CAI Policy Insights: The ‘Do No Harm’ Edition
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Welcome to CAI Policy Insights, a periodic policy digest covering the latest legal and policy updates impacting online and hybrid learning and the use of educational technologies. By staying up to date on news and emerging controversies in these areas, we believe faculty, administrators, learning experience designers, and academic leaders can all make more informed decisions regarding program development, technology integrations, student engagement and assessment strategies, and more. Topic-by-topic breakdowns of key regulatory issues can also be found on the Online Teaching Compliance Page.
Summary and Insights
As of July 1, 2026, institutions of higher education have been operating under a drastically changed regulatory framework, with the One Big Beautiful Bill Act (OBBBA) (also known as the “Working Families Tax Cut Act”) and many of its implementing regulations now in effect. This edition of CAI Policy Insights provides a final update on a number of OBBBA rulemaking efforts that had first been previewed nearly a year ago. All three major OBBBA rules are now available in their final form:
- Reimagining and Improving Student Education-Federal Student Loan Program Final Regulations (RISE Rule), which establish new graduate, professional-student, and Parent PLUS loan limits, phase out Graduate PLUS borrowing for new borrowers, and restructure federal repayment plans;
- Accountability in Higher Education and Access Through Demand-Driven Workforce Pell (AHEAD): Pell Grant Exclusion Relating to Other Grant Aid; and Workforce Pell Grants (Workforce Pell Rule), which permit Pell Grants to support qualifying short-term workforce programs and restrict Pell eligibility when certain nonfederal aid meets or exceeds a student’s cost of attendance; and
- AHEAD: Student Tuition and Transparency System (STATS) and Earnings Accountability (STATS and Accountability Rule), which replaces the Financial Value Transparency and Gainful Employment framework with a broader earnings-based accountability system.
The RISE Rule and Workforce Pell Rule both became effective July 1, 2026. The STATS and Accountability Rule, meanwhile, contains regulations that have been pushed back to August 31, 2026 and July 1, 2027 but with early implementation options for institutions also provided.
Taken together, the rules change how institutions can finance graduate education, develop short-term credentials, communicate program costs and outcomes, and evaluate the continued viability of Title IV programs. The RISE Rule may place greater pressure on institutions to address financing gaps for graduate and professional students who can no longer rely on unlimited federal borrowing. The Workforce Pell Rule creates opportunities to develop affordable, employment-connected programs lasting between eight and fourteen weeks, but eligibility depends on state approval and an ability to satisfy specific completion, placement, earnings, tuition, and employer-alignment standards. Finally, the STATS and Accountability Rule extends earnings accountability beyond traditional gainful-employment programs: programs that repeatedly fail to produce earnings above the applicable high-school or bachelor’s-degree benchmark may lose Direct Loan eligibility, and institutions with large concentrations of low-earning programs may face broader Title IV consequences.
As these rules are interdisciplinary in nature, impacting program eligibility, data reporting, financial aid, and student and career services, institutions will want to consider leveraging existing or establishing new cross-functional coordination and implementation working groups. Representation from financial aid, academic affairs, institutional research, registrars, legal and compliance offices, government relations, and online and continuing-education leaders may all be critical to these efforts. Some specific examples of work that may need to be done include inventorying affected programs, verifying CIP codes and student data, modeling new loan limits and likely earnings outcomes, and deciding whether to implement STATS reporting requirements early. Institutions will also need to review websites, financial-aid counseling practices, admissions communications, and vendor systems to ensure that learners receive accurate information about borrowing limits, Pell eligibility, program costs, expected earnings, and any required warnings in future years. For institutions with large distance education portfolios, modeling should also account for student residency, since nationally enrolled institutions may be evaluated against different state or national earnings benchmarks as geographic enrollment distribution changes.
The new rules also create strategic opportunities. Institutions can assess whether existing noncredit certificates, boot camps, or employer-sponsored programs could be redesigned to qualify for Workforce Pell; develop institutional aid, employer-financing, or lower-cost pathways for graduate students affected by the new federal loan limits; and use STATS data to identify programs that would benefit from pricing changes, stronger career integration, improved completion support, or closer alignment with demonstrable workforce demand. Rather than viewing the release of these new rules as solely a compliance exercise, institutions can use the implementation process to strengthen program-governance systems, create more transparent and affordable learning pathways, and make better-informed decisions about launching, expanding, and redesigning both online and residential programs.
