/E rate calculation. The Department thinks the reliance
interests are minimal here because the Department is not aware of D/E
rates from any of the GE regulations being widely used by consumers as
a gauge of institutional quality. The Department thinks that reliance
on the part of institutions is minimal as the D/E rate creates
institutional burden associated with reporting and compliance.
Calculating Earnings Premium Measure (Sec. 668.403)
Statute: Section 454 (c)(3) of the HEA, as amended by the OBBB,
explains the requirements for calculating the median earnings of
program completers. The Secretary is also required to collect data and
information on programs to ascertain the effectiveness of such programs
in achieving their intended purposes under Section 431 of the GEPA.
Current Regulations: The current regulation entitled ``Calculating
Earnings Premium Measure'' is numbered as Sec. 668.404. The Secretary
calculates the earnings premium measure for a program by determining
whether students' annual earnings exceed the earnings threshold.
Under current regulations, a Federal agency with earnings data
provides the Secretary with the most currently available median annual
earnings of the students who completed the program during the cohort
period. The Secretary uses the median annual earnings of students with
a high school diploma or GED to calculate the earnings threshold. The
Secretary annually publishes the earnings thresholds in the Federal
Register.
In current Sec. 668.404(c), students are excluded from the
earnings premium measure calculation if the Secretary determines that
(1) one or more of the student's Direct Loans have been approved for a
total and permanent disability discharge; (2) the student was enrolled
full-time in any other program qualifying for title IV, HEA funds
during the calendar year of the earnings data; (3) for an undergraduate
program, the student completed a higher credentialed undergraduate
program at the same institution prior to the earnings premium measure
calculation; (4) for a graduate program, the student completed a higher
credentialed graduate program at the institution prior to the earnings
premium measure calculation; (5) the student is enrolled in an approved
prison education program; (6) the student is enrolled in a
comprehensive transition and postsecondary (CTP) program; or (7) the
student died.
The Secretary does not issue the earnings premium measure for a
program if fewer than 30 students completed the program during the two-
year or four-year cohort period or when the Federal agency with
earnings data does not provide the programs median earnings data for
the program.
Proposed Regulations: First, the Department proposes to strike the
existing 668.403 regulation entitled Calculating D/E rates, consistent
with our proposal to eliminate that metric. As a conforming change, we
propose to renumber the ``Calculating Earnings Premium Measure''
provisions currently in Sec. 668.404 to 668.403.
The proposed regulations would slightly broaden the programs
considered to be passing the earnings premium measure calculation to
include those in which the median annual earnings of the students who
completed the program equal or exceed the earnings threshold, as
opposed to only those whose earnings exceed the threshold as under the
current regulations. In proposed Sec. 668.403(b)(1), the proposed
regulations clarify that the calculation would use the most currently
available median annual earnings of the students who completed the
program during the cohort period and would specifically consider
earnings from the fourth tax year following program completion of
students who are working. Proposed changes to Sec. 668.403(b)(2) would
more generally describe the earnings thresholds as using the median
annual earnings of working adults, removing the reference to students
with a high school diploma or GED, consistent with the proposed changes
to the definition of the earnings threshold discussed in Sec. 668.2.
Under proposed Sec. 668.403(b)(3), the Secretary would no longer
publish the earnings thresholds using a notice in the Federal Register,
instead allowing the Department to publish the earnings threshold
through other, less formal means, such as, on a website.
Reasons: The Department proposes to update which programs would
pass the earnings premium measure to incorporate the changes included
in the OBBB accountability framework. Section 84001 of the OBBB states
that a program only fails if the median earnings of its graduates are
less than the median earnings of a working adult, which would allow a
program to pass if the median graduate earnings were equal to working
adults. The OBBB accountability framework only includes working
students in that median calculation, a change from the current
regulations which include both working and non-working students in the
calculation of median earnings for a program.
Initially, the Department proposes to remove an exclusion for
completers of graduate programs, whereby the Secretary would exclude a
student from the earnings premium measure calculation for a graduate
program if the Secretary determined that the student completed a higher
credentialed graduate program at the institution subsequent to
completing the program as of the end of the most recently completed
award year prior to the calculation of the earnings premium measure.
The Department believed that this exclusion for higher credentialed
graduate programs would apply less frequently than in undergraduate
programs, and that removing it could potentially reduce confusion and
burden for institutions. Institutions raised numerous questions during
the 2024 and 2025 FVT/GE reporting cycles. For example, institutions
repeatedly asked why an associate degree

[[Page 21106]]

