WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education has issued a final rule that could cut off federal student aid for college programs whose graduates do not earn enough after leaving school. The department says the new framework, called the Student Tuition and Transparency System and Earnings Accountability rule, is meant to make schools show that their programs lead to better pay for students.
Under the rule, undergraduate programs must show that graduates earn more than the typical person with only a high school diploma. Graduate programs must show that graduates earn more than the typical person with a bachelor’s degree.
If a program fails that earnings test in two of three consecutive award years, the department says it can lose access to the federal Direct Loan program. An award year is the school-year period used to track federal aid. If the failures continue for three years, the department says it could also end Title IV eligibility, including Pell Grants, for low-earning programs at that institution.
How the rule works
The Education Department says the new system is meant to line up earnings checks that were already in place with new accountability measures. The department said nearly all programs and sectors will fall under the same transparency and earnings-accountability framework, regardless of tax status or credential level.
Under Secretary Nicholas Kent said the goal is to stop federal money from supporting programs that do not pay off for students. In remarks reported by NPR, Kent said: “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.”
What schools will have to report
The unofficial regulatory text says schools will need 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 regulations also say the department will get earnings data from at least one federal agency. That data will include students who are working and not enrolled during the year the department measures earnings.
The department says that setup is meant to give it a clearer picture of what graduates actually earn, not just what they borrowed or how long they stayed in school.
Which programs are treated differently
The rule gives some programs and institutions special treatment. The department says it will delay program-eligibility consequences for certain programs that prepare students for jobs where most workers receive tipped income. 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.
The department also says 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. Another exemption applies to institutions that exclusively serve people with documented disabilities.
When it takes effect
The department said the final rule would be on public inspection in the Federal Register on June 30, 2026, and published on July 1, 2026. In comments reported by NPR, the department said it would begin calculating the first year of graduate earnings in early 2027 and that some programs could first be identified as low-earning outcome programs in the 2028-29 financial aid award year.
Why it matters
For colleges and universities, the rule makes program outcomes part of the federal aid equation. A program no longer needs only students and tuition revenue to keep going; it also has to clear the department’s earnings test to keep access to some federal loan and grant money.
For students and families, the change is meant to push schools toward programs that lead to stronger pay after graduation. The department says the point is to protect federal aid dollars from backing programs that do not improve graduates’ financial standing.
