How graduate programs will be affected by new gainful employment rule

David Levy
David Levy

David Levy

David Levy manages the product and data strategy for Degreechoices and writes about college rankings and accountability.

Dr. Michael Nietzel
Dr. Michael Nietzel

Dr. Michael Nietzel

Dr. Michael Nietzel is a Senior Educational Policy Advisor to the Missouri Governor. He was appointed President of Missouri State University in 2005. He has also worked as the Director of Clinical Psychology at the University of Kentucky, where he was Chair of the Psychology Department, Dean of the Graduate School, and Provost.

Updated Feb. 12, 2024
How graduate programs will be affected by new gainful employment rule

Graduate programs across the U.S. will come under increased scrutiny as a result of the Biden administration’s recently finalized “gainful employment” rule. The rule is a strengthened revision of an earlier regulation by the Obama administration that had been discarded by the Department of Education under Donald Trump.

The 775-page regulatory framework, which will go into effect on July 1, 2024, is intended to increase accountability by protecting students and taxpayers from low-value degree programs that burden graduates with debt they are unable to pay off.

The rationale behind the regulation is that if schools are graduating students who are unlikely to succeed in the work force and whose educational loan debt outpaces their earnings then:

  1. students should be warned
  2. taxpayers should not be subsidizing these programs.

“As we fight for greater college affordability we must demand greater accountability,” Education Secretary Miguel Cardona said in a statement. “We can’t keep throwing taxpayer funded financial aid dollars at colleges that cost students an arm and a leg and then leave them in a ditch unable to climb the economic ladder.”

The rule is based on two different benchmarks – the first on the ratio of debt to earnings, the second on average earnings. Programs that fail either of these benchmarks would be designated as “high debt burden” or “low income” institutions. Continued classification in these categories could disqualify a school from receiving federal funds – a death sentence for most colleges – or, in the case of graduate programs, a requirement that prospective students acknowledge they are enrolling in a program with poor financial outcomes.

54% of New York University’s graduate programs would not fulfill new gainful employment benchmarks

As part of the rule, programs at for-profit institutions – as well as non-degree programs in any higher education sector – would be required to show that graduates can afford their annual debt payments and that their average yearly income exceeds that of adults in their state who didn’t attend college. Failing either of those tests in two consecutive years could lead to a program losing access to federal financial aid.

Here’s how those two measures are calculated:

To pass the debt-to-earnings test, a program must either show that average debt payments are no more than 8% of annual earnings or 20% of discretionary earnings, which is defined as annual earnings minus 150% of the Federal poverty guideline for a single individual (about $21,870 in 2023).

The earnings premium test requires at least half of program graduates earn more have than a typical worker in the state age 25-34 who never enrolled in postsecondary education.

This final rule also contains what’s termed a Financial Value Transparency (FVT) framework, which gives all students detailed information about the cost of postsecondary programs and the financial outcomes they can expect.

The FVT measures will apply to all programs in any sector – for profit schools as well as private, nonprofit, and public colleges – but won’t affect financial aid eligibility. This article focuses on the likely effect of these new regulations on graduate programs only.

Master’s-level programs that enroll 30 or more students must demonstrate they pass one of two debt burden tests: annual debt must be less than or equal to 8% of total earnings OR debt must be less than 20% of a graduate’s discretionary income.

To be eligible for federal funds, institutions will be responsible for reporting the information needed to determine their performance. New data will be collected beginning in 2024, and performance information will become available publicly in 2026.

Using existing College Scorecard data, we have estimated which programs and institutions are likely to run afoul of these new benchmarks. Our initial analysis indicates that the effects of this gainful employment reform could affect a large number of graduate programs. It is important to note that only 22% – 7,262 programs out of 32,963 – of the total US graduate program market report enough debt and earnings data to be included in this analysis. Any data reported below is based only on this part of the market.


  1. We looked at all graduate programs with meaningful debt and earnings data, regardless of size. (Note: the regulations would consider only schools with more than 30 students enrolled). In total, we analyzed 7,262 graduate programs at 1,309 different institutions of higher education.
  2. We used 4-year median earnings and the median estimated monthly Stafford (direct subsidized/unsubsidized) federal loans and Grad School Plus loan debt of the program at each institution. Note that these figures do not include additional private loans, which will be included in the official benchmark calculations.

The total debt to earnings threshold calculation used is: Total debt/4-year earnings

  1. We used the HHS federal poverty guideline for 1 person households of $14,580, which corresponds to a 150% rate of $21,870. The discretionary earnings calculation used is: (4-year earnings – $21,870)*20%-total debt

While we are working with limited data, we believe our calculations do a reasonably good job of surveying the current performance of the graduate education market and can flag programs that are in danger of falling below gainful employment performance thresholds.


  • Just above half of all reported programs, 3,576, demonstrated debt levels greater than 8% of student median earnings.
  • 23.5% of graduate programs demonstrated debt figures greater than 20% of discretionary spending.
  • 1,704 graduate programs, 23.4% of all programs measured, failed both high debt burden tests – the debt to earnings ratio, and the debt to discretionary earnings ratio. These are the programs that would fail to meet the new gainful employment requirements.
  • 36.7% of private for-profit graduate programs failed both debt burden tests, compared to 29.6% and 15.3% of private and public graduate programs, respectively.
  • 57.6% of HBCUs failed both debt burden tests.

State performance

Worst performing states

  • Puerto Rico: 41 out of 60 programs, 68%
  • Mississippi: 29 of 53 programs, 55%
  • Vermont: 20 of 39 programs, 51%
  • Montana: 6 of 12 programs, 50%
  • Louisiana: 37 of 90 programs, 41%

Best performing states

College performance

Analysis was limited to colleges with 20+ programs.

Worst performing colleges

Best performing colleges

Program performance comparison

When analyzing programs’ performance, we used the Department of Education’s CIP code classification system, which assigns every degree a code so that similar programs at different schools, which often have different naming conventions, can be aggregated and compared to each other. For example, CIP code 52 correlates to Business, Management, Marketing, and Related Support Services, a relatively broad grouping of degrees.

There are 14 different subdivisions of CIP code 52 – for instance, 52.02 is Business Administration, Management, and Operations, and 52.08 is Finance and Financial Management Services.

In comparing program types, we aggregate performance up to the 2-digit level – i.e. 52. While this is a relatively wide aggregation that may include programs that are only loosely related, it is a good way to determine the performance of a general category.

Worst performing program categories

  • Fine arts: 169 out of 200, 85%
  • English Language and Literature: 48 of 69 programs, 70%
  • Psychology: 195 out of 332, 59%
  • Theology: 41 of 74, 55%
  • Biology: 47 of 117, 40%

Best performing program categories

  • Engineering: 0 out of 106 programs, 0%
  • Computer science: 2 out of 186 programs, 1%
  • Business: 111 out of 1471 programs, 7.5%
  • Education: 279 out of 1679 programs, 17%
  • Parks and recreation: 20 out of 110 programs, 18%
  • Library science: 10 out of 49 programs, 20%

One negative side effect of these new regulations, as well as other higher education performance measurements based exclusively on economic returns, is that they may discourage some students from pursuing degrees in areas that society needs – even though they do not result in high earnings. The rule could have severe implications for humanities and fine art education, two areas that are essential for the intellectual vitality and cultural enrichment of the country.

Nevertheless, we should not ignore that many “low income” programs, while important for a well-rounded and civic-minded society, are burdening students with debt they can’t pay off. It is in society’s best interests to continue producing majors in the fine and liberal arts – and so we need to figure out how to stop punishing students who choose these majors. Program-based tuition subsidies may be one potential avenue to explore.

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