Feature Policy Updates: New Rule Reshapes Title IV
July 1 has arrived and with it the official effective date of the One Big Beautiful Bill Act. Also on July 1, ED published its third and final package of OBBBA implementing regulations with its STATS and Accountability rule, replacing the Financial Value Transparency and Gainful Employment (GE) frameworks with a broader earnings-based accountability system. This new earnings-based accountability framework covers nearly all programs participating in Title IV federal student-aid programs.
More significantly, this rule extends program-level eligibility consequences beyond traditional gainful-employment programs to degree and other non-GE programs at public and nonprofit institutions. Programs that repeatedly fail the new earnings test may lose access to federal Direct Loans, while institutions with a sufficiently large concentration of low-earning programs may face broader Title IV consequences.
Beyond meeting new compliance and reporting requirements, institutions will need to consider how best to incorporate earnings outcomes into program approval, admissions and enrollment communications, and decisions about whether to expand, redesign, or discontinue offerings. And because distance education enables institutions to enroll students across geographic boundaries, the rule’s treatment of institutional location, student residency, regional labor markets, and program classification may produce distinctive results for these programs.
From Financial Value Transparency to STATS
The final rule rebrands the only recently established Financial Value Transparency framework (FVT) as the Student Tuition and Transparency System, or STATS. Institutions will continue to report program- and student-level information needed for ED to calculate and publish program costs and outcomes, which will then inform whether programs will maintain Title IV eligibility based on earnings data over time. Reporting categories continue to include tuition and fees, books and supplies, institutional grants and scholarships, private education loans known to the institution, and other information necessary to calculate students’ net program costs.
However, institutions will likely find the STATS reporting requirements easier to manage relative to FVT/GE requirements. While there remain a number of reporting categories, which are outlined in the final rule under the revised § 668.402, ED estimates that its revisions eliminate approximately 30 percent of the data elements and associated reporting burden imposed under those existing and soon-to-be previous frameworks. This is in large part because ED will now be relying more heavily on enrollment and federal administrative data already available to the federal government.
ED will then use reported and administrative data to publish comparable information about program costs and earnings. Institutions will also need to prominently link out to this information, maintained by ED, from all their websites containing cost, financial aid, or admissions information about the program or institution.
How the New Earnings Premium Test Works
Under the final rule, a program “passes” the new earnings premium test when the median annual earnings of its completers—measured in the fourth tax year following program completion—equals or exceeds the median earnings of a corresponding group of “working adults,” as detailed below. “Programs” are identified by a unique combination of 6-digit OPEID, credential level, and 6-digit Classification of Instructional Programs (CIP) code. “Earnings” can include wages, income reported to the Internal Revenue Service, self-employment income, and other earned income. “Working adults” are individuals in the workforce aged 25-34, regardless of whether a program is offered at the undergraduate or graduate level.
While the age range is consistent, the educational backgrounds and current educational activities of working adults are relevant in creating the comparison cohort. Undergraduate programs are compared with the median earnings of working adults who have only a high school diploma or equivalent and who were not enrolled in an eligible institution. Graduate programs, meanwhile, are compared with working adults whose highest credential is a bachelor’s degree.
Student location is also relevant. For undergraduate programs, ED generally uses the threshold for the state in which the institution is located. However, if fewer than half of the institution’s students are residents of that state, ED employs a national comparison instead. For graduate programs, ED uses the lowest available benchmark among several state, national, and field-of-study comparisons. Where fewer than half of the institution’s students reside in the institution’s home state, the comparison shifts to the lower of the applicable national benchmark or national field-of-study benchmark.
ED will calculate earnings using cohorts of program completers in the fourth tax year post-completion. It will begin with completers from a single award year and expand the cohort if fewer than 30 students remain after required exclusions through protocols that involve incorporating data from up to three additional, prior years taken from the same 6-digit CIP and, if needed, aggregating programs that share a 4-digit CIP until an appropriately sized cohort can be formed.
Consequences for Low-Earning Programs
A program becomes a “low-earning outcome program” when it fails the earnings-premium measure in two of any three consecutive award years for which the measure is calculated. The consequence is loss of eligibility to participate in the Direct Loan Program. The final rule establishes a process through which ED will notify institutions of program results and initiate an eligibility action. The final regulation gives institutions an opportunity to appeal the ED’s low-earning determination before ED proceeds with the applicable limitation or termination process. An appeal generally must be submitted within 30 days and may be based only on very limited, specified grounds, such as errors in the underlying program or earnings data.
