What's Happening?

The Education Department has introduced a new earnings test regulation for postsecondary programs, which was approved by an advisory committee. This regulation, set to take effect in July, mandates that all postsecondary programs must demonstrate that their graduates earn more than a working adult with only a high school diploma. Programs failing this test will lose access to federal student loans and, under certain conditions, the Pell Grant. The regulation aims to ensure that taxpayer funds are used effectively and that students receive valuable education. The decision follows extensive negotiations and a compromise that was necessary to reach consensus among committee members.

Why It's Important?

This new regulation is significant as it aims to protect students and taxpayer funds by ensuring that educational programs provide real economic value. By cutting off federal aid to programs that do not meet the earnings threshold, the regulation seeks to eliminate low-performing programs that do not enhance graduates' earning potential. This move could potentially save close to a billion dollars annually in Pell Grant funds and affect approximately 650,000 students currently enrolled in failing programs. The regulation also sets a precedent for accountability in higher education, encouraging institutions to offer programs that align with labor market demands.

What's Next?

The Education Department will release the proposed regulations for public comment before finalizing them. Institutions will need to adapt to these new standards, which may involve revising or discontinuing programs that do not meet the earnings criteria. The regulation is part of a broader effort to implement the One Big Beautiful Bill Act, which includes other measures related to student loans and workforce training programs. The department aims to finalize these rules by July 1, with further announcements expected later this month.

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