About 300 California college programs could eventually lose access to federal student loans after preliminary data placed their graduates below a new earnings benchmark. The federal accountability rule took effect July 1, 2026, and covers public, nonprofit, and for-profit institutions.
The U.S. Department of Education will issue the first official results in early 2027. No California program has lost loan eligibility, but repeated failures could trigger restrictions during the 2028-2029 award year.
California’s undergraduate benchmark is about $36,000 a year, or roughly $18 an hour for full-time work. It reflects the median earnings of workers ages 25 to 34 with a high school diploma as their highest credential.
Federal Rule Connects Loans to Earnings
Undergraduate programs must demonstrate that their alumni earn more than comparable high school graduates. Graduate programs face a separate comparison with workers whose highest credential is a bachelor’s degree.
The department measures median earnings four years after students complete a program. The earnings rule now applies across higher education, rather than targeting only career schools.
A single failure does not end federal support. A program must fail during two of three consecutive award years before losing access to Direct Loans.
After an initial failure, colleges must warn current and prospective students. Schools may continue the program, withdraw it from the loan system, or arrange a closure and teach-out plan.
A second failure within two years would classify the course as a low-earning program. The institution could appeal by identifying an error in the federal calculation.
Career Certificates Face Greatest Exposure
Most California programs cleared the threshold. An analysis of nearly 3,000 programs found that about 300 programs failed the preliminary test.
Many of the lowest-performing programs operate at for-profit career colleges. Cosmetology, personal grooming, medical assisting, and other occupational fields appeared frequently.
More than one-quarter of the California programs below the threshold prepare students for cosmetology or personal-care work. Some graduates reported earnings below $20,000 four years after training.
Graduates of the Shasta School of Cosmetology in Redding earned slightly above $12,000 annually in the period examined. That amount was about one-third of California’s current benchmark.
Certain cosmetology, barbering, and massage programs received a one-year delay before failures can count toward penalties. The delay allows future data to reflect tax changes affecting tipped income.
Those programs are not exempt. Affected students may retain access to loans until at least the 2029-2030 award year.
Certificate programs face greater exposure nationally. A review of federal data found that certificate failures reached 29%, compared with about 2% of associate and bachelor’s programs.
Arts Degrees Draw Scrutiny
The preliminary list also includes programs at public universities. Theater and fine arts courses at eight California State University campuses and three University of California campuses fell below the benchmark.
More than 30 California programs in theater, music, photography, film, and fine arts failed to meet the standard. About 100 programs in similar subjects passed.
Graduates of UC Berkeley’s film program and fine arts programs at San Diego City College and the University of Southern California earned more than $70,000 four years after completion. Programs at Fresno State, Chico State, Stanislaus State, and Cal State Bakersfield also passed.
California Institute of the Arts reported earnings below $30,000 for graduates of several creative programs. Ranu Mukherjee, dean of its film and video school, said the institution did not plan to eliminate programs central to its mission.
Arts educators argue that earnings data cannot fully capture freelance work, self-employment, or careers that take longer to develop. The figures also do not identify whether graduates work in jobs related to their degrees.
The rule still treats earnings as the controlling measure. Colleges cannot avoid a failing result by citing a program’s cultural or social contribution.
Preliminary Figures Carry Limits
The California findings use 2022 and 2023 tax information for students who completed programs during the 2017-2018 and 2018-2019 academic years. Those graduates later entered a labor market disrupted by the pandemic.
The data may not reflect recent curriculum revisions, tuition changes, career services, or employer partnerships. They also offer limited information about part-time work and regional wage differences.
Separate research found that most California credentials still deliver measurable value. Across 2,695 programs, 112 programs lacked returns because many graduates earned less than high school graduates five years after completion.
That finding supports a program-level approach rather than a blanket judgment about college. Nursing or business courses may perform well, whereas an arts or occupational certificate at the same school may fall short.
Official Results Begin in 2027
Colleges have time to improve employment outcomes before repeated failures produce sanctions. Schools can strengthen internships, licensing preparation, employer partnerships, and career counseling.
They may also reconsider tuition and borrowing levels for programs leading to low wages. The rule evaluates earnings rather than debt, but high costs can amplify the impact of low pay.
The Education Department expects official results in early 2027 for the 2027-2028 award year. Programs failing in both 2027 and 2028 could lose Direct Loan eligibility the following year.
No affected California program faces an immediate cutoff. The next major update will come when federal officials release the first calculations and notify colleges of initial failures.
