Colleges Must Prove Grads Earn Enough or Lose Loans
Published Date: 7/1/2026
Rule
Summary
Starting July 1, 2027, colleges must prove their programs help students earn enough money to keep getting federal student loans. This new rule affects schools offering Direct Loans and aims to stop loans for programs where graduates don’t make enough. Some parts kick in earlier on August 31, 2026, so schools better get ready to show they’re helping students succeed in the workforce!
Analyzed Economic Effects
7 provisions identified: 2 benefits, 4 costs, 1 mixed.
Earnings test can cut off Direct Loans
Starting July 1, 2027, a program that fails the Department's "earnings premium" test in two out of any three consecutive award years will lose eligibility for Direct Loans. Institutions have 30 days to appeal a determination that a program is a low-earning outcome program.
Institution-wide provisional status rule
If an institution fails the administrative capability condition in two out of any three consecutive award years (meaning at least half of its Title IV recipients and at least half of its Title IV funds come from low-earning outcome programs), the institution can be placed on provisional status and its low-earning outcome programs can become ineligible for Title IV funds.
New student-level reporting and STATS
Institutions must report program- and certain student-level data (including tuition, fees, and grants/scholarships for students who completed or withdrew during the award year) so the Department can publish net program cost and other disclosures in the Student Tuition and Transparency System (STATS).
Orderly closure and borrowing limits option
A program that fails to meet certain requirements but is not a low-earning outcome program may continue to participate in Direct Loans if the institution voluntarily conducts an orderly program closure (limited to three years or the program's full-time duration, whichever is less). Alternatively, an institution may avoid an administrative-capability-based loss of Title IV eligibility by voluntarily preventing students from borrowing Direct Loans in that program for at least five years.
Territories and Freely Associated States included
The rule removes exclusions for institutions located in U.S. Territories and Freely Associated States, making those programs subject to the STATS reporting and the earnings premium accountability framework.
Program mapping and eligibility blocking
An institution is prohibited from listing as eligible any program that shares the same 4-digit CIP code and any overlapping SOC codes with a failing program that was subject to a two-year loss of eligibility.
Pell lifetime-eligibility notices required
Institutions must notify any student eligible for Pell Grants of their remaining lifetime Pell Grant eligibility and explain that Pell funds used for the program count against future lifetime eligibility; they must also provide remaining Pell eligibility information when disbursing Pell funds.
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