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The revamped proposal could cut failing programs off from federal student aid entirely.
Photo illustration by Justin Morrison/Inside Higher Ed | skodonnell/E+/Getty Images | tarras79/iStock/Getty Images
After a week of talks and a final compromise from the Education Department, an advisory committee on Friday signed off on regulations that would require all postsecondary programs to pass a single earnings test.
The new accountability metric, set to take effect in July, could eventually cut failing programs off from all federal student aid funds—an enhanced penalty that appeared key to the committee reaching consensus Friday. Before the compromise, programs that fail the earnings test would only have lost access to federal student loans. Under the proposal, college programs will have to show that their graduates earn more than a working adult with only a high school diploma.
In the course of negotiations, committee members repeatedly argued that allowing failing programs to receive the Pell Grant didn’t sufficiently protect students or taxpayer funds, and it appeared unlikely that without more significant changes, the committee would reach unanimous agreement.
But now, failing programs will also lose eligibility for the Pell Grant if their institution doesn’t pass a separate test, which measures whether failing programs account for either half of the institution’s students or federal student aid funds. If either condition is met in two consecutive years, the programs will be cut off. The timing of the two tests and consequences mean that it will take at least three years for institutions to lose all access to federal student aid. Individual programs lose access to loans after failing the earnings test in two consecutive years.
Preston Cooper, the committee member representing taxpayers and the public interest, who had opposed the department’s initial proposal, said the agency’s compromise would “protect a lot of students.”
“By some of our calculations here, this would protect around 2 percent of students and close to a billion dollars a year in Pell Grant funds,” he said.
The department unveiled this new penalty late Friday morning after what ED’s lead negotiator Dave Musser called an “extremely productive” closed-door meeting with nearly all of the committee members. The proposed regulations aren’t yet final. The department is required to release them for public comment and review that feedback before issuing a final rule.
Other committee members also praised the compromise as “reasonable’ and “common-sense.” Members representing states and accreditors said the revised earnings test and new penalties would help to ensure institutions offer credentials that boost graduates’ earnings. Some suggested that the accountability framework could better inform discussions between institutions and employers, as it sets clear standards.
“And those standards are going to influence the decisions that [employers] make, and that’s going to be a pretty large educational effort,” said Randy Stamper with the Virginia Community College System, who represented states on the committee. “But at least we have the tool to hang our hat on to make points that low-earning programs are a result of low pay, and I think that will help us.”
The department’s proposal essentially combines two accountability metrics—the Do No Harm standard that Congress passed last summer and the existing gainful-employment rule. Gainful employment only applies to certificate programs and for-profit institutions, whereas Do No Harm covers all programs except certificates.
Tamar Hoffman, the committee member representing legal aid, consumer protection and civil rights groups, was the only person to abstain from voting. (Abstaining doesn’t block consensus.)
“The reason I’m abstaining from this vote is because it was made very clear to me throughout this process that protections for students in certificate programs would be taken away altogether if I blocked consensus, and those students are just too important for me to take that risk, especially with the long history of abuse in certificate programs,” Hoffman said.
About 6 percent of all programs would fail the combined earnings test, including about 29 percent of undergraduate certificates, according to department data. Roughly 650,000 students were enrolled in a failing program as of the 2024–25 academic year, half of whom attend a for-profit institution.
“Proprietary institutions are eager to be able to demonstrate where we have programs that are of great value and have good outcomes,” said Jeff Arthur, the committee member representing the for-profit higher education sector. “We’re looking forward to having that opportunity to have a level comparison for the first time across several metrics with all other programs.”
Education Under Secretary Nicholas Kent praised the committee’s work in his closing remarks, saying they made history by adopting a standard accountability metric that will ensure the taxpayer investment in higher education is working for everyone.
“For years, we have been bogged down in ineffective measures that simply failed to capture the full picture of how all programs were actually performing,” he said. “This new framework is different. It’s about ensuring that all programs meet a baseline for financial value, a baseline that reflects the needs of students and taxpayers alike.”
Friday’s meeting ends two rounds of negotiations at the Education Department to implement Congress’s One Big Beautiful Bill Act. In November, a different advisory committee reached consensus on regulations related to repayment plans, graduate student loan caps and what’s become a controversial plan to designate 11 degree programs as eligible for a higher borrowing limit. Then, in December, this advisory committee approved rules to expand the Pell Grant to short-term workforce training programs.
