The Department of Education is Cutting Federal Loans for Low-Paying College Degrees

Choosing a college major has always been a balancing act among the many career opportunities you want to pursue. Now, a new federal rule from the U.S. Department of Education may add another factor to consider when choosing your major, and it all relates to your future earning potential.

Beginning in 2027, college degree programs that produce graduates with lower earnings could lose access to federal direct loans if they fail to meet new federal accountability standards. While supporters say the policy will protect students from taking on debt for programs that don't provide a strong financial return, critics worry it could limit access to important professions that have traditionally offered lower salaries. The jobs themselves are also very important, and many students are passionate about pursuing those careers.

Students and families will need to be more informed than ever as they prepare for the upcoming college year and make important college decisions. These changes are too important to overlook, and Send Your Kids to College is here to help you understand what they mean and guide you through every step of the process.

In this blog, we will explain how the Department of Education is cutting federal loans for low-paying degrees and how we can guide you through this change.

The Changes From This New Rule on Federal Loans

The Department of Education recently finalized a statement report on what’s called the Student Tuition and Transparency System (STATS) and Earnings Accountability rule. Under both, undergraduate degree programs must demonstrate that their graduates earn more than the typical worker with only a high school diploma. Graduate programs must show that graduates earn more than the typical bachelor's degree holder.

Any program that fails to meet these standards in two out of three consecutive years will lose eligibility for federal loans. If a university continues to have low-performing programs over a longer period, those programs could eventually lose eligibility for additional federal financial aid programs, including Pell Grants. We’ve actually written about how Pell Grants have been changed too, and we recommend you give that blog a read!

Which Programs Could Be Most Affected?

So which programs are going to be the most affected? The Department of Education has not released a list just yet of who will lose their eligibility, but many experts expect fields with lower starting salaries to face the brunt of these changes.

Education, social work, arts programs, human services, and some certificate programs have been mentioned in news coverage because graduates tend to enter into a career that provides community value but a relatively modest compensation package, especially during the first several years after their graduation.

That does not mean these careers lack any value that you are looking for to help attain a career, nor does it mean that every program in that field will be affected. Depending on how well you do, graduates in these professions could see a meaningful amount in their salary grow over time with hard work and dedication.

What This Means for College Families and Students

Higher education represents one of the largest financial investments a family will make before their kid starts school. If graduates consistently earn too little to reasonably repay the loans they borrowed, some might believe colleges should share greater responsibility for those outcomes rather than placing all of the financial risk on students.

Holding Colleges Up to The Standard of Quality for Degrees

The policy is also intended to encourage institutions to evaluate program quality and ensure academic offerings align with workforce demand. Colleges need to prove that what they are charging will give students the best quality for what they are going to school for. There will be people who worry that measuring programs primarily by graduates' earnings may overlook the broader value of certain professions.

Professions that are still a dream for people to go to school for. We wrote a blog back in December of last year about how other student loan changes will affect some of those professions. Give that one a read too!

Many careers that greatly benefit communities, including teaching jobs, nonprofit professions, social workers, or public service employees, may not offer high salaries despite requiring significant education and providing essential services. Those are some of the most important jobs, and they need a great deal of workers every year!

As this new policy change is implemented over the coming years, institutions will likely review their academic offerings and provide additional guidance to upcoming students before a new year of college begins. Thankfully for you, we are going to be one of your trusted resources to guide you through that process as well!

How Send Your Kids to College Can Help

Let’s run through some steps of how we can do that! Our goal has always been to help students find the right path into college. We work with families and students to understand what their interests are and make a plan around that using our resources from our website. That includes helping students:

• Explore career options that align with their passions

• Compare colleges based on academic fit and affordability

• Maximize scholarship opportunities in WNY and nationally

• Understand how financial aid policies may affect their college options

• How to avoid a student loan crisis

The college landscape continues to evolve, and federal policies like these will likely continue to change in the coming years. Students who begin planning early and with us at Send Your Kids to College will be in the strongest position to make the best decisions. If you have any questions about this policy change or are looking for other help with your college planning, give us a call or reach out through our contact form, and we will be in touch with you as soon as possible!