In a separate development, two federal courts block the department's new limits on Public Service Loan Forgiveness
The Department of Education (ED) released its final rule on program-level accountability for colleges and universities last week, capping a negotiated rulemaking process that drew nearly 10,000 public comments.
The rule will not take effect until July 1, 2027, a full year later than originally proposed. A narrower set of provisions tied to loan agreements will take effect Aug. 29. ED devoted several paragraphs of the preamble to explaining why the master calendar requirement applies to this rule, a notable contrast with its approach to the loan limits rule and other recent rulemaking, where the same requirement was not addressed.
ACE has said it supports the broad goal of holding low-performing programs accountable but has concerns about how ED has chosen to implement it.
"We think institutions should be better about providing programs that give a livable wage, and if they're not, they should either fix the programs or stop them," ACE President Ted Mitchell told The Wall Street Journal. ACE supports the general direction of the rule but has concerns about parts of the framework, particularly how it ties Pell Grant eligibility to a test Congress wrote for federal loans alone.
ACE's Jon Fansmith echoed that concern in comments to The Washington Post, saying the association has repeatedly told ED that the rule will have negative unintended consequences on programs that are critically important to the country, in ways not yet fully understood.
What Changed Between the Proposed and Final Rule
Programs that prepare students for occupations in which tipped income makes up a substantial share of pay, such as cosmetology and similar fields, will get a delay on being judged against the earnings threshold until tax data reflects the "No Tax on Tips" policy that took effect this year.
ED also created what Under Secretary Nicholas Kent called a "parachute option," allowing institutions whose programs fail the earnings test after the first year to voluntarily exit the federal loan program in order to retain Pell Grant eligibility. ED estimates this will protect students in roughly 600 religious-affiliated programs from losing access to Pell Grants. A separate exemption applies to institutions that have not participated in the loan program for the prior five years.
In addition, ED will use cohort data going back as far as 2018 to determine earnings premium measures, and institutions will have access to a more robust appeals process.
What Did Not Change
The final rule retains the elimination of the debt-to-earnings metric in favor of an earnings premium test alone, along with the two-out-of-three-year failure standard.
ACE also continues to press its central legal objection: that ED is using a statutory provision written specifically for Direct Loans to justify cutting off all Title IV eligibility, including Pell Grants, for institutions where half or more of Title IV funding flows through low-earning programs. In comments on the proposed rule submitted in May, ACE and dozens of other higher education associations argued that Congress' clear intent in OBBBA was to deny only Direct Loan eligibility for programs that fail the earnings test, not to eliminate all Title IV aid.
The groups noted that ED's own preamble language, citing the department's heightened interest in loan repayment specifically, undercuts its decision to extend the consequences to all Title IV funds.
Public Service Loan Forgiveness Rule Vacated
In a separate development, two federal judges last week struck down the Trump administration's overhaul of the Public Service Loan Forgiveness (PSLF) program, ruling in favor of advocates who argued the changes risked turning the program into a tool for political retribution.
A U.S. district court judge in Massachusetts vacated the Education Department's changes, finding that they exceeded the agency's authority and threatened to violate First Amendment free-speech protections, in a case brought by more than 20 states along with a coalition of nonprofits and cities. A parallel ruling came from a district court in Washington, DC, in a case brought by nonprofit organizations. Both rulings landed a day before the new rules were set to take effect.
Congress created PSLF in 2007 to encourage college graduates to take government and nonprofit jobs, promising loan forgiveness after 10 years of public service work. Last year's overhaul would have added eligibility rules stripping the benefit from workers whose employers were deemed to have a "substantial illegal purpose," a change aimed at nonprofits and government organizations seen as at odds with the administration's priorities, such as immigration and support for transgender youth.
The Massachusetts ruling said that the department had failed to tie its definitions of illegal activity to any criminal statutes, writing that it cannot create new criminal prohibitions through rulemaking. The judge also questioned ED's own rationale for the rule, noting that the department's estimates suggested fewer than 10 employers per year would actually be barred and asked why such sweeping consequences were necessary to address so narrow a problem.
Under Secretary of Education Nicholas Kent said the department was evaluating next steps.