Introduction
Most coverage of the STATS rule starts with the Department's proposal. That is the middle of the story. The accountability regime your programs will be measured against was set in motion months earlier, by statute. Understanding that origin tells you which parts of STATS are negotiable in rulemaking and which parts are locked in by law. (If you want the full three-term breakdown first, the STATS vs FVT/GE vs PPD explainer is the right entry point.)
Step 1: OBBB created the mandate
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, did two things that reshaped higher-ed accountability.
It created Demand-Driven Workforce Pell, extending Pell to short-term workforce programs on the condition that those programs prove their value. It also established an earnings-accountability framework in statute. Federal student-loan eligibility for a program can be tied to whether its graduates actually earn more than they would have without it.
Because this lives in statute, the Department cannot simply comment its way out of it. The Earnings Premium concept is the law's, not the Department's. Which is why, across 8,796 public comments, the requests that gained traction were about implementation (delay, transition, program-type adjustments), not repeal.
Step 2: STATS operationalized it
The Student Tuition and Transparency System (STATS) is the Department's machinery for executing the OBBBA mandate, built on top of ED's existing FVT/GE guidance. It does two jobs.
Transparency. A public website publishing program-level cost and outcome data, plus required warnings about low-performing programs.
Accountability. The Earnings Premium test that can remove a program's access to federal Direct Loans.
STATS is the successor to FVT/GE, but it answers a different question. And that question comes straight from the statute. (The FVT/GE final reporting year guide covers what carries over from your October 1, 2026 submission into the new regime, and what does not.)
Step 3: The Earnings Premium formula
Here is the whole test, in one sentence.
“A program's completers should earn more than someone who never enrolled.”
Concretely, the Earnings Premium compares the median earnings of a program's completers, measured a few years after they finish, against the median earnings of a typical high school graduate (ages 25–34) in the same state, for undergraduate programs.
For graduate programs the bar rises. Completers are compared against a typical bachelor's-degree holder. If the program's graduates don't clear the relevant baseline, the program fails the test for that year.
Notice what is not in the formula: debt. This is the clean break from FVT/GE's debt-to-earnings test. A program can be inexpensive, leave students nearly debt-free, and still fail, if its graduates don't out-earn a high-school baseline.
Step 4: The 2-of-3 eligibility math
| Year | Median completer earnings | State HS-grad baseline | Result |
|---|---|---|---|
| Year 1 | $31,200 | $32,000 | Fail |
| Year 2 | $33,500 | $32,400 | Pass |
| Year 3 | $31,900 | $32,800 | Fail |
A single failing year does not end eligibility. A program loses access to federal Direct Loans after it fails the Earnings Premium in two of any three consecutive years.
Two fails inside a three-year window. The program enters the ineligibility process, even though it passed in Year 2. The lesson for leadership. A program hovering within a thousand dollars of the baseline is not "passing." It is one ordinary cohort away from a countdown.
What this means for your portfolio
The metric is statutory
Repeal is not a strategy
Plan for the Earnings Premium to exist in some form regardless of how the final rule reads. The methodology is reshape-able in rulemaking. The existence of the test is not.
Low-wage fields carry structural risk
By design, not by accident
Any program whose graduates' typical earnings sit near a state's high-school baseline is exposed by design, not by accident. That includes many short-term, workforce, and personal-services credentials. The math doesn't care about program intent. It cares about graduate earnings against a baseline.
The margin is the management problem
Borderline programs are the priority
Because of the 2-of-3 rule, the programs that need attention are not the obvious failures. They are the ones within a few hundred dollars of the line, where a single soft cohort tips a pass into a countdown. Manage the margin, not just the obvious risks.
The first official results land in February 2027, on cohorts who have already graduated. The math is knowable now. The institutions that run it on themselves first will be making decisions. Everyone else will be reacting to a published list. The program-level exposure-map playbook walks through how to map your exposure; the 50% institutional trigger covers the portfolio rollup; and the PPD:2026 data-wrangling walkthrough tells you what the analyst's week looks like underneath all of it. Clema's STATS AI Agent is the fastest way to run this math against your own programs today.
Run the Earnings Premium on your own programs, today
Clema's STATS AI Agent applies the OBBBA earnings-accountability math to your program portfolio and tells you, in plain English, which programs clear the baseline, which fail, and which sit inside the 2-of-3 danger margin. Before the Department publishes its version in February 2027.
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