Federal Financial Aid, Beauty School Accountability and Closures, and the Future of Cosmetology Education

Understanding the policy debate around cosmetology schools, student debt, and workforce pathways

Federal financial aid for cosmetology, barbering, and beauty education programs is receiving renewed attention because of federal accountability rules tied to graduate earnings. These rules could affect whether some programs remain eligible for federal student aid.

For beauty schools, the concern is practical. Many cosmetology, barbering, and beauty-related programs rely on federal aid to support enrollment. If aid eligibility changes, enrollment could fall, and some programs may struggle to remain open. In states where school-based training remains the primary pathway to licensure, sudden disruption could affect students, workers, employers, and communities. Those concerns deserve to be taken seriously, but the debate should not stop there.

The more important question is not whether the current education system should be preserved exactly as it is. The question is whether beauty and grooming education can become more affordable, transparent, accountable, and connected to real workforce outcomes.

The U.S. Department of Education’s Financial Value Transparency and Gainful Employment rule was designed to address career-training programs that leave students with unaffordable debt relative to earnings or with no earnings gain compared to workers with only a high school education. That concern is directly relevant to cosmetology and barbering education because these programs often require students to pay high tuition for credentials tied to relatively modest early-career earnings.

What is the Gainful Employment rule?

The Gainful Employment rule is a federal accountability framework for career-training programs that receive federal student aid. It evaluates whether graduates earn enough after completing a program to justify the debt they took on. This matters because federal financial aid is not only an access tool. It is also public funding. When taxpayer dollars support career-training programs, policymakers have a responsibility to ask whether those programs produce meaningful value for students.

The Department of Education and Federal Student Aid have also described newer accountability measures through the Student Tuition and Transparency System, or STATS, and related Earnings Accountability provisions. Federal Student Aid identifies the April 20, 2026, posting as a proposed rule that would implement statutory changes to Title IV federal student aid programs.

In plain terms, the policy direction is moving toward a basic standard: federally supported programs should demonstrate that students are not being left financially worse off by enrolling.

That standard should not be understood as anti-training or education. It is a public-value test.

What is the Earnings Premium test?

The new Earnings Premium test is one of the accountability measures at the center of this debate. It asks whether program graduates earn more than comparable adults who did not complete postsecondary education. Federal Student Aid guidance explains that the Financial Value Transparency and Gainful Employment regulations establish two metrics: a debt-to-earnings ratio and an earnings premium.

In practical terms, the Earnings Premium test asks a simple but consequential question:

Do graduates earn more after completing the program than they likely would have earned without it?

For beauty and grooming programs, this is significant because earnings data may not fully capture the industry’s complexity. Many workers earn tips, work part-time, move into booth rental or self-employment, or experience uneven income growth during the first years after licensure. At the same time, these labor-market realities are part of the reason policymakers are questioning whether high-cost programs should continue receiving federal aid without stronger transparency requirements.

The Department’s proposed STATS and Earnings Accountability framework for April 2026 would use earnings outcomes to determine whether programs meet federal standards. The Department stated that the proposal would hold institutions and programs accountable for low-earning outcomes regardless of tax status or sector.

The Earnings Premium test should not be understood as an automatic mechanism for school closure. It is better understood as a compliance pressure point. Programs that fail may need to lower tuition, improve completion and placement outcomes, strengthen employer partnerships, reduce student debt, redesign curriculum, or connect students to paid training and apprenticeship pathways. That distinction matters. A failed Earnings Premium result does not necessarily mean a school must close. It means the school must confront whether its cost, structure, and graduate outcomes meet the standard required for public subsidy.

Beauty School Accountability and Closure: Why is cosmetology education under scrutiny?

The cosmetology education system has been criticized from multiple perspectives. New America’s 2025 report, Cut Short: The Broken Promises of Cosmetology Education, argues that cosmetology education in the United States needs serious reform, citing burdensome debt, weak outcomes, and gaps between what students expect from school and what programs provide. New America’s related reporting states that students often pay high costs to meet licensing requirements for an education that may not provide the financial return students expect.

The Institute for Justice reaches a similar concern from a licensing-reform perspective. Its report, Beauty School Debt and Drop-Outs, examines the costs, debt, and completion outcomes associated with mandatory cosmetology schooling and argues that the current model often transfers wealth from students and taxpayers to cosmetology schools while failing to improve student outcomes reliably.

These sources do not come from the same ideological position. New America focuses on student protection, federal aid, and institutional accountability, while the Institute for Justice focuses on occupational licensing, economic liberty, and barriers to entry. Yet both point toward the same structural concern: cosmetology education is expensive, outcomes are uneven, and the current model requires serious reform.

Licensing is part of this larger education problem because, in most states, beauty and grooming workers cannot enter the labor market without first completing state-required training and obtaining a license. Economists have long studied cosmetology licensing as a labor-market restriction. Adams, Jackson, and Ekelund’s study, “Occupational Licensing in a ‘Competitive’ Labor Market: The Case of Cosmetology,” found that state occupational regulation in cosmetology was associated with a significant net decrease in quantity in the market, meaning licensing requirements can restrict entry even in an otherwise competitive service industry.

