Education Department Will Cut Federal Loans From Low-Earning College Programs

The U.S. Department of Education announced a final rule that will, for the first time, strip federal student loan eligibility from college and career programs whose graduates fail to out-earn workers who never enrolled.

The Student Tuition and Transparency System (STATS) and Earnings Accountability rule applies a single standard across every sector of higher education, from public universities to for-profit certificate schools, regardless of an institution's tax status or the credential it awards.

The premise is simple: undergraduate programs must demonstrate that their graduates earn more than working adults who hold only a high school diploma. Graduate programs must show their completers earn more than typical bachelor's degree holders. A program that can't clear that bar for two of three years will lose the ability to enroll students who borrow federal loans. That doesn't mean it has to shut down - but the government is not going to continue to lend to students who end up having a bad financial outcome.

"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. He pointed to "rising rates of default and delinquency in the $1.7 trillion federal student loan portfolio" as the backdrop for the new framework.

The rule is the third and final rulemaking package authorized by the One Big Beautiful Bill Act, which President Trump signed on July 4, 2025. It also folds the new earnings standard into the Department's existing Financial Value Transparency and Gainful Employment regulations, replacing what officials described as nearly two decades of regulatory back-and-forth with one test that reaches almost every program and sector.