WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education in Washington has issued a final rule that ties federal student aid to what college programs’ graduates earn after school.
The new framework, called the Student Tuition and Transparency System and Earnings Accountability rule, is meant to make colleges and universities answer for programs that do not lead to strong earnings. The department says the rule will apply to nearly all programs and sectors, no matter whether a school is public, private nonprofit or for-profit.
What does the rule require?
At the center of the rule is a new earnings test.
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 bachelor’s degree holder.
The Education Department says the new standard is meant to work alongside existing transparency and accountability rules, including Financial Value Transparency and Gainful Employment requirements.
What happens if a program fails the test?
The rule gives programs a set of warning signs before more serious penalties kick in.
If a program fails the earnings test in two out of three consecutive award years, the department says it will lose access to the federal Direct Loan program.
If the weak results continue for three years, the department says it could also end Title IV eligibility for all of an institution’s low-earning outcome programs. Title IV is the part of federal law that governs student aid such as Pell Grants and federal loans.
What information will schools have to report?
The department’s regulations say colleges will need to report program-level data and some student-level data. That includes tuition, fees and financial aid awards such as grants and scholarships.
The regulations also say the department will use earnings data from at least one federal agency. That data will include students who are working and not enrolled during the earnings-measurement year.
Are any schools or programs exempt?
The rule includes a few carveouts.
An institution is exempt from automatic loss of Title IV eligibility if it has not taken part in the Direct Loan program during the five most recently completed award years.
The rule also exempts institutions that exclusively serve people with documented disabilities.
The department says it will also delay program-eligibility consequences for certain programs that prepare students for jobs where most workers receive tipped income. The delay is meant to let the department use earnings data from tax years when the No Tax on Tips policy is in effect, starting with the 2026 tax year.
Why is the department doing this?
The department says the goal is to make colleges more accountable for the value of the programs they offer. It says the new framework is designed to line up the new earnings standard in the Working Families Tax Cuts Act with existing accountability rules.
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.