Department Releases Accountability Final Rule and Professional Degree Guidance

The U.S. Department of Education issued its final Student Tuition and Transparency System (STATS) and Earnings Accountability rule, implementing the low-earning outcomes accountability framework enacted by Congress in the Working Families Tax Cuts Act (WFTCA), also known as the One Big Beautiful Bill Act (OBBBA). The official version of the Final Rule will be published in the Federal Register soon, but the unofficial version of the Final Rule is available here and the fact sheet here.

The Final Rule reconciles the new earnings threshold authorized under OBBBA with existing earnings accountability measures in the Financial Value Transparency and Gainful Employment regulations. All Direct Loan participating programs, in every sector, are subject to the same transparency and earnings accountability metric.

In the preamble of the rule, defending the extension of the WFTCA earnings threshold to undergraduate certificates, the Department continues to assert its “gainful employment” authority, dismissing arguments by CECU and others that “gainful employment” simply means employed for pay, and is a descriptor of the employment, not of the degree or certificate program.

The preamble also argues that the Department was within its authority to incorporate new administrative capability standards “for purposes of qualifying institutions of higher education for participation in title IV, HEA programs.” This statement defends a provision inserted during negotiations that would prohibit the use of all Title IV funds, including Pell, at institutions with more than 50 percent of students receiving federal aid in failing programs at that institution.

The Final Rule did not modify the earnings threshold comparison groups to address part-time work, gender disparities, geographic or cost-of-living variation, or to measure undergraduate certificate completers to a younger cohort, measures CECU argued for in public comment. On each, the Department rested primarily on the statutory text of WFTCA as prohibiting these modifications.

Similarly, the Department dismisses all arguments for abiding by the Master Calendar, again citing its interpretation of the WFTCA and case law on the Administrative Procedure Act.

There are some meaningful changes to the final regulation when compared against the proposed rule.

No Tax on Tips Delayed Implementation: The Department will delay implementation of the program eligibility consequences for certain programs that prepare students for employment in occupations where a majority of workers receive tipped income, in order to use reported earnings from the tax years when the “No Tax on Tips” policy is in effect, which begins with the 2026 tax year. Programs such as cosmetology, barbering, massage therapy, and similar occupations will receive at least a one-year delay before accountability consequences apply. During this period, the Department will continue to publish earnings information, but these programs will not be considered to have either passed or failed the earnings test. This change does not incorporate an adjustment for unreported income, but it provides at least one year for reported incomes to increase in these fields due to the new tax-advantaged treatment of up to $25,000 in tip income.

Lowered Benchmark for Small Graduate Cohorts: In § 668.2(b)(3), where ACS same-state, same-field data for graduate programs are unreliable (fewer than 16 sampled individuals), the threshold is now set to $1, which functionally exempts those graduate programs rather than holding them to another benchmark. The Department estimates roughly 2,650 graduate programs are affected. That is a comparison-group change favorable to certain graduate programs, but it does nothing for undergraduate degrees and certificate programs. The cohort expansion process was also simplified (2-digit CIP aggregation removed, capped at 4-digit), but that concerns how the completer pool is built, not the benchmark group.

Programs not participating in Direct Loans: In the Final Rule, the Department exempts an institution from the automatic loss of Title IV eligibility if the institution does not currently participate in the Direct Loan program and has not participated in the Direct Loan program for the five most recently completed award years.  

In addition, under the Final Rule, the Department also exempts a program from automatic loss of Title IV eligibility if the program is not yet determined to be a low-earning outcome program and the institution and the Department agree to amend the institution’s program participation agreement to prevent students from borrowing Direct Loans for the program for a period of at least five years.  

Programs exclusively serving individuals with disabilities: The Final Rule exempts institutions from the program eligibility consequences if they exclusively serve individuals with documented disabilities, as defined under 34 CFR 300.8.

The Department reduced the STATS reporting requirements by approximately 30 percent by eliminating several reporting elements that are already collected through existing Department data systems. Institutions must begin submitting STATS data by October 1, 2026, with annual reporting each October thereafter.

The provisions implementing the statutory changes take effect on July 1, 2026. Certain additional provisions become effective on July 1, 2027, although institutions may choose to implement them early. Programs subject to the GE regulations that do not elect early implementation will remain subject to the 2023 GE regulations, including all applicable program eligibility consequences, until July 1, 2027.

As a reminder, the Department has collected two years of GE/FVT reporting data. As a result, programs that do not elect early implementation could lose Title IV eligibility under the 2023 GE regulations before July 1, 2027. 

Department Issues Professional Degree Guidance Following Court Order

The Department also released an Electronic Announcement identifying the Classification of Instructional Programs (CIP) codes that will be treated as professional degree programs for reporting Title IV loan originations and disbursements to the Common Origination and Disbursement (COD) System. The guidance was issued in response to the June 24, 2026, federal court order that temporarily stayed portions of the Department's professional degree definition in the RISE Final Rule.

The Department states that, while it continues to defend the RISE professional degree definition in court, it will temporarily recognize the designated programs as professional degree programs to implement the court's order. The Department notes that these interim designations may change as the litigation proceeds.

Institutions may originate and disburse loans using the higher professional annual loan limits for the designated programs by reporting the appropriate professional student level to the Common Origination and Disbursement (COD) System. The Department also advises institutions to consider limiting borrowing to the graduate loan limits for programs that are temporarily classified as professional degree programs to minimize potential disruption if the litigation results in future changes.