Week two of the AHEAD negotiated rulemaking concluded with consensus on Friday. The Committee’s negotiations focused on harmonizing the FVT/GE Rule with the Do No Harm accountability framework created by OB3. If implemented as drafted, ED’s data suggests that 92.5% of cosmetology programs would fail the new framework’s accountability metric. Because the Committee reached consensus, the proposed rule is expected to reflect the draft language. The Department will publish the proposed rule, which will be followed by a public comment period. ED can modify the language of the final rule, based on public comments the agency receives, so all is not lost. AACS will advocate aggressively—through every means necessary, including but not limited to regulatory engagement, formal comments, litigation, and lobbying—to protect our schools, our students, and the communities they serve. We will need the help of every AACS member, including at Hill Day in April, to have our voices heard to change this draft rule that unfairly targets our sector. The Scope The new framework would apply to all Title IV-eligible programs at all institutions of higher education, regardless of sector, including undergraduate nondegree programs. Unlike the FVT/GE rule, under the new framework, the corresponding sanctions would apply to both GE and eligible non-GE programs. ED’s proposal to include undergraduate nondegree programs in the new framework is a departure from OB3, which specifically excluded undergraduate certificate programs. The Metric If implemented, the draft language would eliminate the debt-to-earnings metric and maintain a version of the FVT/GE rule’s earnings premium, with certain OB3-specific modifications. The earnings premium would compare the median annual earnings of working adults four years following completion of a Title IV program to the earnings of a designated comparator group. In general, the median annual earnings of undergraduate program completers would be compared to the same earnings of working adults, ages 25-34, with only a high school diploma in the state where the institution is located. If, during the award year for which calculations are made, fewer than 50% of the institution’s students are from the state where the institution is located, ED would instead compare the program completers’ earnings to a national high school completer comparator group. A similar approach would apply to graduate programs, using baccalaureate degree completers, rather than high school completers, as the comparator group. The result of this calculation is called the earnings threshold. A program would pass the earnings premium if the program completers’ earnings equal or exceed the earnings threshold and would fail if the program completers’ earnings are less than the earnings threshold. The Process The new framework would still require institutions to report a range of program- and student-specific information to ED annually, but there would be fewer required data points as compared to the FVT/GE rule. Similar to the FVT/GE rule, for each program, the Department would compile a list of program completers, subject to certain exclusion criteria. The Department would provide the draft list to the institution, after which the institution would have 60 days to correct the information reported by the institution. The final list would be sent to a yet-to-be-named federal earnings agency, like the IRS. The IRS or another agency would provide ED with the median annual earnings of the individuals on the list. Using that information, the Department would calculate the earnings premium, notify institutions whether their programs passed or failed, and publish the results on a program information website. Among other things, institutions would be required to “prominently” post a link to the website on any institution webpage containing cost, financial aid, or admissions information for that program. Warnings An institution would be required to provide a warning to current and prospective students if its program could become ineligible for Direct Loans in the next award year for which the earnings premium is calculated. As a practical matter, this means institutions would be required to issue warnings if a program fails a single year, because a program would be one year from potentially losing Direct Loan eligibility following a single failure. Institutions would not be permitted to enroll a prospective student until the student acknowledged the warning. Loss of Eligibility If a program fails the earnings premium in two out of any three consecutive awards years for which the program’s earnings premium is calculated, ED would deem the program a “low-earning outcome program,” and the program would lose Direct Loan eligibility. Furthermore, if 50% or more of an institution’s Title IV recipients are in, or 50% or more an institution’s Title IV funds are from, low-earning outcome programs, the institution would fail a new administrative capability standard. If an institution were to fail this new standard in two out of any three consecutive award years, the institution would be placed on provisional status and the institution’s low-earning outcome programs would lose access to all Title IV funds (including Pell grants). Functionally, this means a program would have to fail the earnings premium test in three consecutive years prior to losing Title IV-eligibility. Appeals An institution would be permitted to appeal the Department’s “low-earning outcome programs” determination if the institution believes ED made an error “in the calculation” of the earnings premium. As a reminder, the calculation involves the simple subtraction of one number from another, making the basis for appeal extremely limited. Voluntary Program Closure Option After one year of failing the earnings premium, institutions would generally be permitted to voluntarily teach out the program while maintaining Direct Loan eligibility. The eligibility would not exceed three years or the normal full-time length of the program, whichever is shorter. The eligibility would continue based on an addendum to the institution’s Program Participation Agreement, which would require the institution to stop new enrollments and complete a teach-out of enrolled students, among other things. Reestablishing Eligibility Institutions would be required to wait two years to reestablish the Direct Loan eligibility of a program that lost eligibility or that a school voluntarily discontinued. Timeline ED has suggested the following potential timeline: the Department would publish an interim rule, effective July 1, 2026. Then, the Department would use the data institutions have already submitted in fulfillment of their reporting requirements under the FVT/GE rule to calculate the first round of earnings premiums. ED would issue notices of determination in early 2027. On July 1, 2027, the final rule would become effective and institutions who failed the earnings premium would be considered to have failed for the first time as of the same date. Institutions would first lose Direct Loan eligibility in mid-2028, following the Department issuing the second round of earnings premium determinations. Institutions would first lose all Title IV eligibility in mid-2029, following the Department issuing the third round of earnings premium determinations.
We invite you to join us for an informative webinar featuring a report on the AHEAD Negotiated Rulemaking Committee taking place tomorrow, Thursday, January 15 at 1:00 pm EST. All school owners, administrators, and compliance leaders are encouraged to attend. | 