At the same time, licensing cannot be understood only as an economic barrier. Historical scholarship shows that barbering and beauty licensing developed through a mix of public health concerns, professionalization efforts, labor-market protections, and exclusionary practices. Tanner Corley’s “Regulating Beauty: The Licensing of Barbers and Beauticians in Alabama and the Nation” examines how racialized licensing laws affected barbers and beauticians as they competed for clientele and professional legitimacy.

This history matters because the current debate over federal aid, school costs, and alternative pathways is not only about tuition. It is also about who gets access to the profession, who benefits from existing training requirements, and whether regulation is being used to protect the public or to preserve a costly entry system.

Why are some schools concerned about closure?

School advocates have warned that earnings-based accountability could place many cosmetology programs at risk. A February 16, 2026, letter from the American Association of Career Schools to U.S. Secretary of Education Linda McMahon argues that the draft accountability framework could result in the closure of nearly all cosmetology programs in the United States. The letter states that 92.5% of cosmetology programs would fail the proposed Earnings Premium metric, based on AACS’s reading of Department projections.

This concern should be considered carefully. If many programs are projected to fail, policymakers may need to examine the design of the metric, the transition timeline, the quality of available earnings data, and how the rule would affect students in states with limited alternative training pathways.

At the same time, it is important to distinguish between the failure of an accountability metric and automatic closure. A program that fails the Earnings Premium test may face compliance pressure. That pressure could lead to several possible responses: lower tuition, revised program length, improved placement support, stronger employer partnerships, better student disclosures, hybrid models, or new work-based training options. Closure is one possible outcome, but it is not the only possible outcome. This distinction matters because the policy debate can become distorted when compliance challenges are described only as closure risks. A more precise discussion would ask which programs can adapt, what supports are needed during transition, and how students can be protected if programs do lose eligibility.

Treating noncompliance as inevitable closure narrows the policy conversation. It frames reform as destruction, when the more accurate question is whether current programs can adapt to meet public funding standards. If a program can survive only when students take on federal debt, even as it fails earnings-based accountability tests, then the underlying issue may not be the accountability rule alone. It may be the program’s cost structure, created to accommodate federal financial aid.

The cost structure of beauty education

It is important to note that beauty schools existed long before they had access to federal financial aid. However, the federal aid system has inflated program costs over the last 40 years. One reason federal aid policy matters is that beauty education can be expensive relative to expected earnings. The average beauty school tuition is approximately $16,251, compared with an estimated $6,000 for apprenticeship training, but it can be much lower. It also compares student debt burdens of approximately $7,000 to $11,000 for beauty school students against $0 debt in the apprenticeship model.

The economic difference becomes larger when lost wages are included. A student in school may pay tuition while also forgoing income. The full economic cost of beauty school is estimated as tuition plus lost wages, or ~$30,000. By contrast, apprenticeship training may offset training costs because apprentices earn wages while learning. These figures do not argue that all schools are poor quality or that all apprenticeships are automatically better. They illustrate why cost, earnings, and financing structure matter when evaluating training pathways.

If federal aid allows high-cost programs to keep tuition above what the labor market can justify, then accountability rules may create pressure for market correction. That correction may be difficult, but it is not inherently anti-education.

Accountability is not the same as elimination

Accountability does not have to mean eliminating cosmetology education. It should mean asking whether federally supported programs are affordable, transparent, and effective. Students should be able to compare program cost, completion rates, licensure outcomes, job placement, earnings, debt levels, practical readiness, and available training alternatives before enrolling. Employers should be able to trust that graduates are prepared for entry-level work. Taxpayers should be able to expect that federal aid supports programs with measurable public value. That is the core of the federal accountability question.

The Department of Education’s 2023 Gainful Employment rule specifically addresses programs that prepare students for recognized occupations but may leave them with unaffordable debt or no earnings gain compared to workers with no more than a high school education. In a sector where students often enter low-wage, part-time, commission-based, tipped, or self-employed work, this concern is not abstract; it is central to the financial defensibility of the education model.

Apprenticeships and lower-cost pathways

Apprenticeships are often discussed as one possible response to high training costs. In a federal apprenticeship model, aspiring professionals train while earning wages and gaining supervised practical experience.

From an economic standpoint, apprenticeships can reduce direct tuition costs and opportunity costs, as students remain in the labor market during training. They may also connect training more directly to employer needs. Lower-cost pathways can increase supply, reduce deadweight loss, and move the training market closer to an efficient equilibrium. However, apprenticeships require oversight. Beauty and grooming work involves sanitation, chemical exposure, bodily contact, infection control, client safety, and worker safety concerns. Moreover, there are labor-protection issues, including wage theft, exploitation, and the need for stronger training around worker safety and legal rights.

For that reason, apprenticeship expansion should not be treated as deregulation by another name. Lower-cost pathways still need quality standards, training plans, supervision, wage protections, and public-health safeguards. They also need safeguards against reproducing the same inequities that have appeared in licensing systems, including uneven enforcement, exclusionary testing practices, and racialized assumptions about who belongs in the formal beauty and grooming workforce.

