How the New Federal Earnings Test for Colleges Works
The One Big Beautiful Bill Act created a new accountability rule that compares program graduates' earnings to a regional benchmark. Here's how the test actually operates, what triggers sanctions, and when they bite.
For the first time, the federal government has drawn a line: if your program’s graduates earn less than high school graduates in the same region, your program fails.
Under the One Big Beautiful Bill Act (OB3A), the Department of Education now measures the median earnings of program graduates four years after they leave school and compares them to a regional benchmark. Programs that fall short face sanctions, and if enough programs at an institution fail, the entire school could lose access to federal financial aid.
This post walks through how the test works. For an analysis of which programs actually fail under the new rule, see Which Programs Don’t Pay Off?
How the Test Works
The explainer below walks through the test step by step, including an interactive tool where you can click through real programs and see how they compare against their benchmarks.
What Happens Next
Programs that fail the OB3A earnings test won’t lose federal funding immediately. A program must fail in two of three consecutive years before it loses access to federal Direct Loans, and the first sanctions don’t take effect until Academic Year 2028-29, giving institutions a window to improve outcomes or voluntarily close underperforming programs.
But as Robert Kelchen has noted, the earnings test doesn’t operate in isolation. Starting July 2026, new lifetime borrowing caps limit graduate students to $100,000 in total federal loans (down from unlimited Grad PLUS borrowing), while professional programs are capped at $200,000. For institutions already facing earnings test failures, the simultaneous loss of loan flexibility compounds the financial pressure on the very programs most likely to be affected.
For institutions with high concentrations of failing programs, the stakes are existential: if 50% or more of an institution’s testable programs fail, the entire institution faces provisional certification, a significant regulatory and reputational consequence.
Read More
Now that you know how the test works, see what the 2026 data actually shows: Which Programs Don’t Pay Off? analyzes the 2,880 programs that fail under the new rule.