WASHINGTON, July 21 (DC Times Online) — In Washington, D.C., the U.S. Department of Education has issued a final rule that would tie federal student aid to how much graduates earn after they leave college. The new framework, called the Student Tuition and Transparency System and Earnings Accountability rule, is meant to give the department one earnings test for most college programs.
What the rule measures
Under the rule, undergraduate programs must show that graduates earn more than the typical person with only a high school diploma. Graduate programs must show that their graduates earn more than the typical person with a bachelor’s degree. The department says the approach is meant to line up new and existing accountability rules, including Financial Value Transparency and Gainful Employment.
The department says nearly all programs and sectors will fall under the same framework, no matter a school’s tax status or the level of credential it offers. Under Secretary Nicholas Kent said, “If a program cannot show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers.”
What happens if a program fails
A program that misses the earnings test in two of three straight award years would lose access to the federal Direct Loan program. If weak earnings continue for three years, the department says it could also end Title IV eligibility, including Pell Grants, for all of an institution’s low-earning outcome programs. Title IV is the part of federal law that covers most grants and loans for college students.
How the government will check earnings
Schools will have to report program-level data and some student-level data, including tuition, fees, and aid such as grants and scholarships. The department said it will use earnings data from at least one federal agency. That data will include students who are working, even if they are not enrolled during the earnings-measurement year.
The department also said it will delay penalties for some programs that prepare students for jobs where most workers receive tips. It said it wants to wait for earnings data from tax years when the “No Tax on Tips” policy is in effect, beginning with the 2026 tax year.
Who is exempt
The department says it will not automatically cut off Title IV aid for institutions that have not taken part in the Direct Loan program for the five most recently completed award years. Schools that exclusively serve people with documented disabilities are also exempt.
The department said the final rule will be on public inspection in the Federal Register on June 30 and published on July 1. NPR reported that the department plans to start calculating the first year of graduate earnings in early 2027, and that some programs could first be labeled low-earning in the 2028-2029 financial aid award year.