Washington Just Started Grading College Degrees on Whether They Pay Off — More Than 825,000 Students Are Already Enrolled in Programs That Fail the Test
On July 1, 2026, the U.S. Department of Education began enforcing a rule that ties a college’s access to federal student loan dollars to something no regulation has required before: proof that a degree program actually leaves its graduates better off financially than if they’d never enrolled. Officials are calling it the STATS and Earnings Accountability rule, and it implements the “Do No Harm” earnings-accountability provision written into the Working Families Tax Cuts Act — the formal name for the sweeping reconciliation law more commonly known as the One Big Beautiful Bill Act, which President Trump (R) signed on July 4, 2025.
The Department finalized the rule on June 29, 2026, after a year-long negotiated rulemaking process that produced something rare in Washington: a committee of college administrators, accreditors, and outside economists who mostly agreed on how to measure whether a degree pays off. Using data from before the rule even took effect, Inside Higher Ed reports roughly 825,000 students are currently enrolled in programs that already fail the earnings test the rule imposes.
This is the record of what the rule actually measures, who built it, why the Department says taxpayers have been subsidizing failure for decades, and why Democrats on the House Education and Workforce Committee call it a disguised cut to the students who can least afford one.
- $1.7 trillion — total outstanding federal student loan balance nationwide, per Federal Student Aid's own data center
- 825,000+ students — enrolled in programs that already fail the rule's earnings test, using 2024-25 award year data — Inside Higher Ed
- 23% / 43% — share of bachelor's / master's degree programs nationwide showing negative return on investment — 2024 FREOPP survey
- $100k / $200k — new lifetime federal loan caps for graduate students and professional-degree students (medicine, law), replacing Grad PLUS the same day
- ~5% — of degree programs nationwide AEI economist Preston Cooper estimates will actually fail the test and lose eligibility
The rule’s mechanics are the whole story. Starting with data institutions must begin submitting by October 1, 2026 under what the Department is calling its STATS reporting requirement, every degree- and certificate-granting program in the country has to report what its graduates actually earn and how much debt they carried to get there. The Department then runs the Do No Harm test: comparing a program’s typical graduate earnings against workers who never enrolled in it at all. A program that can’t clear that bar doesn’t lose funding overnight — the first earnings calculations aren’t expected until early 2027, and the earliest any program could actually lose eligibility to enroll new students in federal Direct Loans is the 2028-29 award year.
The earnings test isn’t the only lever the rule pulls. The same July 1, 2026 effective date brought new federal loan caps that replace the old Grad PLUS program entirely: $100,000 lifetime and $20,500 annually for most graduate students, and $200,000 lifetime and $50,000 annually for professional-degree students in fields like medicine and law. Where the earnings test targets specific low-performing programs one at a time, the loan caps are blunter — they limit how much any student, regardless of a program’s quality, can borrow directly from the federal government.
The rule’s public face is Under Secretary of Education Nicholas Kent, who previously worked in Virginia Gov. Glenn Youngkin’s (R) administration and at Career Education Colleges and Universities, a for-profit higher-ed trade association, before joining the Department. Kent led the negotiated rulemaking committee — known internally as AHEAD — that spent from January through the spring of 2026 hashing out the rule’s details with college administrators, accreditors, student advocates, and outside economists in the room.
“This consensus-backed framework will drive meaningful change in postsecondary education, ending years of regulatory whiplash and addressing student debt that has left too many students worse off.”
Nicholas Kent · Under Secretary of Education
Kent has been blunter about the underlying philosophy than the regulatory text itself allows.
“If postsecondary education programs do not leave graduates better off, taxpayers should not be forced to subsidize them.”
Nicholas Kent · Under Secretary of Education
Secretary of Education Linda McMahon (R) had been previewing the same argument for more than a year before the rule existed. In an April 2025 Wall Street Journal op-ed — written well before this rule was drafted, but describing the same underlying problem — she put it plainly: “Many of the degree-granting programs that qualify for student loans are worthless on the job market.” One economist who sat at the negotiating table representing taxpayers’ interests, Preston Cooper of the American Enterprise Institute, has since published his own estimate of the rule’s real-world bite: roughly 5% of degree programs nationwide, by his modeling, will actually fail the test and lose eligibility — a far smaller slice than the 825,000-student figure implies, because most enrollment is concentrated in programs that clear the bar easily.
The rule got the full cable-news treatment before it even took effect.
Independent commentary channels picked up the same argument in the weeks around the rule’s finalization, including a video from independent YouTuber Anton Daniels arguing the new borrowing limits are overdue given how often nursing and allied-health graduates leave school unable to find work in the field their loans financed.
