National Association of Schools of Music
FEDERAL UPDATE: CONCLUSION OF THE “AHEAD” NEGOTIATED RULEMAKING COMMITTEE AND NEXT STEPS
Continuing NASM’s work to monitor and provide information regarding developments in federal policy that will have a direct impact on institutions of higher education, please see the information below regarding the outcome of the Accountability in Higher Education and Access through Demand-Driven Workforce Pell (AHEAD) Committee’s work, as well as negotiated rulemaking efforts to clarify by way of regulation, the implementation details of the higher education provisions found in Public Law No. 119-21 (P.L. 119-21) (referred to in previous NASM federal updates as H.R.1.), which was signed into law on July 4, 2025. Links to previous updates which provide additional background information related to this topic can be found below and in the “Current Notices” section of the NASM website:
Federal Update: Work of the AHEAD and RISE Negotiated Rulemaking Committees (12/11/25)
Federal Update: Information Regarding the Accountability Measure in H.R.1. (9/30/25)
Federal Advisory: Higher Education Provisions in the 2025 Reconciliation Bill (H.R.1.) (7/21/25)
Outcome of the AHEAD Committee’s Negotiations: Consensus
The AHEAD Committee held its second round of meetings from January 5 through January 9, 2026 for the purpose of negotiating draft regulatory language regarding the accountability measure included in P.L. 119-21 and related elements of the existing Financial Value Transparency and Gainful Employment regulations. The Committee reached consensus on draft regulatory language, meaning that the United States Department of Education (USDE) is bound to use the consensus-based language in any proposed rule(s) on the topics negotiated by the Committee. This language can be found on the USDE website (expand the “AHEAD” section and scroll to the file labeled “Draft Consensus Language from January 9, 2026”). Reaching consensus is an important detail because it allows institutions and the public to review in advance the language that will serve as the basis for any proposed rule(s) prior to its publication.
It is important to note that this text is not final at this time and that there will be an opportunity for public comment when the proposed rule is published in the Federal Register. If an institution or member of the public deems it appropriate to submit a comment on the forthcoming proposed rule, such comment can be informed by the consensus-based language. USDE will have the ability to amend the language of any proposed rule(s) based on public comments received during the public comment period, however because USDE and negotiated rulemaking committees can regulate only the statutory language of P.L. 119-21 and cannot amend provisions of the law through regulation it is important to a) provide comment subsequent to review of the consensus-based language and b) draft comments with a clear understanding of the statutory language found in P.L. 119-21.
Overarching Principle
The main goal of USDE upon commencing these meetings was to “harmonize” the existing Financial Value Transparency and Gainful Employment regulations with the accountability measure found in P.L. 119-21. As a reminder, Gainful Employment programs are currently defined as all postsecondary curricular programs offered by for-profit institutions, and non-degree-granting programs offered by public and private non-profit institutions.
The approved consensus-based language removes the debt-to-earnings test outlined in the current Gainful Employment rule leaving only the earnings premium test which more closely aligns with the earnings premium test included in P.L. 119-21, applicable to non-gainful employment programs. Under the framework set forth in the consensus-based language, the combination of the existing Gainful Employment rule and P.L. 119-21’s accountability measure would encompass all programs offered by postsecondary institutions and tie continued eligibility for Title IV funds at the program level to the earnings of graduates measured 4 years post-completion against earnings of working adults between the ages of 25 and 34 in the institution’s state, or nationally, depending on certain enrollment factors.
Detailed information regarding the statutory language of the accountability measure was provided by NASM in a September 2025 notice, which may be helpful to revisit prior to reviewing the information found below which outlines the specifics of the consensus-based language.
A Note on Value vs. Earnings
Throughout the negotiations, representatives from USDE and the appointed negotiators were careful to state that the earnings premium test in P.L. 119-21 does not attempt to measure the value of a postsecondary curricular program, rather, it measures the earnings of graduates as reported when filing taxes at a specific point after the graduates have completed such a program.
It was noted that a system which measures only earnings excludes vitally important factors such as the value of the student’s expertise to society and the creative economy, personal fulfillment, lifetime earnings, as well as other factors or aspects that are not easy to measure in dollars and cents. As well, a limited measurement tool such as that described in P.L. 119-21 ignores the fact that some fields are historically underpaid and that the careers of many artists do not follow a linear trajectory. Attentive to these important considerations, the consensus-based language refers to programs as “low-earning outcome programs.” Negotiators were careful not use the phrase “low-value” during deliberations for reasons mentioned above.
Despite the negotiators’ attention to these issues, articles, press releases, and remarks have reverted to language implying that programs which fail the earnings premium test are “low-value” programs. In feedback provided, it is important to be diligent to address and correct this mischaracterization lest it take hold and become part of the higher education discourse as P.L. 119-21 is implemented.