A program that loses Direct Loan eligibility generally cannot regain eligibility for at least two years. The rule also restricts institutions from avoiding the sanction by discontinuing a failing program and creating a nominally different replacement. Restrictions will also apply to new programs offered at the same credential level that share the failing program’s 4-digit CIP code and overlapping occupational classifications.
The rule does provide some limited flexibility for an orderly program closure as well. When a program has failed the earnings test but has not yet become a low-earning outcome program, ED may allow continued Direct Loan participation for up to three years—or the program’s full-time duration, whichever is shorter—if the institution agrees to discontinue the program and ED determines that continued participation is in students’ best interests. The required closure plan must address student completion, transfer opportunities, financial arrangements, and other protections.
An institution may alternatively agree to prohibit Direct Loan borrowing in the program for at least five years. This option can prevent the program’s performance from triggering some of the broader institutional sanctions discussed below, but it would substantially alter the program’s financing model and accessibility.
Institutions must also provide warnings to prospective and enrolled students when a program is at risk of losing eligibility—i.e., after the earnings premium threshold was not reached after one year. The warnings must describe the program’s earnings result, the potential loss of Direct Loan eligibility (and other forms of Title IV assistance), and relevant educational alternatives. The required warning must be delivered separately from supplemental institutional explanations so that additional marketing or contextual language does not obscure the federally prescribed notice.
What Changed From the Proposed Rule?
While the final rule largely preserves the architecture described in the April 2026 Notice of Proposed Rulemaking (NPRM), ED has made several changes:
Deadline extensions. While OBBBA itself took effect on July 1, 2026, most provisions of the STATS and Accountability Rule do come with extensions. The amendments to 34 C.F.R. Part 685 implementing the Direct Loan earnings-accountability provisions, for example, take effect August 31, 2026. The Department has authorized early implementation of the reduced reporting requirements beginning July 1, 2026. Institutions that omit data elements eliminated by the final rule will be treated as having elected early implementation. Institutions that do not early implement must continue reporting under the existing FVT/GE requirements for the October 1, 2026, reporting cycle. All other provisions are effective July 1, 2027, but are, importantly, based on performance and reporting data that is currently taking shape.
Appeals process updates. While the existence of an appeals process was both required by statute and appears in the NPRM, proposed regulations would have moved more directly toward a limitation or termination action after a program failed in two out of three years. The final rule creates a separate preliminary appeal process, giving institutions 30 days to challenge the low-earning determination before ED proceeds under its formal enforcement procedures. Institutions seeking to take advantage of this more preliminary process should not wait for a failing determination to investigate discrepancies in CIP codes, program status, completer records, student exclusions, or other information that could affect the calculation.
Completer cohort updates. ED has simplified the process for expanding small completer cohorts. Rather than using the more complicated sequence proposed in the NPRM—including possible aggregation at the two-digit CIP level—the final rule generally adds prior award years and then aggregates programs sharing the same four-digit CIP code and credential level.
A limited treatment for tipped occupations. For certain gainful-employment programs preparing students for occupations in which tipping is widespread, ED will temporarily refrain from assigning a pass or fail result when the calculation includes earnings from 2025 or earlier. ED concluded that pre-2026 tax data may not capture earnings consistently enough to evaluate these occupations following statutory changes involving tipped income. Earnings data and the otherwise applicable threshold will still be disclosed.
Targeted institutional and program exemptions. The final rule exempts programs at institutions that enroll only individuals with documented specific learning disabilities or autism. It also addresses concerns raised in comments for when ED may lack the data necessary to complete an accurate comparison for program cohorts under the earnings premium test (e.g., uncommon graduate fields of study and in less-populated states), defaulting to the smallest possible value that working individuals could earn during a year, i.e. one dollar. ED otherwise declined requests to exempt broad categories of programs, including programs in education, theology, public service, health care, the arts, or other socially valuable but comparatively low-paid fields.
Additional warning language. The final rule adds language informing students when an institution’s repeated failure of the administrative capability standard could place the program’s access to Pell Grants and other Title IV aid at risk.
Key Takeaways for Online Education
The rule does not create a separate accountability standard for online programs. Nevertheless, several features are especially significant for institutions with large online portfolios. The earnings premium test employs thresholds that ordinarily depend on the institution’s home state, unless fewer than 50 percent of enrolled students reside there. Large online institutions may therefore move between state and national benchmarks as their geographic enrollment mix changes. This produces an important portfolio-planning issue. The same online program could face a different benchmark depending on the institution’s overall student distribution, even when the program’s curriculum, faculty, price, and learner outcomes remain unchanged.
