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Trump Administration Ends Federal Loans for Low-Paying Degree Programs
Department of Education announced that federal student aid will no longer be available for college programs whose graduates earn less than $30,000 annually.
The U.S. Department of Education announced that federal student aid will no longer be available for college programs whose graduates earn less than $30,000 annually. The rule, issued in March 2020, targets low-wage majors at both for-profit and public institutions.
The Department of Education released the rule on March 13, 2020, stating that any program whose median earnings after graduation fell below $30,000 or whose debt-to-earnings ratio exceeded 15 percent would be ineligible for federal loans and Pell Grants [1]. The policy applies nationwide to all accredited post-secondary institutions that receive Title IV funding [1].
The announcement was made by Secretary of Education Betsy DeVos on behalf of the Trump administration [3]. The rule was developed after the department analyzed earnings and repayment data from the College Scorecard and other federal sources [2]. Institutions were given a 30-day window to submit compliance plans outlining how they would adjust curricula or discontinue affected programs [1].
Policy Scope and Eligibility Criteria
The rule defines “low-paying” programs as those where the median annual earnings of graduates, measured three years after completion, are under $30,000 [2]. It also incorporates a debt-to-earnings metric: programs in which the average student loan debt exceeds 15 percent of expected earnings are barred from receiving Title IV aid [2]. The thresholds were derived from a 2017 Department of Education analysis linking high debt-to-income ratios to increased default rates [3].
Both public and for-profit colleges must apply the standards to all degree-granting programs, including associate, bachelor’s, and certificate tracks [1]. Programs that fail the test lose eligibility for federal direct loans, Federal Family Education Loans (FFEL), and Pell Grants. The rule does not affect existing borrowers but prevents new students from enrolling in the disqualified programs with federal aid [2].
Implementation Process
The department released a final rule after a public comment period that received over 1,500 submissions from colleges, student groups, and industry associations [3]. After the comment period, the department finalized the rule and published it in the Federal Register on March 13, 2020 [2]. Institutions were required to submit a compliance plan by April 30, 2020, detailing how they would either improve earnings outcomes or discontinue the affected programs [1].
Compliance monitoring will be conducted through annual reporting to the Department of Education’s Office of Federal Student Aid.
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Read More →Compliance monitoring will be conducted through annual reporting to the Department of Education’s Office of Federal Student Aid. Programs that do not submit a plan or fail to meet the earnings thresholds will automatically lose Title IV eligibility for the subsequent academic year [3]. The department indicated that the policy aims to protect taxpayers by reducing the risk of loan defaults associated with low-earning occupations [2].
Immediate Impact on Students
Students seeking enrollment in programs now classified as low-paying must secure alternative financing, such as private loans, scholarships, or personal savings [2]. The rule affects an estimated 300,000 current and prospective students, according to a Department of Education estimate released with the rule [1]. Because private loans often carry higher interest rates and less favorable repayment terms, the policy may increase the overall cost of education for these students [3].
The restriction also influences student decision-making. Prospective borrowers are required to review program eligibility before applying for aid, prompting many to consider higher-earning fields such as health care, technology, or business [2]. Institutions have reported a surge in inquiries about program eligibility and financial aid options following the rule’s release [1].
Institutional Responses
Colleges and universities have begun revising curricula to meet the earnings thresholds. Some for-profit schools announced the discontinuation of specific certificate programs in fields like culinary arts and early childhood education, citing the new federal requirements [3]. Public community colleges reported plans to enhance career services and employer partnerships to improve graduate earnings outcomes [2].
A number of institutions filed legal challenges, arguing that the rule exceeds the Department of Education’s statutory authority and could disproportionately affect low-income students [1]. As of the end of April 2020, at least three lawsuits had been filed in federal court, though none had yet resulted in an injunction [3]. The department has indicated that it will enforce the rule while litigation proceeds [2].
A number of institutions filed legal challenges, arguing that the rule exceeds the Department of Education’s statutory authority and could disproportionately affect low-income students [1].
Fiscal and Policy Implications
The Department of Education estimates that eliminating federal aid for low-paying programs could reduce student loan defaults by up to 2 percentage points, potentially saving the federal government $1.5 billion over a ten-year horizon [3]. The policy aligns with the Trump administration’s broader goal of tying federal student aid to labor-market outcomes [1].
Critics note that the rule may limit access to post-secondary education for students from disadvantaged backgrounds who rely on federal aid [2]. However, the department maintains that the measure protects taxpayers and encourages institutions to align curricula with market demand [3]. The rule will remain in effect unless altered by subsequent administration actions or further judicial rulings [1].
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Students currently considering low-wage majors should verify program eligibility for federal aid before enrolling, as the rule eliminates direct loan options for disqualified programs [2]. Educators and administrators must assess their program portfolios and develop compliance plans to avoid loss of Title IV funding [1]. Taxpayers may see a modest reduction in federal loan defaults, reflecting the policy’s intended fiscal benefit [3].
Key Facts
What: Federal student loans and Pell Grants are no longer available for college programs whose graduates earn less than $30,000 annually.
Impact: Students in affected programs must seek alternative financing; institutions must redesign or discontinue low-paying programs to retain federal aid eligibility.
When: Rule announced March 13, 2020; compliance plans due April 30, 2020.
Impact: Students in affected programs must seek alternative financing; institutions must redesign or discontinue low-paying programs to retain federal aid eligibility.
Sources
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