Provisions of Note in the Consensus-Based Language
Earnings Premium Test—Timing of the Earnings Premium Test, Data Sources, Cohort Aggregation and Exemptions, Consequences of Failure
Timing of the Earnings Premium Test
As outlined in the law, postsecondary level curricular programs will be subject to an earnings premium test in which the earnings of federally-aided program graduates (“completers”) are compared to the earnings of working adults either in the state where the institution is located, or nationally. This test was discussed in detail in the September 2025 update. Under the consensus-based language, programs would be identified based on their six-digit Classification of Instructional Programs (CIP) code, and completers’ earnings would be measured using the data from the fourth tax year following program completion. For example, if USDE is conducting the earnings premium test in early 2027, the most recent tax year for which complete data would be available would be 2025. In this case, the completers being measured would be those who completed their programs during the 2020-2021 award year, which is 4 years prior to the year for which the most recent earnings data is available at the time the test is being administered.
Data Sources
The law stipulates that the data pertaining to working adults is to be taken from the Census Bureau. During the negotiated rulemaking sessions, USDE utilized data from the American Community Survey (ACS), a survey administered by the Census Bureau, for all data analyses requested by the negotiators as the Survey is the instrument that measures the required data for the age bracket specified in P.L. 119-21 (working adults ages 25–34).
The consensus-based language does not specify the data source for completers, rather it states that earnings data would be taken from “a federal agency with earnings data.” Throughout the negotiated rulemaking sessions, it was stated that the Internal Revenue Service (IRS) would be the most likely source. This is made more likely given that the consensus-based language defines earnings as “wages, income as reported to the Internal Revenue Service, and other earned income, including from self-employment.” Based on discussions during negotiations, it is expected that USDE will solicit public feedback through the comment period of the proposed rule on the specific lines of the IRS form 1040 to be used to capture these earnings amounts.
Cohort Aggregation and Exemptions
A takeaway from the negotiated rulemaking sessions is that aggregating additional years of completer data will be necessary for about 91% of programs, meaning that only about 9% of programs have a “statistically reliable” cohort size each year (30 completers annually). In cases where there are not at least 30 completers in a cohort, USDE will aggregate additional cohorts of completers until the number of completers in the measurement set reaches a minimum of 30. Important to note is that, under the consensus-based language, each additional cohort pulled into the measurement set during the aggregation process would have their earnings measured using the tax data for the fourth complete year after they have completed the program. Building upon the example used above, this means that if USDE uses the 2019-2020 cohort to supplement the 2020-2021 cohort to reach 30 total completers, the 2019-2020 cohort would be measured based on the 2024 tax year and the 2020-2021 cohort would be measured based on the 2025 tax year to keep the length of time from completion to measurement consistent across the cohorts.
Aggregation would be accomplished by going back with in the same 6-digit CIP code one year at a time for a maximum of four years. If additional completers are necessary after this first round, USDE would move back to the original cohort year being measured and bring in completers from programs sharing the same 4-digit CIP code, again expanding one year at a time for a maximum of four years. If additional completers are necessary after this round, USDE would repeat the same step at the 2-digit CIP level.
If, after this process, the cohort still has not reached a statistically reliable number, USDE would not make a determination under the earnings premium test for that year. As well, if the federal agency with earnings data does not provide the median earnings data, a determination would not be made for that year.
The 4- and 2-digit CIP programs used during the aggregation process would not be subject to loss of Direct Loan eligibility if the 6-digit CIP program for which they are used to supplement fails the earnings premium test.
Completers would be excluded from the cohort if:
- One or more of the student’s Direct Loans have been approved for discharge, or are under review for discharge, based on the student’s total and permanent disability;
- The student is enrolled in any other educational program during the year for which USDE obtains program completer earnings data;
- When measuring an undergraduate program, the student completed a higher credentialed undergraduate program at the institution between the time they completed the program being measured and the end of the most recently completed award year prior to the calculation of the earnings premium;
- When measuring a graduate program, the student completed a higher credentialed graduate program at the institution between the time they completed the program being measured and the end of the most recently completed award year prior to the calculation of the earnings premium;
- The student is enrolled in an approved prison education program;
- The student is enrolled in a comprehensive transition and postsecondary program; or
- The student is deceased.
Consequences of Failure
USDE will perform the earnings premium test each year and provide the results to institutions. If a program fails the earnings test in 2 of any 3 consecutive years, that program will no longer be eligible to have federal Direct Loans applied to its tuition. If, for one of the two reasons listed above, a program does not have the earnings premium test calculated for a given year, the program would remain in the same status as the previous year.
Under the consensus-based language, institutions would be required to provide a warning to current and prospective students of any program if that program is at risk of losing its Direct Loan eligibility in the next award year. Functionally, this means that the warning would need to be provided after receipt of the first failing test result given that Direct Loan eligibility would be removed with a failure in the following year.
Any program that loses its Direct Loan eligibility would not be able to reestablish that eligibility until two years have passed.
Voluntary Teach-Out and Program Closure
Negotiators were successful in proposing and approving a mechanism by which an institution could, if agreed to by the Secretary, voluntarily teach out and close a program while maintaining eligibility for Direct Loans after it receives its first earnings premium test failure determination. This option could only be chosen upon the first year of failure, must be chosen within 120 days of the determination that the program failed the earnings premium test, and must be determined by the Secretary to be in the best interest of students.
