New Earnings Test Could Strip Federal Loan Access from Low-Performing Programs

The Education Department finalized its STATS earnings test last month, a new accountability metric created by the One Big Beautiful Bill Act that measures whether graduates of college programs out-earn comparable workers with only a high school diploma and cuts off federal loan access for programs that fail the test in two out of three consecutive years. For most programs, the first round of data will be released in 2027, with penalties potentially kicking in as early as 2028, but the Department granted a significant carve-out for 20 tip-reliant fields including cosmetology, culinary arts, and massage therapy, pushing their earliest possible penalty date to 2029 or later, after lobbying from industry groups who argued that widespread underreporting of tips on tax forms would make the 2025 earnings data unfair to their programs. Student advocates are pushing back hard, pointing out that those 20 categories enroll 39% of aid recipients in programs that already fail the minimum earnings threshold, and that research suggests tip underreporting accounts for only about 8% of earnings in personal services fields, making the delay, critics say, a gift to low-performing schools at students’ expense. Inside Higher Ed reports that congressional Democrats have already introduced legislation to block the extension, while for-profit college groups, though supportive of the framework, argue the earnings formula still fails to account for part-time work, gender pay gaps, and regional income differences.