completer would be excluded if they later completed a bachelor's
degree, but a bachelor's completer would not be similarly excluded if
they later completed a graduate or professional degree. Institutions
also voiced confusion about higher credential roll-up when graduate-
level sequences of study did not follow a numerical progression of
credential levels. For example, as a first professional degree, a Juris
Doctor (JD) would have the credential level ``07''. In many cases a
student pursuing further study after the JD would seek a Master of Laws
(LLM), which as a master's degree would correspond with the credential
level ``05''. Because a master's degree corresponds to a lower-numbered
credential level in the FVT/GE framework, debt from a JD program would
not roll up to a subsequently completed LLM degree at the same
institution, despite the fact that a LLM is considered to be further
along the sequence of study. With this in mind, the Department
initially proposed removing higher credential roll-up for graduate-
level programs. However, during negotiated rulemaking, negotiators
noted the importance of maintaining higher credential roll-up. In
response to negotiators who advocated for the retention of this
exclusion, we agreed to retain the language to exclude students who
completed graduate programs and then went on to complete a higher-
credentialed graduate program at the same institution. The Department
agreed with the negotiators that there are several potential downsides
associated with the removal of the higher credential exclusion and
roll-up, including the possibility that the earnings of a student
completing a master's degree on the way to completing a doctoral degree
could be counted in the master's program rather than the doctoral
program. Typically, in such circumstances, the doctoral degree is the
terminal degree and would be the program that is more appropriately
evaluated under the earnings accountability framework.
For undergraduate certificate programs only, some negotiators also
proposed to use the 60th percentile of completer earnings, rather than
the median, for undergraduate certificate programs only. Those
negotiators believed that using the 60th percentile would provide a
more accurate and stable measure of program performance while
preserving rigorous accountability. They believed that this approach
would not alter the comparison benchmark, the timing of earnings
measurement, or the statutory structure of the earnings premium test.
The negotiators also believed that the refinement would improve
measurement accuracy, reduce false negative determinations driven by
known statistical distortions, and remain consistent with the
accountability objectives of the OBBB. The Department disagreed,
indicating that using the 60th percentile of completer earnings for
undergraduate certificate programs only would unfairly advantage these
programs compared with other programs and would contradict the
Department's goal of a fair framework that treats all types of academic
programs consistently. Furthermore, using the 60th percentile of
completer earnings is inconsistent with the accountability framework
established in the OBBB, which calls for the use of medians.
The Department believes that it is important to publish earnings
thresholds annually, however the publication of the earnings threshold
in the Federal Register annually would be burdensome for the
Department. The Department believes it is more appropriate to include
it with other guidance that we publish, such as a Dear Colleague Letter
or publication on a Department website, in part because there would be
significantly more variants of the earnings thresholds under the OBBB
framework than for the existing FVT framework.
Process for Obtaining Data and Calculating Earnings Premium Measure
(Sec. 668.404)
Statute: Section 454(c) of the HEA, as amended by the OBBB,
describes the data that the Secretary uses to calculate the median
earnings of certain student cohorts to determine low earning outcome
programs. In addition, Section 431 of the GEPA requires the Secretary
to prepare and disseminate information about applicable programs to
determine whether programs achieved their intended purpose.
Current Regulations: The current regulations at Sec. 668.405
explain the process the Department uses to calculate D/E rates and
earnings premiums for programs using enrollment, disbursement, and
program data, along with other title IV, HEA participation data
institutions are required to report to the Secretary. An institution
must correct or update any reported data within 60 days after an award
year.
The current process allows the Secretary to use the data to create
a list of students who completed programs during the cohort period,
obtain from a Federal agency with earnings data the median annual
earnings of the students on each list, calculate the D/E rates and
earnings premium measure, and provide them to the institution.
Proposed Regulations: The Department proposes renumbering Sec.
668.405 to 668.404 as a conforming change, following the elimination of
Sec. 668.403 ``Calculating D/E rates'' as mentioned above. We would
also modify the process described in the regulations to allow the
Secretary to calculate the earnings premium measure using Federal
agency earnings data reports from records of earnings on at least 16
students who are working. We propose to strike the current provision
that removes the highest loan debts for the number of completers not
matched to earnings data, because it is unnecessary after removal of D/
E rates.
Reasons: Since the IRS would most likely be the Federal agency to
provide earnings data, and it sets its threshold for returning
aggregated earnings data to more than 15 individuals, we propose to
change to 16 individuals to establish that threshold. The Department
indicated that it expects that the IRS would be the Federal agency that
provides the earnings data, but as discussed above in Sec. 668.2, the
proposed regulations would offer the Department flexibility to use data
from another Federal agency or a combination of data from multiple
agencies if appropriate. Additionally, we propose removing language
from the current regulation which required the highest loan debts to be
removed for the number of completers that did not match earnings data.
That calculation would no longer be needed, because it is unnecessary
after removal of D/E rates calculations.
Determination of the Earnings Premium Measure (Sec. 668.405)
Statute: HEA Section 454 (c)(6) requires institutions to provide
warnings to students regarding at-risk programs. Section 454 (c)(7)
also states that programs that fail the earnings test are ineligible
for Direct Loan program participation for a period of not less than two
years.
Current Regulations: The Secretary calculates D/E rates and the
earnings premium measure for a program, for each award year. The
Secretary issues a notice of determination to inform institutions of
the D/E rates for each program, the earnings premium measure for each
program, and the consequences of passing or failing GE programs. The
Secretary also determines whether student acknowledgments are required.
For GE programs, the notice of determination informs the institution
whether the GE program could become

[[Page 21107]]

