WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education has issued a final rule in Washington that creates a new federal accountability system for most college programs and could cut off federal aid to programs whose graduates repeatedly do not earn enough after finishing school.
The rule is called the Student Tuition and Transparency System, or STATS, and Earnings Accountability rule. The department says it is meant to pull together new and existing earnings-based oversight, including the federal Financial Value Transparency and Gainful Employment rules.
How the new test works
Under the rule, 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 department says nearly all programs and sectors will be subject to the same transparency and earnings-accountability framework, regardless of tax status or credential level.
What happens if a program fails
The rule gives schools a warning system tied to federal student aid. If a program fails the earnings-premium measure in two out of three consecutive award years, the program loses eligibility for the federal Direct Loan program.
If failure continues for three years, the department says it could also end Title IV eligibility for an institution’s low-earning outcome programs, including Pell Grant eligibility. Title IV is the part of federal higher-education law that governs most student aid, and Pell Grants are need-based grants for students with financial need.
What colleges will have to report
To run the new system, the regulations say institutions will have to report program-level data and some student-level data, including tuition, fees, and financial aid awards such as grants and scholarships.
The rules also say earnings data will come from at least one federal agency, and that the earnings measure will include students who are working and not enrolled during the year being measured.
Who is exempt
The department says the final rule does not automatically apply in the same way to every institution. Schools that have not participated in the Direct Loan program for the five most recently completed award years are exempt from automatic loss of Title IV eligibility under the rule.
Institutions that exclusively serve people with documented disabilities are also exempt.
The department further says it will delay program-eligibility consequences for some programs that prepare students for jobs where most workers receive tipped income. That delay is meant to allow the department to use earnings data from tax years when the “No Tax on Tips” policy is in effect, beginning with the 2026 tax year.
Why the department says it is doing this
The department says the point of the rule is to make sure federal aid supports programs that lead to better financial outcomes for graduates. In practice, that means colleges and universities will face a new federal check on whether a program’s graduates earn enough to justify the cost of the credential.
The department said the final rule would be on public inspection in the Federal Register on June 30 and published on July 1.
