WASHINGTON, D.C. — The U.S. Department of Education has finalized a new accountability framework that could strip federal student loan eligibility from college programs whose graduates fail to earn more than similarly educated workers who did not attend those programs.
The rule establishes the Student Tuition and Transparency System, or STATS, and Earnings Accountability framework, one of the most significant federal efforts in years to link access to student aid with graduates’ financial outcomes.
Under the rule, undergraduate programs must demonstrate that their graduates earn more than the typical high school diploma holder, while graduate programs must show earnings above those of a typical bachelor’s degree recipient.
Programs that fail to meet the earnings threshold in two of three consecutive award years will lose eligibility for the federal Direct Loan program. Programs that consistently fail the standard for three years could also lose eligibility for Title IV aid programs, including Pell Grants.
“The Trump Administration is hitting the hard reset button on higher education and implementing commonsense reforms that will drive down the cost of higher education and hold all institutions, regardless of sector, accountable for low earnings outcomes,” Under Secretary of Education Nicholas Kent said in a statement.
“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,” he added.
The department said the rule is intended to address concerns over rising student debt and poor outcomes at some postsecondary programs. Americans collectively owe about $1.7 trillion in federal student loans.
The final rule also aligns the new earnings standards created under President Donald Trump’s Working Families Tax Cuts Act with the department’s existing Financial Value Transparency and Gainful Employment regulations, creating a single accountability framework that applies across nearly all higher education sectors and credential levels.
The department delayed implementation of certain provisions affecting programs that prepare students for occupations where most workers receive tips. Officials said the delay will allow the government to use earnings data from tax years in which the administration’s “No Tax on Tips” policy is in effect.
Several categories of institutions and programs will be exempt from automatic sanctions.
Institutions that have not participated in the Direct Loan program during the previous five completed award years will not face automatic loss of Title IV eligibility. Programs may also avoid sanctions if institutions agree to stop allowing students to borrow federal Direct Loans for those programs for at least five years.
In addition, institutions that exclusively serve individuals with documented disabilities are exempt from the rule’s program eligibility consequences.
The rulemaking process began after President Trump signed the Working Families Tax Cuts Act on July 4, 2025. The department held public hearings and convened a negotiated rulemaking committee that included colleges, employers, legal aid groups and taxpayer advocates.
The proposed rule was published in April and generated nearly 10,000 public comments, according to the department.
The final rule was published in the Federal Register on July 1 and represents the third and final package of higher education regulations authorized under the law. Federal officials said the measures are intended to curb unsustainable student lending, align higher education more closely with workforce demands and provide students with clearer information about the economic value of academic programs.
Support the local news that supports Chester County. MyChesCo delivers reliable, fact-based reporting and essential community resources—free for everyone. If you value that, click here to become a patron today.