ineligible based on its final D/E rates or earnings premium measure for
the next award year, and whether the institution must provide student
warnings for a GE program at the risk of losing title IV, HEA
eligibility.
Proposed Regulations: We propose to renumber Sec. 668.406 to Sec.
668.405 and to rename the section consistent with the elimination of
the D/E rate calculation from the transparency framework. The proposed
regulations would also eliminate all references to the D/E rate
calculation and the acknowledgement process and would refer to all
programs, instead of GE programs, when describing program eligibility
consequences for failing the measure.
Reasons: The Department would determine if programs pass or fail
the earnings premium measure and reference warnings across all types of
programs. Institutions would no longer need to require student
acknowledgments under Sec. 668.407, since the accountability framework
in part 668, subpart S, including the student warning process in Sec.
668.605, would now apply to both GE and non-GE programs. The separate
student acknowledgement process is not required under the OBBB
framework, and it is duplicative with the warning process described in
34 CFR 668.605. Overall, the changes to this section would be made to
reflect the elimination of the D/E rates calculation from the
regulation and to reflect the change of scope to apply provisions
consistently to both GE programs and eligible non-GE programs.
Reporting Requirements (Sec. 668.406)
Statute: Section 431 of the GEPA grants the Secretary authority to
establish rules to require institutions to make data available to the
public about the performance of their programs and about students
enrolled in those programs. That section directs the Secretary to
collect data and information on applicable programs for the purpose of
obtaining objective measures of the effectiveness of such programs in
achieving their intended purposes and also to inform the public about
Federally supported education programs.
Current Regulations: Current 34 CFR 668.408(a) specifies the data
elements that institutions must report to the Department under the FVT
framework. An institution offering any group of substantially similar
programs, defined as all programs in the same four-digit CIP code at an
institution, with 30 or more completers in total over the four most
recent award years, must report to the Department certain data at the
program level and at the student level.
At the program level, for each GE program and eligible non-GE
program, an institution must report for its most recently completed
award year--
<bullet> The name, CIP code, credential level, and length of the
program;
<bullet> Whether the program is programmatically accredited and, if
so, the name of the accrediting agency;
<bullet> Whether the program meets licensure requirements or
prepares students to sit for a licensure examination in a particular
occupation for each State in the institution's metropolitan statistical
area;
<bullet> The total number of students enrolled in the program
during the most recently completed award year, including both
recipients and non-recipients of title IV, HEA funds; and
<bullet> Whether the program is a qualifying graduate program whose
students are required to complete postgraduate training programs, as
described in the current definition under 34 CFR 668.2.
Current 34 CFR 668.408(a)(2) specifies the student-related data
elements that must be reported annually to the Department. For each
student, institutions must report the following--
<bullet> Information needed to identify the student and the
institution;
<bullet> The date the student initially enrolled in the program;
<bullet> The student's attendance dates and attendance status
(e.g., enrolled, withdrawn, or completed) in the program during the
award year;
<bullet> The student's enrollment status (e.g., full-time, three-
quarter time, half time, less than half time) as of the first day of
the student's enrollment in the program;
<bullet> The student's total annual cost of attendance (COA);
<bullet> The total tuition and fees assessed to the student for the
award year;
<bullet> The student's residency tuition status by State or
district;
<bullet> The student's total annual allowance for books, supplies,
and equipment from their COA under HEA section 472;
<bullet> The student's total annual allowance for housing and food
from their COA under HEA section 472;
<bullet> The amount of institutional grants and scholarships
disbursed to the student;
<bullet> The amount of other State, Tribal, or private grants
disbursed to the student; and
<bullet> The amount of any private education loans disbursed to the
student for enrollment in the program that the institution is, or
should reasonably be, aware of, including private education loans made
by the institution.
The current regulation under 34 CFR 668.408(a)(3) further requires
an institution to report the following information on students who
completed or withdrew from the program during the award year--
<bullet> The date the student completed or withdrew from the
program;
<bullet> The total amount the student received from private
education loans, as described in current 34 CFR 668.403(d)(1)(ii), for
enrollment in the program that the institution is, or should reasonably
be, aware of;
<bullet> The total amount of institutional debt, as described in 34
CFR 668.403(d)(1)(iii), the student owes any party after completing or
withdrawing from the program;
<bullet> The total amount of tuition and fees assessed to the
student for the student's entire enrollment in the program;
<bullet> The total amount of the allowances for books, supplies,
and equipment included in the student's title IV, HEA COA for each
award year in which the student was enrolled in the program, or a
higher amount if assessed by the institution for such expenses; and
<bullet> The total amount of institutional grants and scholarships
provided for the student's entire enrollment in the program.
The current regulation under 34 CFR 668.408(a)(4) states that
institutions must report any other information the Secretary requires,
as published by the Department in the Federal Register.
The current regulations under 34 CFR 668.408(b)(1) provides the
timing for initial and annual reporting. Except as provided under the
transitional reporting option under paragraph (c) of this section, for
initial reporting an institution was required to report the program-
level and student-level information described above no later than July
31, 2024.
For all subsequent award years, institutions must annually report
the required information by October 1 following the end of the relevant
award year, unless the Secretary establishes different dates in a
notice published in the Federal Register.
The current regulations under 34 CFR 668.408(b)(2) address the
possible failure of an institution to provide all or some of the
required information. For any award year in which an institution fails
to provide all or some of the required information, the institution
must provide to the Secretary an explanation, acceptable to her, of why
the institution failed to comply with any of the reporting
requirements.
The current regulations under 34 CFR 668.408(c)(1) provide for an
optional

[[Page 21108]]

transitional reporting period and metrics.
For the first six years for which D/E rates and the earnings
premium are calculated under the current regulations, institutions
could opt to instead initially report the required program-level and
student-level information for its eligible programs for only the two
most recently completed award years.
The current regulations under 34 Sec. CFR 668.408(c)(2) provide
that if an institution chose the transitional reporting option, the
Department would for the first six years calculate transitional D/E
rates using the earnings for students who graduated during the cohort
period but the median debt for the more recent period reported. In
other words, as the Department explained in Dear Colleague Letter GEN
24-04, for institutions using transitional rates, to calculate D/E
rates for the institution's programs, the Department would use earnings
for the students from the appropriate cohort period but would use debt
information for different students from the most recently completed
award years covered by transitional reporting.
Proposed Regulations: The proposed regulations would modify the
data elements reported to the Department by adding new items, adding
specificity to others, and removing items that would no longer be
needed under the proposed STATS framework. The Department proposes to
retain many of the existing reporting requirements in current 34 CFR
668.408. We intend to renumber 34 CFR 668.408 to Sec. 668.406 to
conform with deleted prior sections of this part.
In 34 CFR 668.406(a), we are proposing to make several changes. We
propose to expand the types of institutions required to report by
removing the current exemption for institutions with no groups of
substantially similar programs with 30 or more total completers over
the four most recently completed award years. With regard to licensure
reporting, we also seek to collect a list of all States where the
institution has determined a program meets licensure requirements,
rather than collecting only information about the States in the
institution's metropolitan statistical area.
The proposed regulations would clarify the reporting requirement
for the cost of attendance by requiring institutions to report values
for the award year. We also wish to clarify that when reporting the
tuition and fees assessed to the student, institutions should report
the actual amount for that student (not a general amount for a category
of students). Institutions would report a student's residency tuition
status only as applicable (rather than in all cases). This would
capture whether a student was charged in-State (or in-county or in-
district) tuition rates or out-of-State rates, or if residency status
is irrelevant (i.e., tuition is calculated without regard to
residency). The proposed regulations would also more clearly describe
the amount and types of aid disbursed for the award year (e.g., grants
and private loans).
For students who completed or withdrew from a program during the
award year, the proposed regulations would remove reported items
related to certain graduate programs that require postgraduate
training, student attendance dates, withdrawal dates (if applicable),
enrollment statuses, and total institutional debt upon completing or
withdrawing from a program.
In 34 CFR 668.406(b), the proposed regulations would change the
date institutions must initially report the information specified in 34
CFR 668.406(a) to October 1 following the date the regulations take
effect, while for subsequent annual reporting the date would remain
October 1 of each year as under the current reporting requirements.
We propose to remove references to 34 CFR 668.406(c) and to remove
references to qualifying graduate programs.
The proposed regulations would also remove the transitional
reporting process and metrics provided under current 34 CFR 668.406(c).
Reasons: Renumbering 34 CFR 668.408 to Sec. 668.406 is a
conforming change required by the deletion of 34 CFR 668.403 and
668.407. This is necessary to ensure consistency and alignment
throughout the CFR.
The modifications to the data elements defined in 34 CFR
668.406(a)(1), and ultimately reported to the Department, are required
in part because the Department seeks to reexamine and remove reporting
items when possible. We believe removing certain items would be helpful
to institutions because it should reduce reporting burden and
complexity. Some items would be removed because they support metrics or
processes that would not be used; other items would be removed because
they would not support the Department's more focused priorities for
transparency data.
When reporting under the current FVT/GE requirements, institutions
often questioned the Department about how to best report the licensure
status for each State in the institution's metropolitan statistical
area. During negotiated rulemaking, several negotiators indicated that
they believed that the licensure information provided substantial value
to consumers, and that reporting burden on institutions could be
minimized if the list of States matched the similar listing in existing
public disclosure requirements. Therefore, in 34 CFR
668.406(a)(1)(iii), the Department agreed to instead require
institutions to provide a list of all States where the institution
determines the program meets such requirements. Although this change
would expand the number of States that an institution would be required
to report, because that list would be consistent with existing
disclosure requirements under 34 CFR 668.43(a)(5)(v), the requirement
would still be simpler for institutions to perform than narrowing the
reporting to only certain metropolitan statistical areas. This change
would clarify and simplify the reporting requirement for institutions
while still yielding useful information for informational disclosures
to students.
In 34 CFR 668.406(a)(1)(v), we propose removing the reporting
element addressing whether a program is a qualifying graduate program
whose students are required to complete postgraduate training programs.
We propose this because under HEA Section 454(c)(2), the Department
must measure earnings four years after graduation for all types of
programs, with no extended earnings measurement period for graduate
programs with postgraduate training requirements.
In 34 CFR 668.406(a)(2), the proposed regulations would clarify the
items to be reported to the Department. These clarifications are
intended to help institutions regarding which amounts should be
reported (e.g., actual tuition and fees) and the time period applicable
to those amounts (e.g., award year).
We propose the addition of the phrase ``as applicable'' in the
context of reporting the student's residency tuition status by State or
district because some institutions do not distinguish between States or
districts or make residency status distinctions related to tuition
charges. We believe this change would help reduce confusion for
institutions reporting this information.
In 34 CFR 668.406(a)(3), the Department now believes it can obtain
the date the student withdraws or completes the program from routine
NSLDS enrollment reporting data and does not need a separate reporting
item under the STATS requirements.
We propose to remove the total amount of institutional debt the
student may owe any party after completing or withdrawing from the
program because

