Ending H-1B Grace Period Fails Cost-Benefit Test

Executive Summary

• Costs of ending exceed savings by about $121 million to $762 million a year across the three scenarios, with a central estimate of $263 million.
• Over ten years, the net cost is roughly $850 million to $5.4 billion in present value at a 7% discount rate. The central estimate is $1.8 billion at 7% and $2.2 billion at 3%.
• Every dollar of claimed USCIS savings comes with $42 to $5,118 in costs. In the central scenario, the ratio of costs to savings is 354 to 1.

Table 1. Annual costs and benefits of eliminating the grace period, three scenarios

Source: CCIA analysis of DHS, 91 FR 57807 (Sept. 11, 2026), and public data. DHS illustration, FY2025 count: DHS’s own two-month illustration (fn. 54) at the $131,000 median wage, applied to DHS’s FY2025 count of 5,178, with omitted costs at low values and generous USCIS savings. Central and High use mid-range and upper-range assumptions and include DHS’s 1.46 benefits multiplier; High uses a FY2027 trend population. All columns are conditional scenarios that assume exposure across DHS’s full administrative cohort. Components may not sum to totals because of rounding.

Since 2017, skilled workers in the H-1B, L-1, O-1, E and TN classifications have had a safety valve. If a job ends before their authorized stay does, they and their families may remain in status for up to 60 days while they line up a new employer, change status, or prepare an orderly departure. The Department of Homeland Security now proposes to eliminate that grace period. Unless otherwise authorized to remain, workers would be expected to leave the country the day their employment ends.

DHS rests its proposal on two claims: that the grace period burdens USCIS adjudicators, and that removing it better aligns the regulations with the statute. Neither claim is supported by the agency’s own record. A careful look at the numbers DHS published shows a rule whose costs are larger than the agency acknowledges, whose administrative savings are unmeasured and partly illusory, and whose reasoning is vulnerable under settled administrative law.

Start with the agency’s own numbers. At DHS’s $131,000 wage benchmark, one additional month without pay for just 273 workers would exceed the roughly $3 million in annual USCIS savings from a scenario that eliminates ten minutes of review from every potentially relevant filing. DHS has not shown that the disruption its rule causes would stay below that threshold.

DHS left its own math unfinished

In its regulatory impact analysis, DHS identifies 3,795 workers a year for whom a new employer filed a petition within 60 days after the prior petition was withdrawn, a proxy DHS treats as an upper-bound estimate of the population that could incur costs. In a footnote, it gives a per-worker example: a worker who needs as much as two months to search for a job and return would lose about two months of pay at the cohort’s $131,000 median wage. Then, in its accounting statement, DHS reports the costs as “Not Estimated.”

If every worker in DHS’s own five-year average experienced the two-month loss DHS describes, the annual cost would be about $82.9 million. DHS’s five-year average is also stale. The same table shows the count rising from 2,138 in FY2021 to 5,178 in FY2025, a 2.4-fold increase. FY2025 is 36 percent above the average DHS used for an analysis covering FY2027 through FY2036. Apply DHS’s own per-worker illustration to DHS’s own most recent count, and the figure reaches $113.1 million a year.

That number matters. Executive Order 12866 designates rules with annual effects of $100 million or more as economically significant, which triggers a fuller regulatory analysis. DHS concluded this proposal falls short of that line without reporting the product of its own inputs. At a minimum, DHS owes the public a sensitivity analysis supporting that finding.

The two-month “upper bound” collides with consular reality

DHS’s two-month figure assumes a quick departure and return. Workers who need a new visa face a further source of delay, and India is especially relevant: Indian-born beneficiaries accounted for 71 percent of approved H-1B petitions in FY2024.

As of the State Department’s September 17, 2026 data, the next available appointment for petition-based visas is 5.5 months away in Hyderabad and 3 months away in New Delhi. As of October 21, 2026, the wait time had increased to 6.5 months in Hyderabad and to 3.5 months in New Delhi, showing that the September 17, 2026 figures used in our analysis are by no means outlier or peak values. Either wait alone exceeds DHS’s entire two-month allowance, before counting the job search, the petition, or the trip home. DHS offers no explanation of how its “upper bound” accommodates appointment availability like this.

