Policy Change · 2026
The New Federal Loan Earnings Test, Explained
Finalized July 1, 2026. The federal government will now cut student loans off from college programs whose graduates don't out-earn high school graduates.
Sources: U.S. Department of Education final rule (Federal Register, July 1, 2026); Wall Street Journal reporting. Plain-English summary — not legal or financial advice.
What changed
For almost 70 years, essentially any accredited program could accept students paying with federal loans. That link is now conditional: a program must show its graduates end up financially better off than if they had never enrolled. Programs that can't clear that bar lose access to federal Direct Loans — the money most families borrow with.
The test
A program passes if its graduates' median earnings, measured four years after completing the degree, meet or beat the median earnings of high school graduates aged 25–34 in the institution's state (or nationally, if most students come from out of state). Graduate programs are measured against bachelor's-degree holders instead.
The consequence
Fail in 2 of 3 consecutive years and the program loses access to federal Direct Loans. Programs that keep failing can eventually lose all federal aid eligibility — including Pell Grants — though a "parachute option" lets some programs exit the loan program early while keeping Pell.
The scale
The Department of Education estimates roughly 3,200 programs enrolling about 690,000 federal-loan borrowers are currently on track to fail. Fields where pay is low relative to program cost — and some graduate programs — are most exposed.
Who it covers
Nearly every degree and certificate program at nearly every kind of school. Earlier federal accountability rules mostly targeted for-profit colleges; this framework applies without regard to tax status or credential level.
The timeline
Final rule takes effect
The Department of Education's earnings accountability rule is finalized and published in the Federal Register. It applies to public, private nonprofit, and for-profit institutions alike.
Earnings data collection begins
The federal government starts collecting graduate earnings data that will feed the first round of program-level earnings calculations.
First earnings results released
The first official earnings-premium calculations are published. Programs learn where they stand — and so does the public.
Earliest possible loan cutoffs
A program must fail the earnings test in 2 of 3 consecutive years to lose federal Direct Loan eligibility, so the earliest a program can be cut off is mid-2028 — while today's applicants are still enrolled.
Why this matters for a family applying now
A student applying this cycle will still be enrolled when the first cutoffs land. The earliest programs can lose loan eligibility is July 1, 2028 — two years into a four-year degree that starts in fall 2027. A program losing federal loans mid-degree means finding private financing at higher rates, transferring, or paying cash.
The government is now grading programs on the same question we built Project College to answer: does this specific program, at this specific school, leave graduates earning enough to justify what it costs?
You don't have to wait for the government's first report in 2027. The earnings data behind this rule is largely the same federal data — program-level median earnings and median debt from the U.S. Department of Education — that Project College already shows for tens of thousands of degree programs, school by school, major by major.
Three things to check before your student applies
- The program's median earnings, not the school's brand. The rule is program-by-program for a reason: the same university can house programs that pass comfortably and programs on the failure list.
- Earnings against debt. A program can technically pass the government's bar and still leave your family with debt that outweighs the paycheck. Passing the earnings test is a floor, not a recommendation.
- The backup plan. If a program on your student's list is in a historically low-earning field, ask the school directly how it expects to fare under the new rule — and know what your family would do if federal loans were cut off mid-degree.
Official resources
See program-level earnings and debt for every school on your student's list — the same federal data this rule runs on.
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