More than 800,000 students are currently enrolled in college programs whose graduates earn less than someone with a high school diploma. Over 90% of cosmetology certificate programs fail the government's new earnings test.

Starting this month, those programs lose access to federal student loans.

Here's what those cosmetology programs actually look like. For-profit beauty schools enroll more than 177,000 people a year and charge an average of $17,000 or more in tuition, fees, and supplies. Four years after completing the program, the typical graduate earns $27,000. The federal earnings benchmark the new rule uses — what a high school graduate earns — is higher than that. Four in five graduates of for-profit beauty schools already earn less than their counterparts who never went beyond high school. At the typical cosmetology school, roughly a third of students fall behind on their loan payments. Among the approximately 1,000 institutions nationwide where student loan delinquency exceeds 30 percent, nearly half are cosmetology schools.

This is the sector that has been feeding off federal student loans for decades. The new rule is the government finally noticing.

The Department of Education published its final "Do No Harm" rule on July 1, 2026, implementing a provision of the Working Families Tax Cuts Act that President Trump signed on July 4, 2025. The concept is almost aggressively simple: if a program can't prove its graduates earn more than the average high school graduate, that program gets cut off from the federal student loan program. Graduate programs face the same test against bachelor's degree holders.

This is the third time the federal government has tried to implement this idea. The Obama administration first attempted a version called Gainful Employment in 2010 and again in 2014. The first Trump administration's Education Secretary Betsy DeVos repealed the rule in 2019. The Biden administration revived it in 2023 with updated Gainful Employment regulations. The current Trump administration killed the Biden version — and then implemented this one, with a key difference: it's written into statute now, not just regulation. That makes it significantly harder to kill by executive action alone, which is worth keeping in mind when the rule's critics argue it won't survive the next administration.

Under Secretary of Education Nicholas Kent put it plainly: "If a program can't show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers."

The rule works on a two-out-of-three-years basis. Programs whose graduates fail to out-earn high school grads in two of three consecutive award years lose eligibility for the Direct Loan program. Three straight years of failure, and the Department can yank all Title IV funding — including Pell Grants. If more than half of a school's federal aid recipients are enrolled in failing programs, the entire institution's eligibility is on the chopping block.

The numbers tell you exactly where the rot is. Roughly half of the 800,000 students in failing programs attend private for-profit schools. A full 25% of students in undergraduate certificate programs — the fast-track-to-a-career variety — are in programs that would fail the test. Theater, fine arts, and music bachelor's degrees are flagged. So are master's programs in mental and social health services. Only about 1% of bachelor's programs and 4% of master's programs are expected to fail, which means we're not talking about gutting higher education. We're talking about pruning the dead branches.

The Education Department received nearly 10,000 public comments during the rulemaking process and held five days of negotiated rulemaking in January 2026 through the AHEAD Committee. The rule carved out one exception worth noting: programs in cosmetology, barbering, and massage therapy — fields where workers earn tipped income — get at least a one-year delay so earnings data can reflect the "No Tax on Tips" policy that takes effect with the 2026 tax year.

Chris Madaio of the Institute for College Access & Success, a group that generally advocates for student borrowers, called the bar modest. "This is really a very low floor, right?" he told NPR. "High school earnings is not an exceedingly high metric for a program to meet."

He's right. The benchmark isn't "does this degree make you rich." It's "does this degree leave you better off than if you'd skipped college entirely." The fact that hundreds of thousands of students are enrolled in programs that can't clear that bar is the scandal. The rule is just the belated response.

Critics in the arts and humanities world argue the test reduces education to economics. Lee Ann Scotto Adams of the Strategic National Arts Alumni Project told NPR that creative workers "want to make an impact culturally," not just earn a paycheck. Cindy Flores, a music teacher in Oregon's Salem-Keizer School District carrying $55,000 in student loan debt, said it was "never about the money."

Nobody's arguing that music teachers shouldn't exist. The question is whether federal taxpayers should keep writing six-figure checks to programs that reliably produce graduates who can't service the debt. The programs losing funding aren't the ones at serious universities turning out working professionals. They're the ones at institutions where the business model depends on a steady flow of loan dollars and a deliberate lack of accountability for what happens after graduation.

The portfolio those loan dollars have built is now in crisis. As of March 2026, nine million borrowers carrying $220 billion in outstanding federal student loans are in default — 13 percent of the total $1.64 trillion federally managed portfolio. In the first quarter of 2026 alone, 2.6 million borrowers defaulted. The cosmetology schools, the certificate mills, the for-profit programs that can't demonstrate any earnings premium — they are a significant part of how the portfolio got there.

The first programs could lose Direct Loan eligibility as early as the 2028-2029 academic year. Schools can voluntarily begin reporting under the new system now. That's how you know which institutions are confident in their outcomes and which ones are hoping the next administration kills the rule before it bites — though with this version encoded in statute rather than just regulation, that calculation is harder than it used to be.

The government didn't ban a single degree. It just stopped guaranteeing the check.