[[Page 21109]]

it would no longer be needed for purposes of the debt-to-earnings rate
(which we propose to eliminate) and because of the complicated way that
institutions were required to report this information, particularly for
withdrawn students. We believe this change would substantially reduce
burden for institutions.
We propose to include the total amount of Federal, State, private,
or other grants and scholarships provided for the student's entire
enrollment in the program to obtain a more complete picture of the
amount of aid an individual receives from an institution in order to
calculate a more accurate net price. The Department has collected this
through FVT annual amount reporting for the 2024 and 2025 reporting
cycles, so this is not a new concept, but we believe it is also
necessary for institutions to report this as total amount data for
students who complete or withdraw. However, we believe it is
appropriate to add a regulatory requirement for something that we would
need to collect.
One negotiator argued that private loan debt should not be reported
to the Department. The negotiator stressed that reporting this item
would introduce data quality, interpretive, and equity concerns and
could lead to misleading conclusions, particularly when used in
conjunction with earnings-based accountability measures. The Department
disagrees and believes private loan debt that the institution is, or
normally should be, aware of should be reported in order to convey the
greatest extent of consumer information regarding current and future
costs (e.g., tuition due at once and future loan repayment obligations)
to prospective and current students. In accordance with 34 CFR
668.16(f)(3), the Department does not expect that private loans that
the institution does not know about, or should not be normally aware
of, be reported.
In 34 CFR 668.406(b) we made conforming changes to remove
references to the eliminated section 34 CFR 668.406(c) and to improve
readability and clarity. We made further changes by proposing to limit
the scope of information that must be reported under this section from
five years' worth to two. The Department has already, in most cases,
collected data from the prior period through the reporting process
under the existing FVT regulations.
We propose removal of 34 CFR 668.406(c) because we see no need for
a transitional reporting process under the revised accountability
framework. The OBBB requirements are specific and do not provide for a
transitional reporting period and metrics. The proposed new framework
does not demand institutional reporting of debt, scholarship, or grant
values for cohorts of students who graduated or withdrew numerous years
in the past.

Earnings Accountability

Earnings Accountability Scope and Purpose (Sec. 668.601)
Statute: Section 481 of the HEA defines, in part, certain
categories of an ``eligible program,'' including most undergraduate
nondegree programs, as a ``program of training to prepare students for
gainful employment in a recognized profession.'' Section 454 of the
HEA, as amended by Section 84001 of the OBBB, further establishes an
accountability framework for programs qualifying for title IV, HEA
assistance that lead to an undergraduate degree, graduate or
professional degree, or graduate certificate that evaluates such
programs by measuring the earnings outcomes of graduates.
Current Regulations: Current regulations under 34 CFR 668.601
establish the scope and purpose of the Department's existing
accountability framework under part 668, Subpart S. As noted in Sec.
668.601(a), the current accountability framework applies to programs
that prepare students for gainful employment in a recognized occupation
and establishes rules and procedures for the Department to make title
IV, HEA eligibility determinations regarding such programs.
Current Sec. 668.601(b) provides two exemptions from the GE
accountability framework under subpart S. First, the current
regulations categorically exempt institutions located in U.S.
Territories or Freely Associated States. Second, the regulations exempt
a particular institution if it offered no groups of substantially
similar programs, at any credential level within the same four-digit
CIP code, that produced a combined total of 30 or more completers over
the four most recently completed award years.
Proposed Regulations: Proposed changes to Sec. 668.601 would
rename the accountability framework under subpart S from Gainful
Employment to Earnings Accountability and would broaden its scope to
cover both GE programs and eligible non-GE programs, applying the
accountability framework to include the same institutions and programs
covered under the transparency framework and thereby extending
accountability to nearly all programs qualifying for title IV, HEA
assistance. Notwithstanding the significantly expanded universe of
institutions and programs that the revised accountability framework
would cover, the proposed changes would also narrow the scope of the
Department's eligibility determinations under subpart S from
determinations of a program's overall title IV, HEA eligibility to
determinations of Direct Loan program eligibility only.
The proposed changes would also eliminate the exemptions under
current Sec. 668.601(b) for institutions located in U.S. Territories
and Freely Associated States and for institutions that offer no groups
of substantially similar programs that produced at least 30 total
completers over the four most recently completed award years.
Reasons: The accountability framework delineated under Section
84001 of the OBBB applies broadly to undergraduate degree programs,
graduate or professional degree programs, and graduate certificate
programs, without regard to institutional sector. Some negotiators
proposed that the Department entirely rescind the existing GE
accountability framework in favor of the OBBB accountability framework
to reduce regulatory complexity. Other negotiators countered that
rescinding the current GE accountability framework would exclude
undergraduate certificate programs from oversight, putting students and
taxpayers at an increased risk that may lead to poor earnings outcomes
in these programs. If the Department were to rescind the GE
accountability framework, it would leave undergraduate certificate
programs without any meaningful programmatic accountability, in stark
contrast to virtually all other programs, which would remain subject to
accountability measures. Similar to the non-federal negotiators, who
ultimately voted in favor of the proposed framework here, the
Department is firmly unpersuaded that undergraduate certificate
programs should be exempt from consequences due to low earnings. Such
an exception would not be in the best interest of students or
taxpayers.
Although undergraduate certificate programs were not specifically
mentioned in Section 84001 of the OBBB, the Department notes that
Congress nonetheless did not explicitly forbid the Secretary from
applying the accountability framework to those programs, nor did
Congress choose to otherwise eliminate, limit, or curtail the
Department's existing GE accountability framework, either when crafting
the OBBB or in any other prior legislative act. Additionally, Congress
did not eliminate other authorities that authorize the Department to
ensure accountability, such as under the

