The Department of Education has proposed a new rule that could severely limit federal student loan access for college programs whose graduates fail to meet specific earnings benchmarks. The policy, rooted in President Donald Trump's "One Big Beautiful Bill," aims to hold educational institutions accountable for programs that leave students financially burdened.
New Earnings Thresholds for Federal Aid
Under the proposed rule, undergraduate programs must demonstrate that their graduates earn at least as much as high school diploma holders, while graduate programs must exceed benchmarks set by bachelor's degree holders. Programs falling short of these standards could lose eligibility for federal loans and Pell Grants. The policy targets a broad range of disciplines, including cosmetology, fine arts, music, and certain health-related fields.
"Some people go to college, take out loans for programs that really just don’t have a whole lot of economic value," said Preston Cooper, a senior fellow at the American Enterprise Institute. "They end up with a lot of debt, and then they don’t really have the earnings to repay it."
Impact on Institutions and Students
Out of the nearly 20 million post-secondary students in the U.S., approximately 95% are enrolled in programs likely to pass the earnings test. However, nearly 2,000 colleges and universities have at least one program at risk of failing, potentially affecting over 600,000 students. Programs that fail the earnings test in two out of three years will face federal loan cuts, with significant changes expected by the 2028–29 academic year.
The proposal also requires institutions to notify students of a program's "low earning outcome" status, increasing transparency in higher education. This initiative expands on the Obama administration's "gainful employment rule," which primarily targeted for-profit colleges and vocational programs.
Public comments on the proposed rule are being accepted until May 20, with finalization potentially as early as July 1.