The Government Is Cutting Student Loans for 'Low-Earning' Majors — Here's What You Need to Know

Starting in 2027, the federal government will begin cutting off student loans for college programs whose graduates don't earn enough money. If that sounds dramatic, it's because it is. The new STATS (Student Tuition and Transparency System) and Earnings Accountability rule, finalized in July 2026, means that your choice of major could determine whether you can even get a federal student loan.

Here's everything families need to know — and why this matters more than almost any other college planning development in decades.

What the STATS Rule Actually Does

Under the new rule, which grew out of the One Big Beautiful Bill Act signed in July 2025, every college program eligible for federal student loans must now prove its graduates earn above a minimum threshold:

• Undergraduate programs: Graduates must earn more than the median high school diploma holder in their state (roughly $41,800/year nationally for ages 25-34).
• Graduate programs: Graduates must earn more than the median bachelor's degree holder (roughly $66,600/year nationally for ages 25-34).

Earnings are measured using IRS tax data four years after program completion and compared against state-level benchmarks. Programs that fail the earnings test in two out of three consecutive years lose access to federal Direct Loans. After three years of consistent failure, institutions may lose Title IV eligibility — including Pell Grants — for those programs.

The Timeline

• July 2026: Final rule published.
• Early 2027: First earnings calculations released.
• July 2028: Earliest date a program can actually lose loan eligibility (after failing 2 of 3 years).

Which Majors Are at Risk?

Based on current earnings data, the programs most likely to fail the test include:

• Social Work — Median starting salaries often hover around $38,000-$42,000.
• Early Childhood Education — One of the lowest-paying fields requiring a degree.
• Art and Art Therapy — 75% of art therapy students have historically borrowed more than $20,500/year.
• Music — Many programs produce graduates earning well below the threshold.
• Religious Studies — Limited high-paying career paths for graduates.
• Counseling and Mental Health — Critical work, but often underpaid relative to education costs.
• Cosmetology and Personal Services — Though these received a temporary reprieve due to tip-income reporting changes.
• French and some Humanities — Niche language degrees at certain institutions.

According to research from the HEA Group, approximately 2% of undergraduate programs (~804 programs) currently fail the earnings test, affecting around 40,000 students. When graduate programs are included, estimates suggest up to 5% of all programs could be affected — impacting over 600,000 students and billions in federal loans.

The Graduate Student Squeeze

The pain doesn't stop at the earnings test. Concurrent changes to federal lending have also slashed how much graduate students can borrow:

• Non-professional graduate programs (including education, social work, nursing, public health): Capped at $20,500/year with a $100,000 lifetime limit.
• Professional programs (pharmacy, dentistry, veterinary, law, etc.): Capped at $50,000/year with a $200,000 lifetime limit.
• Grad PLUS loans are eliminated for new borrowers after July 1, 2026.

The Department defined only 11 fields as "professional" — and nursing, education, and public health are not among them. The American Association of Colleges for Teacher Education called this decision "strongly dismaying."

What This Means for Your Family

If you or your child is considering a major in any of the at-risk fields, this changes the calculus significantly. It doesn't mean those careers aren't valuable — social workers, teachers, and counselors are essential to society. But the federal government is now signaling that it won't finance education that doesn't clear an earnings bar.

Families need to:

1. Check the data now. Don't wait until 2028 to find out your program is at risk. Compare major outcomes by school using real Department of Education salary data today.
2. Understand your state's threshold. The test is state-specific, so a social work degree might pass in a high-cost state but fail in a low-wage one.
3. Have a backup plan. If your intended program loses loan eligibility, you'll need alternative funding — private loans (with higher rates), scholarships, or a different program entirely.
4. Consider program-specific outcomes, not just field averages. A social work program at one school might produce graduates earning $50,000, while the same degree at another school produces $35,000 earners. The school matters.

The Bigger Question

Whether you agree with this policy or not, it introduces a new reality: the government is now in the business of deciding which degrees are "worth it." That's a massive shift — and one we have strong opinions about (more on that in our companion piece).

But regardless of where you stand on the policy, the practical implication is clear: families need to be more data-driven about college decisions than ever before. The era of choosing a major based purely on passion and hoping it works out financially is officially over.