- A new federal law creates a “no harm, no foul” earnings test: Programs whose graduates earn less than graduates of similar high schools will lose access to federal student loans starting in the 2028-29 school year.
- 93% of cosmetology degree programs are expected to fail. Master’s programs in mental health services also experience higher than average failure rates.
- There are 644,000 students currently enrolled in programs that are expected to fail, receiving $2.7 billion in federal loans annually. Students who are already enrolled are protected and can finish their degrees, but new enrollees will eventually lose access to loans if their program fails for two consecutive years.
Hundreds of thousands of college students are enrolled in degree and certificate programs that, under a new federal law, may soon be cut off from federal student loans. The One Big Beautiful Bill requires colleges to prove that their programs actually improve graduates’ earning capacity, and those who don’t risk losing access to federal student loan programs.
This framework, informally called “do no harm,” sets a new standard: If graduates of the program earn less than similar workers who never went to college, the program will be unable to obtain federal loan funding.
Education management Preliminary data has already been released Across nearly 50,000 programs, the results reveal a clear pattern of at-risk fields, including some that legally require a college degree to work in the profession at all.
He remembers: It’s not just about the degree (eg Bachelor of Business). It depends on the program and school (e.g. University of Vermont, BS in Plant Science). It is the individual programs and degrees awarded by individual colleges that are at risk.
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Use of federal data
This free tool analyzes the federal data set and will tell you if your specific program passed or failed in upcoming “hold harmless” provisions.
How the University Degree Earnings Test will work
The new test is based on a basic premise: College credentials should enhance your ability to earn beyond what you would have achieved without them. For bachelor’s programs, the benchmark is the average income of graduates of similar high schools in the same state. For graduate programs, it is the average income for holders of a similar bachelor’s degree.
The Department of Education measures earnings four years after a student leaves the program. If program graduates fall below the benchmark for two out of three consecutive measurement years, the program will lose access to Federal Direct Loans.
There are some protections for currently enrolled students: The teaching requirement allows programs that fail by one year to keep current students using federal student loans, as long as the school stops accepting new students and completes teaching within three years. Students who are already enrolled in a failing program when the sanctions take effect no To be left stranded.
The department will calculate the first round of performance data in early 2027 and the second in early 2028. Given the need for two consecutive years of failure, the soonest a program could lose student loan eligibility is the 2028-29 school year.
Which programs are most at risk?
The Department’s initial data set covers nearly 50,000 programs across all levels of accreditation. Of these, 95% of programs are expected to be successful. The remaining 5% still represents 644,000 students and $2.7 billion in annual federal loan payments.
Certificate Programs: Highest failure rates
University degree programs face the most exposure yet. Cosmetology is the most obvious example: 93% of cosmetology degree programs are expected to fail the earnings test. Medical assisting certificate programs and bodywork programs also carry high failure rates.
The cosmetology number is particularly eye-catching because cosmetologists are legally required to obtain a state-issued license and obtaining that license requires completing an accredited program.
In other words, credentials are not optional: they are a basic legal requirement for employment. However, nine out of ten of these programs produce graduates who earn less than the high school wage standard.
Restricting federal loans will not eliminate demand for cosmetologists but may make it more difficult for low-income students to access the profession.
Associate Degree Programs
Most two-year programs are successful, but two areas stand out with high failure rates: health and medical administrative services, and design and applied arts.
These programs often lead to entry-level management or creative roles where starting wages fall below the high school income standard, especially in states with lower median minimum wages.
Bachelor’s degree programmes
Success is expected in almost all bachelor’s degree programmes. Four-year degrees carry a large enough earnings premium over high school degrees that exceeding the standard is obvious for most fields.
Exceptions are concentrated in the arts and humanities – programs in fine arts, studio arts, and related disciplines where average graduate wages fall below the standard.
Master’s Degree Programs: The Mental Health Paradox
At the graduate level, about 4% of programs are expected to fail, but the distribution is uneven.
Mental Health and Social Services is the only graduate field in which the majority of programs fall below the standard income level for bachelor’s degree holders. More than 60% use data provided by the Department of Education.
Collectively, failed graduate programs receive nearly $1 billion in student loan funding annually. This data point is also one of the driving factors behind the new distinction between graduate and professional programs.
The problem of mental health licensing
Of all the programs cited in the administration’s data, Mental Health Services Outcomes is one of the most challenging because it reveals a direct conflict between what the law requires and what is now punishable.
To practice independently as a Licensed Professional Counselor (LPC), Licensed Clinical Social Worker (LCSW), or Licensed Marriage and Family Therapist (LMFT), you need a master’s degree. These are mandatory qualifications set by state licensing boards. There is no path to independent licensure in these professions without completing a graduate program.
However, the department’s preliminary data shows that many master’s programs in mental health and social services fail the earnings standard, which compares graduates’ wages to those of similar bachelor’s degree holders.
Basic problem: Many mental health professionals (especially early in their careers when they have the required hours and training) work in community mental health centers, nonprofit organizations, and government agencies, where salaries are much lower than in private practice.
The earnings test measures average wages, which pulls back significantly from these low-wage settings.
This matters more than just the programs themselves. The United States is in the middle of a well-documented Mental health workforce shortage (PDF file). Restricting access to federal loans for graduate programs that train licensed counselors and social workers could reduce the number of mental health providers at the very moment demand surges.
Graduates entering this field often carry significant debt from master’s programs (typically $40,000 to $70,000) for careers with salaries in the $40,000 to $55,000 range, especially in nonprofits and the public sector. They also rely heavily on programs like Public Service Loan Forgiveness to get federal student loan forgiveness.
The earnings test, as written, does not take into account the public value of mental health services, the mandatory nature of credentials, or structural wage suppression in nonprofit and government settings.
It remains to be seen whether this will be addressed through regulatory amendments or public comment. A bill to expand the new definition of professional degrees is already in Congress, but it does not appear to be set to pass at this time.
What this means for future students
For students currently enrolled in programs that are expected to fail, providing outside education provides protection. You will not be cut off from federal loans midway through the program.
Schools that fail the earnings test for the first time can continue to use federal loan dollars to terminate the education of enrolled students, as long as they stop accepting new students and complete the divestment process within three years.
For prospective students, the implications are even more significant. If the program fails the earnings test in both 2027 and 2028, it will lose federal loan eligibility starting in the 2028-29 school year. Students who begin a two- or four-year program today may have finished the program correctly when these penalties begin to take effect.
Nearly 2,000 of the nation’s 5,000 colleges and universities have at least one program that is projected to fail. An institution’s general reputation tells you little: what matters is the specific degree you are pursuing.
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