Your Student's Major Now Has to Pass an Earnings Test: What the New STATS Rule Means for Your Family

If you are helping a student pick a college or a major, the federal government just added a new wrinkle to the decision. Under a final rule published on July 1, 2026, college programs must now prove that their graduates earn more than people who never enrolled. Programs that fail the test can lose access to federal student loans, and eventually to Pell Grants too.

The rule is called the Student Tuition and Transparency System and Earnings Accountability framework, or STATS for short. It comes out of the same 2025 law that capped Parent PLUS loans and ended Grad PLUS loans, often called the One Big Beautiful Bill Act (OBBBA). This piece of the law gets less attention than the loan caps, but it could quietly reshape which programs your family can borrow for.

Here is what the rule says, when it takes effect, and what it means for the choices your family is making right now.

What the New Earnings Test Requires

The Department of Education's final rule sets a simple benchmark, sometimes called an earnings premium test:

• Undergraduate programs must show that their graduates earn more than a typical worker with only a high school diploma.
• Graduate programs must show that their graduates earn more than a typical worker with only a bachelor's degree.

The comparison uses real earnings data from former students, measured a few years after they finish. It is not based on what a college promises in its marketing. It is based on what graduates actually get paid.

This idea is not brand new. An earlier rule known as Gainful Employment applied a similar test, but mostly to career training programs and for-profit colleges. The STATS rule goes much further. It applies to nearly every program at nearly every school that takes federal aid, whether public, private nonprofit, or for-profit, and whether the credential is a certificate, a bachelor's degree, or a doctorate.

What Happens When a Program Fails

A program does not lose aid access after one bad year. The consequences build in stages:

• If a program fails the earnings test in two out of three consecutive years, it loses eligibility for federal Direct Loans for at least two years. Students in that program could not take out new federal student loans for it.
• If a program keeps failing for three straight years, the Department can go further and cut off all federal aid for the school's low-earning programs, including Pell Grants.

There are a few exemptions worth knowing. Schools that do not participate in the federal loan program at all (some community colleges, for example) are treated differently. A school can also strike a deal with the Department to stop offering federal loans for a borderline program for at least five years and avoid the automatic penalty. And programs that mostly lead to tipped jobs, like some culinary programs, get at least a one-year delay so the earnings data can reflect the new No Tax on Tips policy.

When the Rule Takes Effect

Most of the rule's provisions take effect on July 1, 2027, though schools have the option to adopt parts of it as early as July 1, 2026. The first programs to actually lose loan eligibility would do so after failing the test in two of three measured years, so the earliest real consequences are still a little way off.

That gap matters for planning. A student starting college in fall 2026 will likely be enrolled when the first eligibility decisions land. Families choosing programs today are choosing under the new rules, even if the penalties have not started yet.

Why This Matters for Your Family's College Budget

You might be wondering why a rule aimed at colleges should change anything for your household. There are three reasons to pay attention.

Federal Loans Are the Cheapest Money in Your Plan

Federal Direct Loans for undergraduates carry fixed rates and borrower protections that private loans usually cannot match, including income-driven repayment and federal forgiveness programs. If a program loses Direct Loan eligibility, students in it do not stop needing money. They just lose the safest way to borrow it, and families get pushed toward private loans, which depend on credit and often require a cosigner.

The federal loan amounts at stake are meaningful: dependent undergraduates can borrow $5,500 as freshmen, $6,500 as sophomores, and $7,500 in later years. Losing access to that money mid-degree would leave a real hole in most funding plans.

The Rule Creates New Information You Can Use

There is a silver lining here. To run the earnings test, the government has to publish program-level earnings data, and the rule expands the transparency reporting schools must do. That means families will have better numbers than ever for answering a basic question: what do graduates of this specific program at this specific school actually earn?

You do not have to wait for the rule's penalties to use its data. The College Scorecard at collegescorecard.ed.gov already shows median earnings by field of study for many schools. Our guide to college ROI by major walks through how to read those numbers and what counts as a strong return.

A Program's Aid Status Is Now a Real Risk Factor

Before this rule, the main aid-related risk in picking a school was the school itself closing or losing accreditation. Now individual programs carry their own risk. Two majors at the same university could have different federal loan futures.

That does not mean you should panic or avoid every low-paying field. Plenty of important careers, like teaching and social work, have modest early salaries but pass the earnings test because the comparison is against high school diploma earnings, not against engineers. But it does mean the earnings question deserves a seat at the table when your family compares options.

What to Do If Your Student Is Choosing a College or Major Now

For families in the middle of the college search, a few practical steps:

1. Look up program-level earnings before you commit. Check the College Scorecard's field-of-study data for each school on your list. If median earnings for a program look close to or below typical high school graduate earnings (roughly $45,000 nationally for full-time workers, though it varies by state), ask questions.
2. Ask the school directly about the program's status. Financial aid offices know which of their programs are close to the line. A fair question: "Has this program passed the most recent earnings measures, and do you expect it to keep federal loan eligibility for the next four years?"
3. Compare schools by outcomes, not just price. A cheaper program that fails the earnings test can cost more in the long run. Our guide to comparing colleges by student loan default rate covers another outcome measure worth checking side by side.
4. File the FAFSA no matter what. Grants, work-study, and state aid are not affected by a program's Direct Loan status during the phase-in, and Pell eligibility only comes into play after years of repeated failures. Start at the official FAFSA site.

What to Do If Your Student Is Already Enrolled

If your student is already partway through a degree, the picture is calmer. The earliest loan eligibility losses are still ahead, and the Department has signaled that changes will roll out with notice. Still, it is worth doing two things this year.

First, know your timeline. A current sophomore will likely graduate before most penalties bite. A current high school junior planning on a five-year program will live under the full framework. Second, if your student is in a field with historically low early-career wages, keep an eye on mail and email from the school. Schools whose programs are at risk must generally disclose that to students, and you want to hear about it early enough to adjust your borrowing plan.

What This Means for Graduate School Plans

The stakes are arguably higher for graduate programs. Grad students lost access to Grad PLUS loans on July 1, 2026, and new borrowing is now capped at $20,500 per year and $100,000 total for most master's programs. Professional programs in fields like medicine and law have higher caps but face the same earnings test, measured against bachelor's degree earnings.

A master's program whose graduates earn no more than bachelor's degree holders is exactly the kind of program this rule targets. If you or your student are weighing grad school, run the numbers on what graduates of that specific program earn, and read our overview of borrowing for graduate school before assuming loans will be there.

The Bottom Line

The STATS rule will not change your tuition bill this fall. What it changes is the risk map. Starting in 2027, a program that cannot show its graduates out-earn high school graduates can lose federal loan access, and families who did not see it coming could face a mid-degree funding gap.

The best defense is the same habit that serves families well everywhere in college planning: look at outcomes data before you borrow, ask schools direct questions, and build a funding plan that does not depend on any single source of money. Paying for college is stressful enough without surprises, and a little research now can prevent a scramble later.

CollegeLens can help you see the whole picture for each school on your list, including costs, aid, and the gap you would need to cover. Create your free CollegeLens plan to compare your options side by side.

-- Sravani at CollegeLens