Education Department Finalizes Rule Cutting Federal Loans for Programs Failing 2 of 3 Earnings Tests
Updated
Updated · US Department of Education · Jun 29
Education Department Finalizes Rule Cutting Federal Loans for Programs Failing 2 of 3 Earnings Tests
3 articles · Updated · US Department of Education · Jun 29
Summary
Programs whose graduates do not out-earn typical high school or bachelor’s degree holders in 2 of 3 consecutive years will lose federal Direct Loan eligibility under the Education Department’s final STATS and Earnings Accountability rule.
After 3 straight years of failing the earnings-premium test, the department can also strip Title IV eligibility — including Pell Grants — from an institution’s low-earning outcome programs.
The rule applies a largely uniform accountability and transparency framework across nearly all programs and sectors, aligning the new standard in Trump’s 2025 Working Families Tax Cuts Act with existing gainful-employment and value-transparency rules.
At least 1 year of sanctions will be delayed for programs tied to tipped occupations so earnings can reflect the 2026 'No Tax on Tips' policy, while some non-Direct Loan institutions, certain borrowing-restricted programs and disability-only institutions are exempt.
The final package, the third rulemaking under the 2025 law, follows January 2026 negotiated rulemaking and nearly 10,000 public comments as the administration targets risks in the $1.7 trillion federal student loan portfolio.
As new rules tie funding to graduate pay, will essential but lower-paying public service and arts programs disappear?
With Grad PLUS loans eliminated and new borrowing caps, is graduate school now reserved only for the wealthy?
The government will now judge colleges based on graduate pay. But can its data be trusted to make fair decisions?
The 2026 Earnings Premium Rule: What the New Federal Student Aid Test Means for Colleges and Students
Overview
Starting July 1, 2026, the U.S. Department of Education will implement a new earnings test rule for federal student aid, as mandated by the One Big Beautiful Bill Act (OBBBA). This policy aims to enhance accountability across higher education by linking federal funding eligibility to how effective programs are in the job market. The new regulations create a robust framework for evaluating educational programs, ensuring that federal aid supports only those that lead to positive career and financial outcomes for students. This shift is designed to protect both students and taxpayers by focusing funding on programs that deliver real economic value.