What's Happening?
An advisory committee of the Education Department has approved new regulations requiring all postsecondary programs to pass a single earnings test. This new accountability measure, set to be implemented
in July, aims to ensure that graduates of these programs earn more than individuals with only a high school diploma. The regulations stipulate that programs failing this test will lose access to federal student loans and, if they continue to fail, will also lose eligibility for the Pell Grant. The decision follows extensive negotiations and a compromise that was necessary to reach consensus among committee members. The new rules are designed to protect students and taxpayer funds by cutting off federal aid to programs that do not provide sufficient financial value to graduates.
Why It's Important?
The implementation of this earnings test is significant as it introduces a stricter accountability framework for postsecondary programs, potentially affecting a large number of students and educational institutions. By tying federal student aid to the financial outcomes of graduates, the Education Department aims to ensure that taxpayer investments in higher education yield positive returns. This move could lead to the closure of programs that fail to meet the new standards, thereby impacting institutions, particularly for-profit colleges, which have a higher percentage of programs that might not pass the test. The regulations are expected to protect approximately 2% of students and save close to a billion dollars annually in Pell Grant funds.
What's Next?
The proposed regulations will be released for public comment before being finalized. The Education Department will review feedback and issue a final rule. Institutions will need to prepare for the new standards, which could involve restructuring or discontinuing programs that do not meet the earnings criteria. The department's efforts are part of a broader initiative to implement the One Big Beautiful Bill Act, which includes other regulatory changes related to student loans and workforce training programs. The finalization of these rules is anticipated by July 1, with further developments expected as the department continues to refine its approach to higher education accountability.
