The Trump administration finalized new federal student loan regulations linking college programs' access to federal loans to graduates' earnings, potentially limiting loans for programs with lower-paying outcomes starting in 2027. Separately, social work students face borrowing limits due to their exclusion from professional-degree loan classifications, amid ongoing legal and policy debates.
- New rules tie federal loan eligibility to graduates' median earnings compared to a lower education benchmark, effective July 1, 2027.
- Programs failing the earnings test in two out of three years can lose access to the Direct Loan Program for at least two years.
- The Department of Education denies banning programs, stating the policy aims to hold colleges accountable for poor economic outcomes.
- Graduate and professional student loan limits changed July 1, 2026, with social work excluded from higher professional-degree borrowing limits.
- Legal challenges have temporarily expanded eligible programs for higher loan limits, but social work remains excluded pending further litigation.
New Federal Rules Could Eventually Cut Loan Access For College Programs Whose Graduates Fail To Meet Federal Earnings Benchmarks
The Trump administration is moving forward with a new federal student loan system that ties a college program’s access to federal loans to how much its graduates earn, a change that could put pressure on programs in lower-paying fields.
The U.S. Department of Education finalized regulations in July establishing an earnings accountability system scheduled to replace existing Financial Value Transparency and Gainful Employment regulations beginning July 1, 2027. Under the new framework, programs will be evaluated by comparing graduates’ median earnings against an earnings threshold for workers with a lower level of education.
Programs that fail the federal earnings test in two out of three award years can lose access to the Direct Loan Program for at least two years. Schools can, under certain circumstances, wind down a failing program while allowing students already enrolled to continue receiving federal loans to complete their degrees.
The Department defended the policy this week amid criticism and a dispute following a Los Angeles Times report examining how the administration’s new earnings standard could affect programs whose graduates enter lower-paying fields.
This is fake news at its finest.
— U.S. Department of Education (@usedgov) September 28, 2026
First off, we’re not ‘banning’ any program. The federal government doesn’t set curriculum or programs.
Here’s the truth: we are holding colleges accountable for leaving students worse off than if they never enrolled. Too many graduates… https://t.co/P9yY5B6117
“This is fake news at its finest,” the Department wrote on X in response to reporting about the rules. “First off, we’re not ‘banning’ any program. The federal government doesn’t set curriculum or programs.”
The Department said the policy is intended to hold colleges accountable when graduates leave school with debt but little improvement in their earning potential.
“Federal student loans are not a welfare program for failing college programs,” the Department said. “American students deserve education and training pathways that prepare them for the workforce – and transparency about programs that will never pay off.”
How The New Student Loan Earnings Test Works
The first earnings test is expected to be calculated in early 2027. Programs could record their first failure beginning July 1, 2027, but would not lose federal student loan eligibility after a single failing year. The earliest programs could lose Direct Loan access under the system is July 1, 2028, after failing the earnings requirement twice.
The change was authorized through the federal law signed by President Donald Trump in 2025 and establishes an earnings accountability requirement for programs participating in the federal Direct Loan system.
The policy represents a significant shift in how Washington determines whether higher education programs should continue receiving federal loan dollars. Instead of focusing primarily on whether an institution or student meets eligibility requirements, the government will also examine the economic outcomes of graduates.
Supporters argue that colleges should face consequences when students borrow substantial amounts for programs that provide little financial return.
Critics, however, have raised concerns about applying an earnings-based standard to professions where salaries may be relatively low despite requiring advanced education or providing essential public services.
Social Work Students Face A Separate Loan Squeeze
Social work students are also facing another federal student loan change, although it is separate from the new earnings test.
Federal law established new borrowing limits for graduate and professional students beginning July 1, 2026. Graduate students generally face an annual federal loan limit of $20,500 and a $100,000 aggregate limit, while students in programs classified as professional degrees can borrow as much as $50,000 annually and $200,000 overall.
Social work was excluded from the Department’s original list of programs receiving the higher professional-degree borrowing limits. The National Association of Social Workers has argued that the classification could make obtaining required graduate education more difficult for future social workers.
A federal court subsequently stayed portions of the Department’s professional-degree definition, prompting the agency to temporarily expand the list of programs eligible for the higher borrowing limits while litigation continues. Social work, however, remains outside the expanded list.
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NASW has continued pushing the federal government to recognize social work as a professional degree for student loan purposes.
The debate now places two questions at the center of federal higher education policy: how much students should be allowed to borrow for graduate education and whether taxpayers should continue financing programs whose graduates earn relatively low salaries.
For the Trump administration, the answer increasingly depends on whether a degree produces measurable economic returns.
For colleges and students entering fields such as social work and other lower-paying professions, the new approach could make the salary attached to a degree nearly as important as the education itself.