[[Page 21110]]

quality assurance system authority in the HEA. 20 U.S.C. 1087d(a)(4),
(7). Conversely, records clearly demonstrate that Congress was well
aware that undergraduate certificate programs were already covered
using a similar earnings test under the Department's GE accountability
framework.\15\ When Congress passed the OBBB, the Department was
implementing final rules on GE that were in effect and had not been
enjoined, yet Congress made no attempt to alter those regulations. This
stands in contrast to how the OBBB delayed the Department's borrower
defense to repayment and closed school loan discharge regulations until
2035, eliminated the statutory authority for three income-driven
repayment plans that had been created by the Department in regulations,
and most importantly created accountability rules for all programs that
were not covered by the GE framework.
---------------------------------------------------------------------------

\15\ See Senate Comm. on Health, Educ., Labor, and Pensions,
Q&A'S ABOUT HIGHER EDUCATION IN THE ONE BIG BEAUTIFUL BILL at 4
(``Which types of programs are covered by the ``do no harm''
earnings standard? . . . The earnings standard applies to
undergraduate degree, graduate degree, and graduate certificate
programs. (It does not apply to undergraduate certificate programs,
which are covered by a similar earnings test in the Gainful
Employment regulation)''), available at <a href="https://www.help.senate.gov/imo/media/doc/faq_docpdf.pdf">https://www.help.senate.gov/imo/media/doc/faq_docpdf.pdf</a>.
---------------------------------------------------------------------------

This context provides compelling support for the notion that
Congress did not implicitly relieve only undergraduate certificate
programs from all levels of accountability at the same time that it
established earnings accountability measures for all other programs for
the first time. The better reading is that Congress did not, in the
OBBB, disrupt the statutory authority that the Department had, prior to
enactment, relating to GE, the quality assurance system authority, and
other authorities in the HEA. The Department therefore believes that
rescinding the existing GE framework outright, and thereby excluding
undergraduate certificate programs from the accountability framework,
would be inconsistent with the statute. Again, we also fully agree with
the negotiators who noted that doing so would put students and
taxpayers at an increased risk.
A negotiator also suggested that for severability purposes, the
Department should maintain two separate accountability frameworks, one
for GE programs and another for the programs specified under Section
84001 of the OBBB. As stated above, the Department maintains that it
has the legal authority to impose an accountability regime on
undergraduate certificate programs, a position upheld by federal
courts.\16\ But even if we do not (which we would vigorously contest),
a court could narrowly tailor a remedy to enjoin application of the
rule against only certificate programs while leaving the rest of the
scheme intact. As such, the negotiator's concerns about severability
are overstated. In addition, having separate GE and OBBB accountability
frameworks would add significant complexity, increase administrative
burden and costs for institutions and the Department, and could
generate increased confusion for students in comparing and
understanding differing informational disclosures and warnings
generated from multiple frameworks that apply to different institutions
and programs. As the Department explained during negotiated rulemaking,
we view harmonization of the existing FVT/GE framework and the OBBB
accountability framework to be essential in promoting parity among
institutions and program types through a single accountability
framework that covers the vast majority of programs qualifying for
title IV, HEA assistance and nearly all title IV, HEA recipients.
---------------------------------------------------------------------------

\16\ See Ass'n of Priv. Sector Colleges & Universities v.
Duncan, 640 F. App'x 5, 8 (D.C. Cir. 2016) (``Had Congress been
uninterested in whether the loan-funded training would result in a
job that paid enough to satisfy loan debt, it would have created a
federal grant system instead of a federal loan system focusing on
preparation for gainful employment.''); American Assoc. of
Cosmetology, 2025 WL 4219345, at *5; Ass'n of Priv. Colleges &
Univs. v. Duncan (Duncan I), 870 F. Supp. 2d 133, 146 (D.D.C. 2012);
See Ass'n of Private Sector Colleges & Univs. v. Duncan (Duncan II),
110 F. Supp. 3d 176, 184, 186 (D.D.C. 2015); Ass'n of Proprietary
Colleges v. Duncan, 107 F. Supp. 3d 332, 358, 362-63 (S.D.N.Y.
2015).
---------------------------------------------------------------------------