The costs DHS waves away

DHS acknowledges many harms and then declines to measure them. Several can be quantified from public data.

Other pathways: In its FY2025 cohort, DHS identified 2,733 workers who filed to change or extend status and 438 who filed to adjust to permanent residence within 60 days after their prior petition was withdrawn. DHS’s cost analysis prices none of them. The proposal also removes the grace-period window in which otherwise eligible workers can seek an initial compelling-circumstances work permit. DHS identified 49 beneficiaries who applied for compelling-circumstances work permits in its FY2021-FY2025 cohorts.

Families: USCIS approved more than 77,000 initial and renewal H-4 work permits in FY2023. When a principal’s job ends today, a dependent spouse can keep working during the grace period. Under the proposal, that authorization ends with the principal’s status, up to 60 days earlier. DHS acknowledges that dependent spouses would lose compensation. Its family assessment then asserts that any financial effect “would not stem from this rulemaking.” Those statements cannot both be right. Holding the principal’s job loss constant, the spouse’s earlier loss of work authorization, and the earnings that go with it, is a cost of repeal.

Enforcement: DHS concedes that workers who cannot leave on the day their job ends could receive Notices to Appear in immigration court, yet it predicts only a “marginal” increase from 37 such notices in FY2025. That baseline concerns H-1B beneficiaries who failed to maintain status beyond the existing grace period, so it does not measure the workers newly exposed when that period disappears. DHS then prices the consequence as a single hearing appearance costing $204 to $301 in time and travel. A removal proceeding can require multiple appearances, and a single appearance omits notice preparation, prosecution, adjudication, and legal fees. For scale, EOIR’s $844 million in FY2025 enacted funding divided by 797,496 reported immigration-court completions equals about $1,058 per completion, a budget ratio rather than an estimate of what an additional proceeding costs. DHS notes that fees recover USCIS costs. Fee funding changes who pays for that work; the work itself remains.

Travel, consular work, and employers: Forced departures and returns impose travel costs. Every returning worker who needs a new visa adds work at an overstretched consulate. Employers that cannot wait face replacement hiring, reassignment, or vacancy costs. If a replacement requires a new cap number, the annual registration and lottery calendar can add many months. DHS assumes employers will simply find equally qualified substitutes or re-petition, and offers no evidence that either path is quick or costless. Nearly two-thirds of the 2,886 employers DHS identified are small businesses, the firms least able to absorb a long vacancy. Research on earlier H-1B restrictions finds that affected multinational firms expand employment at foreign affiliates. DHS should examine whether blocking domestic job transitions would push work abroad in the same way.

The savings DHS claims are unmeasured and partly illusory

DHS’s affirmative case rests on administrative burden. It reports that more than 1.9 million filings between FY2018 and May 2026 potentially required grace-period screening, about 220,000 a year. It never estimates how much time that screening takes.

A transparent scenario shows the scale of the claimed savings. Suppose every one of those filings consumed ten full minutes of officer time that repeal would eliminate entirely. That is a fifth of the average time USCIS reported for an entire Form I-129 adjudication in its 2016 fee review. At the 2026 Washington-area GS-12, Step 5 salary, loaded with DHS’s own 1.46 benefits multiplier, the savings come to roughly $3 million a year.

That scenario credits repeal with eliminating all ten minutes, even though essential status review would remain. Part of the work DHS calls burdensome is establishing when a worker’s employment ended, and repeal does not eliminate it. Existing regulations, which the proposal leaves intact, still require USCIS to confirm that a worker maintained status before granting an extension, using evidence such as paystubs, W-2 forms, tax returns, contracts and work orders. Under a zero-day rule, a single day’s gap can decide the case. Meanwhile, repeal shifts new work onto consulates, immigration courts, and ICE. If grace-period review averages five minutes per filing and half of it survives repeal, USCIS would save about $745,000 a year. Using the $205 visa fee as a rough proxy for processing cost, just 3,633 additional visa applications would offset that amount. DHS should estimate the actual workload.

