The U.S. Department of Education finalized new regulations on July 1 aimed at restricting federal financial aid for many college programs in low-wage fields, a move that could significantly impact thousands of institutions across the country. The rules require undergraduate programs to demonstrate that their graduates earn higher wages than state residents with only a high school diploma, while graduate programs must show their alumni earn more than individuals holding bachelor’s degrees in comparable fields.

Programs failing this earnings threshold for two out of three years risk losing access to federal student loans, and if they fail for three consecutive years, they may also lose eligibility for Pell Grants. Undersecretary of Education Nicholas Kent emphasized that programs should only receive federal funding if they improve graduates’ financial situations compared to non-enrollees.

The regulations represent a continuation of the “gainful employment” policies originally developed under the Obama and Biden administrations, designed to prevent federal aid from subsidizing programs that leave students with untenable debt and poor job prospects. However, unlike previous efforts that faced legal challenges over congressional authority, the latest rules are grounded in language from the One Big Beautiful Bill passed in 2025, which provides a clearer legislative mandate.

Despite receiving nearly 10,000 public comments during the review process, the Department largely rejected major amendments proposed by higher education groups. Notably, exemptions were not granted to fields such as religious studies, cosmetology, or the performing arts, areas where graduate earnings tend to be relatively low. The government estimated that roughly 89 percent of master’s programs in religion and religious studies and the majority of corresponding bachelor’s programs could lose aid under the new test. All barbering programs and nearly 93 percent of cosmetology certificate programs were also projected to fail the earnings requirement.

The rules affect both public and private institutions and extend to programs at elite universities, including some master’s degrees in film, music, and other visual and performing arts. The Education Department estimates the regulations could impact about 5 percent of all college programs nationwide, touching hundreds of thousands of students.

Some adjustments were made in response to stakeholder feedback. For example, penalties for fields relying heavily on tipped income will be delayed until 2026 data is available, when the federal government ceased taxing many tipped workers’ earnings. Additionally, programs exclusively serving students with documented disabilities are exempted.

The regulations drew varied reactions from education leaders and lawmakers. Representative Tim Walberg (R-Michigan), chair of the House Education and Workforce Committee, described the new rules as a major accountability reform to ensure taxpayer money supports programs that genuinely benefit students financially. Conversely, Jon Fansmith, senior vice president of the American Council on Education, cautioned that the rules could inadvertently damage important educational programs serving vulnerable populations, noting that implementation would begin in phases—some provisions commencing immediately and others phased in over the next year—with potential program losses starting in the summer and fall of 2028 and expanding into 2029.

Jason Altmire, CEO of Career Education Colleges and Universities, welcomed the uniform accountability standards for all higher education institutions but expressed concern that the earnings formula does not adequately account for factors such as part-time work, gender pay disparities, and regional income differences.

The final rule reflects a broader bipartisan effort to curb federal aid for programs that do not sufficiently prepare students for financially sustainable careers, though it continues to provoke debate over the balance between fiscal responsibility and supporting diverse educational fields.