In a bold move, the U.S. government has implemented a new law that holds colleges accountable for the post-graduation earnings of their students. This legislation, part of the One Big, Beautiful Bill Act, aims to ensure that higher education institutions are delivering value to their graduates. The crux of the matter is simple: if a college's graduates aren't earning at least the median wage of someone with just a high school diploma, the college may lose access to federal loans for its students.
The Earnings Threshold
The threshold set by this law is an interesting one. $36,000 a year, or roughly $18 an hour, is just above the minimum wage in California. It's a 'low bar', as Michael Itzkowitz, president of the HEA Group, puts it. If you're investing in a college education, you'd expect to earn more than minimum wage, right?
However, in places like the Bay Area, $36,000 barely covers housing costs, let alone other expenses. This raises a deeper question: is the threshold too low, or is it a reflection of the harsh economic realities faced by many graduates, especially in high-cost-of-living areas?
Programs Falling Short
According to Itzkowitz's analysis, about 90% of graduates from higher education courses in California earn at least $36,000. But there are around 300 programs, particularly in cosmetology, medical assisting, and the arts, where graduates fail to meet this mark four years after graduating.
Most of these failing programs are at for-profit colleges, which have a history of scrutiny due to poor outcomes and high tuition costs. But even community colleges and four-year universities aren't immune, with theater and fine arts programs at several California State University and University of California campuses also falling short.
The Response from Institutions
CalMatters reached out to various institutions, but the response was largely silence. The few schools that did respond offered explanations for their low-earning graduates. For example, the California Institute of the Arts, whose alumni include Don Cheadle and Tim Burton, pointed to the unique nature of arts careers and the time it takes to build them.
A History of Regulation Attempts
This isn't the first time the federal government has tried to regulate colleges offering poor returns on investment. Previous attempts, such as the 1989 rule banning certain federal aid for colleges with high student loan default rates, had initial success but eventually failed due to loopholes. Institutions, as Itzkowitz says, have learned to 'game the system'.
The Obama administration's attempt to tie federal financial aid to a college program's debt-to-income ratio met a similar fate, with the Trump administration ending the rules before they were enforced. Another Biden administration policy suffered the same fate when Trump was re-elected in 2025.
The New Law's Potential Impact
The new law, with its direct link to federal loans, has more 'teeth' than previous attempts, as Itzkowitz notes. However, it's not without its critics. Some schools argue that the earnings data is misleading and doesn't account for the unique nature of certain industries, like the arts or cosmetology, where business owners might not report all their income.
Christopher Madaio from the Institute for College Access and Success supports the law as a step in the right direction, despite its imperfections. He believes it provides a much-needed mechanism for holding colleges accountable for the outcomes of their programs.
Conclusion
This new law is a fascinating development in the higher education landscape. It raises important questions about the value of a college education, the role of government in ensuring that value, and the unique challenges faced by certain industries. While it's too early to predict the long-term impact, it's a bold step towards ensuring that colleges deliver on their promise of providing a better future for their students.
