The Do No Harm Rule: How Colleges Could Lose Pell Eligibility Over Graduate Earnings
By Muntasir Minhaz • Published Aug 04, 2026 • US Higher Ed News & Policy
A new federal rule checks whether your degree program's graduates earn more than people without that degree. Programs that fail this earnings test for 2 of 3 years lose federal loan access, and 3 straight years of failing puts Pell Grant funding at risk too.
🎓 Undergraduate programs: graduates must out-earn high school graduates in their state.
🎓 Graduate programs: graduates must out-earn bachelor's degree holders in their state.
⚠️ Fail 2 of 3 straight years: program loses federal Direct Loan eligibility.
⚠️ Fail 3 straight years: program risks losing all federal aid, including Pell Grants.
⏱️ Most of the rule takes effect July 1, 2027.
📩 Undergraduate certificates are not covered here. They fall under separate Gainful Employment rules.
What the rule checks
The Department of Education finalized a new earnings accountability standard as part of the One Big Beautiful Bill Act, sometimes called the Do No Harm rule because it targets programs that leave graduates worse off financially than if they had skipped the program. It compares what your program's graduates actually earn against a baseline tied to their education level and state.
For undergraduate degree programs, completers' median earnings get compared against the median earnings of high school graduates in the same state. For graduate degree and certificate programs, completers' median earnings get compared against the median earnings of bachelor's degree holders in the same state, according to College Aid Services ' summary of the final rule.
Undergraduate certificate programs are not measured by this test. They remain under separate, revised Gainful Employment rules instead.
Why this differs from the old Gainful Employment rule
The previous Gainful Employment standard only applied to for-profit schools and non-degree programs at any school. The new earnings test applies across every institution type, public, private nonprofit, and for-profit, and to degree programs, not just certificates. That is a much wider net.
The tradeoff is in what happens after a program fails. Under the old Gainful Employment rule, a failing program lost access to all Department of Education aid at once, Pell Grants included. Under Do No Harm, the first consequence is narrower, loss of federal loan eligibility only, with Pell risk arriving later if the program keeps failing. Analysts at the PEER Center point out that because roughly half of federal aid recipients rely on Pell Grants alone with no loans, a narrower first-stage consequence protects fewer students than the old rule did in year one.
What worse off actually measures
The rule does not look at whether you personally regret a degree. It looks at group-level median earnings for everyone who completes a specific program, compared against a baseline group with a lower credential in the same state. A nursing program where graduates typically earn well above the state's median bachelor's holder easily clears the bar. A program where graduates earn near or below the median for people without that credential is the kind the rule targets.
This means a program can be reasonably priced and still fail the test if graduate earnings in that field are low relative to the comparison group, and a program can be expensive and still pass if its graduates earn enough above the baseline. Cost and the earnings test are related but separate questions, so check both before you enroll.
How many strikes before a program loses aid
The consequences build in stages rather than hitting all at once:
| Outcome | Consequence |
|---|---|
| Fails the earnings test in 2 of 3 consecutive years | Program loses eligibility for the Federal Direct Loan Program |
| Fails the earnings test 3 consecutive years | Program risks losing eligibility for all Title IV aid, including Pell Grants |
This means a program can lose loan access before it loses Pell access. If your program shows up on a warning list, that alone does not mean your Pell Grant disappears next semester, but it signals the program is on a path toward losing federal aid entirely if outcomes do not improve.
Timeline
The Department published the underlying STATS and earnings-accountability regulations on July 1, 2026. Most provisions, including the earnings test itself, take effect July 1, 2027. A few technical reporting requirements started earlier, on August 31, 2026.
What this means if you are already enrolled
If your program later fails the earnings test, your current enrollment is not immediately cut off. The loss of loan or Pell eligibility applies to the program going forward once it hits the 2-year or 3-year failure threshold. If you are partway through a program that gets flagged, talk to your financial aid office about your options and timeline well before any aid cutoff date, since you do not want to be mid-program when funding disappears.
How to check your program before enrolling
Ask your school's financial aid office whether the program has passed or failed the earnings test in recent reporting.
Compare the program's typical starting salary against your state's median earnings for your target credential level.
Favor programs with public, program-level outcome data over programs that only report school-wide averages.
If you already borrowed federal loans for a program that later fails, ask your loan servicer whether your existing balance is affected, since the consequence applies to future eligibility for the program, not automatically to loans you already hold.
Where the earnings data comes from
The Department pulls the earnings figures used in this test from the same reporting pipeline that feeds the Student Tuition and Transparency System (STATS), the federal system now tracking program-level cost and outcome data. Schools report completer information, and the Department matches it against tax and wage records to calculate median earnings by program. That data collection is what makes the 2-of-3-year and 3-consecutive-year tracking possible in the first place.