Trump wants to cut federal loans from college programs that don’t pay off. College cosmetology, fine arts, and music programs are at risk

Colleges and universities may soon have to give students a blunt warning: some of their programs might not pay off.

Earlier this month, the Department of Education proposed a new rule that would cut off federal student loan access to college programs whose students earn too little after they graduate. For undergraduate programs, those diploma holders would generally need to earn at least as much as young workers with only a high school degree. For graduate programs, graduates would need to beat a benchmark based on workers with only a bachelor’s degree. In certain cases, programs that fall short could also lose access to Pell Grants.

The programs most at risk vary widely and span both traditional four-year colleges and more technical, career-focused institutions. Some are short-term certificate programs, including cosmetology and other vocational training fields. Others are degree programs in areas where graduates often earn less early in their careers, such as music, fine and studio arts, and certain health-related fields.

Out of the nearly 20 million post-secondary students, some 95% are enrolled in a program that is likely to pass the earnings test. But, close to 2,000 colleges and universities in the U.S. have at least one program at risk of failing the earnings test, and it could leave over 600,000 students at risk, according to Preston Cooper, a senior fellow at the American Enterprise Institute who tracks higher education reform. (You can search his list of at-risk programs here, but some include agricultural studies, telecoms, and teaching programs). 

Cooper pointed out this isn’t only an issue for one’s career prospects. Instead, he pointed to the $1.7 trillion in outstanding federal student loan debt as a reason why these programs should be held accountable for potential financial harm.

“Some people go to college [and] take out loans for programs that really just don’t have a whole lot of economic value,” Cooper told Fortune. “They end up with a lot of debt, and then they don’t really have the earnings in order to be able to repay that debt.”

Trump’s One Big Beautiful Bill is rewriting higher education finance

The new rule stems from President Donald Trump’s One Big Beautiful Bill and could be finalized as early as July 1. IRS data would be used to calculate the median earnings of graduates and determine if the programs are leaving graduates better off financially than before they started. Programs would have to fail the earnings test in two out of three years before losing federal loan eligibility. In the meantime, flagged programs would be required to notify current and prospective students of their “low earning outcome” status.

Major changes wouldn’t take effect immediately. Cooper said institutions likely wouldn’t have to make significant adjustments until the 2028–29 academic year, when programs that repeatedly fall short could face a choice: wind down their offering or continue operating without access to federal student loans.

The changes could bring a new level of transparency to higher education—something many institutions have historically lacked at the program level, Cooper added. The Obama administration first attempted to address earnings accountability through a “gainful employment rule,” but it applied primarily to for-profit colleges and vocational programs. 

Under Secretary of Education Nicholas Kent said in a press release the new proposal will expand accountability—and will result in taxpayers not having to subsidize postsecondary education programs that leave graduates in a financial hole.

“This consensus-backed framework will drive meaningful change in postsecondary education, ending years of regulatory whiplash and addressing student debt that has left too many students worse off,” Kent said.

The Department of Education told Fortune it could not comment further during the rule’s ongoing public comment period, which ends May 20.

Other changes are coming to college financing system alongside the earnings rule. Beginning July 1, 2026, the Grad PLUS loan program, which will mark its 20th anniversary this July and allowed graduate students to borrow up to the full cost of attendance, is being phased out. New limits will take effect: professional students, which includes select fields such as pharmacy, dentistry, law, and medicine, may borrow up to $50,000 per year, with a lifetime cap of $200,000 in federal unsubsidized loans. Other graduate students, including those in nursing, accounting, and education, may borrow up to $20,500 per year, with a lifetime limit of $100,000.

Gen Z are finding out the hard way: college degrees do not guarantee a stable job

The return on investment of postsecondary education has increasingly become a hot-button topic as many young people have confronted a grim reality: the decades-old promise that a college degree unlocks a high-paying job isn’t true for everyone.

Some 5.6% of college graduates between the ages of 22 and 27 are unemployed, and 42.5% of recent college graduates are underemployed, according to data compiled from the Federal Reserve Bank of New York. Over the past three decades, meanwhile, average tuition at both public and private four-year colleges has roughly doubled after adjusting for inflation, according to the College Board, and the average federal student loan balance has climbed to about $39,075 per borrower. As the Trump administration restarted loan repayments after Biden-era attempts at canceling or reshaping those programs, those balances are once again squeezing household budgets.

Throw in the rise of AI—and mounting uncertainty about whether some entry-level jobs will even exist in the future—and questions have sharpened about whether colleges and universities have adapted fast enough to meet shifting workforce needs.

At the same time, some business leaders are rethinking what students should study in the first place. Rather than steering young people exclusively toward high-paying technical fields like computer science, a growing number are emphasizing the long-term value of skills often associated with a humanities or liberal arts education.

“I actually think studying the humanities is going to be more important than ever,” Anthropic President Daniela Amodei told ABC News. “A lot of these models are actually very good at STEM. But I think this idea that there are things that make us uniquely human—understanding ourselves, understanding history, understanding what makes us tick—I think that will always be really, really important.”

The tension between rising interest in human-centered skills and a policy environment increasingly focused on earnings underscores a broader debate about what higher education should deliver. Steve Taylor, policy director at Stand Together Trust, an economic mobility nonprofit and member of Virginia’s State Council of Higher Education, said the degree-or-bust model is failing too many Americans.

“College can have civic, personal, and cultural value beyond wages,” he told Fortune. “But when students are taking on federal debt, it’s fair to ask whether a program gives them a reasonable path to repay what they borrowed.”

Having more transparency at the program level will give students a better idea of the job prospects on the other side of a certain degree versus learning that the hard way when they cannot find a job, and are left with debt to begin repaying.

“If a program consistently leaves graduates with debt they struggle to manage, students should know that before they enroll,” he added. “And institutions should be asking whether they are helping students translate what they learn into durable skills, meaningful work, and long-term adaptability.”

Greater transparency could also help open the door to opportunities outside of traditional degree pathways that  are opening up—including skilled trades and other career-focused training programs.

“College can still be a great choice,” Taylor said. “But it should not be treated as the only serious path to opportunity.”

Cooper echoed that sentiment, but argued the conversation needs to move beyond a simple four-year-versus-trade-school divide—and instead focus on which programs actually deliver strong outcomes for students.

“I think that there are some great four-year college programs, and there are some great trade school programs. There are also some bad four-year college programs, and there are some bad trade school programs,” Cooper said.

“We should be giving students the tools to recognize what are the high-value pathways within each of those sectors.”

This story was originally featured on Fortune.com