WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education has issued a final rule that gives the federal government a new way to judge whether college programs are worth keeping in the student aid system.
The rule creates a postsecondary accountability framework the department calls the Student Tuition and Transparency System, or STATS, and Earnings Accountability. In practical terms, it means undergraduate and graduate programs will now be measured against earnings benchmarks, and programs that repeatedly fall short can lose access to federal aid.
What the rule does
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 person with a bachelor’s degree.
The department said the goal is to align the new earnings standard with existing federal transparency and accountability rules, including Financial Value Transparency and Gainful Employment requirements.
The rule applies broadly across sectors and credential levels, the department said, so colleges and universities cannot avoid the standard simply because they are public, private nonprofit or for-profit institutions.
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, according to the department’s final rule.
If a program continues to fail for three years, the department said it could also end Title IV eligibility for all of an institution’s low-earning outcome programs. Title IV is the section of federal law that governs major student aid programs, including Pell Grants.
That makes the rule important not only for colleges, but also for students who rely on federal loans and grants to pay tuition, fees and living costs.
What schools must report
The department’s regulatory text says institutions will need to submit program-level and some student-level information, including tuition, fees and financial aid awards such as grants and scholarships.
The rules also say the government will use earnings data from at least one federal agency. Those earnings calculations will include students who are working and not enrolled during the year being measured.
Who is exempt
The department said two types of institutions are exempt from automatic loss of Title IV eligibility under the rule: schools that have not participated in the Direct Loan program in the five most recently completed award years, and institutions that exclusively serve people with documented disabilities.
The department also said it will delay consequences for certain programs that prepare students for jobs where most workers receive tipped income. The delay is meant to allow the department to use earnings data from tax years when the “No Tax on Tips” policy is in effect, beginning with the 2026 tax year.
When the rule takes 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.
NPR reported that the department said it will begin calculating the first year of graduate earnings in early 2027, and that some programs could first be identified as low-earning outcome programs in the 2028-2029 federal aid year.
Why this matters
Federal student aid helps determine which college programs can survive. If a program loses Direct Loan eligibility, it becomes harder for students to borrow to attend it. If Title IV eligibility is later cut off, the consequences can spread further, affecting Pell Grants and other aid.
The department says the rule is meant to protect students and taxpayers from programs that leave graduates worse off financially. Under Secretary Nicholas Kent told 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.”
For students and families, the rule is likely to matter most when choosing among programs with similar prices but different earnings outcomes. For colleges, it means federal aid participation will depend more directly on what happens to graduates after they leave school.
