If you spend the money and time to complete a college program, you’re probably hoping it pays off after you graduate. Starting this year, colleges are about to face consequences if it doesn’t.
Tucked among the numerous changes that are coming as part of President Donald Trump’s overhaul of the federal student loans system is a new accountability standard for colleges. Nearly all college programs will need to pass an earnings test that measures whether students actually make more money after they graduate. If a program fails, it loses access to student loans.
The test, referred to as the “do no harm” standard, has been largely overshadowed by other student loan revisions such as new borrowing caps and repayment plans. It’s also unlikely to impact most programs at most institutions. However, certain fields and schools could be hit hard. The earnings test also shines a light on the expected outcomes for students pursuing everything from short-term certificates to graduate degrees.
While the Department of Education is still finalizing the details, the proposed earnings standard is relatively simple. For a program to pass, the median earnings of students four years after graduation must be higher than the median earnings of those ages 25 to 34 with only a high school diploma. If most of a program’s students stay in the state, then earnings are tested against the state median. If most students move out of the state, earnings are compared to the national median. Students won’t qualify for federal loans if a program fails the test in two out of three years. (For graduate programs, earnings are measured against students with a bachelor’s degree.)
The standard will go into effect on July 1, 2026, and the first earnings test results will come out in 2027. Because a program must fail for two years to lose loan access, the first penalties wouldn’t be assessed until 2028.
Education policy experts say the standard addresses a key issue, although it sets the bar fairly low for programs to pass.
“Relatively few programs would fail in the grand scheme of things,” says Robert Kelchen, a professor of education at the University of Tennessee who researches college accountability policies. “The programs that would fail would predominantly be shorter-term certificate programs and disproportionately at for-profit colleges.”
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A New Test, but Not the First
As with many higher education and student loan policies, the earnings standard being introduced is essentially a new take on an existing rule.
The Gainful Employment standard, created during the Obama administration, largely targeted those certificate programs and for-profit institutions and required them to prove that they sent students on their way with higher earnings and manageable debt. But also like many policies, it has been subsequently revised, repealed and reinstated since then, flipping on and off like a light switch controlled by a toddler as administrations changed and courts ruled.
The new rule was initially aimed at programs not covered by Gainful Employment, but the Department of Education later decided the new standard would apply to all programs, essentially replacing the Gainful Employment rule.
While political parties can’t always agree on how to do it, there’s widespread agreement that colleges should be held accountable for financial outcomes of their students.
A 2025 survey conducted by New America, a left-leaning think tank, found that 68% of Americans believe programs should lose tax dollars if they have high rates of graduates who earn less than the average high school graduate, with a majority of both Democrats and Republicans agreeing.
“Americans across the political spectrum think that colleges should be held accountable for their outcomes and whether or not students earn more after they graduate,” says Antoinette Flores, director of higher education accountability and quality at New America.
Although the new standard applies to many more institutions, it doesn’t factor in the debt that students leave school with. Instead, colleges are measured solely on the earnings of their graduates. Flores considers the new threshold a “bare minimum.”
“It does not capture one of the big issues, which is, can students repay their loans?” she says. “Or even if they have increased earnings, are those earnings enough to account for the cost that they pay? That’s one of the questions that is kind of lost with the changes made to the Gainful Employment rule.”
Here’s How Many Students and Programs May Be Affected
Only about 6% of college programs would fail the earnings test, according to data released in January by the Department of Education and studies conducted by several research groups. Around 650,000 students who attend those programs would be affected, the Department of Education says.
Undergraduate certificate programs and for-profit colleges dominate the list of programs at risk of failing. About 29% of all undergraduate certificate programs — coursework that typically runs six to 18 months and provides specialized skills or career training — would fall short of the earnings standard. For-profit colleges, which tend to offer a higher percentage of those shorter-term courses, would be impacted considerably, with 35% of for-profit programs likely to fail the test.
