by Claire Harrington
The Education Department has approved a plan to cut federal loans to college programs that result in low-earning jobs – a move the Trump administration sees as an opportunity to rein in runaway borrowing, while critics argue it is a blow to students seeking degrees in such fields as music, public service and religious studies.
The department announced the so-called “rule” Monday for its new Student Tuition and Transparency System and Earnings Accountability initiative – after saying in April, when the rule-drafting process started, that the federal student loan portfolio was approaching $1.7 trillion as “more students are left financially worse off than if they had never attended college.”
“The Act presents a once-in-a-generation opportunity to rein in unsustainable student loan borrowing … and bring uniform accountability across the higher education system,” the release also stated.
Right now, the national student loan delinquency rate for balances three months past due is over 10%.
A new earnings premium test
The new rule established new eligibility criteria for higher education programs to participate in the federal Direct Loan program, or Title IV, replacing the previously-used debt-to-earnings metric with a new earnings premium test.
Bachelor’s programs will now be required to prove that their graduates earn higher median annual earnings than the average high school graduate, and masters programs that their graduates earn higher median annual earnings than the average bachelor’s degree recipient.
If a program’s graduates do not meet this threshold in two-out-of-any-three consecutive award years, the program is categorized as ‘low-earning’ and loses eligibility for Direct Loans. Bachelor’s programs in Religion/Religious Studies (53.3%) and Graphic Communications (17.7%) most frequently failed the earnings test, according to agency data.
“If a program cannot show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers,” said Under Secretary of Education Nicholas Kent.
During public comment period, some advocated against earnings test
As part of the rule drafting process that started this spring, the department included a standard public comment period in which the National Education Association, the nation’s largest teachers union, called the new earnings test a “severe regression in consumer protection.”
The union also argued that “an earnings premium alone does not go nearly far enough to ensure that programs lead to true financial stability” and that the rule “abandons advanced degree seekers,” as well as “unfairly penalizes essential but lower-paying public service fields,” which carry non-monetary value.
Many degree programs, the Association of American Universities (AAU) similarly reasoned, “produce substantial public value that wage data alone cannot capture,” concluding that STATS would “discourag[e] entry” into “public service and culturally vital careers,” such as the arts.
Exponentially more Master’s degree programs failed the earnings test; notably, Religion/Religious Studies degrees (89.4%), Mental and Social Health Services (64.3%), Fine and Studio Arts (44.1%), and Music (41.8%).
The Defense of Freedom Institute, a right-leaning policy think tank, argued that the ruling may even infringe on First Amendment protections because it “disproportionately burdens religious institutions and ministry and rabbinical programs based on the economic characteristics of religious vocations.”
Subjective nature of “social value” vs. “sufficient earnings”
In an unofficial, 641-page copy of the final rule released Monday, the department addressed the public’s concerns, acknowledged the rule’s “significant impact on religious programs.”
The department also argued many such programs don’t participate in the Direct Loan program, amended its regulations so low-earning religious programs can continue accessing Pell Grants—while still cutting off Direct Loan funds for students who would likely struggle to repay them.
In response to arguments concerning the “social value” of programs, the department challenged the subjective nature of the phrase, reaffirming that “students need sufficient earnings to afford and repay their Title IV student loans, which makes the earnings test in the final rule an appropriate policy for student loan access.”
Other revisions added
Aside from establishing minimum earnings potential, the Department also ruled that:
-
Income data from programs that prepare students for tipped income will not be collected for at least one year until data from the “No Tax on Tips” policy can be reported;
- Programs not yet labeled ‘low earning’ may avoid immediate disqualification of Title IV funds if the institution and department agree to pause Direct Loans borrowing for at least 5 years; and
- Institutions that exclusively serve individuals with qualified disabilities are exempt from program eligibility consequences.
– – –
Claire Harrington is a reporter for Just the News.
