A new federal policy implemented on July 1 now prevents students from taking out federal loans to finance degree programs that fail to demonstrate a positive return on investment. This change aims to protect students from accumulating debt for degrees that do not lead to a livable wage.
Under the revised policy, graduates of certain college programs are now being compared against the average earnings of high school graduates in the same state. If a program's graduates consistently earn less than this benchmark, it will lose access to federal financial aid. Programs that fail this earnings test for two out of three consecutive years will be unable to receive federal loan funding.
This marks a significant alteration to financial aid regulations, described by experts as potentially the "biggest set of changes to financial aid in decades." The policy utilizes data from the Department of Education, with earnings from approximately 32,000 bachelor's degree programs compared against average high school graduate wages. Initial findings indicate that around 804 programs, graduating approximately 40,000 students annually, could be affected. These programs represent about 2% of all undergraduate programs.
Examples of programs flagged include music degrees from institutions such as the University of Southern California, Juilliard, and The New School, where graduates reportedly earn less than the average high school graduate four years after obtaining their degrees. Similarly, graduates from Fine and Studio Arts programs at Cooper Union and Bard College have also shown lower average earnings in the years following graduation.
Experts suggest that these changes could lead to shifts in college enrollment and financial aid offerings. Some higher-cost institutions with less generous financial aid may face the most significant impact. The Department of Education will analyze tax records to determine the return on investment for students in different programs and institutions.
Proponents of the policy argue that it aligns with student desires to achieve better financial outcomes than those with only a high school diploma. The intention is to ensure that federal lending supports educational investments that genuinely improve a student's economic prospects, thereby safeguarding both students and taxpayers from financially detrimental educational pathways. Critics, however, argue that the changes do not go far enough, suggesting that programs could still saddle students with excessive debt even if they offer a marginal increase in earnings, thus remaining a poor financial investment.