Today, the U.S. Department of Education (the Department) announced a final rule establishing a long-overdue postsecondary education accountability framework. Under the new Student Tuition and Transparency System (STATS) and Earnings Accountability rule, undergraduate programs will be required to demonstrate that their graduates earn more than the typical high school diploma holder, and graduate programs will be required to demonstrate that their graduates earn more than the typical bachelor’s degree holder.
If a program fails to show at least this modest financial return on investment for its graduates in two out of three consecutive award years, it will lose eligibility to participate in the federal Direct Loan program. After three years of consistently failing the earnings premium measure, the Department could also terminate eligibility for Title IV of the Higher Education Act (HEA), including Pell Grant eligibility, for all of an institution’s low-earning outcome programs.
Additionally, the final rule will harmonize new and existing earnings accountability measures, aligning the new earnings standard in President Trump’s Working Families Tax Cuts Act (the Act) with the Department’s existing Financial Value Transparency and Gainful Employment regulations. Under the final rule, nearly all programs and sectors will be subject to the same transparency and earnings accountability framework, without regard to an institution’s tax status or credential level.
“The Trump Administration is hitting the hard reset button on higher education and implementing commonsense reforms that will drive down the cost of higher education and hold all institutions, regardless of sector, accountable for low earnings outcomes,” said Under Secretary of Education Nicholas Kent. “If a program cannot show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers. Amid rising rates of default and delinquency in the $1.7 trillion federal student loan portfolio, this new accountability framework is a responsible policy that will safeguard American taxpayer dollars and protect students from taking on unmanageable debt for programs that cannot demonstrate a reasonable return on investment.”
This is the third and final rulemaking package authorized by the Act, which will rein in unsustainable student loan lending, realign postsecondary education with workforce needs, and bring uniform accountability across the higher education system.