Loan rules could cut aid to trade schools, small colleges

The U.S. Education Department is finalizing regulations that would link federal student aid eligibility to graduates’ earnings, potentially cutting off funding for thousands of programs. Trade schools and colleges, including those offering cosmetology, theology, and performing arts degrees, face severe enrollment declines and job cuts under the new rules. The department estimates 89% of students in master’s programs for religion and religious studies could lose federal loans, prompting the Association for Biblical Higher Education to demand exemptions or major revisions. Supporters claim the rules are necessary to prevent taxpayer funds from supporting programs that fail to prepare students for well-paying jobs. Over 5% of undergraduate and graduate programs may fail the earnings test, affecting hundreds of thousands of students. To qualify, graduates must earn at least as much as the average person without their degree level, such as undergraduates needing higher pay than high school graduates. The proposal builds on the Obama-era ‘gainful employment’ rule, which faced lawsuits and revisions before being absorbed into the One Big Beautiful Bill’s accountability framework. The department and education experts recently negotiated changes, removing student debt from assessments but keeping earnings comparisons as the key metric. Critics argue the bar is too low, while defenders say it introduces long-overdue accountability. The regulations, expected by June, could reshape higher education funding, particularly for low-paying majors and small institutions. Trade schools and religious colleges warn of catastrophic financial impacts, while think tanks like Third Way argue the rules force necessary reforms. The debate reflects broader tensions over student aid, program quality, and taxpayer responsibility in education.