ED Publishes Final Regulations Implementing OBBBA Accountability Framework
By NASFAA Policy & Federal Relations Staff
The Department of Education (ED) on Wednesday released its final rule covering the new Student Tuition and Transparency System and Earnings Accountability (STATS) framework, created by the One Big Beautiful Bill Act (OBBBA), also referred to as the Working Families Tax Cuts Act (WFTCA). Most changes are effective July 1, 2027, with an option for early implementation beginning July 1, 2026.
Two provisions are effective August 30, 2026: the addition of definitions for “Eligible non-GE program” and “Gainful employment Program (GE program)” at CFR 685.102 and changes to CFR 685.300 whereby institutions, by nature of entering into a program participation agreement (PPA) with ED, agree that programs must meet the STATS and earnings accountability requirements in order to participate in the Direct Loan program.
Institutions are not required to affirmatively choose early implementation. Rather, ED will assume that schools have opted for early implementation if they complete their annual reporting on October 1, 2026, and omit the data elements required under the Gainful Employment and Financial Value Transparency (GE/FVT) regulations that are no longer required under the new rules. If a school chooses not to early-implement the changes effective July 1, 2027, it would be required to report all data elements under the current GE/FVT reporting requirements by October 1, 2026.
As a reminder, the STATS regulations amend the GE/FVT regulations, retaining the earnings premium but eliminating the debt-to-earnings metric. It applies the earnings premium to almost all programs across all institution types, resulting in the loss of Direct Loan eligibility for programs that fail the test in any two out of three consecutive years. Failing programs can lose eligibility to participate in all of the Title IV programs if at least half of the institution’s Title IV funds or at least half of the institution’s Title IV recipients are associated with low-earning outcome programs. The regulations allow programs that fail in a single year to teach out currently enrolled students if the institution agrees not to enroll any new students in the program, and to close the program. Reporting requirements are largely unchanged from the previous GE/FVT reporting, but fewer data elements are required under the new framework.
ED simplified the process for expanding cohorts to reach a sample size of 30, a requirement of the OBBBA. The single-year cohort period continues to be all program completers in the same 6-digit Classification of Instructional Programs (CIP) code for the fourth award year prior to the year for which the most recent earnings data are available from the Federal agency when the earnings premium measure is calculated. If a single year cohort is smaller than 30 completers, ED will continue to sequentially add previous award years, as was included in the proposed rule, but will only go as far back as the seventh award year, whereas the proposed rule allowed for ED to look back to the 8th award year prior to the year for which earnings data was available.
Under the proposed rule, if the cohort size had not yet reached 30 completers after looking back to the 8th prior award year at the 6-digit CIP level, ED would have looked back at the fourth through eighth prior award years at the program's 4-digit CIP level, and would have then repeated the same process at the 2-digit CIP level. ED was persuaded by commenters not to expand the cohort as far out as the 2-digit CIP level due to concerns over comparability between programs at that level, so ED will stop expanding at the 4-digit CIP code level, looking back only to the 7th award year prior to the year for which the most recent earnings data are available from the Federal agency when the earnings premium measure is calculated.
While OBBBA conditioned only a program’s eligibility to participate in the Direct Loan program on passing the earnings premium metric, ED’s proposed rules went a step further and added a provision to the administrative capability requirements that failing programs at institutions where at least half of their Title IV funds or at least half of their Title IV recipients are associated with low-earning outcome programs could lose eligibility to participate in all of the Title IV programs.
ED retained this provision in the final rule but added a new exemption for programs offered by institutions that do not participate in the Direct Loan program, and have not participated in the five most recently completed award years prior to the year in which the earnings premium measure is calculated. The same exemption would also apply to institutions that agree not to permit Direct Loan borrowing for a failing program for at least five consecutive award years, provided ED determines that doing so is in the best interests of students.
ED clarified in the rules that this provision also covers Prison Education Programs (PEPs), since they do not offer Direct Loans. NASFAA had raised concerns in its comments that, despite PEP enrollees’ exclusion from the earnings premium metric calculation, a non-PEP program that shares a 6-digit CIP with a PEP could cause the PEP to fail due to the non-PEP program’s completers’ low incomes. ED also provided assurances that “any denial of participation applying to a program that includes students who are enrolled in a PEP or CTP program will not apply to those students.”
