Education Department Unveils Earnings-Based Rule for Federal Student Aid

The U.S. Department of Education announced a new rule that will evaluate undergraduate and graduate programs based on graduates’ median earnings four years after completion. Programs that cannot demonstrate that graduates earn more than comparable high-school-only workers (or, for graduate programs, more than workers with only a bachelor’s degree) would become ineligible for federal loan and grant underwriting. The rule, finalized in July, is presented as a means to prevent students from incurring debt for programs that do not improve their financial prospects.

Newsweek

The proposal follows reports that the Trump administration was considering restricting federal aid for students in lower-paying fields. Earlier coverage suggested that degrees such as social work, art, religious studies, music, teaching assistance, and cosmetology might be most affected. The policy emerges amid rising default and delinquency rates in the $1.7 trillion federal student-loan portfolio.

Newsweek

• The Los Angeles Times estimated that about 3 % of bachelor’s and advanced-degree programs at public and nonprofit colleges would fail the earnings test, versus roughly 33 % at for-profit institutions. Overall, an estimated 5.2 % of programs could be deemed ineligible, affecting 4.2 % of federal loan or grant recipients.

Newsweek

• A May study by the Postsecondary Commission and Mathematica, analyzing nearly one million Texas public-college students, found that liberal arts majors yielded the lowest 15-year net earnings gain (? $35,400), while engineering and architecture graduates saw average net gains exceeding $200,000. All examined bachelor’s fields still produced a positive average return.

Newsweek

The Department of Education, citing Under Secretary of Education Nicholas Kent, described the rule as a “hard reset” for higher education, emphasizing that programs must demonstrate a financial benefit to students to justify federal funding. The agency dismissed earlier reports of a “ban” as “fake news,” noting that the federal government does not set curricula.

Newsweek

Proponents argue the framework will protect taxpayers and steer students away from debt-heavy programs with limited earnings upside. Critics warn that earnings alone may not capture the social value of certain professions, potentially limiting access to fields such as social work and the arts. The rule’s implementation will shape loan eligibility for a modest share of programs but could set a precedent for outcome-based funding across higher education.

Newsweek