The gainful employment rule in 2026: what replaced the debt-to-earnings test
A final rule published July 1, 2026 replaces the debt-to-earnings metric with an earnings premium measure and applies it to programs that were never gainful employment programs at all. Here is the current posture, read out of the rule itself.
Current status
The Department of Education's final rule Accountability in Higher Education and Access Through Demand-Driven Workforce Pell: Student Tuition and Transparency System (STATS) and Earnings Accountability was published on July 1, 2026. It is a final rule and it amends 34 CFR parts 600, 668 and 685.[1]
It is effective July 1, 2027, except for amendatory instructions 13 and 14, which are effective August 31, 2026.[1]
It implements the earnings-accountability provisions of Public Law 119-21, the Working Families Tax Cuts Act (WFTCA), signed July 4, 2025 — the same statute that the Department had earlier referred to as the One Big Beautiful Bill Act.[1]
What the earnings premium measure is
The rule removes the former debt-to-earnings (D/E) metric and its related definitions entirely, and makes the earnings premium the accountability standard. The earnings premium is the amount by which the median annual earnings of recent completers exceed the earnings threshold; it is zero when the two are equal and negative when completers earn less.[1]
For undergraduate programs the threshold is the median earnings of working adults aged 25–34 with only a high school diploma, in the institution's state — or nationally when fewer than 50 percent of the institution's enrolled students are from that state. For graduate programs the comparison group is working adults aged 25–34 with only a bachelor's degree.[1]
Earnings are the median annual earnings of students who completed the program in the cohort period, measured in the fourth tax year following program completion, obtained from at least one federal agency.[1]
A program with 30 or more completers in the single-year cohort is measured on that year. Below 30, the Department sequentially expands the cohort period — adding the fifth, then the sixth and seventh prior award years — before falling back to programs sharing the same 4-digit CIP code and credential level.[1]
What happens to a program that fails
A program fails when its completers' median annual earnings are below the threshold. Programs that fail the measure in two out of three consecutive years lose Direct Loan eligibility; limited extensions may be granted where an orderly program closure under § 668.603(c)(4) is in the students' best interest.[1]
The statute behind it — HEA section 454(c)(7), as amended by the WFTCA — makes a program that fails the earnings test ineligible for Direct Loan participation for a period of not less than two years.[1]
Where a program is designed to prepare students for an occupation that qualifies for a tip-income deduction and 50 percent or more of workers in it receive tip income, the program is treated as neither passing nor failing for any year in which earnings data from tax year 2025 or earlier is used; the Department publishes the earnings and threshold that would have applied.[1]
Which programs this now covers — including non-GE programs
HEA sections 101 and 102 divide title IV-eligible programs into degree programs at public and private nonprofit institutions, and programs required to lead to gainful employment in a recognized occupation — which include nondegree programs at any type of institution and nearly all programs at proprietary institutions.[1]
The revised earnings premium measure applies to both GE and non-GE programs. That is the largest single change for a compliance office: programs that were never subject to a gainful employment test now carry Direct Loan eligibility consequences.[1]
The 2023 Financial Value Transparency and Gainful Employment rule required the Department to calculate a D/E rate and an earnings premium for most title IV programs, but imposed eligibility consequences only on GE programs. This rule removes the D/E half and extends the consequence.[1]
What a compliance office has to do
- Report program-level and certain student-level data — including tuition, fees, and financial aid awards such as grants and scholarships — to the Department under the Student Tuition and Transparency System (STATS), which applies to all programs qualifying for title IV, HEA assistance. [1]
- Update the institution's Direct Loan-eligible program list. [1]
- Issue warnings to students about at-risk programs and about Pell Grant lifetime limits. [1]
- Meet the new administrative capability standard in § 668.16(t). [1]
- Where all of an institution's title IV programs are low-earning outcome programs — and have remained so for two out of three consecutive years — the Department terminates title IV eligibility for those programs and requires the institution to participate on a provisional basis. [1]
Rule pages behind this topic
34 CFR Part 600 · 34 CFR Part 668 · 34 CFR Part 685
Sources
- Accountability in Higher Education and Access Through Demand-Driven Workforce Pell: Student Tuition and Transparency System (STATS) and Earnings Accountability — 91 FR 40136 (July 1, 2026), Final rule, effective 2027-07-01. Federal Register document 2026-13286; retrieved 2026-10-19T05:00Z.
This page explains published regulatory text. It is not legal advice and is not affiliated with the U.S. Department of Education. Read the cited document before acting on it.