While the Department appreciates the negotiator's concerns about
severability, as we explain above in the ``Authority for This
Regulatory Action'' section, we believe this proposed rule falls
squarely within the Secretary's statutory authority. Nonetheless, as we
explain in the discussion of definitions under Sec. 668.2(b), the
Department proposes a minor revision to the current definition of an
eligible non-GE program, in part to address the negotiator's concerns
about severability and to provide additional clarity regarding which
programs would be subject to the accountability framework.
Some negotiators suggested that programs the Department determines
to lead to low-earning outcomes under the proposed accountability
framework should lose access to all title IV, HEA programs, as required
under the current GE accountability framework, rather than only losing
eligibility for the Direct Loan program. These negotiators expressed
concern about students using their limited lifetime Pell Grant
eligibility on programs that are not performing well, and argued that
the prospect of losing all title IV, HEA funding for low-earning
outcome programs would better incentivize institutions to shift their
program offerings away from failing programs or to improve the quality
of their programs, which in turn would better serve the interests of
students and taxpayers. Other negotiators argued that a program's loss
of Direct Loan program eligibility would in many cases already lead to
the closure of the program, or in some cases even the institution
itself.
The Department notes that it has a greater interest in applying an
earnings accountability framework to the Direct Loan program because,
unlike the other title IV, HEA programs, the government and taxpayers
expect loan funds to be repaid, and a student's earnings generally
correlates with their ability to repay. We further note that the
accountability framework set forth in Section 84001 of the OBBB resides
in the Direct Loan program-specific provisions in HEA Section 454,
which generally limits the scope of consequences to the Direct Loan
program only. To the extent that undergraduate certificate programs
would be covered by the proposed accountability framework under another
statutory authority (i.e., the longstanding HEA requirement for such
programs that lead to gainful employment in a recognized occupation),
we believe that such authority does not explicitly or inherently
require loss of all title IV, HEA eligibility as the sole remedy for
noncompliance.
In addition, to address negotiator concerns regarding continued
Pell Grant eligibility for low-earning outcome programs, the Department
further proposes changes to the PPA and administrative capability
regulations at sections Sec. Sec. 668.14 and 668.16, respectively,
that would terminate title IV, HEA eligibility for all of an
institution's low-earning outcomes programs if more than half of the
institution's title IV, HEA recipients or title IV, HEA revenue are
from low-earning outcome programs. We further address those provisions
in the discussions below for the relevant regulatory sections.
We further note that while a 15-year history of pendular regulatory
changes pertaining to GE has contributed to an environment of lasting
uncertainty for institutions, students, and other stakeholders, not one
program has yet lost eligibility under the current GE accountability
framework or any of the

[[Page 21111]]

multiple prior iterations of GE accountability rules. We believe that
treating institutions and programs consistently would reduce the
likelihood of ongoing regulatory fluctuation. The Department's goal in
proposing this unified framework is to at last set forth a harmonized,
reasonable, data-driven, minimally burdensome, and implementable
accountability framework that ensures parity across all institutions
and program types. This framework is designed to withstand the test of
time, provide stability for institutions, and offer actual, realized
protections for students and taxpayers. To that end, we firmly believe
the scope of this proposed accountability framework strikes the correct
balance, is well founded, and is consistent with our statutory
authority, as further demonstrated by the higher education community's
support, expressed through consensus in negotiated rulemaking.
With regard to the proposed removal of the exemptions under current
Sec. 668.601(b)(1), Section 84001 of the OBBB does not extend
authority to the Department to categorically exempt institutions
located in the U.S. Territories or Freely Associated States from the
earnings accountability framework. Regarding the proposed removal of
the current exemption under Sec. 668.601(b)(2) for institutions that
offer no groups of substantially similar programs that produced at
least 30 total completers over the four most recently completed award
years, Section 84001 of the OBBB similarly does not include this
specific exemption. With that said, as discussed above with regard to
Sec. 668.403, the Department proposes not to issue an earnings premium
measure if the fully expanded cohort period includes fewer than 30
completers and--given the robust cohort period expansion procedures
proposed--we anticipate that few students attend programs that would
fall below this minimum threshold. Similarly, as discussed above,
earnings thresholds would not be calculated for programs in States
(including U.S. Territories) where available data from the Census
Bureau does not allow for a computation of such a threshold.
Earnings Accountability Criteria (Sec. 668.602)
Statute: Section 481 of the HEA defines, in part, an ``eligible
program'' as a ``program of training to prepare students for gainful
employment in a recognized profession.'' Section 454 of the HEA, as
amended by Section 84001 of the OBBB, further establishes an
accountability framework that evaluates earnings and employment
outcomes using an earnings test and limits Direct Loan program
eligibility to programs that do not fail this metric in two out of
three years.
Current Regulations: Current Sec. 668.602(a) stipulates that the
Department considers a GE program to lead to gainful employment in a
recognized occupation if it satisfies three conditions. First, the GE
program must meet certain certification requirements as set forth in
Sec. 668.604. Second, the GE program must not fail the D/E rates
measure in two out of any three consecutive award years in which the
Department calculates D/E rates for the program. Third, the GE program
must similarly not fail the earnings premium measure in two out of any
three consecutive award years in which the Department calculates said
measure for the program.
If the Department does not calculate or issue D/E rates for a
program for an award year, current Sec. 668.602(b) clarifies that the
program receives no result under the D/E rates for that award year and
would remain in the same status under the D/E rates metric as the
previous award year. Current Sec. 668.602(c) further provides that
when making program eligibility determinations, the Department
disregards any D/E rates that were calculated more than five
calculation years prior.
Similarly, if the Department does not calculate or issue the
earnings premium measure for a program for an award year, current Sec.
668.602(d) clarifies that the program receives no result under the
earnings premium measure for that award year and would remain in the
same status under said metric as the previous award year. Current Sec.
668.602(e) similarly provides that when making program eligibility
determinations, the Department disregards any earnings premium that was
calculated more than five years prior.
Proposed Regulations: Consistent with the proposed changes in scope
discussed above with Sec. 668.601, proposed changes to Sec. 668.602
would rename the section from ``Gainful employment criteria'' to
``Earnings accountability criteria'' and would expand the universe of
programs covered by those criteria to include both GE programs and
eligible non-GE programs. In addition, consistent with proposed changes
discussed above in Sec. 668.402, proposed changes to Sec. 668.602
would remove all references to the D/E rates metric, establishing the
earnings premium measure as the sole earnings accountability metric.
Under the proposed earnings accountability criteria, the Department
would consider a GE program or eligible non-GE program to lead to
acceptable earnings outcomes if the program satisfies the certification
requirement under Sec. 668.604 and the program does not fail the
earnings premium measure in two out of any three consecutive award
years in which the Department calculates it.
As under the current GE framework, if the Department does not
calculate or issue the earnings premium measure for an award year, the
program would receive no result for that award year and would remain in
the same status under the accountability framework as in the previous
award year. For example, if the program fails said measure in one year,
and the following year the Department does not calculate the measure,
the program would retain eligibility and would continue to be treated
as a program that has failed in one year (e.g., the program would
remain eligible, student warning requirements would continue to apply,
and the program would become ineligible for Direct Loan program
participation if the Department calculates a failing earnings premium
measure in either of the following two years in which the measure is
calculated). The Department would no longer disregard an earnings
premium that was calculated more than five years prior.
Reasons: The Department proposes to rename this section to reflect
the revised scope of the institutions and programs covered under the
accountability framework. HEA Section 454(c)(2), as amended under
Section 84001 of the OBBB, applies broadly to undergraduate degree
programs, graduate and professional degree programs, and graduate
nondegree programs without regard to whether those programs are GE
programs or eligible non-GE programs. For the reasons discussed in
Sec. 668.601 above, the Department proposes to expand the scope of the
earnings accountability framework, including the criteria here in Sec.
668.602 by which the Department would determine whether a program leads
to acceptable earnings outcomes, to encompass both GE programs and
eligible non-GE programs.
With regard to the proposed removal of D/E rates as an
accountability metric, as the Department notes in the discussion of
proposed Sec. 668.402, the Direct Loan program accountability
framework in HEA Section 454(c) establishes an earnings comparison
metric only, not a debt-to-earnings measurement. Moreover, we again
note that the Department's data analysis

