A new provision in the Republican-backed One Big Beautiful Bill Act could force some colleges to lose access to federal student loans if their graduates do not earn more than people with only a high school diploma. This accountability measure takes effect July 1, 2026 and reflects an effort to ensure taxpayer-funded loan dollars support programs that deliver a return on investment.
The provision—sometimes called the “do no harm” rule—applies to associate and bachelor’s degree programs that receive federal student loan funding. A program must demonstrate that the majority of its graduates earn more than the median earnings of a comparable group of high school graduates four years after graduation. Programs failing this earnings test in two out of three consecutive years risk losing eligibility for federal loans.
Analysts estimate that about 2% of U.S. degree-granting programs could fail this test, potentially affecting around 40,000 students. Programs in fields such as arts, religion, and certain trade areas like cosmetology are among those most likely to struggle with the earnings threshold, according to research cited.
Supporters of the rule argue that federal loans should not support degrees that leave students worse off financially than if they had never enrolled. Senate Republican leaders and education policy advocates have framed the earnings requirement as a taxpayer protection tool, asserting that students and the nation benefit when education is aligned with economic outcomes.
Implementation of the earnings framework comes as part of broader changes the One Big Beautiful Bill Act makes to higher education financing. Other provisions include caps on graduate and professional student borrowing limits, restructuring of federal repayment plans, elimination of Grad PLUS loans for new borrowers, and a lifetime federal loan limit of roughly $257,000.
The Department of Education and negotiated rulemaking committees have been working on regulatory details, including how earnings metrics are calculated and aggregated, before enforcing loan eligibility changes. These discussions cover how small programs are assessed and what data sources are used to determine median earnings.
Critics of the earnings test framework argue that it could disproportionately affect institutions serving diverse students or programs that lead to valuable but lower-paying careers. They warn that students in sectors such as public service, education, and the arts might face reduced access to federal financial aid, which could limit opportunity and choice. However, supporters maintain that the reforms will encourage accountability and push colleges to prioritize student outcomes.
As colleges prepare for compliance deadlines, students and families are advised to understand how the changes might affect financial aid options, particularly for programs that historically do not yield high earnings relative to the benchmarks established by the new law.