This arrangement would allow an institution to teach out a program while maintaining its eligibility for federal Direct Loans for a period of time not to exceed the lessor of 3 years or the full-time normal duration of the program. The concept was introduced by negotiators late in the week in an effort to provide flexibility for an institution to allow students to finish a program while maintaining access to Direct Loans rather than risk having the students be abruptly cut off from that eligibility if the voluntary teach-out option was not chosen and the program received a failing earnings premium test result in the following year. It is important to note that this option would need to be chosen by an institution before the institution knows for sure that the program would in fact fail the earnings premium test a second time, and as a result become ineligible for Direct Loans. However, it does allow the institution to make a choice which may aid currently enrolled students in completion of the program, preventing students from either changing to another major or institution and potentially adding time to completion of a degree or dropping out altogether, both decidedly negative implications of an abrupt cut off from higher education funding.
This provision would be carried out through an amendment to the institution’s Program Participation Agreement (PPA), approved by the institution and the Secretary, requiring the institution to (quoting from the draft language):
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- “Cease accepting new enrollments on or after the date of the agreement;
- Engage in an orderly closure of the program in which the institution provides an opportunity for enrolled individuals to complete their program regardless of their academic progress at the time of closure;
- Inform the institution’s State authorizing agency and accrediting agency and to meet any program discontinuation or closure requirements of those agencies;
- Acknowledge that the program has been voluntarily discontinued and subject to the requirements of 34 CFR 668.603(c)(2);
- Maintain the program under a warning status and provide warning notice to students in accordance with the requirements set forth in 34 CFR 668.605, with the exception of (c)(1)(ii) of that section;
- Provide to students the academic and financial options to continue their education in another program to which the student’s academic credit would transfer that has not failed to satisfy the requirements of [34 CFR] 668.402, either at the same institution or a different institution;
- Agree not to restart the same program or to start a program that shares the same 4-digit CIP code, for at least two years following the completion of the orderly closure described under paragraph (B).”
Institutions would not be able to propose this option “in cases where the program or the institution[,] based, upon the program’s compliance[,] is subject to a probation or equivalent action by a recognized accrediting agency or State regulatory agency (including licensing Boards)” or if the institution is participating in student loan programs under the reimbursement payment method.
Ineligibility Period and Scope of Ineligibility
Under the consensus-based language, a program that loses its Direct Loan eligibility due to two consecutive years of earnings premium test failure could not reestablish its Direct Loan eligibility until two years have passed from the time it became ineligible. During this period, institutions would also not be able to establish Direct Loan eligibility for a program sharing the same 4-digit CIP code or any overlapping Standard Occupational Classification (SOC) code.
Loss of Pell Eligibility
P.L. 119-21 specifies that programs which fail the earnings premium test twice in three consecutive years would lose access to Direct Loan programs. However, some negotiators voiced concern that if some programs were deemed to be low-earnings and thus ineligible for some federal money (Direct Loans), these programs should see their eligibility for all Title IV dollars, including Pell grants, removed. A compromise was reached in the form of a proposed addition to the current regulations regarding standards of administrative capability. These are requirements that institutions must meet in order to continue their participation in any Title IV program, inclusive of Pell grants. In addition to existing requirements, institutions would need to demonstrate that “at least half of the institution’s recipients of Title IV, HEA funds and at least half of the institution’s total Title IV, HEA funds are not from low-earning outcome programs” in order to meet administrative capability standards.
Appeals Process
Some negotiators advocated for a broad appeals process which would allow institutions to present alternative earnings data in cases where programs fail the earnings premium test. These efforts were ultimately unsuccessful, and under the consensus-based language appeals would only be possible if the institution believes that USDE erred in “the calculation of the program’s earnings premium.” Appeals based upon alternate earnings data would not be permitted.
Next Steps
The text of the proposed rule, which must match the consensus-based language, is now being drafted by USDE. Proposed rules take some time to draft as they include summary and background information in addition to the proposed regulatory text. When prepared, it will be published in the Federal Register and will carry with it a public comment period during which time institutions and other members of the public may submit comments on the proposed regulatory language. Instructions for submitting comments will be included in the Federal Register announcement containing the proposed rule. USDE does have the ability to amend the proposed rule prior to publication of a final rule based on public comment. As mentioned above, institutions can begin to review the consensus-based text and, if deemed appropriate, draft comments for submission during the public comment period.
Resources
Should institutions wish to follow these efforts as they continue to unfold, the following resources may prove to be useful:
P.L. 119-21 (The text of the law as signed by the President on July 4, 2025. Higher Education provisions can be found in Title VIII).
The Federal Register (All proposed rules and final rules must be published by USDE in the Federal Register. Users may create a free account and set up email alerts to be notified when USDE publishes information).
USDE Negotiated Rulemaking Webpage (This page includes all information related to negotiated rulemaking, including proposals submitted by negotiators, data sets, USDE presentations, and transcripts).
Electronic Code of Federal Regulations (Contains current regulatory text. Higher Education regulations can be found under Title 34: Education).
Should questions arise, please do not hesitate to reach out to staff in the NASM National Office.
Thank you.