Student loans have been a noose around the neck of many college grads for years, but the Department of Education is enacting reforms to help prevent more young people from falling into this debt trap. Ironically, some colleges that are supposed to serve students are furious because it means their taxpayer-funded gravy train is coming to a halt.
The federal student loan program is supposed to operate on the simple principle of allowing a young person to finance an education today and repay the cost out of a higher future income. That principle has been wantonly violated for years by colleges and universities, institutions that lured young people into mountains of debt with no prospects of repayment.
That’s why the Trump administration’s new earnings accountability rule will protect future college students. It requires undergraduate programs to show that their graduates out-earn typical high-school diploma-holders, while graduate programs must top the earnings of typical bachelor’s degree-holders.
If a program fails this test in two out of three consecutive years, it loses eligibility for federal direct loans. Students can still choose those majors, but they won’t be able to go deeply into debt via the federal student-loan programs.
Whereas the Biden administration sought to foist the repayment of student loans onto the backs of taxpayers under the euphemism of “loan forgiveness,” the current Department of Education wants to close the barn door before any more horses get out by stopping the issuance of loans that will likely never be repaid.
This is about protecting young Americans, many of whom are newly minted adults right out of high school, from a debt trap. That doesn’t stop the hyperbolic critics who decry this common-sense reform as an assault on higher education. Ironically, those far-left voices were silent when Democrat administrations originated this policy.
The Obama administration adopted its “gainful employment” rule in 2014 to cut off aid to career programs, overwhelmingly at for-profit colleges, whose graduates couldn’t earn enough to manage their debt.
Then, in 2023, Biden administration revived that approach by pairing an earnings test with a debt-to-earnings ratio test that covered certificate programs everywhere and every program at for-profit colleges.
Those efforts had little impact, unfortunately. They not only excluded most college students, but the Department of Education spent 15 years issuing several versions of the rule with each one bogged down by legal, administrative, and operational challenges, and not one program ever lost eligibility.
This time, however, it’s been enshrined into statute. Congress wrote the “do no harm” earnings test into the One Big Beautiful Bill Act, enacted July 4, 2025, and the new rule applies the standard evenly and fairly, across every program at every institution. Students are protected regardless of whether their school is nonprofit or for-profit.
It’s protection for taxpayers too and not just the students who get buried under mountains of debt that they can never repay. When borrowers can’t repay their loans, they wind up in income-driven repayment plans, “forgiveness,” or default, and the loan ends up being paid for by taxpayers, including Americans who never went to college, or who paid off their own loans.
The government has no business using taxpayer dollars to subsidize young adults going tens or hundreds of thousands of dollars into debt with little prospect of repayment. But many schools are up in arms about this move because it effectively stops the subsidies for the schools themselves.
The massive debt that students take on gets paid to the colleges those students are attending, so it’s really a giveaway to higher ed, not the students. Some of these schools are petrified at the prospect of having to warn current and prospective students when a program is at risk and require signed acknowledgment from students that it’s effectively a bad financial decision.
Unlike what critics say, the rule bans no major and people can still study whatever they choose. The only difference is that the federal government will no longer give young people massive loans for a program that won’t improve their earnings potential, leaving them worse off financially.
For decades, endless streams of federal dollars let colleges raise the cost of attendance while selling 18-year-olds useless majors, which often end in the word “studies.” Tying loans to outcomes finally motivates schools to care if graduates can succeed financially. That policy is pro-student, pro-taxpayer, and long overdue.
E.J. Antoni and Sarah Parshall Perry co-authored this article. E.J. Antoni, Ph.D., is chief economist and the Richard Aster fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.
Sarah Parshall Perry, J.D., is vice president and senior legal fellow at Defending Education and served as senior counsel to the Assistant Secretary for Civil Rights at the U.S. Department of Education.