Education Department Overhauls Student Loan and Gainful Employment Rules

The United States Department of Education concluded negotiations on a proposal to overhaul student-loan borrowing accountability and revise the gainful employment rule. Part of President Donald Trump's spending legislation, the overhaul introduces new income-driven repayment plans and borrowing caps for graduate and professional students, set to take effect in July 2026.

Undersecretary Nicholas Kent described the initiative as a way to ensure institutions are held accountable and that taxpayer investments are used wisely. The revised gainful employment proposal removes the debt-to-earnings ratio test, which previously capped payments at 8% of annual earnings, in an effort to reduce complexity. Additionally, programs that fail the earnings premium test can maintain Pell Grant funding unless at least half of their Title IV funds are directed toward failing programs. These specific requirements are scheduled for implementation in the fall of 2027.

Critics of the plan suggest the changes could jeopardize students. Carolyn Fast of The Century Foundation warned that removing the debt-to-earnings test may leave low-income students with debt that is unaffordable relative to their potential earnings.