Don’t Stop at Earnings: Why Congressional Republicans Must Tackle Student Debt in Reconciliation

When students enroll in college, they’re making an investment in their futures—one that’s supposed to lead to better jobs, higher incomes, and greater financial security. But when federal dollars flow to programs that leave students worse off than if they hadn’t enrolled at all, something has clearly gone wrong.

That’s why it’s encouraging to see Senate Republicans include a post-college earnings threshold as a higher education accountability metric in their reconciliation proposal—it's a meaningful step forward for protecting students and taxpayers alike. The bill is moving quickly, but there is still time for Congress to improve the bill and strengthen how colleges are held accountable for student outcomes by including a debt-to-earnings metric in the accountability framework and making small, but meaningful improvements to the earnings threshold.

The idea behind the earnings threshold is simple: If a program’s graduates earn less than they would have if they hadn’t enrolled, that program shouldn’t be eligible for federal student loans. It’s a low bar—but a necessary one.

According to data from the U.S. Department of Education (Department), in 2022, nearly 2,400 programs left their graduates earning less than the national average of a high school graduate: just $25,000 a year, or about $12 an hour. These programs enrolled over 827,000 students and received more than $3.4 billion in federal Pell Grants and student loans.

That’s indefensible for the students failed by those programs and to the taxpayers who help provide the funds for students to attend. Postsecondary education is supposed to lift people up, not trap them in poverty-wage jobs.

So, yes—this provision is a step in the right direction. But it’s just that: a first step. To truly deliver on the promise of accountability, Congress must go further.

The earnings threshold addresses one piece of the problem, but ignores another critical factor: debt. A program could leave its graduates earning just enough to clear the minimum earnings bar but burden them with so much debt that they can’t afford basic necessities on top of their student loan payments.

Consider three similar programs with comparable earnings, but wildly different debt amounts. Looking at the Department data, a community college in Tennessee, a non-profit college in Georgia, and a for-profit college in Florida all offer an associate degree in the same major. All programs produced similar earnings and passed the earnings threshold. However, those programs’ graduates all leave with substantially different student debt burdens. The median graduate of the program at the community college in Tennessee leaves with no student loan debt. Meanwhile, the median student from the programs at the Georgia non-profit college and the Florida for-profit college graduated with more than $20,00 in federal student loans.

And it’s not just across state lines that this happens. Students have better options within their own state. For example, four public colleges in Kentucky that offer the same bachelor’s degree all passed the earnings threshold, with graduate earnings ranging from approximately $25,000 to a little more than $37,000. However, their median debts also ranged from just over $18,000 to almost $27,000. Interestingly, the programs with the lowest debts also had the highest earnings.

If we continue to let programs get away with shouldering students with unaffordable debts, we are neglecting our students and their futures, and we aren’t being good stewards of taxpayer dollars.

Include a Debt-to-Earnings Metric

That’s why Congressional Republicans should include a debt-to-earnings metric alongside the earnings threshold. The Department’s proposed Gainful Employment (GE) and Financial Value Transparency (FVT) rules offer a ready-made framework. The rules have a debt-to-earnings test that measures what graduates would be required to pay based on the amount borrowed compared to their earnings.

To be more specific, the GE rule uses two debt-to-earnings measures to evaluate whether graduates of career education programs can reasonably afford their student loans based on their earnings:

• Annual Debt-to-Earnings Rate: This provides a straightforward measure of whether loan payments are manageable relative to total income by comparing a graduate’s annual loan payment to their actual annual earnings. The formula is:
• Discretionary Debt-to-Earnings Rate: This rate assesses whether borrowers can afford their loans after accounting for basic living expenses, providing a more realistic gauge of financial stress. It compares a graduate’s annual loan payment to their discretionary income, defined as earnings above 150 percent of the federal poverty line for a single individual.

Under the FVT rule, the Department will provide data on graduates’ earnings and the debt-to-earnings metrics for all programs. The GE rule only applies to non-degree programs and for-profit colleges, as the Higher Education Act (HEA) requires that those programs and institutions prepare students for gainful employment in a recognized occupation. If GE programs fail either metric, they are at risk of losing access to federal student aid.

