WASHINGTON, July 21 (DC Times Online) — In Washington, the U.S. Department of Education has issued a final rule that would put new earnings tests on most college programs that receive federal student aid.
The rule, called the Student Tuition and Transparency System and Earnings Accountability rule, is meant to make colleges show that their programs are helping students earn more after they finish school. The department says the change will apply across most sectors and credential levels, not just to for-profit or career-training schools.
What does the rule require?
Under the new framework, 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 says the idea is simple: if a program does not improve graduates’ earnings, then federal aid should not keep flowing to it.
Under Secretary Nicholas Kent said in a statement reported by 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.”
How is the government measuring that?
The department’s regulations say colleges will have to report program-level and some student-level information, including tuition, fees, and financial aid such as grants and scholarships.
The department will also use earnings data from at least one federal agency. That data will include students who are working and not enrolled during the year the earnings are measured.
In plain terms, the government will compare what former students earn after they leave a program with a benchmark it sets for that kind of degree or certificate.
What happens if a program fails?
A program that fails the earnings test in two out of three consecutive award years will lose eligibility for 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 all of an institution’s low-earning outcome programs. Title IV is the part of federal law that covers major forms of student aid, including Pell Grants.
The department says the rule is designed to give schools time to improve, but also to create real consequences when students are not seeing enough financial return.
Are there any exceptions?
Yes. The department says it will not automatically strip Title IV eligibility from an institution that has not participated in the Direct Loan program for the five most recently completed award years.
It also says the rule does not apply in the same way to institutions that exclusively serve individuals with documented disabilities.
The department says it will also delay some consequences for programs that prepare students for jobs where most workers receive tipped income. That delay is meant to allow the government to use earnings data from tax years when the federal “No Tax on Tips” policy is in effect, starting with the 2026 tax year.
Why does this matter for students and families?
For students, the rule is meant to make federal aid more closely match programs that lead to stronger paychecks after graduation.
For families, it could change which programs stay eligible for loans and grants.
For colleges, it adds a new reporting burden and raises the risk that some programs could lose access to federal money if graduates repeatedly fall short on earnings.
The department says the rule is meant to line up new earnings accountability standards in federal law with existing transparency and gainful-employment regulations.
When does it take effect?
The department said the final rule will be on public inspection in the Federal Register on June 30, 2026, and published on July 1, 2026.
