Trump cuts loans for low‑paying degrees

The U.S. Department of Education on June 29 finalized a rule that ties federal loan access to how much graduates earn after leaving college. The rule creates a new earnings-accountability test for undergraduate and graduate programs and can cut off Direct Loan eligibility for programs that repeatedly fail it. The department said the framework was authorized by the Working Families Tax Cuts Act signed by President Donald Trump on July 4, 2025. The rule is scheduled to take effect on July 1, 2027. ### Which programs are at risk under the new rule? Under the final rule, undergraduate programs must show that former students earn more than the typical worker whose highest credential is a high school diploma, according to the department’s June 29 announcement. Graduate programs must show that former students earn more than the typical worker with only a bachelor’s degree. Programs that do not meet those thresholds can lose access to federal Direct Loans. (ed.gov) The Federal Register version says the regulation applies across Title IV institutional-eligibility and Direct Loan rules and revises the department’s prior financial-value-transparency and gainful-employment framework. The department said the new system is meant to create a single accountability structure for low-earning programs. ### How does the government decide whether a program fails? (ed.gov) The final rule measures programs against earnings benchmarks tied to comparable education levels, not against debt-to-earnings formulas that were used in earlier regulations. A McGuireWoods summary of the final text said programs that fail the earnings metric in two of three consecutive years lose Direct Loan eligibility, and may also risk broader Title IV consequences, though the operative standards are set by the regulation itself. (ed.gov) The American Council on Education said the rule capped a negotiated rulemaking process that drew nearly 10,000 public comments. ACE said the department delayed the effective date until July 1, 2027, giving colleges time to prepare for reporting and compliance changes. ### Where did this policy come from? President Donald Trump signed the Working Families Tax Cuts Act on July 4, 2025, and the Education Department said that law authorized the accountability provisions behind the new rule. (ed.gov) Federal Student Aid says the department also published separate loan-related final regulations on May 1, 2026, implementing other parts of the same law. The department’s fact sheet says the earnings-accountability rule was issued alongside revisions to existing Financial Value Transparency and Gainful Employment regulations. (acenet.edu) That means colleges will face a different federal test for whether specific programs provide enough economic return to keep access to federal lending. (studentaid.gov) ### Who is objecting, and over what? Senate Democrats criticized separate Trump administration moves to transfer special education programs and civil-rights enforcement out of the Education Department, saying those changes would weaken oversight and create disruption. Sen. Patty Murray, Sen. Tammy Baldwin and Sen. Bernie Sanders said in a June 30 statement that the administration was “undermin[ing]” special education and civil-rights enforcement by shifting responsibilities to other agencies. (ed.gov) States Newsroom reported on August 5 that Senate Democrats rebuked the transfer effort as part of a broader fight over the department’s restructuring. K-12 Dive reported that a Senate committee was considering legislation to block some of those transfers, including offices overseeing special education, postsecondary education and Native American education. (murray.senate.gov) ### What should colleges and students watch next? July 1, 2027, is the key date in the final rule. That is when the earnings-accountability regulation takes effect, according to the department’s unofficial copy and fact sheet. Colleges can review the final regulatory text and implementation materials through the department, Federal Register and Federal Student Aid guidance pages. (ed.gov) (govexec.com)