The Department’s Victory on Gainful Employment and What It Means for Higher Ed

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Last week, a federal judge delivered what amounts to a total victory for the US Department of Education (ED) in defending its 2021 Financial Value Transparency & Gainful Employment (FVT & GE) rule. The court ruled in favor of ED on the lawsuit brought by cosmetology and trade school associations, leaving the regulation fully intact and cementing the Department’s authority to tie federal aid eligibility to student outcomes. In practical terms, this ruling doesn’t just preserve FVT & GE, it locks in the new organizing concept for federal oversight: the earnings premium test.

Disclosure: I provided a declaration in that lawsuit arguing that ED did not address and provided misleading answers valid complaints during the public comment period. All for naught.

Earnings Premium Redux

That standard - whether undergraduate programs help graduates earn more than the median high school graduate in the same state, or graduate programs earn more than bachelor’s degree holders - is now the anchor for both FVT & GE and the Department’s broader OBBBA Do No Harm accountability framework. Together, they represent a fundamental shift in how program value is defined and enforced across U.S. higher education. What began as a targeted mechanism for career programs is now a federal lens through which all postsecondary education will increasingly be judged.

As a reminder on the FVT & GE regulations, the former is a transparency mechanism (the disclosure of shame) for nearly all programs and the latter is a penalty mechanism for for-profit programs and undergraduate certificate programs.

A Butt Kicking

What’s striking about the FVT & GE ruling is not just that the Department won, it’s how completely it did. The judge didn’t weigh the substance of most criticisms against the rule or engage with the methodological flaws raised in the filings. Instead, the court deferred to the Department on virtually every point, accepting its arguments wholesale and offering little more than procedural justification. In a sense, this was less a test of the gainful employment metrics and more a reaffirmation of agency authority in education oversight.

A telling example came when the court struck my declaration from the record entirely, without considering the data evidence or policy reasoning behind it. In my view, I explained how ED did not address valid concerns brought up during the public comment period, and how ED provided flawed and misleading analysis in the Regulatory Impact Analysis section of the rules. In the court’s reading, my declaration was new information brought up too late in the process, and the judge approved ED’s motion to strike.

That move symbolized the broader dynamic: the Department’s position wasn’t merely upheld, it was insulated. Rather than parsing whether the earnings premium is a reliable proxy for value, the judge treated it as a legitimate administrative choice beyond the court’s purview. For critics hoping for any judicial scrutiny of the rule’s design, this was a clean sweep for the Department, despite what happens in the likely appeals process.

Flawed but Law of the Land

As I’ve covered in recent months, the earnings premium is built on an simple but fundamentally flawed foundation. It compares graduate earnings against the median wages of high school graduates in the same state - an approach that promises comparability but obscures context. Differences in geography, industry mix, gender, and local cost of living can distort outcomes, turning a broad-brush comparison into a pseudo-scientific precision instrument.

The data limitations compound the problem. The Department’s methodology relies on ED and IRS data that lag by many years. By benchmarking against state medians, programs in low-wage states gain an advantage, while those in high-cost, high-wage areas face steeper hurdles. The resulting “value” signal is as much about geography and demographics and outdated data as it is about educational quality.

But after this week’s ruling, one thing is clear: we’re done debating the metric. The earnings premium is here to stay, not just for FVT & GE but as the central logic of OBBBA and future accountability efforts. The flaws aren’t going away, and the sector will have to learn to operate, report, and even market within a system that equates institutional legitimacy with a spreadsheet comparison to high school wages.

A Focus on Program Outcomes

There are reasons for this bipartisan policy move. The purpose is for institutions to have to evaluate the economic outcome of graduates at the program level and, in coordination with the new OBBBA loan limits, and to finally get a handle on the growing student debt program. I get that argument and support the new transparency, conceptually. And I foresee some improvements due to this broad move.

Most of my criticism is that we could have established less flawed metrics and much better policy.

Compliance Burden

To make matters more complicated, Gainful Employment and OBBBA Do No Harm are not identical twins. Their metrics align in spirit but diverge in the details - which data years are used, how programs are grouped, and when reporting is required. The result is a compliance Venn diagram where most institutions will fall into both categories, facing overlapping yet sometimes contradictory requirements. Colleges will have to produce different reports for different rules, possibly showing a program as “passing” under one and “failing” under another.

That mismatch translates directly into rising compliance costs. Unless negotiated rulemaking can reconcile the two systems - possibly as part of the Dec / Jan sessions - institutions will need to build parallel processes for data collection, reporting, and public disclosures. For smaller colleges and public systems already strained by resource limits, this will be a heavy lift.

The FVT & GE initial data reporting for AY2024 and AY2025 was due one week ago, and I suspect that many administrators are getting a much better idea of the compliance costs of just the FVT & GE regulations, but the burden will increase in July 2026 with OBBBA.

So yes, the Department of Education won a sweeping legal victory. But for colleges and universities, the practical message is that the earnings premium era is no longer in doubt. Its conceptual flaws are now structural features, and its administrative burdens are going to grow. The question is no longer whether the metric is fair - it’s how institutions will live with it, and what kinds of educational programs will survive under its logic.

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