Colleges Face Loan Cuts Unless Grads Earn Enough Money
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 federal funding.
Analyzed Economic Effects
9 provisions identified: 3 benefits, 4 costs, 2 mixed.
Earnings Premium Replaces D/E
The Department will replace the old debt-to-earnings (D/E) metric with an "earnings premium" measure for nearly all Title IV programs. If a program fails the earnings premium in two out of any three consecutive award years, that program would lose eligibility for William D. Ford Direct Loan funds; limited extensions for orderly program closure may be allowed for up to 3 years or the program's full-time duration.
Projected Winners, Losers, and Costs
The Department projects that some degree programs will lose Title IV eligibility while some undergraduate and graduate certificate programs may gain eligibility; students who attend programs that lose eligibility will incur costs, and taxpayers will incur new budget costs because the rule is expected to produce a net increase in Title IV fund transfers to institutions.
STATS Reporting of Costs and Aid
Institutions would be required to report program-level data into the Student Tuition and Transparency System (STATS), including tuition, fees, and the total Federal, State, private, or other grants and scholarships each student received for their entire enrollment for students who completed or withdrew during the award year. The Department will use this reporting to publish enhanced disclosures of net program cost to the public.
Pell Lifetime Eligibility Notices Required
Institutions must provide students who are eligible for Pell Grant funds with an indication of their remaining lifetime Pell Grant eligibility and an explanation that Pell Grant amounts received for enrollment in the program count against their lifetime limit. Institutions must also provide information about remaining Pell eligibility at the time they disburse Pell Grant funds.
New Administrative Capability Test
Institutions must demonstrate administrative capability by showing that at least half of their Title IV recipients and at least half of the institution's Title IV funds are not from low-earning outcome programs. An institution placed on provisional status after failing the standard in two out of any three award years may see its low-earning programs become ineligible for Title IV funds.
Limits on Re-Listing Similar Programs
An institution would be prohibited from listing a program as Direct Loan-eligible if that program shares the same 4-digit CIP code and any overlapping SOC codes with a failing program that was subjected to a two-year loss of eligibility. This limits how institutions can reclassify or relabel programs to retain loan access.
Use of IRS and Census Data for Earnings
The Department contemplates using IRS earnings data (for program median earnings) and the Census Bureau's American Community Survey (ACS) to calculate earnings thresholds, and it states it will not allow appeals that challenge the reliability of the federal earnings data set. The Department plans to obtain median annual earnings for the fourth tax year following program completion from a Federal agency.
STATS Expanded to Territories and Small Programs
The proposed rules remove exclusions that previously exempted institutions located in U.S. Territories or Freely Associated States and remove the exclusion for institutions with no program groups that produced 30 or more total completers over the four most recently completed award years, expanding STATS coverage to these institutions and program groupings.
Program Completion Time Disclosure
Institutions would be required to include on the program information website the median calendar time it takes full-time and less-than-full-time students to complete the program's academic requirements and obtain the credential the program awards.
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Key Dates
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