WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education says it has finalized a new federal rule that could put college programs at risk of losing access to student aid if graduates do not earn enough after leaving school.
The rule creates a new accountability system called the Student Tuition and Transparency System, or STATS, and it applies to almost all colleges and universities that participate in federal student aid. In simple terms, schools will have to show that their programs lead to earnings above a basic benchmark: undergraduate programs must outperform the typical high school diploma holder, and graduate programs must outperform the typical bachelor’s degree holder.
What changes under the new rule?
The biggest change is that the federal government will use graduate earnings as a test of whether a program can keep participating in key aid programs.
If a program fails the earnings test in two out of three consecutive award years, the Education Department says it will lose eligibility for the federal Direct Loan program. If low earnings continue for three years, the department says it could also end Title IV eligibility for all of an institution’s low-earning outcome programs. Title IV is the section of federal law that governs most federal student aid, including Pell Grants and Direct Loans.
For students and families, that matters because federal aid often determines whether a program is affordable at all. For colleges, it means earnings data will become part of the basic check on whether a program can keep getting federal money.
How will the department measure earnings?
The department says the final rule is meant to bring together newer and existing accountability systems, including the new earnings standard and the department’s transparency and gainful-employment rules.
Under the regulation text, colleges will have to report program-level information and some student-level information, including tuition, fees, and financial aid awards such as grants and scholarships. The department says earnings data will come from at least one federal agency, and it will include people who are working and not enrolled during the earnings-measurement year.
Under Secretary Nicholas Kent, quoted by NPR, 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.”
Who is covered?
The department says nearly all programs and sectors will be subject to the same transparency and earnings-accountability framework, no matter whether the school is public, private nonprofit, or for-profit, and no matter what type of credential the program offers.
The rule does include a few exceptions. The department says it will not automatically apply the Title IV loss provision to institutions that have not participated in the Direct Loan program for the five most recently completed award years. It also exempts institutions that exclusively serve people with documented disabilities.
The department says it will also delay consequences for some programs that prepare students for jobs where most 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, starting with the 2026 tax year.
Why this matters now
The department did not name any specific colleges or programs as low-earning outcome programs in its announcement. But the rule gives the government a new way to judge whether a program is delivering a financial return for students.
For students, that could mean fewer dollars flowing to programs that do not help graduates earn more than the benchmark the department set. For schools, it means they will need to track costs and outcomes more closely and report more data to Washington.
The Education Department said the final rule would be placed on public inspection in the Federal Register on June 30 and published on July 1.
