Trump cuts federal loans for low‑paying degrees

The U.S. Department of Education has moved to tie federal student-loan eligibility to how much graduates earn after leaving school, a change that would cut off loans for programs that repeatedly produce low wages. Wisconsin Public Radio reported on August 5 that the proposal could hit programs preparing social workers, artists and early-childhood educators. The department said the policy is meant to hold colleges accountable for “low-earning outcomes.” The change sits inside a broader Trump administration effort to reshape federal higher-education finance around labor-market results. ### Which programs are targeted? The July 1 Federal Register notice says the rule limits Direct Loan eligibility to programs whose graduates meet earnings benchmarks. Undergraduate programs would have to show that former students earn more than a typical high school graduate, while graduate programs would have to show earnings above those of a typical bachelor’s degree holder. Programs that miss those thresholds can lose access to federal loans under the department’s accountability framework. (wpr.org) Wisconsin Public Radio reported that fields likely to be affected include social work, art and early-childhood education, because graduates in those areas often enter relatively low-paid work despite degree requirements. The article framed the proposal as one that would judge programs by labor-market pay rather than by mission or public-service role. ### Where did this authority come from? The Department of Education said its proposed accountability framework is authorized by President Donald Trump’s Working Families Tax Cuts Act and by other existing department authorities. (federalregister.gov) Federal Student Aid says Trump signed that law on July 4, 2025, and that several higher-education changes took effect in 2026 and beyond. (wpr.org) The department’s materials show this policy was developed through rulemaking rather than through a one-off enforcement action. A Federal Student Aid posting says the proposal was based on consensus reached during negotiated rulemaking and was designed to align low-earning outcome rules with existing gainful-employment requirements. (ed.gov) ### How does the administration describe the change? The Department of Education said the proposal would “break the cycle of low return on investment for students and taxpayers.” In its press release, the department cast the rule as a way to hold colleges and universities accountable when students borrow for programs that do not produce enough earnings afterward. (fsapartners.ed.gov) The final-rule announcement, issued later, said undergraduate programs will be required to demonstrate that graduates earn more than the typical high school diploma holder and that graduate programs must exceed the earnings of the typical bachelor’s degree holder. The American Council on Education said the final rule would not take effect until July 1, 2027. (ed.gov) ### What changes for colleges and students? Federal loans are a central financing source for many students, so programs that lose Direct Loan eligibility would become harder to access for borrowers who depend on federal aid. The Federal Register notice specifically ties the earnings test to program eligibility in the Direct Loan program, not to blanket institutional eligibility across all offerings. (ed.gov) The Education Department’s approach also expands accountability beyond the older gainful-employment framework, which had focused more narrowly on certain vocational programs. The new rule, according to the department and higher-education groups, applies an earnings test across undergraduate and graduate programs more broadly. ### What happens next? (federalregister.gov) The Department of Education has already moved beyond the proposal stage. The department announced a final rule in July 2026, and the American Council on Education said the measure is scheduled to take effect on July 1, 2027. Colleges and universities now have the rule text and timeline as they assess which programs could face loan restrictions under the new earnings standards. (ed.gov)