Federal Student Loans to be Pulled From Colleges with Poor Graduate Programs

Editorial Staff

Thousands of college degree programs across the U.S. could lose access to federal student loans under a new rule aimed at holding higher education institutions more accountable for student outcomes.

The U.S. Department of Education has finalized an earnings-based accountability policy that links federal student aid to how much graduates earn after completing their studies. Under the new framework, degree programs whose graduates consistently earn less than the average high school graduate four years after finishing their qualification risk losing eligibility for federal loans.

So far, 804 programs serving around 40,000 students each year have been identified as potentially failing the new requirements.

Programs that fail the earnings test in two out of three consecutive years will no longer qualify for federal student loan funding.

“If a program cannot show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers,” said Under Secretary of Education Nicholas Kent.

Elimination of Graduate PLUS Loan Program

The changes stem from the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, which introduced major reforms to federal student aid.

Beginning July 1, 2026, the Graduate PLUS Loan program was eliminated, while new borrowing limits were introduced based on the type of degree students pursue.

Graduate students studying for master’s or doctoral degrees can now borrow up to $20,500 per year, with a lifetime borrowing limit of $100,000.

Students enrolled in professional programs such as medicine, law, and dentistry are permitted to borrow up to $50,000 annually, with a maximum lifetime limit of $200,000.

The legislation also created the Student Tuition and Transparency System (STATS) alongside the new Earnings Accountability rule.

Under these standards, undergraduate programs must show that their graduates earn more than the average high school diploma holder. Graduate programs face a higher benchmark, requiring graduates to earn more than the median bachelor’s degree holder. Earnings are compared against employed adults aged 25 to 34 within the same state who are not enrolled in further education.

How Do Graduate Programs Qualify for Federal Loans Under the New Rule?

Students who borrowed federal loans before July 1, 2026, may still qualify for a temporary exception that allows them to continue using Graduate PLUS loans while completing their current program.

The exception lasts for whichever is shorter: three academic years or the remaining time needed to complete the degree.

To qualify, students must meet three conditions. They must have taken out a Direct Loan for their current program before July 1, 2026, remain continuously enrolled at the same institution in the same program, and avoid any break in enrollment. Approved leaves of absence do not count as interruptions.

Borrowing before June 30, 2026, allows eligible students to retain access to Graduate PLUS loans and the previous borrowing limits under this temporary provision. However, taking out a loan solely to preserve eligibility could leave students with unnecessary long-term debt.

Students who graduate, withdraw, switch programs, or enroll in a different course of study will lose access to the exception and become subject to the new borrowing rules. Once the three-year exception ends—or a student completes their program—they will also move to the new lifetime borrowing limits.

Which College Degree Programs Are Most at Risk of Suffering Cuts?

Undergraduate certificate programs appear to be the most vulnerable under the new earnings standards.

Cosmetology stands out as the field facing the greatest challenge, with 93% of undergraduate certificate programs falling below the required earnings benchmark. Medical assisting and somatic bodywork programs also have a high proportion of programs that fail to meet the threshold.

Associate and bachelor’s degree programs are far less affected, with only around 2% currently considered at risk.

Among bachelor’s degrees, studio and fine arts programs have the highest share of programs failing the earnings test, with roughly 8% falling below the benchmark. Around 3% of design and applied arts programs are at risk, while approximately 1% of English degree programs also fail to meet the earnings standard.

At the master’s level, around 4% of programs do not meet the new requirements. Mental and social health services is the only major field in which most master’s programs fall below the earnings benchmark.