[[Page 21112]]

shows that maintaining the D/E rates metric would result in a 0.2
percentage point increase in the share of failing programs (see Table
6.1 in the ``Regulatory Impact Analysis'' section). In the Department's
view this marginal addition would not justify the significant
difference in complexity, cost, and administrative burden of including
D/E rates.
Retaining a program for which the Department does not calculate the
earnings premium measure for a given award year under the program's
same status as the preceding year is consistent with the Department's
treatment of programs under the current GE framework, and we believe it
remains logical for the program to retain the same status under its
most recently calculated results for purposes of determining whether
the program leads to acceptable outcomes and whether current and
prospective students should be alerted to those outcomes. With that
having been said, the Department proposes to no longer discard a
calculated earnings premium measure from more than five award years
prior, as HEA Section 454(c) does not provide that exclusion, and --
given the more robust cohort period expansion procedures proposed in
this rule as discussed above in Sec. Sec. 668.2 and 668.403--we
anticipate that few students attend programs that would fall below the
minimum completer threshold and believe that the vast majority of
students will attend programs where an earnings premium measure is
calculated.
Low-Earning Outcome Programs (Sec. 668.603)
Statute: Section 454(c)(1) of the HEA, as amended by Section 84001
of the OBBB, stipulates that a low-earning outcome program is
ineligible for Direct Loan program participation. HEA Section 454(c)(5)
provides the opportunity for an institution to appeal the Department's
determination of a program's low-earning outcome status. HEA Section
454(c)(7) establishes a period of ineligibility of not less than two
years for a low-earning outcome program. See also the ``Authority for
This Regulatory Action'' section of this NPRM.
Current Regulations: Current Sec. 668.603(a) stipulates that a GE
program becomes ineligible for title IV, HEA participation if it either
fails the D/E rates metric in two out of any three consecutive award
years in which the Department calculates its D/E rates or fails the
earnings premium measure in two out of any three consecutive award
years in which the Department calculates said measure.
Depending upon the institution's circumstances, there are three
mechanisms whereby the Department may process an ineligible GE
program's loss of eligibility. For an institution that is fully
certified at the time of the loss of eligibility, the Department would
initiate a termination action of program eligibility under part 668,
subpart G. For an institution that is provisionally certified at the
time of the loss of eligibility, the Department would initiate a
revocation of the failing GE program's eligibility. If the Department
is currently reviewing the institution's application for title IV, HEA
recertification at the time of the loss of eligibility, the Department
may simply issue a new PPA that does not include the ineligible GE
program.
The current regulations at Sec. 668.603(b) explain the conditions
under which an institution may appeal a GE program's loss of title IV,
HEA eligibility. An institution may only appeal in instances when the
Department processes a GE program's loss of eligibility through a
termination action under part 668, subpart G, and it may only do so on
the basis that the Department erred in the calculation of the program's
D/E rates or earnings premium measure. The current regulations do not
provide a similar appeal option in cases where the Department processes
a GE program's loss of eligibility through a revocation action for a
provisionally certified institution, or where the Department simply
issues a new PPA that does not include the ineligible GE program.
The current regulations at Sec. 668.603(c) stipulate that an
institution may not disburse title IV, HEA funds to students enrolled
in an ineligible program, except as provided in the Department's
existing regulations at Sec. 668.26(d) which allow conditional
disbursements of Pell Grant and Direct Loan program funds for,
respectively, the remaining portion of the payment period or period of
enrollment during which the program lost eligibility. It also
establishes a three-year period of ineligibility during which an
institution may not seek to reestablish the eligibility of a program
that is ineligible under the D/E rates or the earnings premium measure,
or to reestablish the eligibility of a failing GE program that the
institution discontinued voluntarily before or after the Department
issued the program's D/E rates or earnings premium measure. Either of
these categories of programs remains ineligible until the institution
again establishes the eligibility of the program under current Sec.
668.604(c).
Proposed Regulations: Consistent with the proposed changes in scope
discussed above in Sec. 668.601, proposed changes to Sec. 668.603
would rename the section from ``Ineligible GE programs'' to ``Low-
earning outcome programs'' and would expand the universe of programs
covered under this section to include both GE programs and eligible
non-GE programs. In addition, the changes would remove all references
to the D/E rates metric, leaving the earnings premium measure as the
sole earnings accountability metric. Under proposed Sec. 668.603(a),
the Department would classify a GE program or eligible non-GE program
as a low-earning outcome program if it fails the earnings premium
measure in two out of any three consecutive award years in which it is
calculated.
Unlike the current regulations, which include several mechanisms by
which the Department may process a program's loss of title IV, HEA
eligibility, the proposed changes would require the Department in all
instances to process a low-earning outcome program's loss of Direct
Loan program eligibility as a termination action under part 668,
subpart G. This change would extend to all institutions the option to
appeal a low-earning outcome program's loss of Direct Loan program
eligibility as provided under proposed Sec. 668.603(b). Similar to the
current regulations, the proposed regulations would limit appeals to
only instances where the Department erred in the calculation of the
program's earnings premium measure.
Proposed Sec. 668.603(c) would generally limit the consequences
for a low-earning outcome program to the loss of Direct Loan program
eligibility only, and it would reduce the period of ineligibility from
three years under the current regulations to two years. Similar to the
current regulations, a low-earning outcome program, or a failing
program that the institution voluntarily discontinues, would remain
ineligible until the institution reestablishes the eligibility of the
program under proposed Sec. 668.604.
Proposed Sec. 668.603(c)(4) would provide an institution with a
program that fails the earnings premium measure in a single year an
alternative option to retain limited eligibility for the lesser of
three years or the full-time normal duration of the program during an
orderly closure of the program, provided that the Secretary determines
this extension is in the best interest of students. To qualify for the
orderly program closure option, the failing program must not yet meet
the criteria of a low-earning outcome program (i.e.,

