WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education has finalized a rule that could cut off federal student aid for college programs that leave graduates with weak earnings.
The new policy, called the Student Tuition and Transparency System and Earnings Accountability rule, gives the department a way to judge whether undergraduate and graduate programs provide enough financial payoff for the students who enroll.
How the new test works
Under the rule, undergraduate programs must show that their graduates earn more than the typical person with only a high school diploma. Graduate programs must show that their graduates earn more than the typical person with a bachelor’s degree.
The department said the framework is meant to bring together several federal accountability systems, including the new earnings standard in the Working Families Tax Cuts Act and the department’s existing Financial Value Transparency and Gainful Employment rules.
The department also said the new framework will apply to nearly all programs and sectors, no matter whether a school is public, private nonprofit, or for-profit, and no matter whether the program leads to a degree or a certificate.
What happens if a program fails
The rule uses a repeat-failure standard. If a program misses the earnings test in two out of three consecutive award years, it can lose access to the federal Direct Loan program.
If a program keeps failing for three years, the department said it could go further and end Title IV eligibility for an institution’s low-earning programs. Title IV is the part of federal higher education law that controls federal student aid, including Pell Grants.
That means the consequences can reach beyond one loan program and threaten a school’s broader access to federal aid if low-earning results continue.
Who is covered and who is exempt
The rule includes some carveouts. Institutions are exempt from automatic loss of Title IV eligibility if they have not participated in the Direct Loan program during the five most recently completed award years.
Schools that exclusively serve people with documented disabilities are also exempt.
The department said some programs that prepare students for jobs where most workers receive tips will get a delayed timeline. That delay is meant to let the department use earnings data from tax years when the “No Tax on Tips” policy is in effect, starting with the 2026 tax year.
What schools must report
The regulations say colleges and universities will have to send the Education Department program-level and some student-level information, including tuition, fees, and financial aid such as grants and scholarships.
The department said it will use earnings data from at least one federal agency. That data will include people who are working but not enrolled during the earnings-measurement year.
When the rule appears in the Federal Register
The Education Department said the final rule will be on public inspection in the Federal Register on June 30, 2026, and published on July 1, 2026.
For students and families, the practical effect is straightforward: programs that do not lead to stronger earnings may face loss of federal loan access, and repeated failure could threaten broader federal aid eligibility. For colleges, the rule means more reporting, more scrutiny, and a clearer financial risk if graduates do not show enough earnings growth after leaving school.
