Will Cosmetology Schools Lose Federal Financial Aid?

Cosmetology schools could lose federal student loans under a new earnings rule the Trump administration finalized in July 2026, and the Department of Education's own analysis expects most of them to fail it. The rule compares what a program's graduates earn with what people who stopped at high school earn, and cuts off federal loans to programs whose graduates fall short two years out of three.

Nothing has been cut yet, and the first possible loss is still years away. This post sets out what the rule actually says, how many cosmetology programs the Department expects to fail it, what the federal data on the schools this site covers shows, and what it means if you are thinking about enrolling now.

What Is the New Federal Earnings Rule for Cosmetology Schools?

The new federal earnings rule for cosmetology schools is an accountability test that takes federal student loans away from programs whose graduates earn less than people with only a high school diploma. Congress created it in the law President Trump signed on 4 July 2025, the One Big Beautiful Bill Act, which the administration now calls the Working Families Tax Cuts Act. The Department of Education then wrote the regulations that apply it: it proposed them on 20 April 2026, took comments until 20 May, and published the final rule on 1 July 2026.

That last date matters, because much of the coverage still calls this a proposal. It is not. The rule is final, and it is effective on 1 July 2027 for most of its provisions. Under it, a program that fails the earnings test in two out of any three consecutive years it is measured becomes a "low-earning outcome program" and stops participating in the Direct Loan program. A school can appeal within 30 days of being told, on limited grounds.

The rule reaches only accredited schools, because only an accredited school can offer federal aid in the first place, so a beauty school that takes no Title IV money is untouched by it. The comparison is set by law. For undergraduate programs, which is where every cosmetology certificate sits, the Department measures graduates' earnings from federal tax data and compares them with working adults whose highest qualification is a high school diploma. The Department wrote in the final rule that it does not have the authority to change that comparison, and that it found no basis for a blanket exemption for cosmetology.

How Many Cosmetology Programs Could Fail the Federal Earnings Test?

93 percent of the cosmetology certificate programs subject to the federal earnings test are expected to fail it, according to the Department of Education's own analysis in the final rule: 840 programs out of 900. That is slightly better than the Department's estimate under the previous gainful employment rule, where it expected 99 percent to fail, but it is still close to the whole field.

The Department also counted the programs the test never reaches. There are 1,450 cosmetology certificate programs in its data. About 450 are exempt altogether, mostly because they are too small to produce a measurable cohort or because their students have not borrowed federal loans in the past five years, and about 100 more will not be tested for two years or longer. Counting those, the Department's "effective fail rate" for cosmetology is 58 percent of programs, and 80.6 percent of cosmetology students are in programs expected to fail.

The Department's position is that this is a feature, not a side effect. It argues the rule protects students from programs that regularly leave them with low earnings, and it estimates the overall rule shifts federal spending toward Pell Grants rather than cutting aid. The rule also records the other side: thousands of commenters, among them cosmetologists, estheticians, beauty school owners and students, told the Department it would cut aid to beauty programs, and many argued that tipped income goes under-reported in tax data. Both sides are describing the same 93 percent.

Do Cosmetology Graduates Earn More Than High School Graduates?

Cosmetology graduates do not earn more than high school graduates at most schools, five years after finishing. The College Scorecard records, for each school, how many of its cosmetology graduates out-earn a typical high school graduate five years out. Across the 615 schools on this site where that figure is published, fewer than half of graduates clear the line at 555 of them, which is 90%. At the median school, 37% of graduates do.

Fewer than half clearing the line means the school's median graduate is below it, which is the thing the federal test checks, so this is a close proxy for the rule. It is not the Department's own calculation: the rule measures earnings in a different year after completion and against a state-level high school benchmark, and these 615 schools are the ones large enough for Scorecard to publish the count. Even so, 90% sits close to the Department's 93 percent, which is what you would expect if both are describing the same field.

The gap between the two groups is real money. At the 555 schools where fewer than half of graduates clear the line, the median graduate earns $22,816 five years out; at the 60 schools where more than half do, $31,501. By school type, 91% of the 579 private for-profit schools with a figure fall under half, against 83% of the 29 public ones.

When Could Cosmetology Schools Lose Federal Student Loans?

Cosmetology schools could lose federal student loans only after a program has failed the earnings test twice in a three-year window, and the rule does not take effect until 1 July 2027. A student enrolling in the 2026-27 school year is not affected, and a program's first failing result does not stop loans by itself. Loss of eligibility comes after the second failure and after any appeal.

