Education Dept proposes rule cutting loans to programs where grads earn less than HS diploma

On April 17, 2026, the Department of Education published a proposed rule establishing an earnings accountability standard for nearly all federally funded postsecondary programs. Under the rule, a program passes if the median earnings of its graduates four years after leaving school exceed the median earnings of working adults ages 25 to 34 with only a high school diploma. The benchmark is state-specific if most graduates stay in the state where they enrolled, and national if graduates disperse widely. The nationally, the high school diploma benchmark is $35,490 annually, according to the Department's estimates. The rule was developed under the leadership of Education Secretary Linda McMahon and Under Secretary NKNicholas Kent through a negotiated rulemaking process, a procedure that brings together stakeholders including colleges, student advocates, and lenders to reach consensus on regulatory language before the formal proposal is published.

The rule harmonizes two older accountability frameworks: the Obama-era gainful employment standard, which applied only to certificate programs and for-profit colleges, and the Do No Harm standard written into the One Big Beautiful Bill Act (OBBBA) signed by Trump on July 4, 2025, which extended earnings accountability to nearly all programs. The advisory committee signed off on the harmonized framework in January 2026. The formal proposed rule published in April opens a public comment period under the Administrative Procedure Act, during which any member of the public, any institution, or any advocacy group can submit written comments before the final rule is issued.

The timeline for implementation is layered, and the phased approach reflects negotiated compromises among committee members with competing interests. The rule takes formal effect July 1, 2026. The Department of Education will collect and publish the first round of program-level earnings data sourced from federal tax records and enrollment records in 2027. Penalties don't kick in until 2028 at the earliest. Programs that fail the earnings threshold in two out of three consecutive reporting years lose access to federal student loans. Programs that continue to fail over a longer period eventually lose all federal aid, including Pell Grants.

Consumer advocates and legal services organizations pushed for faster consequences during the negotiated rulemaking process; colleges and universities argued they needed time to adjust admissions, curricula, and career placement before facing financial penalties. The Education Department estimated that giving institutions a multi-year runway would reduce disruption while still creating accountability pressure. The final rule includes what Education Department negotiator DMDave Musser called a compromise position that balances these competing interests, with committee member PCPreston Cooper, representing taxpayers and the public interest, describing the framework as one that would protect students.

About 5 percent of postsecondary programs, roughly 2,000 to 3,000 programs nationwide, are expected to fail the earnings threshold, according to Department estimates reported in Inside Higher Ed and Brookings Institution analysis. Certificate programs and for-profit colleges face the highest exposure because many of their programs train students for lower-wage occupations that pay below the high school diploma median benchmark. Associate and bachelor's degree programs in fields like cosmetology, barbering, some media and communications majors, and certain arts degrees are also at risk in states where high school diploma earnings are relatively high. Programs in music (estimated pass rate 19 percent nationally) and fine arts (25 percent) face particularly steep challenges.

Programs that fail wouldn't disappear automatically. They would lose access to federal loans, meaning enrolled students can't use Pell Grants or federal loans to pay tuition. Some programs could restructure, reduce costs, or shift focus. Others would likely close. Students already enrolled when a program loses access have some transition protections under existing federal law, but students considering enrollment at a failing program wouldn't be able to use federal aid. Roughly 650,000 students were enrolled in programs expected to fail the combined earnings test as of the 2024-25 academic year, according to Department data cited during the negotiated rulemaking.

The Do No Harm rule represents the Trump administration's version of an accountability framework that both parties have debated for years. The Obama administration's gainful employment rule applied only to for-profits and certificate programs. The Biden administration expanded it in 2023 and added a debt-to-earnings measure, which required programs to prove not just that graduates earned enough but that they could reasonably repay their student loans given typical debt loads. The Trump administration's OBBBA repealed the Biden version but substituted its own earnings test covering almost all programs, a broader reach than Obama's, even while eliminating the debt-to-earnings component that consumer advocates argued provided stronger protections.

The rule is now open for public comment. Under the Administrative Procedure Act, any member of the public, any institution, or any advocacy group can submit written comments, typically within 30 to 60 days. The Department must then review and respond to substantive comments before publishing a final rule. The final rule could differ from the proposed rule based on feedback received, including the earnings thresholds, the timeline for penalties, and any exemptions.

The broader policy debate is about what federal student aid is fundamentally for and who should benefit. The government disburses roughly $120 billion annually in federal student loans and grants, making federal support the largest source of postsecondary financing nationwide. Critics of earnings-only accountability argue that it devalues programs in social work, education, and the arts that produce public benefits not captured in salary data. Some of these fields face critical national shortages: mental health professionals, public schoolteachers, and early childhood educators earn below the high school diploma benchmark in many states, yet these professions generate social value. Supporters of the Do No Harm test, including PCPreston Cooper of the American Enterprise Institute and other taxpayer advocates, argue that students deserve to know before borrowing whether a program will pay off financially, and that taxpayers shouldn't subsidize credentials that leave borrowers worse off.

The Education Department's negotiated rulemaking committee brought together conflicting stakeholder groups, and the January consensus reflected significant compromises. Institutional representatives, largely supportive of a simplified accountability framework, backed the overall plan. State higher education officials and employers joined them, calling it fair and straightforward. Consumer protection advocates, represented by THTamar Hoffman of Community Legal Services in Philadelphia, abstained from the final vote. Hoffman said she was made clear that blocking consensus would risk losing protections for students in certificate programs entirely. She remained deeply concerned that the rule didn't include a debt-to-earnings component and wouldn't prevent all failing programs from receiving Title IV funding. Her abstention, rather than an outright no vote, allowed consensus to be declared, even though key advocates for student protection remained skeptical.

By April 2026, the time between the January committee consensus and the April 17 formal proposal, opposition began crystallizing among Senate Democrats and higher education associations. Senator Patty Murray, a longtime champion of higher education access who has served as both chair and ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, raised concerns about how the rule would affect community colleges and working-class students. Senator BSBernie Sanders, currently the ranking member of the HELP Committee, and other Senate Democrats sent letters to Education Secretary McMahon highlighting the dangers of the earnings test and warning that it would make higher education less accessible to students pursuing careers in teaching, mental health, and social services. The National Association of Independent Colleges and Universities (NAICU), representing thousands of smaller colleges, monitored the rule closely but didn't publicly oppose the consensus reached in January, signaling institutional concern but recognition of the political reality.

The Do No Harm rule is part of a broader Trump administration higher education reform agenda under Secretary McMahon that has generated significant political conflict. McMahon, confirmed as Education Secretary in early 2025 after serving as a Small Business Administrator and WWE executive, has led the Department of Education through multiple regulatory proposals, including the RISE rule on student loan limits and the Workforce Pell expansion. Murray, Sanders, and other Senate Democrats have pushed back aggressively on these initiatives, arguing that the administration is using regulatory authority to dismantle higher education access. The Do No Harm earnings test, coming after OBBBA's $300 billion cut to higher education funding, represents the next iteration in this contested regulatory battle. The public comment period for the Do No Harm rule will provide the first formal opportunity for institutions, advocates, and lawmakers to shape what the final rule looks like before the July 1 implementation deadline.