WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education has finalized a rule that could cut off federal student aid to college programs whose graduates do not earn more than typical high school or bachelor’s degree holders.
The new framework, called the Student Tuition and Transparency System, or STATS, and Earnings Accountability rule, is designed to give students a clearer picture of how programs perform after graduation and to hold colleges accountable when federal aid backs programs with weak earnings outcomes.
What the rule changes
Under the rule, undergraduate programs must show that their graduates earn more than the typical high school diploma holder. Graduate programs must show that their graduates earn more than the typical bachelor’s degree holder.
The Department of Education said the framework applies to nearly all programs and sectors, regardless of tax status or credential level.
The rule is meant to line up a new earnings standard in the Working Families Tax Cuts Act with existing Financial Value Transparency and Gainful Employment rules, the department said.
How a program can lose aid
The accountability test is not based on one bad year alone. A program that fails the earnings measure in two out of three consecutive award years will lose eligibility for the federal Direct Loan program.
Direct Loans are federal student loans issued by the government.
If a program keeps failing for three years, the department says it could also end Title IV eligibility, including Pell Grant eligibility, for an institution’s low-earning outcome programs. Title IV is the part of federal law that governs most federal student aid.
In practice, that means a college program could keep operating but lose access to the federal money many students use to pay tuition.
What schools must report
The regulations say colleges will have to submit program-level and certain student-level data to the department. That includes tuition, fees, and financial aid awards such as grants and scholarships.
Earnings data will come from at least one federal agency, according to the regulations. The data set will include students who are working and not enrolled during the earnings-measurement year.
Who is exempt
The department said some institutions are not subject to automatic loss of Title IV eligibility. Those include schools that have not participated in the Direct Loan program for the five most recently completed award years, as well as institutions that exclusively serve people with documented disabilities.
The department also said it will delay program-eligibility consequences for certain programs that prepare students for jobs where a majority of workers receive tipped income. The delay is meant to let the department use earnings data from tax years when the “No Tax on Tips” policy is in effect, beginning with the 2026 tax year.
When it starts
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.
NPR reported that the department said it will 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 year.
The final rule gives the Education Department a new way to judge college programs by what graduates earn, not just by how many students enroll or complete a degree. For schools, the change could mean more reporting and more pressure to prove that a program leads to earnings above the federal benchmark.
