Trump Advances Plan to Alleviate Unaffordable Student Debt

Overview of the Department of Education’s New Proposals

The Department of Education has finalized its plans to enhance accountability in student-loan borrowing. One of the key proposals involves revising the gainful employment rule, a policy aimed at ensuring that students do not take on excessive debt. While the intention was to simplify the process, some experts have expressed concerns that these changes might weaken the protections for students.

The Debate Over Student Debt Affordability

Determining whether one can afford student debt is a complex issue. President Donald Trump’s Education Department spent a week discussing this matter, and on Friday, they reached an agreement on their proposal to strengthen accountability in student-loan borrowing. This includes revising the gainful employment rule.

Nicholas Kent, the department’s undersecretary, described the proposal as "a game changer." He emphasized the goal of building a future where higher education works for everyone, empowering students to succeed, ensuring taxpayers’ investments are used wisely, and holding institutions accountable for delivering results.

Key Changes in the Proposed Rule

Some of these changes are part of Trump’s student-loan repayment overhaul included in his "big beautiful" spending legislation. The Department of Education has already completed negotiations on certain student-loan provisions in the bill, such as creating new income-driven repayment plans and setting borrowing caps for graduate and professional students. These changes will start taking effect in July.

The revisions debated this week include eliminating the debt-to-earnings ratio test, which ensured that a borrower’s student-loan payments do not exceed 8% of their annual earnings. The department claims this will reduce complexity. However, some education policy experts worry that removing this test could leave students with unmanageable debt.

Carolyn Fast, the director of higher education policy at The Century Foundation, stated that streamlining the metrics makes sense, but the proposal risks leaving students with debt they cannot repay. She highlighted the potential consequences of eliminating the debt-to-earnings test.

The Impact of the Gainful Employment Rule

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Read more about student-loan coverage:

• Student-loan borrowers are preparing for higher monthly payments after Trump moves to eliminate their affordable plan.
• How Trump’s big spending bill will overhaul repayment for millions of student-loan borrowers.
• Student-loan borrowers in default are set to see their paychecks garnished in early January.
• How the gainful employment rule works and what could change.

Historical Context of the Gainful Employment Rule

The gainful employment rule was first established by former President Barack Obama in 2014. It cut off federal student aid for schools offering programs that left students with unaffordable debt compared to their likely postgrad income. Trump repealed the rule during his first term in 2019, and former President Joe Biden reinstated it. The existing version went into effect in July 2024.

Biden’s version of the rule used two separate metrics: a debt-to-earnings test and an earnings premium test. The latter measured whether a typical graduate from the program earns at least as much as a typical high school graduate in their state.

In addition to eliminating the debt-to-earnings test, the Department of Education’s proposal would allow programs to continue receiving Pell Grant funding even if they fail the earnings premium test. However, if at least half of Title IV funds are going toward programs that fail the earnings premium test, the department would strip all funding from the failing program.

While removing Pell eligibility for some failing programs is better than nothing, the two changes could weaken protections for students, according to Fast. She warned that low-income students might exhaust their limited Pell Grant eligibility on programs that don’t provide a return on their investment.

Research coauthored by Fast found that in 2022, about 169,000 students received Title IV aid to enroll in programs that would pass the earnings premium test but fail the debt-to-earnings test.

Implementation Timeline and Legislative Push

The department’s negotiator said that the gainful employment changes will not be ready by the start of the 2026 academic year. Therefore, the new requirements are set to go into effect in the fall of 2027.

Lawmakers have previously advocated for a strengthened gainful employment rule. A group of Democratic lawmakers in 2023 called on the Biden administration to put forth a rule that protects students who enroll in "postsecondary programs that saddle students with unaffordable debt and provide low financial returns."

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