The department still has to take public comments and finalize those rules before July 1. Kent said the regulations for the student loan provisions should be published later this month.
Several outside policy experts doubted whether the department could get through the necessary negotiations and reach consensus on all the topics—a point that Kent addressed as he called out some of the media coverage surrounding the talks.
“And yet, here we are today,” he said. “Together, we have built something that will stand the test of time and end the regulatory whiplash. Once again, those who bet against us were wrong. They continue to severely underestimate this administration and this committee.”
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With just one more meeting to go, the Department of Education and an advisory committee tasked with ironing out the details of how to hold college programs accountable appear far from reaching consensus.
The 13-member panel, comprised largely of state officials, think tank researchers and higher ed lawyers, spent the last four days negotiating the rules of a new college earnings test called Do No Harm—which applies to all degree programs—as well as changes to the existing gainful-employment rule, an accountability metric that only applies to certificate programs and for-profits.
The department’s proposal, which aligns the two accountability metrics and holds all programs to the Do No Harm’s standards, has gone largely unchanged in the first four days of negotiation.
Under Do No Harm, all college programs, except undergraduate certificates, that fail to prove their students earn more than someone with only a high school diploma could lose access to federal loans, whereas the current version of gainful employment requires programs to show their graduates pass the earnings test and can reasonably pay off their debt. Programs that fail either test are cut off from all federal student aid.
Although officials have agreed to a series of smaller changes and said they were open to considering larger ones, none made so far address the key issues that are dividing the committee—axing the debt-to-earnings ratio and the Pell Grant penalty.
If the committee doesn’t reach consensus, the department is free to propose any changes to the regulation it wants, which could include scrapping gainful employment entirely. The department met with different committee members in private meetings Thursday, but it’s unclear if those talks will lead to compromises or flip votes.
“Consensus seems pretty unlikely at this point, since negotiators are still disagreeing on key provisions of the department’s drafted text,” said Emily Rounds, an education policy adviser at Third Way, a left-of-center think tank. “Anything is possible, and these caucuses could be productive, but I would be surprised if they reached consensus.”
Institutional representatives on the committee generally back the overall plan, while consumer protection advocates have taken issue with the department’s changes to gainful employment.
Reaching consensus at this point would likely require ED to significantly rework its original proposal.
“We have moved well into the vote-tallying stage,” one committee member said on the condition of anonymity to maintain good faith in the negotiation process. “The question is, does ED think it can get certain negotiators on board without caving on their original proposal to integrate gainful employment and Do No Harm.”
Department officials acknowledged the differences of opinion but said they would work to bring committee members together.
“The department is going to work on some language overnight based on the things that we’ve talked about today in our various caucuses,” Dave Musser, ED’s negotiator, said at the end of Thursday’s meeting. “We plan to come back in the morning prepared to share some of that language, recognizing that it may not be enough alone to get us to consensus. However, we want to show that we are doing everything that we can to get to a place where everyone can get to an agreement.”
The Education Department and institutional representatives said the proposal plan creates a level playing field, calling it a more fair and simple means of accountability. State higher education officials and employers also joined in at times, agreeing that this plan would be the most legally sound and could end years of political ping-pong over higher ed accountability.
But committee members representing taxpayers and legal aid organizations as well as left-leaning research groups and consumer protection advocates argue that the department’s plan waters down existing standards, could put students at risk and may lead to legal challenges.
Although negotiators representing students who receive Title IV aid and students who are veterans have also expressed concerns about the changes to gainful employment, Tamar Hoffman, the committee member representing legal aid organizations, was the most outspoken throughout the week, saying there were “inherent issues” with the department’s current proposal.
“It does not make sense that we would allow the most economically disadvantaged students to use up very precious resources that they have in their lifetime Pell eligibility on programs that the department has deemed to be inadequate to receive loans,” she said at the close of Thursday’s meeting.
Ideally, Hoffman and others would like to see the debt-to-earnings test reinstated as well, though Pell appears to be the top priority.