Institutions should model both the state and national thresholds and monitor whether changes in online recruitment could move the institution across the 50-percent line. Because the calculation appears to rely on institution-level residency rather than the enrollment distribution of each individual program, expansion of one large online program could affect the benchmark applied to other programs.
Additionally, many online graduate programs enroll students who are already employed, changing careers, working part time, or pursuing credentials for advancement within their current occupations. Aggregate earnings may therefore reflect differences in student population as much as instructional quality. While some factors, such as existing/prior employment may be viewed as a benefit in many cases, programs serving public-sector employees, educators, nonprofit professionals, caregivers, or learners in economically distressed communities may be particularly vulnerable. The final rule generally does not adjust for hours worked, career preferences, local wage structures, employer tuition-benefit arrangements, or a program’s nonfinancial purposes. Institutions should analyze who completes each program—not only the general labor-market outlook for the field—and determine whether expected post-completion earnings are likely to exceed the applicable regulatory benchmark.
Finally, program classification becomes more important where online programs are involved. CIP-code selection will affect the relevant field-of-study comparison for graduate programs, how small cohorts are aggregated, and which new or revised programs may be treated as replacements for a program that loses eligibility. Data from programs offered in multiple modalities but that share the same 6-digit CIP and credential level will be combined, which can potentially lead to the performance of one program dragging down the other.
Institutions do not need to wait for their first official STATS results. Preparatory work will vary by institution but likely should include:
- Inventorying every Title IV-eligible program, including delivery modality, credential level, CIP code, program length, enrollment, completers, tuition, grants, and Direct Loan participation.
- Modeling likely earnings thresholds using state, national, and field-of-study comparisons, with particular attention to institutions approaching the 50-percent out-of-state enrollment threshold.
- Reviewing existing FVT/GE data submissions for inconsistent program identifiers, CIP codes, locations, and completer records.
- Establishing governance for low-earning programs, including who reviews preliminary results, approves appeals, changes program pricing, pauses recruitment, or authorizes closure.
- Mapping required warnings across digital systems and vendors so notices can be implemented quickly and consistently.
- Developing program-level contingency plans for loss of Direct Loan eligibility, including institutional aid, employer-paid cohorts, alternative financing, transfer arrangements, and orderly closure.
- Monitoring Federal Student Aid guidance and training, particularly before deciding whether to early implement the reduced reporting requirements.
Other News Worth Monitoring
PSLF “Substantial Illegal Purpose” Rule Vacated
The Department’s new Public Service Loan Forgiveness (PSLF) regulation would have allowed it to exclude an otherwise qualifying government or nonprofit employer after determining that the organization engaged in activities having a “substantial illegal purpose.” On June 30, 2026—one day before the rule was scheduled to take effect—a federal court vacated the regulation. Federal Student Aid subsequently announced that it was removing the related employer attestation from the PSLF certification form. The administration may pursue an appeal, but the vacated standard is not presently in effect. Coverage from NASFAA.
House Committee Advances Bills to Redistribute Education Department Functions
On July 9, 2026, House Republicans introduced a package of bills collectively described as the “Less Bureaucracy, Better Education” initiative. On July 15, the House Committee on Education and Workforce approved 10 bills intended to codify transfers of Department of Education responsibilities to other federal agencies. Among other changes, the package would transfer federal student loan management and student aid eligibility functions to the Department of the Treasury; higher education functions to the Department of Labor; international education programs to the Department of State; and certain foreign gift, accreditation, child care, and career education responsibilities to other agencies. Coverage from NASFAA.
Court Blocks/Directs ED to Revise “Professional Degree” Definition Stemming from RISE Rule
A federal judge temporarily blocked the Education Department’s rule limiting the higher federal loan caps for “professional students” to 11 designated degree fields, finding that the department unlawfully narrowed the broader definition Congress adopted in the One Big Beautiful Bill Act. The disputed rule classified most advanced programs—including physician assistant and many nursing programs—as ordinary graduate programs, whose students would be limited to $20,500 annually and $100,000 overall, rather than the professional-program limits of $50,000 annually and $200,000 overall. Coverage from Inside Higher Ed.
Past Editions
Looking for news that first broke in a prior month or perhaps for historical context of a story featured in this article? Links to past editions of CAI Policy Insights are provided below.
