WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education in Washington, D.C., has finalized a new rule that ties federal student aid to how much graduates earn after college.
The rule creates a new accountability system the department calls the Student Tuition and Transparency System, or STATS. In plain terms, it gives colleges a federal earnings test: programs that do not lead to enough pay can lose access to some kinds of federal aid.
What the rule requires
Under the new framework, 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 said the rule is meant to make schools more accountable when students borrow federal money for programs that do not improve their earnings.
How the test works
The department said it will use earnings data from at least one federal agency. That data will include people who are working but not enrolled during the year used to measure earnings.
Schools will also have to report more information about programs and some students, including tuition, fees, and financial aid such as grants and scholarships.
The department said the new rule is designed to line up new earnings standards with existing federal transparency and gainful-employment rules.
What happens if a program fails
If a program fails the earnings test in two out of three consecutive award years, it will lose eligibility for the federal Direct Loan program.
An award year is the federal student aid year used to track aid and program results.
If a school keeps failing for three years, the department says it could also end Title IV eligibility for that institution’s low-earning programs. Title IV is the part of federal law that covers major federal student aid programs, including Pell Grants.
Who is exempt
The department said some schools will be outside the automatic Title IV penalty. That includes institutions that have not taken part in the Direct Loan program for the five most recently completed award years.
It also exempts institutions that exclusively serve people with documented disabilities.
The department said it will delay consequences for programs that prepare students for jobs where most workers receive tipped income. The delay is meant to allow the department to use earnings data from years when the federal “No Tax on Tips” policy is in effect, starting with tax year 2026.
When it starts
The department said the final rule would be on public inspection in the Federal Register on June 30, 2026, and published on July 1, 2026.
NPR reported that the department said it will begin calculating the first year of graduate earnings in early 2027, and that some programs could first be labeled low-earning outcome programs in the 2028-29 financial aid year.
Why the department says it matters
Under Secretary Nicholas Kent said in a statement reported by NPR: “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.”
The department said the new system will apply to nearly all programs and sectors, regardless of tax status or the type of credential awarded.
