New Earnings Test Will Have Limited but Concentrated Impact

A new report and interactive tool from the Postsecondary Education & Economics Research Center at American University show that only about 2.5 percent—or about 488,900 of the nation’s 19.9 million total students who receive federal student aid—will be enrolled in programs expected to fail the Education Department’s new accountability measure. 

The measure—otherwise known as the earnings test—was launched on July 1 but won’t take full effect and lead to penalization until 2028 at the earliest, since it requires at least two years of data. When the measure is in full swing, a bachelor’s-level degree or certificate program whose average graduate doesn’t earn more than a high school graduate in the same state for two out of three consecutive years will be considered a failure and lose access to federal student loans. The same will be true for graduate-level degree or certificate programs, but their students’ earnings will be compared to the earnings of a bachelor’s degree holder. 

While very few programs and their students are expected to be affected by those losses, the study shows some distinct patterns among those that will.

For example, among graduate-level certificate and degree programs, the highest concentration of programs expected to fail are focused on mental health and social services. And of those graduate-level mental health programs, the five with the largest number of students are offered by colleges that operate largely online: Grand Canyon University, Capella University, Liberty University, Northcentral University (now part of National University) and Regent University.

But the study also shows that far more of the affected students—60 percent—are enrolled in undergraduate certificate programs than in graduate-level ones, though they represent only 10 percent of all students receiving federal student aid. Of the affected undergraduate certificate programs, many focus on fields such as cosmetology, allied health and medical administration. 

In addition to credential level and type of institution, the interactive tool shows how many students are projected to be in a failing program based on the type of program, the state the institution is in, the population density of the institution’s location and whether it is an HBCU or MSI.