Four OB3 Updates From Late June: What Changed and What It Means for Your Programs

The two weeks before July 1 are usually the quietest of the compliance year. This year they were not. In the back half of June 2026, four separate OB3 developments landed almost on top of one another — a final accountability rule, a delay for certain programs inside that rule, a court-driven change to professional degree loan limits, and a piece of Office Hours guidance on how loan proration interacts with the new Schedule of Reductions.

None of these is paperwork. Each one touches program eligibility or how much your students can borrow, and all of them converge on the same July 1, 2026 effective date. Here is what changed, what is final versus interim, and what we would prioritize before fall disbursements.

A note on naming: OB3 (P.L. 119-21) was enacted as the One Big Beautiful Bill Act and is referred to in the Department’s accountability rulemaking as the Working Families Tax Cuts Act (WFTCA). The two names describe the same statute.

The Accountability Final Rule: STATS and Earnings Accountability

On June 29, 2026, the U.S. Department of Education issued its final Student Tuition and Transparency System (STATS) and Earnings Accountability rule, implementing the low-earning outcomes accountability framework enacted in OB3. The final rule was published in the Federal Register on July 1, 2026; the rule began as a proposed rule published April 20, 2026.

The Earnings Accountability metric is a single test applied across every sector. Undergraduate programs must show that their completers earn more than a typical high school diploma holder, and graduate programs must show that their completers earn more than a typical bachelor’s degree holder. The rule reconciles this new OB3 earnings threshold with the existing measures in the Financial Value Transparency and Gainful Employment regulations, so that all Direct Loan participating programs — in every sector — are now subject to the same transparency and earnings accountability metric.

The consequence is program eligibility, not a fine. A program that fails the earnings test in two of three consecutive award years loses eligibility for the Direct Loan program. Sustained failure can ultimately reach Title IV eligibility more broadly, including Pell. This is the existential category of compliance risk, and it is measured at the program level, consistent with the existing Gainful Employment framework.

Two provisions in the preamble deserve attention. First, the Department continues to assert its “gainful employment” authority over undergraduate certificates, rejecting arguments from CECU and others that “gainful employment” simply means employed for pay. Second, the preamble defends a provision, inserted during negotiations, that would prohibit the use of all Title IV funds — including Pell — at an institution where more than 50 percent of students receiving federal aid are enrolled in failing programs. That is an institution-level consequence sitting inside a program-level framework, and it is worth understanding now rather than in 2027.

The Department declined to modify the earnings comparison groups to account for part-time work, gender disparities, geographic or cost-of-living variation, or to measure undergraduate certificate completers against a younger cohort. On each, it rested primarily on the statutory text. It likewise dismissed arguments that the rulemaking should have abided by the Master Calendar.

What changed between the proposed rule and the final rule

For institutions that commented or modeled against the April proposal, several changes in the final rule matter.

A delay for programs tied to predominantly tipped occupations. The Department will delay the program eligibility consequences for programs that prepare students for occupations where a majority of workers receive tipped income — cosmetology, barbering, massage therapy, and similar fields. These programs receive at least a one-year delay before accountability consequences apply. During the delay, the Department will continue to publish earnings information, but these programs are treated as neither passing nor failing the earnings test. The rationale is the OB3 “No Tax on Tips” policy, which exempts up to $25,000 in tip income beginning with the 2026 tax year; the delay gives reported earnings in these fields time to reflect the new tax treatment. The delay does not add an adjustment for unreported income — it simply buys time for reported income to rise.

A lowered benchmark for small graduate cohorts. In § 668.2(b)(3), where the American Community Survey same-state, same-field data for a graduate program are unreliable — fewer than 16 sampled individuals — the comparison threshold is now set to $1, which functionally exempts those programs rather than holding them to an alternate benchmark. The Department estimates roughly 2,650 graduate programs are affected. This is favorable for certain graduate programs, but it does nothing for undergraduate degree and certificate programs. The cohort expansion process was also simplified, with 2-digit CIP aggregation removed and the build capped at the 4-digit level. This means more programs will be rendered too small to calculate.

Exemptions for programs outside the Direct Loan program. The final rule exempts an institution from automatic loss of Title IV eligibility if it does not currently participate in the Direct Loan program and has not for the five most recently completed award years. It also exempts a program not yet determined to be low-earning where the institution and the Department agree to amend the program participation agreement to bar Direct Loan borrowing for that program for at least five years.

An exemption for programs serving students with disabilities. Institutions that exclusively serve individuals with documented disabilities, as defined under 34 CFR 300.8, are exempt from the program eligibility consequences.

A lighter reporting load. The Department reduced STATS reporting requirements by approximately 30 percent, eliminating elements already collected through existing data systems. Institutions must begin submitting STATS data by October 1, 2026, with annual reporting each October thereafter.

Professional Degree Programs After the Court Order

The same day, the Department released an Electronic Announcement identifying the Classification of Instructional Programs (CIP) codes that will be treated as professional degree programs for reporting Title IV loan originations and disbursements to the Common Origination and Disbursement (COD) System.

