This year has brought sweeping changes to the federal student loan system, with the latest coming from the Student Tuition and Transparency System (STATS). Called the Earnings Accountability rule, it will require undergraduate and graduate programs to show that their graduates earn more with their degree than they would without it. The Education Department will look at the median earnings of graduates four years after completing their program and compare them with the earnings of workers with less education. If a program fails this earnings test two out of three years in a row, it could lose its eligibility for federal student loans.
New rule will cut federal loans for low-paying degrees
The Earnings Accountability rule, which is expected to go into effect in 2027, targets college programs whose graduates consistently earn low incomes. If graduates don’t earn more with their degree than without it, the program could lose access to federal student loans.
“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,” said Under Secretary of Education Nicholas Kent in a recent statement.
The Education Department estimates that about 3% of programs at nonprofit colleges and universities may fail, while as much as 33% of programs at for-profit schools won’t pass the test. Overall, it predicts that about 4.2% of student borrowers may lose access to federal student loans.
Nearly half of college students borrow student loans to attend college, so this loss could present a major obstacle for those whose programs are affected. Colleges may also rethink how they offer certain programs or potentially cut them altogether.
ED says the earnings rule will hold colleges accountable for the financial outcomes of their students. Supporters say it could protect students from poor-value programs, while critics say it could hurt fields that provide important services but pay lower salaries, like social work and the arts.
How the new earnings test will work
To keep accessing federal student loans, a program’s graduates must earn more than those with a lower level of education. The Education Department will rely on data from the IRS to make this determination.
For undergraduate programs, it will look at the median earnings of graduates four years after completing the program. Then it will compare that figure with the median earnings of working adults ages 25 to 34 who only have a high school diploma. It will either focus on state data or national data if the college has a lot of out-of-state students.
For graduate programs, ED will compare the earnings of graduates after four years with the median earnings among bachelor’s degree holders. It will require those with their master’s or doctoral degrees to earn more than the median 25- to 34-year old who only has a bachelor’s degree in the same field or across all bachelor’s degrees, whichever benchmark is lower.
If the financial outcomes of students fall short over multiple years, the program could lose access to federal student loans.
Which programs are most at risk?
Programs at for-profit colleges are expected to be hit the hardest by this rule change, but they’re not the only ones. Other programs at risk include those that traditionally lead to lower-paying careers, like programs in the arts, social services, literature, alternative medicine, and religious studies.
Here are some the programs the Education Department predicts are most likely to fail the Earnings Accountability test:
| Program type | Programs with the highest projected failure rates |
|---|---|
| Undergraduate certificate programs | Culinary, entertainment, and personal services; English language and literature; Computer and Information Sciences and Support Services; Cosmetology; Somatic bodywork |
| Associate degree programs | Somatic Bodywork; Cosmetology; Film/Video and Photographic Arts; Fine and Studio Arts; English language and literature; Human Development and Family Studies; Visual and Performing Arts |
| Bachelor's degree programs | Religion/Religious Studies; Graphic Communications; Film/Video and Photographic Arts; Drama/Theatre Arts and Stagecraft; Music |
| Master's degree programs | Alternative and Complementary Medicine and Medical Systems; Religion/Religious Studies; Mental and Social Health Services; Fine and Studio Arts; Music |
Some critics of this new rule say it could lead colleges to preemptively eliminate low-earning programs in the arts and social services. They argue that tying federal aid eligibility so closely to earnings overlooks the community services some of these fields provide, even when they don’t lead to a high income.
How this fits into broader student loan changes
The Earnings Accountability rule isn’t the only way the current administration has sought to limit federal student loan borrowing. Borrowers saw a wave of changes take effect on July 1, 2026 for new borrowers, including the elimination of the Grad PLUS loan program and revised borrowing limits for both parent and graduate student borrowers. Together, these changes may make it harder for some students to finance their education.
Note that borrowers who took out a loan prior to July 1, 2026 can keep following the old rules for three more years or until their program ends, whichever comes first.
What students should know moving forward
The Earnings Accountability rule should start taking effect in 2027, and some programs could be designated as low earning starting in the 2028-29 award year. That doesn’t mean they’ll lose out on federal loans right away, though — programs must fail in two out of three consecutive years before they get cut off from Direct Loans.
If you’ll be enrolling in a program soon, it’s worth considering if it could be affected. Research the program’s graduation outcomes and typical earnings, if the data is available, along with its total costs. Even without this new rule, this type of research can help you make an informed decision about whether a program is worth the cost.
One useful resource is the Department of Education’s College Scorecard, which lets you compare schools by cost, graduates’ earnings, graduation rate, and other factors. You could also reach out to colleges directly for data on career outcomes, employment rates, or whether they have any concerns about this new rule.
As you prepare for college or graduate school, consider all the ways you might pay for your degree, such as savings, income from a part-time job, scholarships, grants, or work-study. Private student loans can also fill a financing gap, though it’s generally best to utilize federal student loans first.
While post-graduation income isn’t the only way to measure a program’s value, it is an important factor if you’re considering taking on student debt. By researching this data, you can make informed decisions about which program to attend and whether to take out student loans.
