U.S. Department of Education Proposes Earnings Premium Metric for Postsecondary Programs

The U.S. Department of Education (ED or Department) on April 20, 2026, released a Notice of Proposed Rulemaking (NPRM) outlining proposed regulations to implement an "Earnings Premium" accountability metric and revise reporting and disclosure obligations for institutions of higher education. This new model is known as the Student Tuition and Transparency System (STATS) and Earnings Accountability framework. The Department is accepting public comments on the proposal until May 20, 2026, and the final rules are likely to take effect July 1, 2026.

Background

This STATS framework is the Department's latest iteration of the "gainful employment" (GE) regulations, which are aimed at assessing program quality and outcomes for institutions that participate in the federal student aid programs. Over the past 15 years, the Department has issued multiple versions of the GE rule, each of which has intended to revoke federal student aid eligibility for programs that do not satisfy the applicable metrics. However, implementation of each iteration has been subject to legal, administrative, and operational challenges and delays. No program has ever lost eligibility under any GE rule.

This NPRM follows the One Big Beautiful Bill Act (OBBB) enacted on July 4, 2025, which included several key changes to the federal student aid programs. (See Holland & Knight's comprehensive OBBB analysis.) Among those changes were the "do no harm" provisions, which imposed an earnings metric to hold institutions accountable for low-earning program outcomes. To align the current GE regulations with the OBBB proposal, ED initiated its rulemaking process in fall 2025.

ED is required to use negotiated rulemaking for most changes to its federal student aid program regulations, which includes convening committees of qualified negotiators to discuss the rule package, with the goal of reaching consensus on proposed regulatory language. Following OBBB's enactment, ED established two negotiated rulemaking committees: Reimagining and Improving Student Education (RISE) and Accountability in Higher Education and Access through Demand-driven Workforce Pell (AHEAD). The two committees were tasked with drafting regulations to implement different sections of OBBB, and both ultimately reached consensus on their rule proposals.

This NPRM includes one portion of the AHEAD committee's proposal. The RISE committee's proposal was published on January 30, 2026, and ED is currently reviewing public comments. (See Holland & Knight's previous alert, "Education Department Proposes RISE Committee Rules on Loan Limits and Repayment Plans," February 5, 2026.) The AHEAD committee's proposal on the Workforce Pell program was published in March 2026, and ED is also reviewing public comments on that proposal.

STATS Framework Proposed Rule

The NPRM features several key provisions to implement the STATS framework, including:

1. Eliminating the D/E Rate

ED proposes to eliminate the debt-to-earnings (D/E) rate used in previous versions of the GE rule. That test generally measured graduate debt against median graduate earnings. The Department would phase out the D/E rate and instead rely only on the Earnings Premium metric to assess program performance.

2. Amending the Earnings Premium Metric

The Department proposes to amend the Earnings Premium calculation, which exists in similar form in the current regulations, and establish it as the sole test for institutional programs under this framework. Importantly, unlike prior versions of the GE rule, the STATS framework will apply to all programs across all types of institutions, whether public, nonprofit or proprietary. Programs that fail the Earnings Premium test in two out of three consecutive years will lose eligibility for Direct Loans.

At a high level, the Earnings Premium test measures whether the Median Annual Earnings of program graduates during a specified cohort period equal or exceed the median earnings of working adults with a lesser degree level (Earnings Threshold). This is calculated as follows:

• Median Annual Earnings. This will include earnings from students who completed the program during the cohort period and are employed. Certain students, including those who are enrolled in another institution or have completed a higher-credentialed program, are excluded from the cohort.

The cohort period will generally include completers from the fourth year prior to the most recently available earnings data. For example, if the Department relies on earnings data from 2025, the cohort period would use completers from the 2021 award year. If this single-year cohort period has 30 or more students, that is the only cohort year used in the calculation. If this single-year calculation results in fewer than 30 students, the Department will sequentially expand the cohort period using prior year data, in accordance with the sequence outlined in the regulations, until the cohort equals or exceeds 30 students.

