Trump is moving forward with his student-loan repayment overhaul — this time focused on unaffordable debt

• The Department of Education concluded negotiations on its proposals to boost accountability in student-loan borrowing.
• It proposed revising the gainful employment rule, which is intended to ensure students don't borrow too much.
• While it was intended to reduce complexity, some experts were concerned that the new rule would weaken protections.

How do you make sure you can afford the student debt you're taking on?

It's a complicated question that President Donald Trump's Education Department spent a week hashing out. On Friday, the department concluded negotiations and reached consensus on its proposal to strengthen accountability in student-loan borrowing, including revising the gainful employment rule.

"This is a game changer," Nicholas Kent, the department's undersecretary, said in his closing remarks. "We are building a future where higher education works for everyone, where students are empowered to succeed, where taxpayers can trust that their investments will be used wisely, and where institutions are held accountable for delivering results."

Some of these changes are part of Trump's student-loan repayment overhaul in his "big beautiful" spending legislation. The Department of Education has already completed negotiations on some of the student-loan provisions in the bill, including the creation of new income-driven repayment plans and borrowing caps for graduate and professional students, which will begin taking effect in July.

The revisions debated this week include eliminating the debt-to-earnings ratio test, which ensured a borrower's student-loan payments are no more than 8% of their annual earnings. It said this would reduce complexity. Some education policy experts worry it would weaken protections for students.

Carolyn Fast, the director of higher education policy at the left-leaning think-tank The Century Foundation, told Business Insider that it "makes a lot of sense" for the Department of Education to streamline the metrics, but the proposal risks leaving students with debt they're unable to repay with the elimination of the debt-to-earnings test.

How the gainful employment rule works and what could change

Gainful employment, first established by former President Barack Obama in 2014, cut off federal student aid for schools that offered programs that left students with unaffordable debt compared to their likely postgrad income. Trump repealed the rule during his first term in 2019, and former President Joe Biden reinstated it. The existing version went into effect in July 2024.

Biden's version of the rule used two separate metrics to determine whether a program met gainful employment requirements: a debt-to-earnings test and an earnings premium test, which measured whether a typical graduate from the program is earning at least as much as they typical high school graduate in their state.

In addition to eliminating the debt-to-earnings test, the Department of Education's proposal would allow programs to continue receiving Pell Grant funding even if they fail the earnings premium test. However, if at least half of Title IV funds, which include Pell Grant funds, are going toward programs that fail the earnings premium test, the department would strip all funding from the failing program.

While removing Pell eligibility for some failing programs is better than nothing, the two changes could weaken protections for students, Fast said.

"We're worried that low-income students will exhaust their limited Pell Grant eligibility on programs that don't provide a return on their investment," Fast said.

Research that Fast coauthored, for example, found that in 2022, about 169,000 students received Title IV aid to enroll in programs that would pass the earnings premium test but fail the debt-to-earnings test.

The department's negotiator said that the gainful employment changes will not be ready by the start of the 2026 academic year, so the new requirements are set to go into effect in the fall of 2027.

Lawmakers have previously pushed for a strengthened gainful employment rule. A group of Democratic lawmakers in 2023 called on the Biden administration to put forth a rule that protects students who enroll in "postsecondary programs that saddle students with unaffordable debt and provide low financial returns."