Your 2021 Graduates Are Already Being Tested — and You Might Not Know It

Right now, the Department of Education and the IRS are calculating how much money your 2021 graduates earned last year. If those earnings fall below a federal benchmark, your program could receive its first strike toward losing federal student aid eligibility — and you will not find out until early 2027.

This is not hypothetical. The timeline is already in motion. The cohort has been selected. The tax data is being processed. And for most institutions, the outcomes are already locked in — because you cannot retroactively change what your 2021 graduates earned in 2025.

Welcome to the AHEAD earnings test.

What Is the Earnings Test?

The AHEAD framework — Accountability in Higher Education and Access through Demand-Driven Workforce Pell — was finalized through negotiated rulemaking in January 2026. It establishes an earnings premium test that applies broadly to postsecondary programs receiving federal Title IV student aid, including both traditional degree programs and the new Workforce Pell short-term programs launching in July 2026.

The test is straightforward in concept: your program's graduates must earn more than a relevant benchmark group. For undergraduate programs, that benchmark is the median earnings of working 25-to-34-year-olds in your state who hold only a high school diploma. For graduate programs, the benchmark is based on bachelor's degree holders, using the lowest of several geographic and field-specific comparisons.

If your graduates earn less than that benchmark, your program fails the earnings test for that year. If your program fails in two out of any three consecutive years, it becomes a "low-earning outcome program" and loses eligibility for the federal Direct Loan program.

And it can get worse from there.

Why 2021?

The Department is using a four-year measurement window. The first test uses completers from the 2020–2021 award year — students who graduated between July 1, 2020, and June 30, 2021. Their earnings are measured using 2025 tax data (filed in early 2026), which captures what they earned from January through December 2025. That gives a full four years between completion and measurement, which is the statutory requirement.

Here is the timeline:

• Late 2026 – January 2027: The Department exchanges data with the IRS and calculates earnings rates for every eligible program.

  
  

• Early 2027: Institutions are notified of their results. Programs that fail receive their first strike.

  
  

• July 1, 2027: The first failure year takes effect. Student warnings become mandatory for failing programs.

  
  

• Early 2028: The second earnings test is calculated, this time using 2021–2022 completers and 2026 tax data.

  
  

• July 1, 2028: If a program has failed two of the first two (or eventually three) years, it loses Direct Loan eligibility. This is the earliest date a program could actually lose federal aid.

The key insight is that by the time you receive notification in early 2027, the data is already four years old. The students already graduated. Their careers already took the paths they took. Whatever your program did or did not do for the class of 2021 is now a matter of tax records.

How the Benchmark Works

The test compares two numbers: what your graduates actually earned, and what the Department says they should have earned based on their credential level and location.

For undergraduate certificate and degree programs at institutions where at least 50% of students come from the same state, the benchmark is the median earnings of working adults aged 25 to 34 in that state who hold only a high school diploma and are not enrolled in college. Based on the published data from the Department's chief economist, the national median for this group is approximately $34,808 — but the actual benchmark varies by state. Programs in high-wage states face a higher bar; programs in low-wage states face a lower one.

The data source for the benchmark is the U.S. Census Bureau's American Community Survey, which is a nationally representative survey with over 16 million individuals. The Department chose not to lock specific ACS definitions into the regulatory text — because the Census Bureau could change its methodology at any time — and will instead use subregulatory guidance to define key terms like "earnings," "working," and "same field of study."

For graduate programs, the comparison gets more complex: the benchmark uses bachelor's degree holders rather than high school diploma holders, and the test uses the lowest of several geographic and field-specific benchmarks to give the program the most favorable comparison.

The critical question for your institution is simple: do your graduates out-earn high school diploma holders in your state? If the answer is no — or if it is close — you have a problem that is already baked into the data.

What Happens When You Fail

The consequences escalate in stages, and the terminology matters.

First failure (Year 1): Your program is in a "failing" status. You must begin providing mandatory warnings to current and prospective students that the program has failed the earnings test. No aid eligibility is lost yet, but the warnings are required immediately and must continue as long as the program is in failure status.

Second failure in three years: Your program becomes a "low-earning outcome program." It loses eligibility for the federal Direct Loan program. Students can no longer take out federal loans to attend your program. This is enforced through a formal termination action under subpart G of the regulations, which includes due process protections.

The anti-gaming provision: If your program fails and you try to shut it down before the Secretary formally imposes the loss of eligibility, you are still subject to a two-year ban. You cannot launch the same program or a substantially similar program — defined at the four-digit CIP code level — for two years from the date you voluntarily discontinued it. The Department built this specifically to prevent institutions from closing a failing program on Tuesday and opening an identical one on Wednesday.

