By Louisa Woodhouse, Senior Associate, Policy and Advocacy
Reading time: Six minutes
On Friday, January 9, the AHEAD Committee reached consensus during its second session of negotiated rulemaking – this time, regarding new provisions for institutional accountability and a new earnings premium requirement implemented by the reconciliation
law (also known as the One Big Beautiful Bill, or OBBB). (The AHEAD Committee also reached consensus on Workforce Pell Grant regulations
and the new provisions surrounding Pell Grants for students with full-ride scholarships last month.) Now that the AHEAD Committee has adjourned, the US Department of Education (ED) will post the draft regulations for a public comment period, before
finalizing the regulations, likely sometime this spring or early summer.
National College Attainment Network's (NCAN’s) Midwest Policy Fellow, Magnus Noble, returned to DC last week to serve as the alternate student negotiator on the Committee, advocating for key provisions surrounding Pell eligibility and increased transparency
measures, like the debt-to-earnings test and cost of attendance information. (See below for more details on those proposals.)
All AHEAD Committee materials can be found here, including the most up-to-date
publicly available version of the draft regulations. Read on to learn more about the key issues and outcomes from the second week of rulemaking.
Eliminating the Debt-to Earnings (DTE) Metric
Over the course of the week, ED was vocal about its goal of “harmonizing” the new earnings test from OBBB and accountability measures with the existing framework for Gainful Employment (GE) and Financial Value Transparency (FVT). One of the most controversial
proposals was that of removing the debt-to-earnings (DTE) test from the existing GE requirements.
Currently, to remain eligible for federal student aid (not just loans), the DTE provision states that private for-profit institutions and all certificate programs must show that their graduates earn enough to manage their student loan debt. The rule requires
that graduates of these programs devote no more than 8% of their annual earnings, or 20% of their discretionary earnings, to loan repayment.
The GE rule also includes an earnings test which will be revised according to the provisions in the OBBB, and applied to both GE and non-GE programs for the first time, adding an additional burden for institutions. The new earnings test requires
that for undergraduate programs, completers must exceed the median annual earnings of in-state 25-34-year-old working adults with a high school diploma who are not enrolled in higher education. For graduate programs, earnings are compared to those
with bachelor’s degrees in the same field of study. If programs do not meet this benchmark for two out of three consecutive years, they will lose eligibility for federal student loans. Earnings data will first be available in the summer of 2027.
ED argued that the earnings test alone would be sufficient to identify nearly all failing programs and that continuing to run the DTE test for GE programs would not be “worth the squeeze,” given the administrative burden and the cost. ED cited
data showing that only 0.2% more programs are identified by the DTE metric compared to only the earnings premium.
Several negotiators, led by legal aid, called for ED to continue to require the DTE calculations. They argued that DTE captures an important affordability measure the earnings test alone misses, especially for high-cost programs where students often rely
on significant borrowing, including private loans. Negotiators warned that eliminating DTE would weaken student protections, allowing programs to pass accountability standards despite leaving graduates with unmanageable debt. While ED allocated a
significant amount of time debating the pros and cons of this decision, ED moved forward with plans to eliminate DTE.
Pell Eligibility for “Low Earnings” Programs
Another hot topic was the consideration of Pell Grant eligibility for programs failing to meet the new accountability standards.
Under the current rule, programs that fail to meet the GE benchmarks lose access to all federal student aid, including the Pell Grant. Notably, ED’s draft regulations stated that students in programs failing the earnings premium would only lose access
to federal student loans. Many negotiators, including those representing students, taxpayers, and legal aid organizations, raised serious concerns about the prospect of allowing students in those programs to continue receiving Pell Grants.
After a long series of caucuses on Thursday, and effective advocacy from negotiators, the final draft did include a provision to address Pell eligibility for programs failing the earnings test. The provision would come into play once an institution had
already been flagged for potential loss of federal student loan eligibility. Here’s how it would work:
After two years of failing the earnings test, a program would lose access to loans and be designated as a “low earnings outcome program.”
In year two, ED would run an additional test to determine if 50% of the institution’s Title IV aid recipients or 50% of the institution’s Title IV revenue are enrolled in or coming from the program deemed “low earnings”. If that is the case, the program
is on-notice for loss of Pell eligibility.
In the following year, if the program meets either of those criteria again, all “low earnings” programs at the institution will lose access to Pell Grant dollars.
In addition, the draft also included a provision proposed by the student negotiators that requires institutions to notify students in at-risk programs of their remaining lifetime eligibility for Pell.
Optional Teach-Out Provision for Failing Programs
Another significant area of debate centered on a provision from the negotiator representing private non-profit institutions, concerning how institutions might be able to “teach out”, or wind down, programs that failed the earnings test in year one. Negotiators
recognized that in some cases, allowing students to finish their degree or credential – despite the earnings test outcome – would still benefit graduates.
ED may allow a failing program to temporarily retain Direct Loan eligibility – generally for up to three years or the normal length of the program, whichever is shorter – solely to support an orderly closure that serves students’ best interests. During
this time, institutions must stop enrolling new students, place the program under warning status, notify accreditors and state authorizers, and provide enrolled students with the option to either complete the program or transfer to a comparable program
that has not failed accountability requirements. Institutions must also agree not to restart the same or a substantially similar program for at least two award years after the closure. The teach out option is unavailable to programs or institutions
already on probation or subject to heightened financial oversight for other reasons.
The teach out option is voluntary, and institutions must decide whether or not they plan to engage in this option within 120 days of receiving notice from ED that the program has failed the earnings test.
Cost of Attendance and Emergency Aid Proposals
Though not ultimately adopted into the draft regulations, NCAN championed a proposal from negotiators representing students, public institutions,
legal aid organizations, and veterans that would require ED to report out key information about a student’s cost of attendance (COA). Specifically, the proposal would require the Secretary to report the total cost of transportation, food and housing
(disaggregated by options on campus, off-campus not with family, and off-campus with family,) childcare, other miscellaneous expenses, and also, information about available emergency aid grants.
While ED seriously considered the recommendation, federal negotiators did not move forward with it, explaining that the proposal would require ED to make changes to the existing institutional data reporting requirements. ED officials did seem particularly
interested in figuring out how best to communicate information about emergency aid – so, that may be coming down the line.
What’s Next?
Now that the AHEAD Committee has concluded, ED will post the draft regulation for a 30-day public comment period. While we don’t know exactly when the comment period will open, we expect that it won’t be until at least February, given that the draft regulations
for the first negotiated rulemaking committee (the RISE Committee), have still not been posted for public comment. It is likely that the proposals from the AHEAD Committee’s two sessions of negotiated rulemaking will be posted separately
– one for Workforce Pell and one for the accountability provisions.
NCAN will continue to keep you up to date about the new regulations and the implementation process as we approach the July 1 deadline. In the meantime, please feel free to reach out with any questions (woodhouse@ncan.org),
or join us for our monthly
Beltway Buzz federal policy peer exchanges.
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