College students choosing careers in the arts, social services, and other traditionally lower-paying fields could soon find federal student loans harder to access if their programs repeatedly fail a new government earnings test.
Under final regulations announced by the U.S. Department of Education, colleges will face a new accountability system that measures whether graduates of individual programs earn more than workers with a lower level of education. The Student Tuition and Transparency System, known as STATS, is scheduled to replace the current Financial Value Transparency and Gainful Employment framework on July 1, 2027.
The federal student loan rule could have major consequences for programs where graduates perform important work but traditionally receive lower salaries.
According to the Los Angeles Times, programs involving social work, arts, music, and some mental health fields are among those facing greater exposure to the new earnings test. Undergraduate certificate programs in fields such as cosmetology, massage therapy and film are also expected to face significant pressure.
The system does not simply ban students from borrowing money because they picked a particular major. Instead, the federal government will evaluate earnings at the individual program level. Under the Education Department’s Federal Student Aid guidance, programs that fail the revised earnings premium test in two of three award years will be classified as low-earning outcome programs and must stop participating in the Direct Loan Program for at least two years.
For undergraduate programs, the government will generally compare graduates’ median earnings against those of working adults with only a high school diploma. Graduate programs face a different benchmark, with earnings compared against workers holding bachelor’s degrees. The Education Department says the framework is designed to ensure students receiving federal loans see a financial return from their education.
Federal officials have explained that program earnings will be measured four years after students complete their studies. During the rulemaking process, the Education Department said the calculation uses the median earnings of graduates who are working and not enrolled in college, with program earnings data coming from a federal agency with individual income information, such as the IRS. The benchmarks rely on earnings information for workers between ages 25 and 34.
That approach is creating a larger debate about what makes a college education valuable.
Ted Mitchell, president of the American Council on Education, told the Los Angeles Times that lower salaries do not necessarily mean society can afford to lose workers in those professions.
“We need social workers,” Mitchell said. “Whether it’s the fentanyl epidemic or homelessness in L.A., we need people who can work on the street with people who need it the most.”
The concern is that programs training people for essential but comparatively lower-paying careers could struggle under an accountability model centered on earnings.
Mitchell’s organization has not rejected accountability altogether. According to the American Council on Education, ACE supports holding poorly performing programs responsible but has raised concerns about how the Education Department designed the system. Mitchell separately said institutions should provide programs capable of producing a livable wage and should improve or discontinue programs that fail to do so.
Concerns have also emerged around religious studies.
Gregory Baylor, senior counsel with Alliance Defending Freedom, told the Los Angeles Times that earnings should not become the sole measure of whether an educational path has value.
“The government shouldn’t punish people who pursue socially valuable callings just because in its judgment they don’t earn enough money,” Baylor said.
Stanford associate professor Jonathan Gienapp raised a similar concern about humanities education.
“In certain fields of study, especially in the humanities, whether or not that program has been successful and has done a really good job in its educational mission might not be all that directly tied to immediate earnings potential,” Gienapp told the Los Angeles Times.
Still, the Education Department argues the federal student loan rule creates a basic financial safeguard for borrowers and taxpayers. The agency says undergraduate programs should demonstrate that graduates earn more than typical high school graduates, while graduate programs should show earnings above the applicable bachelor’s degree benchmark.
The potential impact will not be evenly distributed across higher education.
Education Department estimates reported by the Los Angeles Times indicate roughly 3 percent of bachelor’s and advanced degree programs at public and nonprofit institutions could fail the test, compared with approximately 33 percent of programs at for-profit schools. The department estimated about 5.2 percent of programs overall could fail, while approximately 4.2 percent of students receiving federal loans or grants are enrolled in programs expected to fall below the benchmark.
Arts education provides one example of how the numbers could play out. In an Education Department analysis used to explain the earnings test, a hypothetical application using data for a master’s music program at The Juilliard School showed median four-year earnings of $46,372 against a $48,304 applicable benchmark, which would produce a failing result under that example.
For students, the bigger question may become whether colleges respond by lowering prices, restructuring programs, improving career pipelines or providing their own financial assistance when federal loans disappear.
The Los Angeles Times reported that California Institute of the Arts officials were already considering ways to strengthen career fairs and industry partnerships. Interim Provost Michael Bryant also said the school could potentially use institutional funds to support students if programs ultimately lose federal loan eligibility.
The federal student loan rule arrives alongside broader changes to higher education borrowing. Under separate final regulations, the Education Department has implemented new borrowing limits for graduate students, professional students, and parents while phasing out the Grad PLUS program. Those changes stem from the 2025 federal law that also authorized the new earnings accountability framework.
With the STATS earnings framework scheduled to take effect in July 2027, students considering college may increasingly have to weigh not only what they want to study and what tuition costs, but whether the earnings history of that specific program could eventually determine whether federal loans remain available.
