Colleges Must Prove Grads Earn Big or Lose Loan Cash
Published Date: 4/20/2026
Proposed Rule
Summary
Starting soon, colleges and career programs will need to prove their graduates earn enough money to keep getting federal student loans. This new rule affects schools and students using Direct Loans, aiming to make sure education leads to good jobs. Comments are open until May 20, 2026, and these changes could impact which programs get loan support and how tuition info is shared.
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Analyzed Economic Effects
10 provisions identified: 4 benefits, 6 costs, 0 mixed.
Earnings Premium Replaces D/E; Loan Loss Rule
The rule replaces the former debt-to-earnings metric with an "earnings premium" measure. If a program fails the earnings premium measure in two out of any three consecutive award years, that program will lose eligibility for William D. Ford Direct Loan program funds.
Students Face Costs If Programs Lose Eligibility
The Department states that students will incur costs when the programs they attend lose eligibility for title IV funds, or if they enroll in low-earning certificate programs that gain access to title IV funds. Students may also benefit in certain cases where the rule prevents enrollment in low-earning, high-cost programs.
STATS: New Program-Level Tuition & Aid Reporting
Institutions offering GE or eligible non-GE programs must report program-level data through the Student Tuition and Transparency System (STATS), including tuition, fees, and the total amount of Federal, State, private, or other grants and scholarships each student received for their entire enrollment. That specific reporting requirement applies only to students who completed or withdrew from the program during the award year.
Federal Earnings Data & Limited Appeals
The Department contemplates using IRS tax data to obtain median annual earnings (measured in the fourth tax year following program completion) and states it will not allow appeals based on the reliability of the underlying federal earnings data. The Department explains it will match student records to a Federal agency's earnings data for the earnings premium calculation.
Orderly Program Closure Exception
A program that fails earnings requirements but is not a low-earning outcome program may continue participating in the Direct Loan program if the institution voluntarily conducts an orderly program closure and the Secretary agrees it is in students' best interest. That continuation is limited to 3 years or the program's full-time duration, whichever is less.
New Administrative Capability Requirement
Institutions must demonstrate administrative capability by showing that at least half of the institution's recipients of title IV funds and at least half of the institution's total title IV funds are not from low-earning outcome programs under subpart S. Failure to comply in two out of any three consecutive award years can place an institution on provisional status.
Program Inclusion Ban After Two-Year Loss
An institution would be prohibited from including programs that share the same 4-digit CIP code and any overlapping Standard Occupational Classification (SOC) codes as a failing program that was subjected to a two-year loss of Direct Loan eligibility.
Net Budget Cost to Taxpayers
The Department projects that taxpayers will incur new budget costs due to an increase in transfers of title IV funds to institutions relative to current regulations because the proposed regulation results in a net increase in the number of students attending programs that will be eligible for title IV funds.
Pell Lifetime Eligibility Notices Required
Institutions must notify students who are eligible for Pell Grant funds about their remaining lifetime Pell Grant eligibility and must provide that information when disbursing Pell Grant funds. Institutions must also explain that all Pell Grant funds received for enrollment in the program count against future lifetime eligibility.
Program Website Must Show Completion Time
Institutions must include on program information websites the median calendar time for full-time and less-than-full-time students to complete the program's academic requirements and obtain the credential awarded.
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