WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education has issued a final rule that creates a new federal test for college programs based on what their graduates earn after school.
The rule, called the Student Tuition and Transparency System, or STATS, and Earnings Accountability rule, is meant to give the department one earnings standard for most postsecondary programs. The department said it will apply to nearly all programs and sectors, regardless of tax status or credential level.
Under the rule, undergraduate programs must show that their 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.
What the rule changes
The department says the new framework is meant to line up with other federal accountability rules, including Financial Value Transparency and Gainful Employment, while also matching the new earnings standard in the Working Families Tax Cuts Act.
The point, the department said, is to connect federal student aid to programs that leave graduates better off in the labor market. Programs that do not clear the earnings bar face consequences.
The regulations say schools will have to report program-level and some student-level information to the department. That includes tuition, fees, and financial aid awards such as grants and scholarships.
The department also says it will draw earnings data from at least one federal agency. That data will include students who are working and not enrolled during the year the department measures earnings.
What happens if a program fails
A program that fails the earnings test in two out of three consecutive award years will lose eligibility for the federal Direct Loan program, the department said. An award year is the federal aid year used to track student loans and grants.
If a program keeps failing for three years, the department says it could also end Title IV eligibility, including Pell Grant eligibility, for all of an institution’s low-earning outcome programs. Title IV is the section of federal higher-education law that covers major forms of federal student aid.
The department did not name any specific colleges or programs in its announcement.
Who gets extra time or an exemption
The rule gives a delay to certain programs that prepare students for jobs where a majority of workers receive tipped income. The department said that delay is meant to let it use earnings data from tax years when the “No Tax on Tips” policy is in effect, starting with the 2026 tax year.
The rule also exempts two groups from automatic loss of Title IV eligibility. One is institutions that have not participated in the Direct Loan program for the five most recently completed award years. The other is institutions that exclusively serve people with documented disabilities.
Why it matters
For students, the rule could affect whether a program can keep offering federal loans and grants. For colleges and universities, it creates a direct financial penalty if repeated graduates do not earn enough to clear the federal benchmark.
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. The full regulatory text will control how the rule is carried out.