Measuring the Earnings Premium for Graduate Programs in OBBBA’s Accountability Scheme
The One Big Beautiful Bill Act (OBBBA), signed into law last July, established the first-ever statutory framework to hold most higher education programs – including all graduate certificates and degrees – accountable for their outcomes. Specifically, OBBBA requires that graduate-level programs demonstrate that their graduates earn more than the typical person aged 25 to 34 with only a bachelor’s (BA) degree, presumably to ration eligibility for federal aid to those programs where students’ earning potential is improved by attending.
The threshold applied to each graduate program would vary depending on the state where the institution offering the program is located, and the program field of study. The statute gives some leeway to the Department of Education in designing the specifics of the calculation, but suggests an example methodology of using the median earnings for young adults with only a bachelor’s degree in the same broad field of study (measured by the 2-digit Classification of Instructional Programs [CIP] code) using data from the American Community Survey. The proposed regulations that the Department recently released suggest it currently intends to adopt this methodology.
There are, however, several challenges with this approach – some practical and some conceptual – that we outline below, along with several reasoned strategies for resolving the issue. Key issues are:
While the ACS is a large sample (with around 3.3 million individuals sampled per year in recent surveys), it is too small to estimate some of the over 2,000 state by broad-field-of-study combinations envisioned by the OBBBA scheme.
Broad fields of study (measured by 2-digit CIP codes) can sometimes encompass fairly diverse programs (as measured by more granular 4- or 6-digit CIP codes) that, crucially, can have very different earnings.
Several graduate fields attract students from different undergraduate fields of study; and as a result, the earnings of bachelor’s degree-holders in a particular field may be a poor estimate of the earnings that graduate degree-earners in that field would have earned had they not continued to advanced studies.
To help mitigate these challenges, the Department should:
Leverage existing federal methodologies to address the statistical challenges of estimating median earnings for small populations; and
Commission a study (for example, by the National Academy of Sciences, in collaboration with the National Center of Education Statistics) to help identify whether future changes to the methodology are warranted.
Alongside this report, we are making available two relevant data analyses. Appendix A provides the national median earnings for each detailed and broad field of study (as measured by 4-digit and 2-digit CIP codes, respectively), estimated from the American Community Survey. Appendix B provides, for each graduate degree field, the share of degree-holders who earned bachelor’s degrees in the same or other fields of study.