Appeals are narrow: You can appeal only if you believe the Secretary made a calculation error — a mistake in how the cohort was constructed or the methodology was applied. You cannot appeal on the basis that the earnings data does not fairly represent your program, that your local economy is depressed, or that your graduates went into low-paying but socially valuable careers. The Department considered and rejected broader appeal mechanisms during the negotiation.

The Pell Compromise: When It Gets Institutional

Here is where it gets serious for entire institutions, not just individual programs.

During the January 2026 AHEAD negotiation, the committee reached a landmark compromise on Pell Grant eligibility. Under normal circumstances, the earnings test only affects Direct Loan eligibility — not Pell Grants. But the negotiators created an institution-level test that can trigger loss of all Title IV funding, including Pell.

It works like this: if 50% or more of an institution's Title IV students, or 50% or more of its Title IV funds, are in programs classified as low-earning outcome programs — and this condition persists for two out of any three consecutive years — then all of that institution's low-earning outcome programs lose eligibility for all Title IV aid. Not just Direct Loans. Pell Grants, campus-based aid, everything.

The institution is also placed on provisional certification status, which triggers additional oversight and reporting requirements.

This provision was estimated to protect approximately $1 billion annually in Pell Grant funds that would otherwise flow to programs whose graduates do not earn more than high school diploma holders. It received near-universal support from the negotiating committee, including representatives from students, taxpayers, states, veterans, and institutional constituencies.

For institutions with a large share of enrollment concentrated in a small number of programs, this is an existential risk. If your flagship program fails the earnings test, and that program accounts for more than half your Title IV students, the institution-level trigger is in play.

The Pandemic Complication

There is an uncomfortable reality embedded in the timeline: the first cohort being measured — the class of 2021 — graduated during or immediately after the COVID-19 pandemic. Their earnings in 2025 reflect careers that were launched during one of the most disrupted labor markets in modern history.

This was raised during the negotiation. The Department's response was that the earnings benchmark is also subject to the same economic conditions — the ACS data captures what high school diploma holders earned during the same period. Because both sides of the comparison are affected by the same macroeconomic environment, the earnings premium test is designed to be resilient to economic shocks in a way that a raw earnings threshold would not be.

That said, individual programs may have been disproportionately affected. Programs in hospitality, arts, or other industries that experienced prolonged pandemic disruption may find their 2021 graduates' earnings depressed relative to the benchmark, even if the program itself is high-quality. The Department acknowledged this concern but maintained that a four-year measurement window provides sufficient recovery time.

What You Should Be Doing Right Now

The data for 2021 graduates is already locked. You cannot change it. But you can prepare for what comes next.

Find out where you stand. The Department published a preliminary data set in late 2025 showing estimated pass/fail rates at the four-digit CIP level. This data has significant caveats — it uses pooled cohorts from 2017–18 and 2018–19, not the actual 2021 cohort — but it gives directional guidance. If your programs were in the failing range in the preliminary data, take that seriously.

Understand your benchmark. Look up your state's median earnings for 25-to-34-year-old high school diploma holders. That is the number your undergraduate programs need to beat. If your graduates are earning close to that number, you are in the danger zone even if you technically pass — because one bad cohort year could flip you.

Track your graduates now. Even though you cannot change 2021 outcomes, you can start building the infrastructure to track and support graduate employment for current and future cohorts. The programs that will thrive under the AHEAD framework are the ones that know where their graduates are, what they are earning, and whether they need additional support to advance their careers.

Review your program mix. If you are an institution with a small number of programs, understand the institution-level trigger. Calculate what percentage of your Title IV students and funds are in each program. If one program dominates your enrollment, that program's earnings test results have implications far beyond the program itself.

Do not wait for the notification. Early 2027 is when you find out. But the smart institutions are modeling their exposure now, not waiting for a letter from the Department to tell them they have a problem.

Learn More

For a comprehensive breakdown of both the AHEAD earnings accountability framework and the Workforce Pell regulations — including how the two systems interact, the full escalation timeline, and strategic guidance for institutions — read Workforce Pell: The Complete Guide by Jade Foster, published by the NCAIWPA project team. It is available on Amazon and as a free PDF download at ncaiwpa.org under a Creative Commons (CC BY-NC 4.0) license.

NCAIWPA (National Council for AI Workforce Program Accreditation) is a project of Fruition Charitable Arts Foundation and Services, based in Huntsville, Alabama. Funded by the U.S. Department of Education through a FIPSE Special Projects grant (P116J251869). Learn more at ncaiwpa.org.