Biden-Harris Administration Announces Landmark Final Rules to Protect Consumers from Unaffordable Student Debt and Increase Transparency

The Biden-Harris Administration today released final regulations that establish the most effective set of safeguards ever against unaffordable debt or insufficient earnings for postsecondary students. The final rule has two key parts:

• A revitalized and strengthened Gainful Employment (GE) rule, that will protect approximately 700,000 students a year from career training programs that leave graduates with unaffordable loan payments or earnings no better than what someone who did not pursue postsecondary education earns in their state.
• A new Financial Value Transparency (FVT) framework will give students in all programs the most detailed information ever available about the net costs of postsecondary programs, and the financial outcomes they can expect. It will also help prospective students understand the potential risks involved in their program choices by requiring them to acknowledge viewing this information before enrolling in certificate or graduate programs whose graduates have been determined to face unaffordable debt levels.

“Today’s final rules answer President Biden’s call to hold colleges accountable for rising costs and protect students from unaffordable college debt,” said U.S. Secretary of Education Miguel Cardona. “We are fixing a broken system and making sure that students know, before they take out loans, when college programs have a history of leaving graduates with high debts, low earnings, and poor career prospects. The Biden-Harris administration believes that when students invest in higher education, they should get a solid return on their investment and a greater shot at the American dream.”

The Department estimates that the final rules will protect nearly 700,000 students annually who would otherwise enroll in one of nearly 1,700 low-performing programs. Not counting students already covered by the GE accountability provisions, the FVT framework would result in acknowledgments for an estimated 400 graduate programs that enroll about 120,000 students.

“These protections are about ensuring career college programs live up to higher education’s promise as a pathway to a better a life,” said U.S. Department of Education Under Secretary James Kvaal. “Students overwhelmingly say that they’re going to college to find a good job and build financial security, but too often their programs leave them no better off financially than those with no postsecondary education at all. These rules will stop taxpayer dollars from going to schools that continually saddle students with unaffordable debt. Separately, we’re ensuring all students have increased information to make good choices.”

These final regulations are part of the Biden-Harris Administration’s work to ensure that postsecondary education remains an engine for equal opportunity, upward mobility, and global competitiveness. The Administration has already approved more than $117 billion in student loan forgiveness for over 3.4 million borrowers. The Biden-Harris Administration has also championed the largest increase to Pell Grants in a decade and is fighting to put the grant on a path to doubling the maximum award by 2029. President Biden will also continue to fight for tuition-free community college and tuition assistance at Historically Black Colleges and Universities, Tribal Colleges and Universities, and Minority-Serving Institutions.

Gainful Employment Program Accountability Framework

Under the final rule, the Department assesses whether programs offered by private for-profit institutions and certificate programs at all types of colleges meet the statutory requirement to prepare students for gainful employment in a recognized occupation using two separate measures. Specifically:

• The share of annual earnings the typical graduate needs to devote to paying their debt (i.e., their “debt-to-earnings ratio”) must be less than or equal to 8 percent, or less than or equal to 20 percent of their discretionary earnings (defined as their annual earnings minus 150 percent of the federal poverty guideline).This metric captures whether a program’s debt is affordable.
• At least half of graduates have higher earnings than a typical high school graduate in their state’s labor force who never enrolled in postsecondary education. This “earnings premium” assesses whether the program enhances its students’ earnings potential.

Programs will be assessed separately on each metric. Programs that fail either will need to warn students that the program is at risk of losing access to the federal student aid programs. Those that fail to meet the standards on the same metric twice in a three-year period will not be eligible to participate in the Department’s Federal student aid programs.

Financial Value Transparency for All Students and Families

The final rules also include the FVT framework. It will provide students and families across the country with the most detailed information ever available about what they are likely to pay out-of-pocket for programs, how much debt they can expect to take on, and how much money students are likely to earn after graduation. The FVT framework also includes provisions to ensure prospective students are aware, before they enroll, of risks associated with selecting a certificate or graduate program that is likely to leave them with unaffordable debt.

Students will receive this enhanced transparency for programs through new reporting requirements for institutions related to costs (including tuition and fees, books, and supplies), non-federal grant aid, and typical borrowing amounts (for both private and federal loans). The Department will also calculate typical earnings for program graduates. This information will be made publicly available to students on a website run by the Department.

The Department focused the FVT acknowledgements on certificate and graduate programs in the final rule because they are the programs where unaffordable debt is most common, and students tend to enroll directly into particular programs. By contrast, many students seeking undergraduate degrees do not select a program when they enter the institution.

The Department issued these final rules after careful consideration of more than 7,500 public comments received over the summer. The GE accountability and FVT reporting provisions will go into effect on July 1, 2024. The first official financial outcome rates will be published in early 2025. Programs that fail the same GE metric in the first two years the rates are issued will become ineligible in 2026.

The final regulations will be on public inspection in the Federal Register tomorrow and published on October 10, 2023. An unofficial copy of the regulations can be found here. A fact sheet on the final rule can be found here. The Department released comprehensive data on the estimated effects of the rule on most specific postsecondary programs in May. Those data can be found here, along with a description of the data, and a data codebook.