The FAFSA Now Flags Low-Earning Schools: What It Means for Your Enrollment

Published on 1 October 2026 at 17:15

When first-year students file the FAFSA, they may now see a notice warning them that graduates of a school they picked earn less than people with only a high school diploma. If your school is flagged, students see that notice at the exact moment they're deciding where to enroll.

The 2027–28 FAFSA opened in late September, and the flag is part of it. Here's what it is, who it affects, and what your school can do now.

What changed

Federal Student Aid added a "lower earnings indicator" to the FAFSA, effective December 7, 2025. It continues on the 2027–28 form.

Here's how it works:

The Department compares the median earnings of a school's graduates four years after completion to the median earnings of high school graduates in the same state.
If the school primarily serves out-of-state students, the comparison uses national high school earnings instead.
The data comes from the College Scorecard and is updated as the Scorecard is updated.
After a student submits the FAFSA, a notice appears on their FAFSA Submission Summary if any school they selected falls below the benchmark.
Students can click through to see earnings for every school on their list, then keep, remove, or add schools.

The Department describes the notice as informational only. It doesn't change a student's eligibility for aid.

Who it affects

The notice is shown only to first-year undergraduate applicants, which is exactly the group most schools are recruiting right now.

It's based on school-wide earnings, not individual programs. So a school with one strong program and several lower-earning ones can still be flagged as a whole.

According to the Department, less than 3% of undergraduates attend a school that falls below the benchmark. But for the schools that do, the impact on enrollment can be significant. Career schools with programs in lower-wage fields have the most reason to check where they stand.

Key dates

December 7, 2025: The lower earnings indicator goes live on the FAFSA.
Late September 2026: The 2027–28 FAFSA opens, with the indicator carried over.
October 1, 2026: Institutions' first deadline to submit program and student data under the new earnings accountability rule. It repeats every October 1.
Early 2027: The Department calculates the first "Do No Harm" earnings test.
2028–29 award year: The earliest that programs failing the test in both 2027 and 2028 could be designated "low-earning outcome programs" and lose Direct Loan eligibility.
One year later: Programs tied to tipped occupations, such as cosmetology, barbering, and massage therapy, get a one-year delay before consequences apply.

Why it matters now

Students are acting on it. The Department reported that about 25% of students who saw the lower earnings flag changed their school selection. For a flagged school, that's a real share of incoming applicants reconsidering before they ever talk to admissions.

It's also a preview of what's coming. The FAFSA flag is a disclosure, but the separate "Do No Harm" earnings test has real consequences. Undergraduate programs, including certificates, that fail the test in two out of three consecutive years lose Direct Loan eligibility. And if more than half of a school's Title IV students or funds are in failing programs, the school can lose all Title IV aid, including Pell. The flag looks at the school as a whole, while the earnings test looks at each program, but both use the same kind of comparison.

If your earnings data is weak today, the time to address it is before 2028, not after.

What schools should do now

Check your data. Schools can see the earnings data behind the indicator on the FSA Data Center at StudentAid.gov/data-center/school/earnings. Find out whether you're flagged and how close you are to the line.
Look program by program. Even if your school isn't flagged, individual programs may fall short under the Do No Harm test. Know which ones are at risk.
Prepare your admissions team. If you are flagged, students and families will ask about it. Give your team clear, honest talking points about outcomes, placement, and support.
Review your program mix and outcomes. Look at job placement, employer partnerships, and pathways to higher-paying roles. Real improvements here help on both the FAFSA flag and the earnings test.
Plan for 2028 now. Program changes, new offerings, or funding alternatives take time. Starting early gives you options.

How The ECS Firm can help

Our Title IV Institutional Impact Assessment looks at your institution specifically. We review your exposure to the earnings test, what students may see on the FAFSA, how new loan limits affect your students, and whether your short-term programs could qualify for Workforce Pell. You get a clear, prioritized action plan.

For career schools that need funding options beyond federal aid, the ECS Funding Bridge can help you build them.

To talk through where your school stands, contact us at info@ecsfirm.com or 817.510.0046.