ARE BEAUTY SCHOOLS CLOSING?

If you’ve noticed career schools closing their doors at a record pace lately, you might think it’s just the economy. But the reality is much more layered and much more urgent.

We are currently witnessing a perfect storm where federal accountability is clashing head-on with outdated salon hiring practices. The result? A dead zone that is leaving students in debt and schools out of business.

FEDERAL FUNDING

For decades, many career schools operated as license factories. As long as a student graduated and passed their boards, the school’s job was done.That era ended in July 2024. Under the new Gainful Employment (GE) and STATS (Student Tuition and Transparency System) rules, the government has stopped taking a school’s word for it. Now, beauty schools must prove two things to keep their federal funding:

• The Earnings Premium: Graduates must earn more than a typical high school graduate in their state.

• Debt-to-Earnings Ratio: Students can’t be saddled with more debt than their career can realistically pay off.

  
  

If the math ain’t mathing, the school loses its ability to accept federal student loans. For most institutions, that is an immediate death sentence.

1099 MISCLASSIFICATION

While the government is tightening the screws on schools, many salon owners are still operating like it’s 1995. This is where the ambiguity lives. New graduates enter salons only to be treated as interns rather than employees. Even worse, many owners misclassify these stylists as 1099 Independent Contractors while still controlling their hours, dress code, and pricing.

• For the Student: They lack the verifiable income needed to prove they are successful, making it impossible to get car loans or mortgages.

• For the School: If a student’s income is reported incorrectly or under-the-table, the school’s "Earnings Premium" stats tank-leading to federal penalties.

• For the Salon: They are sitting on a misclassification time bomb that leads to massive IRS audits.

MENTORSHIPS

In the past, schools counted any job as a success. If a licensed cosmetologist was working at a coffee shop, it was often still checked off as employed.The government has called the bluff. Now, they need a sure thing. To survive 2026, the relationship between schools and salons must change. We have to move toward a Career Incubator model with formal mentorship, financial literacy, and salon partnerships.

The government is essentially saying, “If we're funding the dream, you have to guarantee the paycheck.” It’s a wake-up call for the entire industry. Schools can no longer just teach the test, and salons can no longer treat new talent as cheap, misclassified labor. Schools have to start building real careers, or there won't be any institutions left to train the next generation.

BLOG | APRIL 2026  

www.vanityhairstudionyc.com