Students in Many Low-Earning Programs Will Wait At Least Another Year for Accountability
Ahead of the July 1 deadline set by Congress in the One Big Beautiful Bill Act, the U.S. Department of Education released final regulations to implement a new framework for earnings-based accountability of higher education programs. But for many higher education programs—including some of the lowest-performing programs projected to fail the new accountability standards—the Trump Administration will delay the implementation of the rules for at least a year. We analyzed the programs that will get the delay, and found that the extra year will affect nearly 44 percent of failing programs, which collectively enroll 39 percent of all federally aided students who are enrolled in low-earning programs.*
New Accountability Standards
The One Big Beautiful Bill Act, passed by Congress last year and with most provisions set to take effect in July 2026, adopted a new accountability standard for most higher education programs, requiring all programs except undergraduate certificates to ensure median earnings, measured four years after completion, that exceed the typical earnings of workers with only a high school diploma (or of a bachelor’s degree, for graduate-level programs). Undergraduate certificate programs, Senate Republicans noted, are instead covered by similar-but-separate gainful employment rules. Through the rulemaking process this year, the Department maintained the coverage of those undergraduate certificate programs, and matched the metrics to the weaker OBBBA standard for undergraduate programs. The rules were proposed by the Education Department earlier this year, with comments accepted through mid-May; this week’s released rule responds to comments and finalizes plans for implementation ahead of May 1.
Delaying the Rules for Certain Favored Programs
Perhaps the most important change the Trump Administration made in the final rules is to delay the loss of eligibility for failing programs until it can use 2026 tax year earnings. That means the first year those programs could fail is 2028, rather than 2027 for all other programs; and the first year in which programs could lose eligibility (a step not taken until programs fail in two out of three years) is 2029, rather than 2028 for all other programs. In other words, low-earning programs that qualify for this delay won’t experience a single real consequence until another administration is in the White House.
The concession came in response to comments from the cosmetology lobby and other industries that argued their graduates under-report (or fail to report altogether) tipped income, lowering their earnings. In reality, research has found that concerns about unreported, tipped income are overblown, estimating this income likely makes up only around 8 percent of earnings for those working in “personal services” fields like cosmetology – unlikely to make the difference in whether a program passes or fails. But the Department noted that, beginning in 2026, a new tax provision will come into effect exempting tipped income from taxes, “further enhancing” the income reporting for workers in fields with a large share of tipped income. The “no tax on tips” provision is set to expire in 2028, though the Department stated that it will keep applying the accountability framework even after that.
So which programs get the delay? The Department pointed to a list of 20 fields, identified by the IRS as fields where most workers receive some tipped income, including cosmetology, massage therapy, and somatic bodywork. Collectively, our analysis shows that these fields make up 39 percent of federally aided students in failing programs. These fields also constitute a comparable share (35 percent) of Title IV aid dollars flowing to failing programs. In other words, the list effectively nullifies the rule for more than a third of poor-performing programs for a full year.
The bulk of programs in delay fields (79 percent) are in for-profit colleges; most (84 percent) are cosmetology programs. Worse, the earnings of these programs are among the lowest in the higher education system; failing programs eligible for the delay have average earnings of less than $25,000 per year—equivalent to about $12 per hour for a full-time, year-round worker. At that level, typical earnings are below the statewide minimum wage in many states. By comparison, failing programs that are not eligible for the delay have average earnings of about $33,000 per year. Delaying accountability for these lowest-earning programs means that nearly 193,000 federally aided students will continue to enroll in them for at least an extra year before any sanctions can take effect.
Other Changes to the Final Rule Were Limited
Despite expanding the reach of accountability to all federally aided programs relative to the 2023 Gainful Employment rules, which—by law—applied only to undergraduate and graduate certificate programs across all sectors, and to for-profit degree programs, the impact of this framework is even lower under the 2026 rules. Our recent brief, “What’s the Harm in ‘Do No Harm’?,” demonstrated the primary reason for that: Under the new rules, institutions will only lose eligibility for federal student loans in failing programs, rather than all federal financial aid, as in the GE rules.
The Department initially proposed that some institutions (those with more than half of federally aided students, or half of Title IV revenue, in failing programs) would later lose Title IV eligibility for their failing programs – including Pell Grant funds. However, the final rules create several new exceptions that weaken this accountability mechanism. Institutions can avoid losing Pell Grant eligibility by voluntarily closing failing programs, voluntarily relinquishing federal loan eligibility for a failing program for five years (rather than the requisite two years), or if the college already hasn’t participated in the loan program for at least five years. As a result, the final rules—designed to save taxpayer dollars by preventing student aid dollars from going to low-value programs—will actually wind up costing more than $10 billion over the next decade relative to the 2023 Gainful Employment rule, mostly in Pell funds.
Another change comes with respect to the application of earnings thresholds to identify failing programs. Some smaller graduate fields of study will effectively get a pass from the accountability standards if the earnings of bachelor’s degree-holders in the same field can’t be calculated from Census Bureau survey data while protecting individuals’ privacy (a challenge for which we proposed a more effective alternative in January).
A few narrower changes were made in response to comments, as well. Small programs won’t be combined with all programs in the same broad area of study (i.e., two-digit CIP code) and credential level, but will still be combined with programs in the same intermediate field (a choice we critiqued in May).
The accountability rules won’t be rolled out immediately, even for programs that are not included in the delay. Colleges will need to report data to the Department this fall, and earnings will be calculated next year. Institutions (other than those benefitting from the delay) will start to lose eligibility for their low-earning programs in 2028; the others, not until 2029, at the earliest. The result is an accountability system that will arrive later for many, apply to fewer of the lowest-earning programs, and ultimately provide weaker protections for both students and taxpayers.
*Data are derived from the 2026 Program Performance Data (PPD:2026). For this analysis, delay fields including programs at the CIP4 level that align with the Department’s list of fields that qualify for the delay at the CIP6 level. Title IV enrollment is defined as average Title IV enrollment across 2024 and 2025. Title IV aid volume is defined as average loan volume across 2024 and 2025, plus average Pell volume across 2024 and 2025. Debt is median Stafford and Grad PLUS loan debt disbursed to students in the program for the pooled 2017-18 and 2018-19 completer cohorts; debt is inflation adjusted to 2019 dollars via CPI-U. Median earnings are those of Title IV completers from the program who are working & not enrolled in college four years after exit from the pooled 2017-18 and 2018-19 completer cohorts. Earnings are measured in CY2022 and CY2023, deflated from 2024 in the PPD:2026 files to 2023 using the CPI-U.