Using data from the Department’s proposed rules, we can see just why holding programs accountable for earnings alone isn’t sufficient. According to the 2022 Department data:

• More than 1,500 programs passed the earnings threshold but failed the debt-to-earnings test, meaning their graduates earned more than the typical high school graduate, but not enough to reasonably afford their loan payments.
• Those programs served over 621,000 students and received more than $6.7 billion in federal loans and over $1.1 billion in Pell Grants.

That’s a massive number of students graduating from programs that technically meet minimum earnings standards but leave them with debt they can’t afford to repay. That puts students at risk—and taxpayers are on the hook when students can’t afford to repay their loans.

Broad Support for a Stronger Standard

While the GE rule is limited in its application due to HEA statutory limitations, reconciliation offers an opportunity to hold all programs accountable. Here’s the good news: there’s broad support for expanding accountability beyond earnings alone, even across the ideological spectrum. For example, polling from Third Way showed that voters overwhelmingly support the idea of including a debt-to-earnings accountability metric for higher education programs, regardless of political party. New America's annual, nationally representative survey of American adults, Varying Degrees, echoes this. Last year, we found that 72 percent of adults said they supported the idea that colleges and universities should lose some access to taxpayer dollars if they have high student loan debt relative to earnings. Voters were aligned across both political parties, with 69 percent of Democrats and 71 percent of Republicans agreeing with the idea.

In addition to New America's support for this policy, the American Enterprise Institute, the Manhattan Institute, and others have argued for holding all programs accountable for unaffordable debts, including using the debt-to-earnings metric in the GE rule. The Career Education Colleges and Universities (CECU), the association representing for-profit colleges, has also made that same argument. President Trump’s nominee for Under Secretary of Education, Nicholas Kent, pushed that proposal forcefully when working for CECU.

Beyond expanding the accountability provision to also include debt, Senate Republicans have an opportunity to strengthen the earnings threshold provision as well. The earnings threshold is strong, but there are two significant gaps in the proposal that warrant addressing.

Don't Leave Certificate Students Behind

One issue with the proposal, as currently written, is that it excludes undergraduate certificate programs from the earnings threshold—despite the fact that they often have some of the worst outcomes. The Department data shows that, in 2022 alone, 1,329 certificate programs left their graduates earning less than the typical high school graduate, enrolling over 827,000 students and collecting more than $3.4 billion in Pell and loan dollars, all for them to end up without the earnings premium that usually comes with pursuing postsecondary education. These students enrolled in short-term programs with limited payoff. If we want meaningful accountability, certificates must be included.

Many students in these programs are low-income, working adults seeking quick paths to better jobs. They deserve the same protections as anyone else. Certificate programs are currently covered by the accountability metrics in place in the GE rule. But with the GE rule facing litigation and a potential rollback, leaving certificate programs out of a legislative fix would be a huge missed opportunity that would increase the cost of the federal student aid program and leave students behind. Furthermore, making all programs subject to the same set of rules would reduce confusion and reporting burdens. If Congress wants to ensure long-term accountability in the federal student aid programs, this is the moment to act, and certificate programs must be included. And as mentioned already, the earnings threshold is an incredibly low bar that all programs should be able to meet.

Protect Pell—and the Students Who Rely on It

Finally, the Senate proposal limits the consequences of failing its accountability provision to the loss of federal student loan eligibility—but that’s not enough. Programs that fail to meet even the most basic earnings standards should also lose Pell Grant eligibility.

Why? Because Pell Grants go to the students with the most need—students who can least afford to be let down by low-value programs. These grants aren’t repaid, so when they’re spent on ineffective programs, taxpayers lose twice: once in wasted dollars, and again when students are trapped in low-wage jobs with little chance for upward mobility.

Protecting Pell dollars is both fiscally responsible and morally right. Students shouldn’t be steered into dead-end programs with no accountability just because they’re using grants instead of loans.

These fixes aren’t just about student success—they’re also about taxpayer risk. When students can’t repay their loans, taxpayers are on the hook. Including a debt metric would help stop high-cost, low-value programs and protect the integrity of the federal student aid programs. It’s a commonsense policy that Americans already support.