President Trump Cuts Back on Direct Student Loans

A new Department of Education rule, part of the Student Tuition and Transparency System (STATS) and Earning Accountability rule, threatens to cut federal student loans to college programs and degrees that do not demonstrate graduates earn more than the average high school or bachelor degree holder. This rule, put into effect on July 1, 2026, could significantly impact students pursuing careers in lower-paying fields, such as education and arts and humanities.

Context

The Department of Education's rule is part of an initiative aimed at increasing accountability in student loan programs. It applies to college programs that fail to show that graduates earn more than the average earnings of high school or bachelor's degree holders. This change is set to take effect on July 1, 2026, giving institutions time to adjust their offerings and outcomes.

Why it matters

This new rule could reshape the landscape of higher education funding by linking federal student loans to graduate earnings. It raises concerns about access to education for students in lower-paying fields, potentially limiting their financial support. The decision may also influence students' career choices, prioritizing certain degrees over others based on projected income.

Implications

Students in fields like education and the arts may face reduced access to federal loans, impacting their ability to finance their education. Colleges may need to reassess their degree offerings to remain eligible for federal funding. The rule could exacerbate existing inequalities in higher education by favoring programs with higher earning potential.

What to watch

As the implementation date approaches, stakeholders will closely monitor how colleges respond to the new rule. Institutions may alter their programs or provide additional support to ensure graduates meet the earnings criteria. Legislative or legal challenges could also arise as affected parties seek to contest the rule's implications.