Preston Cooper, the committee member representing taxpayers and the public interest, voiced more opposition at the beginning of the week as he highlighted his analysis of department data that showed ED’s plan would disburse an estimated $1.2 billion in Pell dollars annually to programs that failed the earnings test.
By Thursday, however, multiple of Cooper’s smaller concerns had been addressed through amendments, and he appeared poised to support the department’s proposal. The changes included added clarity about the ability to separate gainful employment and Do No Harm if courts strike down either test and that failed programs must pass the earnings test for at least two years before regaining loan eligibility.
Despite their overall support for the department’s plan, institutional advocates—particularly Jeff Arthur, the negotiator representing for-profit institutions, and Aaron Lacey, who represented nonprofit institutions—did try to change parts of the earnings test that they argued were unfair, like the age and work experience of high school graduates that college students were compared to, or the way rural institutions were held to the same standard as urban ones. So far, they haven’t been successful.
They had better success with an amendment that allowed existing students in failing programs to maintain the loan access needed to complete their degree. The department agreed to the change under a few conditions: The program will have to voluntarily agree to shut itself down after the first year of failure, terminate all enrollment for new students and enter a formal teach-out plan for those who remain.
Hoffman, however, said the change would only further water down existing accountability standards.
“To me, this seems like a giant loophole for institutions to try to maintain eligibility for Title IV funds when they aren’t actually delivering adequate services to students,” she said. “There isn’t anything here that prevents institutions from ceasing new enrollment in a failing program [while] at the same time standing up a [new] substantially similar program within the same institution.” (Title IV of the Higher Education Act authorizes federal financial aid programs such as the Pell Grant.)
The regulations do include some restrictions on starting new programs, but Hoffman and other student advocates from think tanks don’t believe they are strong enough to prevent institutions from developing other similarly poor-performing certificates and degrees.
By the end of Thursday’s meeting, the department had not yet publicly proposed any concessions to address Hoffman’s concerns on the teach-out plan or the core changes to gainful employment.
But talks appeared to continue after the meeting ended. One department official told Hoffman he’d be amenable to talking over happy hour about what changes would be needed to get her on board.
A recent opinion from the Department of Justice’s Office of Legal Counsel declares that federal Minority-Serving Institution (MSI) programs are unlawful because they allocate funding based on the racial composition of enrolled students. The ruling immediately throws hundreds of campuses—and the students they serve—into uncertainty. But beyond the legal debate lies a more revealing institutional reckoning: if MSI grants disappear, will colleges actually fund these programs themselves?
The short answer, based on decades of evidence, is no.
For years, colleges and universities have framed MSI grants as proof of their commitment to access, equity, and social mobility. Yet those commitments have always been conditional. They have depended on external federal subsidies rather than first-principles institutional priorities. Now that the funding stream is threatened, the gap between rhetoric and reality is about to widen dramatically.
The scale of what is being cut is not trivial. Discretionary MSI programs—serving Hispanic-Serving Institutions (HSIs), Asian American and Native American Pacific Islander–Serving Institutions (AANAPISIs), Predominantly Black Institutions (PBIs), and others—have collectively provided hundreds of millions of dollars annually for tutoring, advising, counseling, faculty development, and basic academic infrastructure. These grants have often been the difference between persistence and attrition for low-income students, many of whom are first-generation and Pell-eligible.
Yet MSI funding has also sustained something else: a sprawling administrative apparatus dedicated to grant writing, compliance, reporting, assessment, and “outcomes tracking.” Entire offices exist to chase, manage, and justify these funds. This is the professional-managerial class infrastructure that has come to dominate higher education—highly credentialed, compliance-oriented, and deeply invested in external funding streams.
Follow the money, and a pattern becomes clear. When federal or state funding declines, colleges do not trim administrative overhead. They cut instruction. They cut tutoring. They cut advising. They cut student-facing programs that lack powerful internal constituencies. Administrative spending, by contrast, is remarkably durable. It rarely shrinks, even in moments of fiscal crisis.
We have seen this movie before. When state appropriations fell over the past decade, public universities raised tuition and reduced instructional spending rather than dismantling administrative layers. When DEI offices were banned or defunded in several states, institutions eliminated student services and laid off staff, then quietly absorbed the savings into general operations. There was no surge in faculty hiring, no reinvestment in instruction, no serious attempt to replace lost support with institutional dollars.