Most cosmetology programs also get extra time. The Department refused to inflate cosmetology graduates' reported earnings to allow for unreported tips, noting its own analysis that an 8 percent uplift would lower fail rates by only about 8 or 9 percentage points. Instead, for programs linked to occupations where at least half of workers report tip income, it will not apply the test until the earnings it measures come entirely from years when the No Tax on Tips deduction is in effect, 2026 through at least 2028 under current law. It says about 77 percent of cosmetology programs qualify for at least a one-year delay.

The logic of that delay is worth understanding. The first group of graduates the Department measures finished in the 2020-21 award year, and their earnings are taken from tax year 2025, before the tips deduction existed. Once tips can be deducted, a stylist has a reason to report them, so the Department is waiting for tax years in which reported earnings should be closer to real ones. Whether that lifts enough programs over the line is the open question.

Would Cosmetology Students Lose Pell Grants Under the New Rule?

Cosmetology students would not lose Pell Grants under the new rule in most cases, because the penalty for a failing program is the loss of federal loans, not grants. The final rule even lets a failing program voluntarily withdraw from the federal loan program after its first failing year, and in return it keeps its Pell Grant eligibility in later years.

The exception matters for beauty schools in particular. A failing program can lose Pell as well as loans if more than half of the federal aid money at its institution goes to students in failing programs, or if more than half of the institution's aided students are in them. A school that teaches only cosmetology, which is most beauty schools, can cross both lines with a single failing program. The rule gives such a school a way out: it avoids that consequence if it does not take part in the federal loan program, or agrees not to let students borrow in its low-earning programs.

So the realistic outcome at many beauty schools is not the end of federal aid but the end of federal borrowing, with Pell Grants still available. For a student that can be a better deal than it sounds, because borrowing is common in this field: the Scorecard file holds a median federal loan balance for graduates of 862 cosmetology schools, and our post on cosmetology school debt shows what those balances look like.

Should You Still Go to Cosmetology School in 2026?

You can still go to cosmetology school in 2026 with federal aid, and the rule gives you a better reason to choose the school carefully rather than a reason to stay away. Federal loans and Pell Grants are available at accredited cosmetology schools as before. Nothing in the rule touches state licensing either: a cosmetology license is earned the same way in every state whether or not your program passes the federal test.

1. Look up the school's earnings before you look at its loans. The College Scorecard publishes what each school's graduates earn, and the state rankings on this site show it on every card. A school whose graduates earn well above its neighbors' is the least likely to lose loan access.
2. Use grant money first. File the FAFSA and take the Pell Grant before borrowing. The rule is designed around protecting Pell, so the grant is the steadiest part of your aid package.
3. Price the public option. Community and technical colleges charge less for the same state hours, and our most affordable ranking lists them state by state. Less to borrow means less exposed to a school losing loans midway.
4. Ask the school directly. Ask how its program scored under the old gainful employment rule, whether it expects to qualify for the tips delay, and what it will do if it loses loan eligibility. A school that has thought about it will have an answer.

How Does the Earnings Rule Affect Cosmetology Careers?

The earnings rule affects cosmetology careers indirectly, through the schools, rather than through the license or the job. The rule does not change who can work as a cosmetologist, what a state board requires, or what salons pay. What it can change is how many schools there are, and how much it costs to train if federal loans disappear from part of the market.

The pay picture the rule is reacting to is the early-career one. Five years after finishing, the median cosmetology school's graduates earn $22,432 in the Scorecard data. The working trade as a whole does better: the Bureau of Labor Statistics puts the median for the 305,710 hairdressers, hairstylists and cosmetologists on payrolls at $35,790, and that survey excludes the self-employed and booth renters, who make up a large part of the field. Our cosmetologist salary page has the range by state.

One practical consequence follows for anyone entering the trade. Because the federal test reads tax records, reported income is the only income that counts in a school's favor, and, under the new tips deduction, reporting tips costs a stylist less than it used to. A graduating class that reports what it earns is part of how a school keeps its students' access to loans.

Where Do the Cosmetology Financial Aid Rule Figures Come From?

• US Department of Education, final rule, Federal Register, 1 July 2026 (91 FR 40136, docket ED-2026-OPE-0100) : the earnings test, effective dates, the two-of-three-years rule, the Pell and loan consequences, the tips delay, and every Department estimate quoted on this page.
• US Department of Education, notice of proposed rulemaking, Federal Register, 20 April 2026 , the proposal the final rule replaced.
• US Department of Education, College Scorecard, field of study data , CIP 12.04: graduates out-earning a typical high school graduate five years after completion, five-year median earnings, and loan balances. Every school count and median about the schools on this site is computed from this file.
• Federal Student Aid, Federal Pell Grants , the grant the rule is designed to preserve.
• Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2025 , hairdressers, hairstylists and cosmetologists (SOC 39-5012).