The Department will use student and program data reported by institutions, as well as earnings data from another federal agency; the IRS is expected to provide this earnings data.

• Earnings Threshold. Median Annual Earnings will be compared to the applicable Earnings Threshold, which is determined as follows:
  • Undergraduate Programs. The Earnings Threshold is calculated using median earnings of working adults ages 25 to 34 with only a high school diploma or equivalent 1) in the state in which the institution is located or 2) nationally if less than 50 percent of the institution's enrolled students are from the state in which the institution is located.
  • Graduate Programs. The Earnings Threshold is determined by the lowest of the median earnings of working adults ages 25 to 34 with only a baccalaureate degree in 1) the state in which the institution is located, 2) the same field of study under the two- or four-digit Classification of Instructional Programs (CIP) code in the state in which the institution is located, or 3) nationally in the same field of study under the two- or four-digit CIP code. If less than 50 percent of the institution's enrolled students are from the state in which the institution is located, the threshold will use national median earnings.
  • Foreign Institutions. Programs offered by eligible foreign institutions will generally use the same approach above but use only national data for working adults in the U.S.

The Department expects to use data from the U.S. Census Bureau to determine the Earnings Threshold; however, it is also seeking feedback in this public comment period on this approach or other alternatives, largely due to the potential for small sample sizes in certain areas and programs.

A program passes the Earnings Premium metric if its Median Annual Earnings equal or exceed the Earnings Threshold. A program fails the Earnings Premium metric if its Median Annual Earnings are less than the Earnings Threshold.

3. Pass/Fail Consequences

A program that fails in two of three consecutive years is designated as a "low-earning outcome program," and ED will initiate a termination action to end the program's eligibility for Direct Loans. Termination actions are processed under 34 C.F.R. Part 668, Subpart G, and the institution may appeal under those procedures. However, appeals are limited to whether ED erred in calculating the Earnings Premium measure, not whether the program is eligible or for any other issues. Institutions must also issue a warning to current and prospective students upon notice from ED that the program may become ineligible due to its Earnings Premium measure and may not enroll such students in that program without a signed acknowledgement. ED will also publish each program's Earnings Premium measure on an ED website.

The Earnings Premium metric impacts only the program's eligibility for Direct Loans. Low-earning outcome programs may still be eligible for Pell Grants. However, to address the scenario in which an institution has a high number of low-earning outcomes programs but continues to disburse Pell Grants for those programs or federal aid for other programs, ED has proposed that institutions must demonstrate that at least half of their federal student aid recipients and half of their total federal student aid funding are attributable to programs that are not classified as low-earnings outcomes programs. Failure to do so will mean that the institution is not administratively capable and may result in provisional certification, conditions on participation in the federal student aid programs or, ultimately, a loss of Title IV eligibility.

4. Reporting Requirements

As with previous versions of the GE rule, the STATS framework will require institutions to report certain data to ED, including information about student enrollments and completions, program cost, and institutional and private aid and scholarships. Similar to existing disclosure and certification requirements, institutions will also need to report any programmatic accreditations and whether the institution's programs satisfy state licensure requirements in certain states.

Timeline and Next Steps

ED is accepting public comments until May 20, 2026, after which it will review the comments and publish the rules in final form.

This set of regulations will likely take effect on July 1, 2026, in line with OBBB's effective dates for these changes. ED is typically subject to certain master calendar restrictions for its federal student aid rules, which require that rules be published in final form before November 1 to take effect the following July 1. However, as with previous OBBB rulemakings, ED believes the restriction is implicitly waived by OBBB's inclusion of a July 1, 2026, effective date.

During the rulemaking process, ED indicated that it plans to calculate the first Earnings Premium metric for institutions in early 2027 using earnings data from 2025, which is the most recent available. This would mean the cohort period will include students who completed their programs in 2021.

For any questions about this rule package or assistance in preparing a public comment, please contact the author of this alert.

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