New Federal Rule Ties College Aid to Graduate Earnings
New federal regulations require colleges to prove that graduates earn more than non-degree holders to maintain federal financial aid eligibility.
The U.S. Department of Education has finalized a rule linking federal financial aid eligibility to graduate earnings. Programs must now show that their graduates earn more than individuals without a college degree to continue receiving federal student loans.
New Earnings Accountability Framework
Effective July 1, 2027, undergraduate programs must demonstrate that graduates earn more than the typical high school diploma holder, while graduate programs must show earnings above those of the typical bachelor's degree holder. Programs failing this test in two out of three consecutive years will lose eligibility for federal Direct Loans. ()
Implementation Timeline
The Department will begin calculating the first year of graduate earnings in early 2027. Programs that fail in both 2027 and 2028 could be designated as low-earning outcome programs as early as the 2028–29 award year. ([wscuc.org]
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Potential Impact on Higher Education
Approximately 800,000 students are enrolled in programs likely to fail the new earnings test, with about half attending for-profit institutions. Programs in fields like cosmetology, early childhood education, and the arts are particularly at risk. ([knkx.org](https://www.knkx.org/2026-07-06/under-a-new-federal-rule-colleges-must-leave-grads-better-off-or-lose-financial-aid?utm_source=openai))
Options Market and Stocks to Watch
Investors should monitor education sector stocks, especially those with significant exposure to programs that may not meet the new earnings criteria. Companies like New Oriental Education & Technology Group Inc. (EDU), Grand Canyon Education Inc. (LOPE), Adtalem Global Education Inc. (ATGE), and Strategic Education Inc. (STRA) could be affected. Watch for potential shifts in enrollment and financial aid eligibility impacting their financial performance.
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