Reregulation alone is not enough

The response to a costly school-based model should not be simple deregulation. Beauty and grooming licensing has often been criticized as expensive, exclusionary, and burdensome. Those critiques have merit. But training requirements also serve public health and worker safety. The issue is not whether the industry should have standards. The issue is whether current standards strike the right balance among access, safety, affordability, and workforce readiness.

Licensing has also been shaped by racialized enforcement and exclusion. In “License to Exclude: Black Barbers in Arkansas,” Tanner Corley, Wendy Lucas, and Marcus Witcher examine Arkansas’s barber licensure system and found that during this time, Blacks taking the cosmetology licensure exam passed at lower rates than white barbers and that the number of Black barbers declined significantly after the regulations were implemented. Their research argues that, although the law was facially neutral, it had racially exclusionary effects in practice.

More recent research on nail salons raises related concerns about racialization and regulatory practice. Zhou, You, and Liang’s “Racialized Narratives and Structural Exclusion” examines media discourse and regulatory practices surrounding Asian-dominated nail salons and argues that nail salons reflect the intersection of racialized narratives, immigrant labor, and policy structures.

These examples complicate the policy debate. Strong standards may be necessary for sanitation, chemical safety, infection control, and worker protection. But standards can also be designed or enforced in ways that disproportionately burden workers with less capital, immigrant workers, and minority communities. This is why the question should not be whether beauty and grooming work should be regulated at all. The better question is how regulation can protect the public and workers without reproducing unnecessary barriers to entry while maintaining workforce safety.

Many policymakers are leaning towards deregulating the industry to reduce financial and entry barriers, but it may also create risks if new pathways do not protect workers from exploitation or provide sufficient training. That is why the better policy question is not “schools or no schools” or “licensing or no licensing.” It is about designing a training system that is affordable, supervised, skills-based, legally compliant, and aligned with real labor-market needs.

The policy tradeoff

The current debate contains a real tradeoff. On the one hand, federal accountability rules may identify programs in which students take on debt but do not see adequate returns on their investments. Stronger accountability can protect students and taxpayers. On the other hand, if accountability rules are implemented too abruptly or without sufficient attention to industry-specific labor-market conditions, students may face reduced access to training, especially in states where alternatives to school-based education are limited. Both concerns are legitimate. Therefore, the policy challenge is to protect students from unaffordable, low-return programs without creating training deserts or weakening health and safety standards.

A more useful policy question

Instead of asking, “How do we preserve federal aid exactly as it currently functions?” the industry should ask more precise questions.

How do we make beauty and grooming education affordable enough that students are not forced into excessive debt?

How do we ensure programs produce graduates who are ready for work?

How do we protect public health and worker safety without using licensing as an unnecessary barrier to entry?

How do we expand apprenticeships and employer-connected training without weakening labor protections?

How do we prevent federal aid from sustaining programs that cannot demonstrate valuable outcomes?

These questions move the conversation away from institutional preservation and toward workforce infrastructure. That is where the policy debate should be.

Where Beyond the Chair stands

Beyond the Chair does not oppose beauty schools. We do not oppose students receiving financial support. We do not oppose formal education. We support stronger accountability and transparency because aspiring professionals deserve clear information about program costs, completion rates, licensure outcomes, job placement, earnings, and debt burden before making major educational and financial decisions.

At the same time, accountability should be implemented with attention to industry realities, including tipped work, part-time employment, self-employment, and uneven early-career earnings. The goal should not be to remove education infrastructure without a plan. The goal should be to improve the quality, affordability, and relevance of that infrastructure to the workforce.

Beyond the Chair’s position is that beauty education reform should include both accountability and pathway development: better disclosures, lower-cost options, stronger employer connections, responsible apprenticeship expansion, and continued attention to public health and worker protections.

Conclusion

The debate over federal aid for cosmetology schools is not simply a debate about whether schools should stay open or close. It is a debate about how beauty and grooming education should be financed, measured, and improved.

The Earnings Premium test brings this issue to the surface by asking whether graduates earn enough to justify the public investment in their training. That question is imperfect, especially in a complex labor market, but it is not irrelevant. A more constructive conversation would focus on how programs can adapt, how students can be protected, how alternative pathways can be expanded responsibly, and how the industry can build training systems that are affordable, safe, and connected to sustainable work. Federal accountability rules may significantly disrupt the existing beauty school market. That disruption deserves careful management. But disruption is not the same as destruction, and noncompliance is not the same as unavoidable closure.

If schools respond by lowering tuition, improving graduate outcomes, strengthening employer partnerships, reducing debt exposure, and redesigning training delivery, the result may be a stronger education system. If some programs cannot survive without high tuition, dependence on federal aid, and weak earnings outcomes, policymakers should ask whether those programs were truly serving students in the first place.

Overall, when it comes to beauty school accountability and closures, the goal should not be to preserve the current system at all costs; it should be to build a more accountable, affordable, and workforce-connected one.