College programs whose graduates fail to earn more than workers with lower levels of education could eventually lose access to federal student loans under a Trump administration rule that puts graduate earnings at the center of federal higher-education funding.
The Department of Education announced the final Student Tuition and Transparency System, or STATS, and Earnings Accountability rule on June 29 and published it in the Federal Register on July 1. The framework extends earnings accountability across public universities, private nonprofit colleges and for-profit schools rather than limiting it to particular sectors.
Undergraduate programs generally must show that their typical graduates earn more than working adults whose highest credential is a high-school diploma or equivalent. Graduate programs face a higher benchmark: their graduates must earn more than comparable workers who hold bachelor's degrees.
A single poor year doesn't trigger a cutoff. Programs lose eligibility for federal Direct Loans only if they fail the earnings measure in two of three consecutive award years, giving institutions time to improve results before federal lending is withdrawn.
That timetable means the consequences won't be immediate. The first earnings calculations are expected in 2027, followed by another round in 2028, making the 2028-29 academic year the earliest period in which a program could lose Direct Loan eligibility under the new framework.
The Education Department will compare the median annual earnings of program completers four years after they finish with earnings benchmarks derived from federal data. Student earnings will be drawn from tax records, while comparison figures will rely on Census Bureau information for working adults ages 25 to 34.
For undergraduate programs, the comparison generally uses earnings for workers with only a high-school credential, with state or national benchmarks depending on where a school's students come from. Graduate programs will be measured against bachelor's-degree holders, with the rule allowing several state and field-specific comparisons.
The administration argues that federal taxpayers shouldn't continue financing programs that leave graduates no better off financially than people who never pursued the additional credential.
"If a program cannot show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers," Under Secretary of Education Nicholas Kent said when the department announced the final rule.
Programs that repeatedly fail can face consequences beyond Direct Loans. The department said that after three years of consistently failing the earnings measure, it could terminate broader Title IV eligibility-including Pell Grant access-for an institution's low-earning programs under specified conditions.
The rule reaches well beyond traditional for-profit career schools. Department analyses during rulemaking suggested undergraduate certificate programs would be among the most exposed, with roughly 29% projected to fail the earnings threshold, compared with about 1% of bachelor's programs and around 4% of graduate certificate and master's programs.
Some graduate fields could face heavier pressure. Programs in social work, counseling, education, religious studies and portions of the arts and humanities have drawn attention because their graduates often enter occupations where earnings are constrained by public-sector pay scales or nonprofit funding.
One department analysis projected that roughly 64% of master's programs in mental and social health services could fail the earnings measure. Those figures are estimates based on existing data, not actual determinations under the final rule.
Older research illustrates why certain career programs could face difficulty. A 2022 Century Foundation study found that cosmetology graduates earned about $16,600 annually three years after completion, roughly $8,600 less than workers with only a high-school diploma, while carrying about $10,200 in student debt. The new federal rule, however, uses fourth-year earnings rather than the three-year measure applied in that earlier research.
The final regulation includes several accommodations after the department reviewed nearly 10,000 public comments. Institutions serving exclusively students with specified disabilities are exempt from the program-eligibility consequences, while programs preparing students for occupations in which most workers receive tips receive at least a one-year delay.
That delay is designed to allow federal earnings data to capture income reported after the administration's "No Tax on Tips" policy took effect for the 2026 tax year. The department specifically cited tipped occupations in explaining why some programs would not immediately be designated as passing or failing.
Critics of earnings-based accountability argue that salaries four years after graduation don't capture the full economic or social value of degrees leading to lower-paid public-service careers. Programs in early-childhood education, counseling and social work, for example, can produce relatively modest wages even where employers face persistent demand for workers.
The Education Department takes the opposite view, framing the rule as a minimum financial-return test rather than an attempt to rank professions. Its June announcement said undergraduate programs must demonstrate that graduates earn more than typical high-school graduates, while graduate programs must outperform typical bachelor's-degree holders.
Schools will also face new disclosure obligations before the first penalties arrive. The STATS framework requires institutions to report program-level information covering costs and student outcomes, part of a transparency system intended to give prospective students more information before they borrow. The new system is scheduled to replace the existing Financial Value Transparency and Gainful Employment framework on July 1, 2027.
