What's Happening?
A new report from the Postsecondary Education & Economics Research Center at American University indicates that approximately 2.5 percent, or 488,900 of the 19.9 million students receiving federal student aid, are enrolled in programs expected to fail
the Education Department's new accountability measure. This measure, known as the earnings test, was launched on July 1 but will not result in penalties until 2028, as it requires at least two years of data. Under the test, bachelor's-level degree or certificate programs will fail if their average graduates do not earn more than a high school graduate in the same state for two out of three consecutive years. Graduate-level programs will be compared to the earnings of bachelor's degree holders. While the overall impact is small, the study identifies specific concentrations of programs likely to fail.
Why It's Important?
This earnings test represents a significant step by the Education Department to hold postsecondary programs accountable for the economic outcomes of their graduates. Although the immediate impact is projected to be limited, it signals a shift towards performance-based funding and could influence program offerings and institutional strategies. Programs that consistently fail the test risk losing access to federal student loans, which could severely impact their enrollment and financial viability. The concentration of failing programs in fields like mental health, social services, cosmetology, allied health, and medical administration suggests that students in these areas may face increased scrutiny regarding the return on their educational investment. This policy aims to protect students from investing in programs that do not lead to sufficient earning potential, potentially redirecting federal aid to more effective programs.
What's Next?
The earnings test will gather data over the next two years, with the first penalties potentially being applied in 2028. Institutions offering programs identified as likely to fail will need to assess their curricula, career services, and student outcomes to improve graduate earnings. They may also need to consider program restructuring or discontinuation to avoid losing federal funding eligibility. The report's findings could prompt further discussions among policymakers about the effectiveness of various educational programs and the criteria used to evaluate them. Students considering enrollment in programs identified as at-risk may re-evaluate their choices, seeking programs with stronger post-graduation employment and earning prospects. The implementation of this test could lead to a more outcome-driven approach to higher education across the U.S.
Beyond the Headlines
The earnings test, while seemingly a straightforward accountability measure, touches upon deeper issues regarding the purpose and value of higher education. It implicitly prioritizes economic outcomes over other potential benefits of education, such as personal enrichment, civic engagement, or contributions to fields that may not offer high immediate financial returns. The concentration of failing graduate-level programs in mental health and social services, fields critical for societal well-being, raises questions about whether the earnings test adequately captures the full value of these professions. This policy could inadvertently disincentivize enrollment in vital but lower-paying fields, potentially exacerbating shortages in critical service sectors. It also highlights the ongoing tension between market demands for specific skills and the broader mission of higher education to foster diverse knowledge and societal good.