The Department’s argument rests on a federal loan portfolio that has grown too large to leave unmeasured. The outstanding balance across all federal student loans stood at $1.7 trillion as of early 2026, per Federal Student Aid’s own data center, with an average balance of $39,075 per borrower. Nearly 40% of borrowers are not currently in active repayment, and roughly a quarter are in default — a share large enough that no administration, of either party, has been able to responsibly ignore it.
Program-level data makes the case more specific than the portfolio-wide numbers alone. A 2024 survey by the Foundation for Research on Equal Opportunity (FREOPP) found 23% of bachelor’s degree programs and 43% of master’s degree programs nationwide show a negative return on investment — meaning a typical graduate of those specific programs would have been financially better off, over a working lifetime, skipping the degree and going straight into the workforce. Using a separate methodology built around 2024-25 award year earnings and debt data, Inside Higher Ed reports more than 825,000 students are currently enrolled in programs that already fail the earnings test this rule imposes.
The DOE will no longer fund worthless degrees for students at US colleges
Not everyone reads those same numbers the same way, and the rule’s consensus at the negotiating table didn’t extend to Capitol Hill.
Rep. Bobby Scott (D-VA), the ranking member of the House Education and Workforce Committee, and Rep. Suzanne Bonamici (D-OR-1) sent a formal comment letter opposing the rule during the May 20-21, 2026 comment period, arguing the earnings test and the new borrowing caps would fall hardest on exactly the students Pell Grants exist to help.
“Actively choosing to cut Pell Grants for the lowest-income students and families in this country.”
Rep. Lucy McBath (D-GA)
Rep. Lucy McBath (D-GA) put the criticism in the bluntest terms of any Democrat on the issue, characterizing the loan caps and earnings test as a Republican choice rather than a neutral accounting fix. Republicans on the committee counter that the rule doesn’t touch Pell Grant eligibility at all — it applies only to federal loan programs — and that the real harm to low-income students has been enrolling them in programs the data already shows leave graduates worse off.
President Trump’s own public statements about higher education, made months before this specific rule existed, give a sense of the administration’s broader thinking on the subject.
Throughout most of our History, America's Colleges and Universities have been a Great Strategic Asset of the United States. Tragically, however, much of Higher Education has lost its way, and is now corrupting our Youth and Society with WOKE, SOCIALIST, and ANTI-AMERICAN Ideology.
Posted more than eight months before the final rule — reflects the administration's general stance on higher education, not a direct reaction to this rule.
I am considering taking Three Billion Dollars of Grant Money away from a very antisemitic Harvard, and giving it to TRADE SCHOOLS all across our land... What a great investment that would be for the USA, and so badly needed!!!
Predates the final rule by more than a year — shown here as context on the administration's broader push toward trade schools over traditional degree programs.
The rule’s timeline stretches out over years, not months. Institutions must submit their first STATS earnings and debt data by October 1, 2026. The Department expects to calculate the first round of program-level earnings tests in early 2027. Even a program that fails outright doesn’t lose federal loan eligibility for new students until the 2028-29 award year at the earliest — giving colleges roughly two full academic cycles to fix a failing program or wind it down before the money actually stops.
That runway is deliberate. The negotiated rulemaking committee that built the rule wanted colleges to have time to change a program’s curriculum, career-services support, or price before losing access to loan dollars — not to be blindsided by a sudden funding cliff. Whether that runway is long enough to protect students already enrolled in a failing program, or too long to protect the ones enrolling in one next fall, is the fight that will play out over the next two admissions cycles.
President Trump (R) — signed the Working Families Tax Cuts Act (OBBBA) on July 4, 2025, the law that created the “Do No Harm” earnings-accountability provision this rule implements.
Linda McMahon (R) — Secretary of Education; finalized the rule and has argued for more than a year that uncapped federal borrowing lets colleges avoid accountability for low-value degrees.
Nicholas Kent — Under Secretary of Education and the rule’s lead spokesperson; previously worked in Gov. Glenn Youngkin’s (R) Virginia administration and at a for-profit college trade association.
Rep. Bobby Scott (D-VA) — Ranking Member, House Education and Workforce Committee; co-signed a formal comment letter opposing the rule.
Rep. Suzanne Bonamici (D-OR-1) — co-signed the same opposition letter during the May 2026 comment period.
Rep. Lucy McBath (D-GA) — the most vocal Democratic critic, framing the rule and its loan caps as a disguised cut to low-income students.
For the first time, a federal rule ties a college’s access to loan dollars to whether its graduates actually come out ahead financially — and by the government’s own numbers, more than 825,000 students are sitting in programs that already fail that test. The rule phases in slowly, with the earliest a program could lose eligibility landing in the 2028-29 award year, and Democrats on the House Education Committee argue the new loan caps hit low-income students hardest. What isn’t disputed is the scale underneath it: $1.7 trillion in outstanding federal student debt, a quarter of it in default, that no administration has been able to ignore.
