Student loans at risk as U.S. Department of Education moves to penalize programs with weak earnings results
The U.S. Department of Education has introduced a sweeping proposal designed to hold colleges and universities accountable for the financial outcomes of their graduates. Announced on April 17 through a Notice of Proposed Rulemaking (NPRM), the plan seeks to ensure that postsecondary programs deliver measurable economic value to students and taxpayers. The rule is part of a broader push to reform student aid under President Trump’s Working Families Tax Cuts Act.
Rising student debt drives urgency for reform
With the federal student loan portfolio nearing $1.7 trillion, policymakers are increasingly concerned that many students are not seeing a return on their educational investment. The Department emphasized that too many graduates are left financially worse off than if they had not attended college at all, creating pressure for a “hard reset” in how higher education is evaluated and funded.
At the heart of the proposal is a new “earnings test” that would require programs to demonstrate that their graduates earn more than comparable individuals without the same level of education. This represents a significant expansion of accountability measures, building on existing Gainful Employment rules while applying more broadly across institutions and programs.
College programs face strict new thresholds
Under the proposed rule, undergraduate programs would lose access to federal student loans if their typical graduates do not earn more than high school graduates. This standard aims to ensure that a bachelor’s degree delivers clear financial benefits, rather than leaving students burdened with debt and limited earning potential.
Graduate-level programs would face similar scrutiny. To remain eligible for federal aid, these programs must demonstrate that their graduates earn more than the average bachelor’s degree holder. This provision is intended to ensure that advanced degrees provide a meaningful economic advantage.
Federal aid eligibility tied directly to outcomes
Programs that consistently fail to meet the earnings benchmarks could lose eligibility not only for federal student loans but, in some cases, Pell Grants. The Department argues that taxpayer-funded aid should only support programs that deliver reliable returns on investment for students.
“The Trump Administration’s proposed accountability framework is grounded in common sense: if postsecondary education programs do not leave graduates better off, taxpayers should not subsidize them,” said Under Secretary of Education Nicholas Kent.
“This consensus-backed framework will drive meaningful change in postsecondary education, ending years of regulatory whiplash and addressing student debt that has left too many students worse off,” he added.
AHEAD Committee consensus shapes final proposal
The proposal is backed by consensus from the Accountability in Higher Education and Access Through Demand-driven Workforce Pell (AHEAD) Committee. This group; comprising representatives from higher education, business, legal aid, and student communities; agreed on a unified accountability framework after extensive negotiations earlier this year.
The new framework would replace multiple overlapping accountability systems that varied by institution type and credential level. By creating a single standard based on earnings outcomes, the Department aims to simplify compliance while ensuring consistent protections for students across all sectors of higher education.
Some education policy experts have long advocated for tying federal aid to economic outcomes. Proposals from researchers and think tanks have suggested using “debt-to-earnings” metrics and labor market tracking to evaluate program effectiveness, arguing that such systems would encourage institutions to focus on return on investment and workforce alignment.
Critics raise concerns over implementation challenges
Despite broad support for accountability, critics warn that the proposal may not fully account for real-world complexities. Career Education Colleges and Universities, a group representing for-profit schools, stated that while “the proposal is a dramatic improvement over the current Gainful Employment rule,” the “accountability formula remains unresolved.”
CEO Jason Altmire, a former Democratic Member of Congress from Pennsylvania, listed “regional wage differences, lack of differentiation of part-time versus full-time work, unreported tipped income, gender wage disparities, and the age range of the comparison group” as issues that remain to be addressed.
The NPRM will be open for public comment for 30 days, with submissions due by May 20, 2026, through the Federal eRulemaking Portal. The Department has indicated it may revise the rule based on feedback before finalizing the regulations, marking a critical period for stakeholders to shape the future of federal student aid policy.
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14 essential strategies to maximize your Social Security and avoid costly mistakes
Social Security is a vital lifeline for many seniors, providing crucial income support during retirement. With inflation at its highest in four decades, Social Security’s inflation-adjusted benefits offer protection against rising costs.
Rising interest rates have disrupted many retirement portfolios, causing bond fund values to plummet. In this volatile financial landscape, Social Security can stabilize a typical stock-bond retirement portfolio. By implementing smart strategies, retirees can maximize their Social Security benefits and ensure a more secure financial future.
14 Essential Strategies to Maximize Your Social Security and Avoid Costly Mistakes
11 reasons you should claim Social Security early
Deciding when to claim Social Security is often about maximizing your benefit. Financial planners usually advise delaying your claim for as long as possible to secure the highest monthly payment. Your benefit is based on your lifetime earnings, with a full payout available at your full retirement age (FRA), which is currently between 66 and 67 depending on your birth year. Claiming before FRA results in a permanent reduction in your monthly benefit, while waiting beyond FRA leads to a permanent increase. However, the decision isn’t solely about maximizing the monthly check. Personal factors such as health, family circumstances, and financial needs can play a significant role in determining the right time to claim.
11 Reasons You Should Claim Social Security Early
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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