When you remove undergraduate certificate programs from the equation, less than 2% of all college programs would fail to meet the earnings standard, according to an October 2025 brief published by the PEER Center, a research hub based at American University.
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Cosmetology, Religious Studies, Fine Arts: Programs That Might Fail the Earnings Test
Some areas of study are at far greater risk of missing the earnings mark.
For example, nearly all cosmetology and similar “personal services” programs would fail, both at the undergraduate certificate and associate degree level, the Department of Education reported. Among bachelor’s degree programs, religious studies and various fine arts fields such as theater and music are more likely to have graduates who don’t meet the earnings standards.
“There are a handful of programs, like cosmetology, massage therapy and other personal services programs, where wages are just really low,” says Jordan Matsudaira, a professor of economics and public policy at American University and the director of the PEER Center. “Compounding that is a lot of undergraduate certificate programs are offered by colleges that are just lower quality. They tend to spend less on instruction and have lower-quality programs that just aren’t serving their students as well.”
Experts note that workers in personal service fields such as cosmetology make much of their income in tips, which may not get reflected in the earnings test data. They also point out that while some undergraduate certificate programs have poor outcomes, others can be effective career advancement tools.
“When they work well, they can be one of the fastest paths to socioeconomic mobility,” says Michael Itzkowitz, founder and president of the HEA Group, an education-focused research and policy organization that published an in-depth analysis of earnings data in January. “Students attend for a short period of time, therefore their education oftentimes costs less because they’re just paying for a shorter program. They gain a skill to enter the workforce, and they start earning immediately. But these are also some of the riskiest types of programs being that about a third show no economic premium whatsoever.”
The HEA Group’s analysis also found 4,441 associate and bachelor’s degree programs where graduates earn at least $50,000 more than a high school graduate within four years of completion. Nearly 140 undergraduate certificate programs also showed this earnings bump.
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Should All Programs Be Measured by Salary?
While the earnings test can hold colleges accountable for financial outcomes, it doesn’t make any exception for low-paying fields where workers may be sorely needed or professions that may contribute to society in other ways. In particular, experts mention early childhood education and mental health counseling as areas of concern.
“I think states should be asking, and we collectively should be asking, whether judging the necessity of programs like that based only on their earnings outcomes is appropriate or whether they’re producing critical professionals or artists who are adding value in ways that are not well captured by what their graduates are earning,” says Matsudaira, who helped write the Gainful Employment law during the Obama years and who served as deputy undersecretary of education in the Biden administration.
Flores says ultimately officials should find a way to improve pay in those fields, rather than just exempting them from the earnings test.
“The question should be, if they are important, how do we fund them and how do we address wages,” she says.
Will Colleges Actually Be Held Accountable?
Some experts expressed doubts that many failing schools will actually be penalized once the time comes.
“I’m not convinced that the administration is going to follow through and take away funding from programs,” says Kelchen. “There’s a pretty long history across both sides of the aisle of backing down when funding is seriously at risk.”
Likewise, Flores says she doesn’t expect the government to raise the standard from its current level.
“Congressional leaders have an interest in holding programs accountable, but once that applies to more and more colleges and programs in your district, the more hesitant you likely are to be,” she says.
However, one state is already taking accountability standards further. Earlier this month, Indiana’s governor signed into law a bill that would simply eliminate any program that fails the federal earnings test. Failing programs would then have the option to make their case to the state if they want to be reinstated.
Even if few programs are penalized, the earnings standard could lead colleges to investigate why certain programs are producing poor outcomes.
“It’s sort of a flag to dig deeper into these programs to figure out why that is happening and can they improve,” says Itzkowitz. “There’s usually some sort of mismatch if a program is drastically underperforming to where we’re offering credentials and there aren’t jobs available in the region that we’re offering them. I do think institutional leaders will start being very intentional while viewing this data and thinking about the sustainability of their programs and whether they are still operable at the institution if their students can’t receive loans and also whether or not they’re beneficial to the students who are pursuing that type of credential.”
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