The comparison with private costs is stark. Spread across DHS’s FY2025 cohort, the $3 million scenario is offset by about 1.6 calendar days’ pay per worker. Even if DHS could document $25 million in annual savings, more than eight times the generous scenario, the break-even would be about 13.5 calendar days’ pay per worker. Given multi-month consular waits, the agency should explain why it expects the disruption to be smaller.

DHS’s second rationale, program integrity, fares no better. The proposal identifies no fraud pattern, no rate of abuse, and no incident data tied to the grace period. It also confirms that USCIS already has authority to shorten or deny a grace period for status violations, unauthorized work, fraud, national security concerns, or criminal convictions. DHS never explains why that targeted authority is inadequate.

A record that invites legal challenge

An agency may change course, but it must show it is aware of the change, give good reasons, and account for serious reliance interests (FCC v. Fox Television Stations). It must also examine the relevant data and connect the facts it finds to the choice it makes (Motor Vehicle Manufacturers Association v. State Farm). This proposal strains against both standards.

Reliance. Employers have extended offers, timed projects, and recruited candidates on the understanding that a laid-off worker could change jobs without leaving the country. Families have built two-earner households around the same framework. DHS acknowledges that reliance and then discounts it as “misplaced” because the grace period is discretionary, citing FDA v. Wages and White Lion Investments. That passage concerned expectations about how an agency would exercise enforcement discretion. The grace period is a codified regulatory framework that preserves status under defined conditions. The Supreme Court has held that discretionary features do not excuse an agency from weighing reliance on a long-standing policy (DHS v. Regents of the University of California).

Prior agency reasoning. When DHS created the grace period, a commenter sought a separate 30-day period for H-1B workers facing involuntary termination, citing the time needed to document retaliation and find new work. DHS declined, explaining that the 60-day period already gave such workers sufficient time to seek new employment, change status, or prepare to depart (81 FR 82454). On the same page, DHS cited the grace period and compelling-circumstances work permits when declining other protections for workers facing retaliation or employer debarment. The proposal eliminates the first safeguard, narrows access to the second, and never addresses that rationale.

Statutory alignment. DHS invokes its broad discretion to set conditions of admission while also suggesting the grace period is inconsistent with the statute. If DHS believes the statute forbids a grace period, it should explain why the provisions it cites foreclose a temporary transition period it found consistent with the same statute in 2016. If it is making a policy choice, it must reasonably explain that choice in light of the harms it acknowledges, reliance interests, alternatives, and the evidence presented in comments.

Unanswered objections. In Ohio v. EPA, the Supreme Court stayed a federal rule, finding the challengers likely to succeed because the agency failed to reasonably respond to a significant concern raised in public comments. Before finalizing any rule, DHS should, at a minimum:

• disclose the query definitions behind its population counts;
• estimate the review time repeal would eliminate and the time that would remain;
• include the costs shifted to consulates, immigration courts, and ICE;
• test current consular delays against its two-month illustration; and
• explain the baseline it uses to dismiss family income losses.

Conclusion 

DHS can achieve administrative clarity without stranding workers and families. A presumptive grace period would do so:

• workers who otherwise qualify receive the period by default;
• the cessation date is documented in a standard format;
• the start and end dates are calculated automatically;
• a short list of disqualifying conduct replaces case-by-case discretion.

That design removes the discretionary review DHS calls burdensome while preserving orderly transitions. At a minimum, DHS should protect workers already in a grace period or with pending filings when any final rule takes effect.

DHS has not shown that the grace period costs the government much, and the grace period provides meaningful benefits. It keeps skilled workers employed in the United States and paying taxes, keeps families intact, and keeps employers from losing talent to a calendar. Nor has DHS shown that eliminating it would save meaningful resources, while its own data suggest the costs would be far larger than it admits. The agency should withdraw the proposal or, at the very least, complete the analysis its own numbers demand.