Federal Cuts to Financial Aid for Low-Earning Programs
On June 29, 2026, the Department of Education announced a final rule that could eliminate federal financial aid eligibility for certain programs if their graduates fail to earn more than workers with lower levels of education, as part of the One Big Beautiful Bill Act.
Why it matters
Under this new rule, college and graduate programs with lower-earning graduates could lose federal financial aid in the next several years, shifting costs and risk onto future students.
What The Rule Says
The rules establish a strict new requirement to qualify for federal student aid, creating multi-year accountability checkpoints before access to loans and grants is cut.
Two-to-Three Year Elimination Window
College programs could lose access to federal student loans if they fail the earnings test two out of three consecutive years. Programs that fail the test for three consecutive years could also lose access to Pell Grants, which provide need-based undergraduate grant aid that does not need to be repaid. The first year of assessment results is expected in 2027.
Assessment Timeline & Penalties
Although the first assessment results are expected in 2027, programs generally cannot lose aid eligibility until 2028, after failing the test for two years.
Undergraduate Program Standard
Undergraduate programs must demonstrate that their graduates earn higher salaries than workers in the same state whose highest level of education is a high school diploma.
Graduate Program Standard
Graduate programs must demonstrate that those who complete the program earn more than bachelor's degree holders working in comparable fields.
Who This Affects
The Department of Education (ED) estimated the new rules could affect approximately 5% of college programs nationwide, with severe concentrations in specific disciplines and vocational tracks.
High-Risk Program Concentrations
- 89% of religion and religious studies master's degree programs, and a majority of bachelor's programs
- 100% of cosmetology associate programs, 93% of certificate programs, and most other related personal grooming services
- Many master's programs in film, video, photographic arts, visual and performing arts, and music
Graduate Degrees with Lowest Estimated Financial Returns
The following graduate degrees have among the lowest estimated financial returns and may be vulnerable to aid cuts under the comparative bachelor's earnings benchmark.
| Graduate Degree | Estimated Total Tuition | Net Lifetime Earnings Without Degree | Net Lifetime Earnings With Degree | Estimated Lifetime ROI | Status / Risk |
|---|---|---|---|---|---|
| Psychology | $14,688 | $1,154,257 | $1,060,595 | -8.1% | High Risk (Net Loss) |
| Clinical Psychology | $14,688 | $1,094,789 | $1,040,889 | -4.9% | High Risk (Net Loss) |
| Social Work | $14,688 | $1,045,884 | $1,020,845 | -2.4% | High Risk (Net Loss) |
| Curriculum and Instruction | $7,344 | $1,135,585 | $1,113,297 | -2.0% | High Risk (Net Loss) |
| Computer Engineering | $8,864 | $2,115,246 | $2,158,402 | +2.0% | Passing (Positive ROI) |
| Architecture | $7,344 | $1,342,216 | $1,389,545 | +3.5% | Passing (Positive ROI) |
| Mechanical Engineering | $8,864 | $2,056,675 | $2,127,855 | +3.5% | Passing (Positive ROI) |
| Electrical Engineering | $8,864 | $2,256,768 | $2,337,338 | +3.6% | Passing (Positive ROI) |
| Computer Science | $8,864 | $1,885,524 | $1,995,574 | +5.8% | Passing (Positive ROI) |
| Educational Administration | $7,344 | $1,206,579 | $1,301,778 | +7.9% | Passing (Positive ROI) |
What Else You Should Consider
Understanding the nuances of the earnings test helps prospective students assess risk before committing to educational debt.
School-Specific Differences
Earnings for specific programs vary across institutions, even within the same field. However, the Department of Education has indicated that programs at elite institutions are not immune and are also likely to face cuts.
Shift to Private Student Loans
Students who lose access to federal loan eligibility can turn to private loans, which generally offer fewer borrower protections and repayment options.
Delayed Consequences
Although the first results are expected in 2027, programs generally cannot lose aid eligibility until 2028, after failing the test for two years.
The Rules Could Change
Implementation directives, future legislation, litigation, and other guidance could change the timeline and methodology before the penalties begin.
The Bottom Line
“The new rule puts federal financial aid at risk for programs with lower income graduates. Before enrolling, consider program-specific earnings, total costs, and alternative funding options.”
Model your graduate degree ROI and borrowing risk
Use our interactive calculators to project debt service, borrowing caps, and take-home earnings before taking out loans.
Jaylen Peng
Higher Education Policy & Student Lending Analyst specializing in legislative reform, institutional accountability, and graduate program ROI.