Protecting Students from Worthless Degrees Act
- Sponsor
- Sen. Merkley, Jeff [D-OR]
- Committees
- Health, Education, Labor, and Pensions Committee (primary)
- Last action
- Jul 16, 2026
Bottom line
The bill aims to protect students and taxpayers by holding postsecondary education programs accountable for student outcomes related to licensure and financial returns, tying federal funding eligibility to these performance metrics.
What it actually does
This bill establishes new consumer protections for students by amending the Higher Education Act of 1965. It mandates that programs preparing students for licensed occupations must fully qualify them for licensure in relevant states. Crucially, it introduces stringent debt-to-earnings standards for all programs receiving federal education assistance funds, making programs ineligible if they consistently fail these metrics. It also strengthens state authorization requirements for distance education programs.
Proponents argue
Supporters argue that the bill is essential to protect students from accumulating unmanageable debt for degrees or certificates that do not lead to gainful employment or qualify them for their chosen professions. They contend it ensures accountability for institutions receiving federal funds and safeguards taxpayer investments by preventing federal aid from flowing to 'worthless degree' programs.
Opponents contend
Critics might argue that the bill's strict debt-to-earnings metrics could be overly prescriptive, potentially disadvantaging programs with lower starting salaries but high social value, or those serving non-traditional student populations. They may also raise concerns about increased administrative burdens for institutions and potential limitations on student choice or access to diverse educational pathways.
The bill is relatively concise but contains technical amendments and detailed definitions that require careful reading to fully grasp its implications.
Section 3
Protections in Occupations Requiring State Licensure
This provision mandates that institutions receiving federal education assistance funds must ensure their programs designed for licensed occupations fully qualify students to take required examinations and obtain licensure in the student's metropolitan area, state of residence, and any state where the institution markets the program. This includes satisfying all accreditation requirements and providing timely placements for clinicals, internships, or apprenticeships.
Supporters argue
Supporters argue this provision directly addresses a critical consumer protection gap, preventing students from investing time and money in programs that fail to prepare them for their intended careers due to unmet licensure requirements.
Critics contend
Opponents might contend that this imposes an undue burden on institutions, especially those operating across multiple states or offering distance education, potentially limiting program availability or increasing administrative costs.
Tradeoffs
Balances robust consumer protection and professional readiness with institutional flexibility and the complexities of varying state licensure requirements.
Section 4(a)
Integrating Debt-to-Earnings Standards into Gainful Employment Definitions
This section amends existing definitions within the Higher Education Act of 1965 to explicitly link the concept of 'gainful employment in a recognized occupation' to the new debt-to-earnings standards outlined in Section 498C. This means that proprietary institutions, postsecondary vocational institutions, and other eligible programs must meet these financial outcome standards to qualify for federal education assistance funds.
Section 4(b) (adding new Section 498C)
Establishing Debt-to-Earnings Standards and Consequences
This section introduces a new Section 498C to the Higher Education Act, defining 'annual debt-to-earnings rate' and 'discretionary debt-to-earnings rate.' A program fails these standards if, for 2 out of any 3 consecutive award years, its discretionary debt-to-earnings rate is 20% or higher, AND its annual debt-to-earnings rate is 8% or higher. Programs that fail become ineligible for federal education assistance funds for three years. The Secretary of Education is mandated to annually calculate, publish, and enforce these rates, including issuing notices of determination to institutions.
Section 4(c) (amending Section 487)
Institutional Certification of Program Eligibility and Student Awareness
This provision requires institutions to provide annual certifications to the Secretary of Education, signed by their most senior executive officer, affirming that each eligible gainful employment program complies with specific requirements. These include programmatic accreditation (if required), satisfaction of professional licensure prerequisites in relevant states, and that the program is not 'substantially similar' to one that failed debt-to-earnings standards and became ineligible or was discontinued in the prior three years. Institutions must also notify students if a program does not satisfy licensure prerequisites for their intended state of practice.
Section 5 (amending Section 101)
Strengthening State Authorization for Distance Education Programs
This section amends the Higher Education Act to require institutions offering postsecondary education through distance education or correspondence courses to be legally authorized in *each* state where their enrolled students are located. It explicitly allows participation in a State authorization reciprocity agreement (SARA) to fulfill this requirement, provided the agreement does not prohibit states from enforcing their own laws and the institution documents that each state has a public complaint process for students.
Specifies the annual interest rates to be used in calculating the 'annual loan payment' for different program types (undergraduate certificate/diploma, associate, postbaccalaureate certificate, bachelor's, master's, doctoral, first professional degree). These rates are based on averages of Federal Direct Unsubsidized Loan rates over 3 or 6 consecutive award years, depending on the program level.
Section 4(b), new Section 498C(a)(2)(C)
Why it matters:This is standard legislative practice for technical definitions and calculation methodologies, but its specificity is vital for understanding the bill's practical impact.
Case for: Supporters would argue that using specific, averaged federal interest rates ensures a standardized, fair, and realistic method for calculating loan payments, reflecting actual student borrowing costs and preventing manipulation.
Case against: Critics might debate the specific averaging periods (3 vs. 6 years) or the choice of Federal Direct Unsubsidized Loan rates, arguing they may not fully represent the borrowing landscape for all students or program types, potentially skewing outcomes.
Estimated impact: Directly influences the calculated annual loan payment for all programs, which is a key factor in determining whether a program meets the debt-to-earnings standards and remains eligible for federal funds.
When calculating the 'median loan debt' for a cohort of students, the bill allows for the removal of a number of the largest loan debts equivalent to the number of students for whom the Federal agency with earnings data reports it is unable to match to earnings data.
Section 4(b), new Section 498C(a)(7)(B)
Why it matters:This is a technical adjustment designed to account for data limitations (unmatched earnings data) and refine the median calculation. While technical, it has substantive implications.
Case for: Proponents would argue this ensures a more accurate median loan debt calculation by excluding data points that cannot be fully correlated with earnings, preventing outliers from distorting the overall picture for a program.
Case against: Opponents might suggest this could be a mechanism to artificially lower the reported median debt for programs, especially if students with very high debt are also those whose earnings data are difficult to match, potentially allowing more programs to pass the debt-to-earnings standards.
Estimated impact: Could subtly improve the debt-to-earnings rates for programs that have a few high-debt students whose earnings data are not available, potentially influencing program eligibility.
This subsection explicitly states that paragraph (3) of section 668.402(c) of title 34, Code of Federal Regulations, as amended by a specific Department of Education final rule (91 Fed. Reg. 40136 (July 1, 2026)), 'shall have no force or effect.' This paragraph likely concerns a delay or differentiation in applying earnings outcomes requirements to 'tipped professions.'
Section 4(e)(2)
Why it matters:This is a direct legislative override of an administrative action (or anticipated action). It's technical in nature, correcting or preventing a specific regulatory carve-out.
Case for: Supporters would argue this ensures equal application of debt-to-earnings standards across all professions, preventing special carve-outs (like for tipped professions) that might undermine the bill's overall intent of universal accountability.
Case against: Critics might argue that tipped professions have unique earnings structures (e.g., reliance on tips, lower base wages) that warrant different consideration, and this provision removes necessary flexibility for programs preparing students for these fields.
Estimated impact: Ensures that programs preparing students for tipped professions (e.g., culinary arts, hospitality management) are subject to the same debt-to-earnings scrutiny as all other programs, potentially impacting their eligibility for federal aid.