WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education in Washington, D.C., has issued a final rule that ties federal student aid eligibility to whether college programs help graduates earn more than people with less education. The agency says the new Student Tuition and Transparency System, or STATS, and Earnings Accountability rule is meant to keep federal dollars away from programs that produce weak earnings outcomes.
What the new rule does
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.
That is not a flat salary cutoff. Instead of asking whether graduates reach one set dollar amount, the department is comparing a program’s outcomes with the earnings of people who stopped at a lower degree level.
How schools can lose aid eligibility
The department says a program that fails the earnings test in two of three consecutive award years will lose access to the federal Direct Loan program.
If a program keeps failing for three years, the department says it could go further and end Title IV eligibility for an institution’s low-earning outcome programs. Title IV is the part of federal law that covers most federal student aid, including Pell Grants and Direct Loans.
For students and families, that matters because losing eligibility can make a program harder to afford and can cut off some federal aid options.
Who is covered
The department says nearly all programs and sectors will fall under the same transparency and earnings rules, no matter their tax status or credential level.
The regulations also set out two notable exemptions. 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. Schools that exclusively serve people with documented disabilities are also exempt.
There is also a delay for programs that prepare students for jobs where most workers receive tips. The department says it will wait to use earnings data from tax years when the ‘No Tax on Tips’ policy is in effect, beginning with the 2026 tax year.
What schools must report
The unofficial regulatory text says colleges will have to report program-level and some student-level information to the department, including tuition, fees, and financial aid such as grants and scholarships.
The department says earnings data will come from at least one federal agency and will include students who are working and not enrolled during the earnings-measurement year.
Why the department says it is doing this
The department says 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. Together, those rules are meant to show whether a program delivers enough value to justify federal aid.
Under Secretary Nicholas Kent told NPR, “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 happens next
The department said the final rule will be on public inspection in the Federal Register on June 30 and published on July 1. NPR reported that the department said it will begin calculating the first year of graduate earnings in early 2027, and that some programs could be labeled low-earning outcome programs in the 2028-2029 financial aid award year.
The department has not identified any specific colleges or programs that would be affected first.
In plain terms, the new rule gives the Education Department a stronger way to watch whether a program’s graduates are getting enough financial payoff from their degree. Programs that do not clear the earnings test could eventually lose the federal aid that helps students pay for college.
