US States Move to Close College Departments with Poor Graduate Outcomes

The Push for Accountability in American Higher Education

In recent months, a significant shift has occurred in how U.S. states and the federal government approach higher education funding. Driven by concerns over student debt, taxpayer dollars, and the return on investment for college degrees, policymakers are targeting programs with poor graduate outcomes. This movement prioritizes employment rates and earnings data, aiming to ensure that postsecondary education delivers tangible economic benefits. While controversial, these measures reflect broader anxieties about a challenging job market for the class of 2026, where employers predict flat hiring and stagnant opportunities.19

The core issue revolves around programs where graduates earn less than the median wage for high school diploma holders—roughly $43,000 annually or $20 per hour. Federal data reveals that about 2% of the nation's 36,000 undergraduate programs fall into this category, with certificate programs faring worse at one-third failing the threshold. Liberal arts fields like music, performing arts, communications, and social services are disproportionately affected, sparking debates on the value of education beyond immediate job prospects.72

Federal Rule Targets Low-ROI Programs Nationwide

The U.S. Department of Education finalized a landmark rule in January 2026, unanimously approved by stakeholders, that cuts federal student aid—including Pell Grants and loans—to persistently low-earning programs. Effective July 2026, this accountability framework defines failure as median earnings four years post-graduation below high school levels. Proponents argue it protects students from debt traps in high-cost, low-reward fields, addressing a $1.7 trillion loan portfolio burdened by poor outcomes.69

Under Secretary Nicholas Kent emphasized, “We’ve developed an accountability framework that institutions can work with, students will benefit from, and taxpayers can rightfully expect to improve outcomes.” Critics worry it could shutter vital programs in underserved areas, but experts like Mark Schneider from the American Enterprise Institute note it's a “low bar” aligned with basic expectations for college value.72

Indiana Pioneers State-Level Action

Indiana became the first state to enact binding legislation when Governor Mike Braun signed Senate Bill 199 in March 2026, mandating public colleges terminate low-earning programs unless waived by the governor-appointed Indiana Commission for Higher Education. Effective July 1, 2026, it uses the same federal earnings threshold, building on prior cuts to over 400 low-enrollment degrees.71

Chalkbeat analysis highlights risks to Indiana University Bloomington's music bachelor's (median ~$42,000), Ball State University's dance, and Purdue Northwest's English and software programs. Ivy Tech's teacher education associate also qualifies, despite serving as a transfer pathway. Universities decry the narrow economic lens, with a folklore student lamenting government overreach into education's purpose.70

Other States Follow Suit

Indiana's move has inspired proposals elsewhere. New Hampshire's House Bill 1774 bars state aid to low-earning programs, pending public hearing. West Virginia's HB 4587 and SB 618 aim to prohibit public funds for such degrees, while Nebraska's LB 1196 targets state and local support. These align with performance-based funding (PBF) systems in over 30 states, where 9.5% of public higher ed budgets tie to metrics like completion and employment.8290

Oklahoma's recent elimination of 41 programs and suspension of 21 more exemplifies broader fiscal pressures, though not solely earnings-driven. As enrollment declines and federal cuts loom, states view PBF as a tool for efficiency amid a projected tough job market for 2026 grads.108

Photo by Kyle Loftus on Unsplash

Fields Most Vulnerable: Beyond the Numbers

Humanities dominate low-earning lists: fine arts (8% at risk federally), ethnic studies, philosophy, and education certificates. STEM fields like engineering ($76k median) thrive, underscoring ROI disparities. Yet, underemployment affects 50%+ of grads initially, with unemployment at 5.6% for recent bachelor's holders versus 7.8% for non-college youth.9373

Areas like cosmetology (56% of failing certificates) and teacher prep face scrutiny, despite societal needs. For-profits bear 85% of at-risk certificate students, highlighting quality variances.70

Stakeholder Perspectives: Pros, Cons, and Debates

Supporters, including Michael Itzkowitz of Third Way, hail it as intuitive: students deserve earnings above HS levels. States guard taxpayer funds, per Schneider. Foes argue it undervalues liberal arts' civic role; Thomas Koehnline warns of economic reductionism. Equity concerns arise for MSIs under PBF, potentially widening gaps.72

For more on PBF impacts, see SHEEO's dataset.

Job Market Pressures Fueling Reform

Employers forecast a dismal 2026 market: NACE predicts 1.6% hiring growth, with Goldman Sachs noting college grad unemployment (5.7%) outpacing non-grads. Nursing (1.4% unemployment) leads; fine arts lags. This amplifies ROI scrutiny, as degrees cost $500k+ lifetime for some.6

Impacts on Students, Faculty, and Institutions

Closures disrupt 600k students potentially, per projections. Faculty face layoffs; IU folklore merges amid risks. Waivers offer flexibility, but redesign burdens small programs. Positively, it spurs high-demand shifts like trades.

Explore Indiana's law details.

Photo by Steven Van Elk on Unsplash

Adaptation Strategies and Solutions

Institutions pivot: stackable credentials, career-aligned curricula, apprenticeships. Indiana's prior low-enrollment cuts saved resources. PBF success stories (e.g., Florida #1 affordability) emphasize equity metrics.

Universities integrate employability: co-ops, data transparency via College Scorecard.

Future Outlook: Reform or Revolution?

With 30+ PBF states and federal backing, expect more closures, but innovation too. Balanced views urge valuing holistic education while prioritizing outcomes. As Gen Z questions ROI, higher ed must evolve for relevance.121