MSI grants will follow the same path. Colleges may offer short-term “bridge funding” to manage optics and morale, but that support will be temporary and partial. The language administrators use—“assessing impacts,” “exploring alternatives,” “seeking private donors”—is a familiar signal that programs are being triaged, not saved.
Could institutions afford to self-fund these programs if they truly wanted to? In most cases, no—or at least not without making choices they refuse to make. Endowments are largely restricted and already used to paper over structural deficits. Tuition increases are politically and economically constrained at campuses serving low-income students. Federal aid flows through institutions but cannot be repurposed for operations. There is no hidden pool of fungible money waiting to be redirected.
What would replacing MSI funding actually require? Cutting administrative spending. Reducing executive compensation. Scaling back amenities and non-instructional growth. Reprioritizing instruction and academic support over branding and “customer experience.” These are choices institutions have consistently shown they will not make.
This is why the rhetoric of social mobility rings hollow. Colleges celebrate access and equity when the costs are externalized—when federal grants pay for the work and compliance offices manage the paperwork. But when that funding disappears, so does the institutional courage to sustain the mission.
The contrast with historically Black colleges and tribal colleges is instructive. Their core federal funding survives precisely because it is tied to historical mission rather than contemporary enrollment metrics, and because these institutions have long-standing political champions. That distinction exposes the truth: what is preserved is not equity, but power.
The coming months will bring program closures, staff layoffs, and diminished support for the students MSI grants were designed to serve. What we will not see, despite solemn statements and carefully worded emails, is a widespread commitment by colleges to fund these programs themselves.
The test is simple and unforgiving. If social mobility were truly a foundational principle of higher education, institutions would treat MSI programs as essential—not optional, not grant-contingent, not expendable. They would pay for them out of their own budgets.
They won’t.
And in that refusal, the performance ends. The mission statements remain, but the money moves elsewhere.
Inside Higher Ed, “DOJ Report Declares Minority-Serving Institution Programs Unlawful,” December 22, 2025.
U.S. Department of Justice, Office of Legal Counsel, Opinion on Minority-Serving Institution Grant Programs, 2025.
U.S. Department of Education, Title III and Title V Program Data, Fiscal Years 2020–2025.
Government Accountability Office, Higher Education: Trends in Administrative and Instructional Spending, various reports.
Delta Cost Project / American Institutes for Research, Trends in College Spending, 2003–2021.
State Higher Education Executive Officers Association (SHEEO), State Higher Education Finance Reports, 2010–2024.
University of California Office of the President, California State Auditor Reports on Administrative Spending and Reserves.
Texas Higher Education Coordinating Board; Florida Board of Governors; UNC System Office, public records and budget documents on DEI office eliminations, 2024–2025.
Bloomberg News and Associated Press reporting on DEI bans and campus program closures, 2024–2025.
National Center for Education Statistics (NCES), IPEDS Finance and Enrollment Data.
American Council on Education, Endowment Spending and Restrictions in Higher Education.
IRS Form 990 filings and audited financial statements of selected public and private universities.
Columbia University public statements on federal research funding disruptions, 2025.
University of Hawaiʻi system communications on federal grant losses and bridge funding, 2025.
Congressional Budget Justifications, U.S. Department of Education, FY2025–FY2026.
Ehrenreich, Barbara and John, The Professional-Managerial Class, and subsequent scholarship on administrative growth in higher education.
Student Borrower Protection Center, Student Debt and Institutional Finance, 2024–2025.
How well did you keep up with this year’s developments in K-12 education? To find out, take our 10-question quiz below. Then, share your score by tagging us on social media with #K12DivePopQuiz.
How well did you keep up with this week’s developments in K-12 education? To find out, take our five-question quiz below. Then, share your score by tagging us on social media with #K12DivePopQuiz.
How well did you keep up with this week’s developments in K-12 education? To find out, take our five-question quiz below. Then, share your score by tagging us on social media with #K12DivePopQuiz.
How well did you keep up with this week’s developments in K-12 education? To find out, take our five-question quiz below. Then, share your score by tagging us on social media with #K12DivePopQuiz.