This guidance exists because of litigation. On June 24, 2026, a federal court temporarily stayed portions of the professional degree definition in the RISE Final Rule, which was published in the Federal Register on May 1, 2026. The RISE definition narrowed which programs qualify as “professional” — and the professional designation carries the higher loan limits of $50,000 per year and $200,000 in the aggregate, versus the graduate limits of $20,500 per year and $100,000 aggregate. The full set of CIP codes currently treated as professional degree programs is enumerated in the Department’s June 29, 2026 Electronic Announcement.

For now, institutions may originate and disburse loans using the higher professional annual limits for the designated programs by reporting the appropriate professional student level to COD. The Department addressed the related NSLDS reporting mechanics in a follow-up Electronic Announcement on NSLDS professional access updates, published July 1, 2026. This is interim guidance, not a settled rule. The Department states that it continues to defend the RISE professional degree definition in court and that these designations may change as the litigation proceeds.

That uncertainty is the operative fact. The Department itself advises institutions to consider limiting borrowing to the graduate loan limits for programs only temporarily classified as professional, to minimize disruption if the litigation changes the designation later. In other words, the higher limit is available, but borrowing a student all the way up to $50,000 against a designation that could be reversed creates real downstream exposure for both the student and the institution.

Loan Proration and the New Schedule of Reductions

The fourth development is the least visible and the most operational. OB3 introduced a Schedule of Reductions that lowers a student’s annual loan limit when the student is enrolled less than full time — a statutory requirement that sits alongside the long-standing loan proration rules in 34 CFR 685.203.

Institutions reasonably asked how the two interact: if both are statutory, do you run both calculations, and in what order? In a June 18, 2026 response following its June 17 Office Hours session, Tamy Abernathy, Director of the Policy Coordination Group in the Department’s Office of Postsecondary Education, answered directly. Where you are applying loan proration under 685.203(a) through (c), a Schedule of Reductions is not required, because the hours enrolled are already taken into account in that calculation.

The practical takeaway is that these are not two stacked reductions. The existing proration calculation already reflects less-than-full-time enrollment in the cases it covers, so applying a Schedule of Reductions on top would double-count. This is sub-regulatory guidance delivered through Office Hours rather than a published rule, so document your reliance on it and watch for any formal confirmation.

What to Do Now

First, run your programs against the projected median earnings metric. Identify which of your programs would be at risk under the Earnings Accountability test, and separate the genuinely exposed programs from those that fall into one of the new exemptions or the tipped-occupation delay. The two-of-three-years structure means the time to understand your position is before the first determination, not after it.

Second, set your professional-program borrowing posture deliberately. Confirm your COD reporting for any program on the interim professional list, and decide — program by program — whether to package at the $50,000 professional limit or hold to the $20,500 graduate limit while the RISE litigation is unresolved. The Department’s own caution points toward restraint where a designation could be reversed.

Third, align your proration logic before fall disbursements. Confirm that your financial aid office applies 685.203(a)–(c) proration without layering a Schedule of Reductions on top in those cases, and that your packaging system reflects that sequence. Catching this in July is far cheaper than unwinding it in an audit.

McClintock’s Perspective

It would be a mistake to over-connect these four developments. They are not a single trend. Earnings accountability already operates at the program level under Gainful Employment, so the final rule extends and standardizes a program-level metric across all sectors rather than inventing one. The professional degree list is a litigation-driven interim measure, and the proration guidance is an operational clarification rather than a program-eligibility question. What they share is timing — four OB3 implementation items landing within days of each other, each bearing on decisions you make before fall disbursements.

We would also flag what these four items share procedurally: a final rule whose later provisions phase in through 2027, an interim list driven by active litigation, and an operational answer delivered through Office Hours rather than regulation. The landscape is settled enough to act on and unsettled enough to keep watching. The institutions that come through this well will be the ones that model their specific exposure now and revisit it as the litigation and the 2027 provisions resolve.

McClintock & Associates works exclusively with postsecondary institutions participating in Title IV, completing more than 150 audits a year across 110-plus institutions, with eight FAAC-credentialed professionals on staff. That vantage point — across sectors, program types, and ownership structures — is what informs the analysis above. (This piece reflects developments through June 30, 2026; additional analysis from recent policy presentations will be incorporated as it becomes available.)

How to Know You’re on Track

• Program-level risk map. You can name every program that would fail the Earnings Accountability test and every program that falls under an exemption or the tipped-occupation delay.
• Professional-program decisions documented. For each program on the interim professional list, you have a recorded decision on whether you are packaging at the $50,000 professional limit or the $20,500 graduate limit, and why.
• STATS readiness. You have a plan to submit STATS data by the October 1, 2026 deadline and to repeat it each October.

Partner Early

The cheapest time to understand your OB3 exposure is before a determination, not after one. If you want to model how the Earnings Accountability framework, the professional degree limits, and the proration guidance affect your specific programs, our team can help you build that picture and decide what to change before fall disbursements. We would rather help you map the risk now than diligence it later.

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