24 states sue over federal loan caps that exclude nursing and healthcare graduate programs from higher borrowing limits

A coalition of 24 states and the District of Columbia filed a federal lawsuit on Monday challenging a Trump administration rule that limits access to higher federal student loan caps for graduate students in nursing and several other healthcare fields, arguing the Education Department unlawfully narrowed the definition of a professional degree and imposed restrictions Congress never enacted.

The Details

The lawsuit, led by New York Attorney General Letitia James, targets an Education Department rule finalized on April 30, 2026, that restructures graduate and professional student borrowing as part of President Trump's Working Families Tax Cuts Act. Under the new framework, most graduate students are capped at $20,500 annually and $100,000 in total federal loans. Only programs the department classifies as 'professional' can access up to $50,000 per year and $200,000 overall.

The department limited the higher professional-degree loan caps to 11 categories, including law, medicine, dentistry, pharmacy, and veterinary medicine. Nursing, physical therapy, and nurse anesthesia were excluded from that list, leaving students in those programs subject to the lower graduate caps.

The plaintiff states argue the department unlawfully narrowed the longstanding federal definition of a professional degree and imposed restrictions that Congress did not enact. They also contend the department relied on an outdated professional-degree framework dating to the 1950s, before many modern graduate healthcare programs existed.

The Education Department has defended the rule as an effort to lower college costs, prevent overborrowing, and simplify repayment. Most provisions are set to take effect July 1, 2026. In addition to the new loan caps, the rule eliminates the Grad PLUS loan program and creates a new income-driven repayment option called the Repayment Assistance Plan. Undergraduate loan limits, including those for undergraduate nursing programs, were left unchanged.

New York Attorney General Letitia James said the rule would worsen existing strains on the healthcare system. 'Higher education is expensive, and our health care system is already under immense strain,' James said. 'This rule will shut talented people out of critical professions and leave communities with fewer health care providers they desperately need.'

The American Nurses Association said it was 'profoundly dismayed' by the finalized rule. ANA President Jennifer Mensik Kennedy said, 'This Department of Education has chosen to make it harder for nurses to advance their education and their careers,' arguing the caps would disproportionately affect nurses seeking advanced degrees, especially those in rural areas.

Education Secretary Linda McMahon, defending the policy before the House education committee, said, 'It is our overall goal to bring down the cost of college and education.'

Preston Cooper, a fellow at the American Enterprise Institute, argued the new caps would affect only a small number of unusually expensive advanced nursing programs and that most programs' graduate debt loads already fall within the new limits. Critics of the rule say it will block access to advanced nursing and other healthcare training, while supporters contend it may pressure schools to lower tuition and primarily affects a narrow set of high-cost programs.

Context

The underlying law changed graduate borrowing after Republicans passed the measure as part of last year's One Big Beautiful Bill Act, also known as the Working Families Tax Cuts Act. The Education Department's April 30 rulemaking implements the borrowing changes directed by that legislation. The rule eliminates the Grad PLUS program, which had allowed graduate students to borrow up to the full cost of attendance, and replaces it with the tiered cap system now at the center of the lawsuit. The department also introduced the Repayment Assistance Plan as a new income-driven repayment option. Undergraduate loan limits were not changed by the rule.

The dispute over which graduate programs qualify as 'professional' touches on a decades-old classification framework. The states argue the department's reliance on a 1950s-era definition ignores the growth and structural complexity of modern graduate healthcare education, including advanced practice nursing and doctoral programs that now require comparable financial investment to programs on the professional list.

What's Next

The lawsuit will proceed in federal court, where the plaintiff states are expected to seek a preliminary injunction to block the rule before its July 1, 2026 effective date. The Education Department has not publicly responded to the litigation. Nursing and healthcare advocacy organizations have signaled continued opposition to the rule and may pursue additional legal or legislative avenues. If the caps take effect as scheduled, students entering affected graduate programs for the 2026-2027 academic year would face the lower borrowing limits unless a court intervenes.