The final rule adds a new exemption to the earnings accountability scope and purpose to exclude programs at institutions that enroll only students with a documented specific learning disability or autism, meaning that the eligibility consequences of the regulations are not applicable to such institutions.
The department also added a new provision that would delay the program eligibility consequences for programs that prepare students for occupations in which a majority of workers earn tipped income. Under the new provision, such programs will be treated neither as passing nor as failing the earnings premium for any year in which graduates’ earnings are measured in 2025 or earlier.
The department’s rationale for this change is based on a new provision from another part of the OBBBA, the “No Tax on Tips” policy, a temporary federal income tax deduction through the 2028 tax year that allows eligible workers in tipped professions to exclude up to $25,000 of their qualifying, voluntary tip income from federal taxes beginning with the 2026 tax year. ED believes tips will be less likely to be underreported in light of this change, and wishes to only begin evaluating earnings for tax years in which the policy is effective.
The result is at least a one-year delay in the rule’s eligibility consequences for affected programs. In the final rule, the department identified 20 programs subject to this delay, listed by CIP code. In the preamble, ED also committed to making the earnings data and the earnings threshold used to calculate the earnings measure available to the public for these 20 programs, but they will not be subject to the consequences of failing the earnings premium metric until the graduates are measured using earnings from the 2026 tax year or later.
The final rule also provided more information about the process by which institutions may appeal the Secretary’s determination that a program is a low-earning outcome program. The regulations specify the items on which an institution can base its appeal, including which individuals are included in the list of completers or the determination of the earnings threshold used in the comparison. Additionally, ED clarified in the final rule that an institution will have 30 days from the date of receipt of a notification of determination to file its appeal.
ED was swayed by commenters who argued that earnings data from the Census Bureau’s American Community Survey (ACS) may be unreliable for calculating one of the graduate-level earnings thresholds, specifically the “same-state, same-field bachelor’s degree median earnings benchmark” for programs at institutions where at least 50% of the students enrolled in the institution during the award year the calculations are made are from the State where the institution is located.
In cases where ACS data are unreliable, which ED estimates would be the case for approximately 2,650 graduate programs, the department has decided to set a value of $1 for the “same-state, same-field of study” earnings threshold.
Regarding the high school earnings benchmark comparison group, NASFAA raised concerns in its comments that the ACS data ED proposes to use for that benchmark includes certificate holders, thereby undermining a fair comparison. In the preamble, ED conceded that there was ambiguity and agreed that the ACS documentation is unclear and that some certificate holders may be miscategorized as having only received a high school diploma.
Still, ED declined to make changes on that front. ED responded with its own analysis of the Census Bureau’s 2024 Survey of Income and Program Participation, which found that certificate holders make up only about 9% of high school diploma holders and that their earnings move the median by roughly $200, which it deemed ‘de minimis.’ ED reached the same conclusion for graduate certificate holders, potentially placing them in the earnings benchmark group for individuals who hold only a bachelor’s degree.
NASFAA questioned ED’s authority to consider an institution not to be administratively capable, and to consequently revoke all Title IV eligibility (not just Direct Loans) for low-earning programs when more than 50% of an institution’s Title IV recipients or dollars are tied to low-earning programs for two out of three consecutive years, since OBBBA did not include that provision. ED defended its authority and did not back down on this new administrative capability requirement. Further, the department expanded the required student warnings related to this provision, adding that an institution that failed this administrative capability test in at least one of the three most recent consecutive award years must also tell students that those in low-earning outcome programs could also lose access to all Title IV aid, not just loans.
Now that the final rules have been published, ED can release official sub-regulatory guidance on provisions of the new accountability framework. ED recently postponed a previously scheduled webinar on the STATS and earnings accountability framework. NASFAA’s virtual summit will include a session on these rules on July 15, 2026.
Publication Date: 7/1/2026
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