WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education has finalized a rule that gives the federal government a new way to measure whether college programs are paying off for students. Under the rule, programs whose graduates do not earn enough can lose access to federal student loans first, and later even federal grants.
The department said the change will apply to nearly all programs and sectors that take part in federal student aid. It is meant to bring together the new earnings standard with the department’s existing Financial Value Transparency and Gainful Employment rules.
What the new rule does
The rule sets different earnings tests depending on the type of program. Undergraduate programs must show that graduates earn more than a typical high school diploma holder. Graduate programs must show that graduates earn more than a typical bachelor’s degree holder.
In practical terms, that means the Education Department is not just looking at whether a school offers a degree or certificate. It is looking at whether that program leads to earnings that are higher than the benchmark set for that level of study.
How a program can lose aid eligibility
A program that fails the earnings-premium test in two out of three consecutive award years can lose eligibility for the federal Direct Loan program. Direct Loans are the federal loans students borrow directly from the government.
If the program keeps failing for three years, the department said it can also end Title IV eligibility for the institution’s low-earning programs. Title IV is the part of federal law that covers major forms of student aid, including Pell Grants, which students do not repay.
What schools will have to report
The regulations say colleges and universities will have to report program-level and some student-level data to the department. That includes tuition, fees, and financial aid awards such as grants and scholarships.
The department also said it will use earnings data from at least one federal agency. Those earnings counts will include students who are working and not enrolled during the earnings-measurement year.
Which schools are exempt
The rule includes some exceptions. An institution is exempt from automatic loss of Title IV eligibility if it has not participated in the Direct Loan program for the five most recently completed award years. The department also exempted institutions that exclusively serve people with documented disabilities.
The department said it will delay consequences for some programs that prepare students for jobs where most workers receive tipped income. That delay is intended to let the department use earnings data from tax years when the federal “No Tax on Tips” policy is in effect, starting with the 2026 tax year.
Why it matters for students and families
For students, the rule is meant to make it easier to see whether a program is likely to lead to income that justifies borrowing. For colleges, it raises the stakes for programs with weak earnings outcomes, because those programs could lose access to the federal aid many students need to enroll.
The department said the final rule will be on public inspection in the Federal Register on June 30, 2026, and published on July 1, 2026.