[[Page 21113]]

has not failed the earnings premium measure in two out of three years
in which it was calculated), and the institution must, within 120 days
of the Department's notice of determination under proposed Sec.
668.405, amend the institution's PPA. Under the amended PPA, the
institution would--
(1) Cease accepting new enrollments to the program, regardless of
the student's title IV, HEA eligibility, on or after the date of the
agreement;
(2) Engage in an orderly closure of the program in which the
institution provides an opportunity for enrolled individuals to
complete their program, regardless of their academic progress at the
time of program closure;
(3) Inform the institution's State authorizing agency and
accrediting agency of the orderly program closure, and meet any program
discontinuation or closure requirements of those agencies;
(4) Acknowledge that the program has been voluntarily discontinued
and is otherwise subject to the two-year ineligibility period under
proposed Sec. 668.603(c)(2), which would begin when the last student
exits the program;
(5) Maintain the program under a warning status and provide the
warning notice to students as otherwise required under proposed Sec.
668.605, with the exception of the warning element under proposed Sec.
668.605(c)(1)(ii) informing students that the program could lose access
to Direct Loans based on the next calculated program metrics;
(6) Provide students the academic and financial options to continue
their education in another program, either at the same institution or a
different institution, to which the student's academic credit would
transfer and that has not failed to satisfy the earnings premium
measure; and
(7) Not restart the same program or start a program sharing the
same four-digit CIP code for at least two award years following the
completion of the orderly program closure.
Proposed Sec. 668.603(c)(4)(ii) would prevent an institution from
accessing the orderly program closure option in cases where, based on
the program's compliance, the program or the institution is subject to
a probation or equivalent action by a recognized accrediting agency or
State regulatory agency, including licensing boards, or where the
institution is subject to the Department's heightened cash monitoring 2
(HCM2) or reimbursement method of payment under Sec. 668.162(c).
Reasons: As with sections Sec. Sec. 668.601 and 668.602 above, the
Department proposes to rename this section to reflect the revised scope
of the institutions and programs covered under the accountability
framework. HEA Section 454(c)(2), as amended by Section 84001 of the
OBBB, applies broadly to undergraduate degree programs, graduate and
professional degree programs, and graduate nondegree programs without
regard to whether those programs are GE programs or eligible non-GE
programs. For reasons discussed in Sec. 668.601 above, the Department
proposes to expand the scope of the earnings accountability framework,
including the criteria here in Sec. 668.603 by which the Department
would determine whether a program leads to acceptable earnings
outcomes, to encompass both GE programs and eligible non-GE programs,
while also generally limiting the consequences for a low-earning
outcome program to the loss of Direct Loan eligibility only, as
provided in statute. Consistent with the wording Congress selected in
HEA Section 454(c)(2), as revised by Section 84001 of the OBBB, and to
reflect the narrower scope of the earnings determination given the
proposed removal of the current D/E rates metric, the Department
proposes to refer to GE and non-GE programs that fail the
accountability metric as ``low-earning outcome programs.'' As specified
in HEA Section 454(c)(7), the period of Direct Loan program
ineligibility for such programs would be two years.
A negotiator recommended that the Department retain the existing
mechanisms provided under the current regulations for the streamlined
removal of low-earning outcome programs in cases where the institution
is provisionally certified or where the low-earning outcome
determination occurs during the Department's consideration of an
institution's recertification application, arguing that removing these
mechanisms would increase administrative burden on the Department and
delay it in acting to protect students and taxpayers from investing in
low-earning outcome programs. Although the Department appreciates the
negotiator's concerns, we believe the requirement in HEA Section
454(c)(5) to provide an appeal option applies in all instances where a
low-earning outcome program would lose Direct Loan program eligibility
under the accountability framework, which necessitates the proposed
change to the mechanisms under current Sec. 668.603(a) by which the
Department would process the change in eligibility. Processing all such
losses of Direct Loan program eligibility as termination actions would
extend the existing appeal process under part 668, subpart G to any
institution with a low-earning outcome program, consistent with the
OBBB requirement. Moreover, this approach would also reflect the
Department's goal of harmonizing the requirements and processes across
institutions and programs, as further discussed above in Sec. 668.601.
Some negotiators suggested that low-earning outcome programs should
not retain Direct Loan program eligibility during the appeal process,
arguing that a higher volume of appeals could be expected under the
proposed rule, which could slow the Department's processing of appeals
while low-earning outcome programs remain eligible during the appeal
process. Negotiators also suggested that the Department require
institutions to provide a letter of credit during the appeal process.
The Department, however, notes that the statutory language in HEA
Section 454(c)(5) allows such programs to continue to participate in
the Direct Loan program during an appeal. Administering the required
appeals process using existing procedures under part 668, subpart G
would allow the Department to both meet this requirement and provide
consistency with the Department's treatment of institutions in other
types of eligibility appeals. In addition, given that no programs would
lose Direct Loan program eligibility under the proposed rule until the
second year of calculations, we believe there is sufficient time for
the Department to plan and prepare for any anticipated change to the
volume of appeals. With regard to the suggestion to require a letter of
credit during the appeals process, while we concur that doing so would
likely reduce the volume of appeals, we note that providing a letter of
credit involves many consequences for institutions and may not be
necessary in all instances to protect taxpayer interests. Imposing a
LOC is principally used by the Department to protect taxpayers against
potential unpaid institutional liabilities and would not be reasonable
in all circumstances where a program at an institution fails the
earnings

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