WASHINGTON, June 30, 2026, 16:03 EDT
- Education Department data shows 3.9% of nonprofit Title IV aid dollars land in projected failing programs under the final earnings rule, up from 0.8%. Exposure for the proprietary sector drops to 14.9%, down from 28.6%.
- Roughly 7 million SAVE borrowers need to move to new plans, and new caps on graduate, professional, and parent borrowing take effect July 1.
- A court order put out a temporary list of professional degrees, keeping some health programs at higher federal caps but putting some theology programs under lower ones.
July 1 student loan changes are shaking up where the risks land. New Department of Education data show fewer for-profit college programs now face losing federal aid under the final earnings rule. Nonprofit schools, on the other hand, now have almost five times more exposure tied to programs flagged as likely to fail. Investors now need to look past tax status and focus on what programs each school runs.
Investors looking at Grand Canyon Education NASDAQ:LOPE, Strategic Education NASDAQ:STRA, Perdoceo Education NASDAQ:PRDO, or private lenders like SLM Corp NASDAQ:SLM and SoFi Technologies NASDAQ:SOFI usually start with federal-aid exposure. The next thing they watch is private credit demand from families once federal limits are reached.
There’s a big pool of borrowers. About 43 million people in the U.S. carry close to $1.7 trillion in student loans. Around 7 million of them were in the SAVE plan, which is now being phased out. “It may be a bit of an overcorrection,” Clare McCann, policy director at the Postsecondary Education & Economics Research Center, told ABC News. She said it could impact “student access.” ABC News
Education Under Secretary Nicholas Kent told ABC, “affordability is the name of the game,” as the department aims to push schools to limit tuition with new caps. New borrowers get fewer repayment options and less federal credit for grad programs. ABC News
| Change | Before July 1 | July 1 rule | Investor read |
|---|---|---|---|
| SAVE repayment | About 7 million in SAVE | 90-day window to switch plans | Some borrowers face bigger payment risk |
| New repayment plans | Multiple income-driven plans available | New borrowers can pick RAP or Tiered Standard | Servicing and default risks get reset |
| Graduate borrowers | Direct loans and Grad PLUS covered total costs | $20,500 annual limit, $100,000 lifetime | Graduate program prices may face pressure |
| Professional borrowers | Grad PLUS covered more expenses before cap | $50,000 max per year, $200,000 total | Field type matters more now |
| Parent PLUS | Borrows could go up to cost minus aid | $20,000 yearly cap, $65,000 per child | Private lenders may see more opportunity |
The separate earnings rule is the main revenue yardstick for schools. Undergrad programs have to prove grads earn more than the typical high school grad in their state. For grad programs, alumni need to earn more than people with bachelor’s degrees in matching fields. If a program fails in two of three award years, it loses access to federal loans. Failing three times can cost it all Title IV aid, including Pell grants. Kent called this a “hard reset button” for programs “underwritten by federal taxpayers.” U.S. Department of Education
| Sector | Annual Title IV volume | Current rule: share in projected failing programs | Final rule: share in projected failing programs | Change |
|---|---|---|---|---|
| Public | $52.80 bln | 0.5% | 0.5% | No change |
| Nonprofit | $33.95 bln | 0.8% | 3.9% | Up |
| Proprietary | $17.05 bln | 28.6% | 14.9% | Down |
| Total | $103.79 bln | 5.2% | 4.0% | Down |
Field data didn’t match assumptions about “career school” risks. Beauty and personal-care undergrad certificates still post the worst failure rates, but this rule also ropes in master’s and bachelor’s programs that got off lighter under the previous gainful-employment test.
| Program or field | Credential | Current rule: projected failing programs | Final rule: projected failing programs | Investor read |
|---|---|---|---|---|
| Cosmetology and personal grooming | Undergraduate certificate | 99.3% | 93.2% | Beauty schools still under real pressure |
| Culinary and personal services | Undergraduate programs | 83.0% | 77.3% | This is still the most at-risk major group |
| Mental and social health services | Master’s | 1.1% | 37.8% | Risk jumps for graduate programs |
| Humanities and liberal arts | Graduate programs | 2.1% | 21.0% | Nonprofit sector exposure climbs |
| Drama, theatre arts and stagecraft | Bachelor’s | 0.6% | 14.0% | Arts field flagged now |
A legal dispute added new questions right before the rule kicked in. On June 29, Federal Student Aid said it would call programs like nursing, physician assistant, physical therapy and occupational therapy professional programs for now, following a June 24 court order that paused part of the professional-degree rule. Theology and theological studies did not get the professional label during the stay, except for the master of divinity.
The timing slows the initial blow to stocks. Jon Fansmith, senior vice president at the American Council on Education, told the Washington Post there could be “negative unintended consequences.” But he said the first programs to lose loan access wouldn’t be hit until summer or fall 2028. Pell Grants and other aid could face cuts from 2029. The Education Department estimate puts 4% of Title IV aid in programs that could be shut out after the delay. The Washington Post
Career Education Colleges and Universities CEO Jason Altmire said he supports having all schools meet the “same standards,” but argues the earnings formula does not account for wage gaps in some careers. The Education Department also told colleges they can cut annual loan caps by program starting July 1 if done consistently, particularly for fields with lower pay or more loan defaults. The Washington Post
Private lenders could see a funding gap from the July 1 cap table as Grad PLUS and Parent PLUS limits kick in. Raw loan volume doesn’t tell the whole story. Some schools might put their own caps on borrowing before private options are needed, and new federal data still flags weak earnings in some programs that would need more credit.
