Beginning this month, colleges, universities and short-term certificate programs across the country face a new financial reality: their students’ ability to borrow federal money now hinges on how much graduates actually earn once they leave school.
Under a provision that took effect this month, schools must show that graduates of a given program earn at least as much as the typical worker in their state who holds only a high school diploma — in California, that benchmark is roughly $36,000 a year, or about $18 an hour, just above the state’s minimum wage. Programs that fail to clear that bar risk losing their students’ access to federal loans.
It’s not a particularly high bar to clear, according to Michael Itzkowitz, president of the HEA Group, a research organization that studies higher education policy. “If you go to college, you expect to earn at least minimum wage, and probably more than that,” he said.
In high-cost regions such as the Bay Area, $36,000 a year barely covers rent, let alone other living expenses.
Of nearly 3,000 California higher education programs reviewed by the U.S. Department of Education, about 90% produced graduates who cleared that income threshold, according to Itzkowitz’s analysis. But roughly 300 programs statewide — many in cosmetology, medical assisting, and the arts — fell short, with graduates earning less than $36,000 four years after finishing their studies.
Most of the underperforming programs are run by for-profit institutions, sometimes described as trade schools or vocational colleges, which have faced scrutiny for decades — including from state lawmakers — over poor outcomes and steep tuition costs. But the list also includes programs at public colleges and universities, among them theater and fine arts programs at eight California State University campuses and three University of California campuses.
Schools still have at least two years to prove to federal regulators that their graduates meet the new earnings standard. If underperforming programs don’t improve, their students could lose access to federal loans starting July 1, 2028.
CalMatters reached out to more than 15 universities, community colleges and for-profit trade schools to ask about the future of programs with low-earning graduates, but few responded. Spokespeople for both the UC and CSU systems said their institutions are reviewing the new federal rule but declined to answer most other questions. CSU spokesperson Amy Bentley-Smith said campuses are working toward “constructive solutions.”
One of the few schools willing to discuss the issue was CalArts, the private arts institute near Santa Clarita whose alumni include actor Don Cheadle, filmmaker and animator Tim Burton, and comedian Paul Reubens, better known as Pee-wee Herman. Graduates of the school’s fine arts, film and photography programs report some of the lowest earnings of any bachelor’s degree program in the state — just under $30,000 four years after graduation.
School officials offered several explanations in an interview, pointing to data limitations and fundamental differences between arts careers and more traditional career paths. Ranu Mukherjee, dean of the school’s film and video program, said creative careers often take longer to become financially stable, and many graduates deliberately turn down higher-paying corporate jobs to pursue their craft.
Just over 30 fine arts, music, theater, film and photography programs in California fail to meet the new earnings test.
Mukherjee said CalArts has no plans to shut down any of the affected programs, though she emphasized the importance of being transparent with students about potential future consequences. “It’s hard to imagine CalArts without an undergraduate film or arts program,” she said. “It’s in our name.”
About 100 other fine arts, music, theater, film and photography programs in California do meet the new income requirement, according to current Department of Education data. Among them are UC Berkeley’s film program and fine arts programs at San Diego City College and the University of Southern California, where graduates report earning more than $70,000 four years after finishing school.
Regulatory Ping-Pong
Over the years, the federal government has repeatedly tried — and often failed — to hold accountable college programs that leave graduates with poor financial outcomes.
Back in 1989, the U.S. Department of Education barred colleges from distributing certain forms of federal aid if too many of their students had defaulted on student loans. The rule worked at first, forcing the closure of several low-performing schools, but loopholes eventually emerged.
“Institutions have learned how to game the system,” Itzkowitz said, noting that many schools encourage low-income borrowers to request loan deferments or forbearance, which delays repayment and masks default rates. “Nobody fails.”
The Obama administration later proposed a rule tying federal financial aid eligibility to the debt-to-income ratio of specific college programs, meaning schools whose graduates carried high debt and low earnings would face consequences. The Trump administration rescinded those rules before they took effect. A related Biden-era policy met the same fate in 2025, once Trump returned to office.
“We’ve been playing regulatory ping-pong,” Itzkowitz said. “The Department of Education would say, ‘We’re going to do this, we’re not going to do that.’ This law carries more weight because it was written by Congress and signed into law.” That law — known as the One Big Beautiful Bill Act, or HR 1 — was signed on July 4 of last year and took effect this month.
Itzkowitz’s analysis draws on preliminary Department of Education data using 2022 and 2023 tax returns from graduates of the 2017-18 and 2018-19 school years. Many schools that failed the new test have pushed back, arguing the numbers are misleading.
It’s too blunt a measurement, wrote Angelica Muro, chair of the visual and public art department at Cal State Monterey Bay, in an email to CalMatters. The new earnings standard “undermines the social benefits of critical thinking and the immense sociocultural value the arts provide,” she added.
According to federal data, fine arts graduates from the school earned around $34,000 four years after graduating, but the Department of Education doesn’t track which industry graduates work in or whether their job relates to their degree. The data also doesn’t account for California’s regional differences, such as the smaller creative economy in the largely rural coastal area surrounding Cal State Monterey Bay, Muro wrote.
Some of the highest-earning fine arts programs are located in the Bay Area, Los Angeles and San Diego, where creative-industry jobs and salaries tend to be higher. But even some universities in rural counties and high-poverty regions — including Stanislaus State, Fresno State, Cal State Bakersfield and Chico State — have fine arts programs that meet the new earnings threshold.
Another Loophole?
Of the roughly 300 California programs that failed the new earnings test, more than a quarter are cosmetology or personal care programs, covering fields such as manicuring, hairstyling and skin care. Numerous studies have long documented struggles within cosmetology training, including high debt loads and low post-graduation earnings.
Graduates of the Shasta School of Cosmetology in Redding, for instance, reported earning just over $12,000 four years after finishing the program — far below the state poverty line. CalMatters reached out to 10 cosmetology schools, mostly private, for-profit institutions with the lowest-earning graduates, but none responded.
As the Department of Education finalized its interpretation of the new law, cosmetology schools argued the earnings data was unfair because it doesn’t account for the fact that many barbers and salon owners run their own businesses and may not report tips as taxable income. The department granted these programs an additional year to comply, meaning their graduates won’t lose access to federal loans before July 1, 2029, at the earliest.
The cosmetology industry’s argument rests on “pretty flimsy grounds” and creates another loophole allowing schools to dodge accountability, said Christopher Madaio, senior counsel for federal and state accountability at The Institute for College Access and Success, which advocates for affordable higher education.
Still, he said he supports the new earnings law as a first step. “It wasn’t ambitious enough, and it’s not perfectly written,” he said. “But yes, I’m glad to see it being implemented.”
Original source: CalMatters
