Department of Education’s Final Regulation Weakens Minimum Earnings Standard for Postsecondary Education Programs

On July 1, 2026, the U.S. Department of Education (ED) issued its final rule administering the new federal accountability and transparency framework for all postsecondary programs. The regulations implement the minimum earnings requirement (also called the “Do No Harm” standard) that Congress created in the One Big Beautiful Bill Act (OBBBA) and changes existing program disclosures related to costs and outcomes. Although the rule takes a meaningful step toward implementing minimum earnings standards for postsecondary programs, ED significantly watered down the final rule in ways that undermine Congress’s intent by leaving students at risk of pursuing credentials that do not lead to higher wages.

How the Do No Harm Earnings Test Works

The OBBBA included a provision requiring that undergraduate degree programs lead to median earnings for graduates that are higher than the earnings among working adults ages 25 to 34 with only a high school diploma. Programs that do not meet this threshold two out of three years will lose access to federal Direct Loans. Similarly, students who complete graduate degrees and graduate certificate programs must achieve median earnings greater than the earnings of working adults ages 25 to 34 with only a bachelor’s degree. This minimum earnings threshold is often referred to as the “Do No Harm” standard.

While the Do No Harm standard takes an important step toward strengthening program accountability by legislating a minimum standard that all degree programs must meet, it is a low bar for programs to clear. For example, the threshold only requires a modest level of positive earnings returns, and does not consider the amount of debt a student may have taken out to obtain those returns. Additionally, programs that fail the metric are not fully prohibited from accessing Pell Grant funds,^[1] meaning taxpayer funds can continue to flow to programs that leave graduates earning less than a high school graduate.

The Do No Harm standard’s most significant weakness, however, is that it does not require undergraduate certificate programs to meet the minimum earnings standard even though those are the most likely of all programs to fail it. Senate Republicans separately published an FAQ document that noted undergraduate certificate programs would continue to be covered by pre-existing gainful employment regulations.

ED’s Do No Harm Proposed Rule

After a week of required negotiations with stakeholders over the details of how ED would implement the new minimum earnings metric, ED released a proposed regulatory package in April that applied the threshold to all programs, using the pre-existing “gainful employment” authority in the Higher Education Act to extend the metric to undergraduate certificates in line with prior Senate assumption. Doing so was critical to achieving the law’s intent to protect students from poor postsecondary outcomes: ED’s own analysis indicates that programs enrolling 31 percent of undergraduate certificate students are projected to fail the earnings premium test, compared with programs enrolling four percent of associate degree students and less than one percent of bachelor’s degree students. This estimate echoes a 2023 study that found most certificate-granting institutions left more than half of their students earning less than their peers with only a high school diploma; the same study found that nearly three in four certificate-granting for-profit institutions leave the majority of their students earning less than the typical high school graduate, even ten years after enrollment.

ED’s Final Rule Weakens the Earnings Test

Despite appropriately including undergraduate certificate programs in the scope of the minimum earnings threshold, ED made a significant change in the final rule that weakened the rule’s impact: the rule delays the consequences of failing the earnings test for any program associated with a list of 20 fields primarily in cosmetology, massage therapy, and somatic bodywork—occupations where a substantial number of workers report tipped income. The delay will be for at least one year, which means that the first year one of those programs could lose federal loan eligibility (after it fails in two out of three years) is 2029, instead of 2028 as specified by Congress in the statute. The delay could be even longer for programs that are small in size. An analysis by the PEER Center shows that these 20 delayed fields contain 39 percent of the students receiving federal aid that are enrolled in programs that fail the minimum earnings test, and 79 percent of the programs in those delayed fields are offered by for-profit colleges.

The final rule also watered down the proposed rule’s process by which some programs that fail the earnings metric might also lose access to Pell Grants and other Title IV funds via the “administrative capability” provisions.^[2] ED weakened this provision by adding new exceptions, giving schools a way to voluntarily forgo access to federal student loans and keep receiving unlimited Pell Grant funds even for programs that repeatedly fail the earnings test.^[3] This means students will risk wasting their limited lifetime Pell Grant eligibility on low-value programs that consistently leave students worse off than if they had never enrolled. ED itself noted in the final rule that the effect of this change is likely to cost the federal government an additional $10 billion in Pell Grant funds that would otherwise have been cut off to programs that demonstrate widespread low performance on the earnings test.

The Path Forward

Last summer, Congress took a first step toward defining a minimum earnings threshold that all postsecondary programs must meet to merit continued access to federal aid, which ED has implemented with this final rule. Looking ahead, Congress will need to strengthen guardrails missing or weakened in the Department’s final regulation—starting with imposing stronger consequences for low-quality programs that include the loss of Pell Grants, not just Direct Loans, curbing delays in protecting students and taxpayers allowed by these final regulations, and addressing key gaps left by removing the debt-to-earnings provisions from the gainful employment regulations.

Footnotes

1. Some programs may lose access to Pell Grants in certain circumstances, pursuant to the recently implemented regulation as discussed below. ↑
2. Under standards of administrative capability (the conditions a school must meet to participate in Title IV), institutions must demonstrate that at least half of their Title IV recipients and at least half of their Title IV volume are not tied to programs that fail the earnings premium test. If an institution does not comply with this requirement in two out of three consecutive award years, the institution will be placed on provisional status and its low-earning outcome programs will lose access to Title IV, including Pell Grants. ↑
3. Institutions can also avoid losing Pell Grant eligibility by voluntarily closing failing programs or if the college already hasn’t participated in the loan program for at least five years. ↑