Within the so-called “Big Beautiful Bill” signed into law on July 4 is a significant shift in education and loan policy for colleges and universities around the country.

Along with a new cap on student loans for professional degrees, like medicine and law, there is a new policy to hold colleges accountable — tying student loan availability to graduate earnings.

Starting in July 2026, the U.S. Department of Education can cut off access to federal student loans for undergraduate degree programs that fail to lead to earnings better than the median pay of a working adult with a high school diploma.

In addition, graduate programs must lead to earnings equal to the typical worker with a bachelor’s degree in the same field of study.

According to Michigan School Data, a high school graduate earns a median income of $21,600 after one-year of employment and $31,900 after five years of employment.

In Michigan, the median income of a degree holder is $49,400 after one-year of employment and $65,700 after five years of employment.

With a year before the policy goes into effect, colleges and universities are awaiting the full details on the new policy.

“Like all the colleges and universities across the country, we are awaiting clear guidance from the Department of Education on how this new accountability metric will be implemented and enforced,” said Dawn Aubry, Oakland University’s vice president of Enrollment Management. “Until we understand exact data sources, formulas and benchmarks it is premature to predict specific impacts on Oakland University.”

Aubry pointed to some of the anomalies that would need to be factored into income equations for undergraduate and graduate programs.

“We are wondering how the Department of Education will calculate and define median earnings, will they adjust for regional job markets and cost of living, will fields like education, non-profit work, the arts, where societal impact is high, but wages are lower, be treated equitably?” said Aubry. “Also, how are smaller emerging programs going to be measured against national benchmarks? Those are questions we are hoping to have answers to soon.”

“The Department of Education has to either administer this or enforce it and right now they are still going through that process,” said Jack Wallace, director of governmental and lender relations at Yrefy, a student loan finance company based in Phoenix. “It is a question that I don’t know the answer to and I’m not sure many people do at this point, but they will begin working on it over the next few weeks.”

According to Jason Cohn from the Urban Institute, 12% of associate’s degree borrowers and 1% of bachelor’s degree borrowers are enrolled in programs likely to fail the high school earnings test and 3% of master’s degree borrowers are enrolled in programs that would fail the earnings test.

According to BestColleges.com, of the 20 most popular master’s degrees, only one field of study has an earnings threshold fail rate above 50%: mental and social health services and allied professions.

According to Wallace, the final bill was essentially a U.S. Senate version and not a combined reconciliation bill with U.S. House of Representatives policies included.

Wallace said the House proposed forcing colleges to have “skin in the game.” Under this model, institutions would be forced to pay a penalty based on the volume of their students’ unpaid loans.

The Senate took a different approach, focusing on “up-front accountability,” which is similar to the gainful-employment rule tying a program’s access to federal aid to the earnings of its graduates.

The gainful employment rule, instituted in 2023, incorporated a debt-to-earnings rate comparing annual student loan payments on debt borrowed for a program to the median earnings of federally aided graduates. The rule also measured earnings of a typical high school graduate in the labor force, which was included in the new bill signed into law on July 4.

Aubry said one possible effect of the new policy could be what higher education institutions offer students in the future.

“Tying aid eligibility solely to earnings really could discourage universities and colleges from offering programs in critical service areas where salaries are modest, but societal need is high,” she said. “This approach would risk narrowing educational opportunities rather than expanding them.”

Capping loans

The bill also establishes a ceiling on federal student loans for professional degrees, like medicine and law.

Graduate students will only be able to borrow $20,000 per year, with a lifetime cap of $100,000. For professional students, including those studying law and medicine, they could borrow $50,000 annually with a lifetime cap of $200,000.

This falls below the total cost of a master’s degree, which typically ranges from $44,640 to $71,140, according to the Education Data Initiative (EDI). Earning a law degree in the U.S. costs an average of $206,000, according to the EDI.

The median cost of attending four years of medical school for the class of 2025 is $286,454 for public institutions and $390,848 for private schools, according to the Association of American Medical Colleges (AAMC).

Over the span of 21 years, medical school tuition has gone up 81 percent, outpacing inflation, according to AAMC.

The law will cap how much graduate students and parents can borrow starting July 2026.

Parents who borrow for their children’s education are limited to $20,000 per year with a $65,000 lifetime maximum using the Parent PLUS loan program.

The Grad PLUS loan program, which allowed graduate students to borrow up to the full cost of attendance, will be eliminated.