A coalition of 24 states and the District of Columbia filed a federal lawsuit on May 19, 2026, challenging a Department of Education rule that restricts federal loan eligibility for graduate students in selected health-care programs.The rule, issued by the Trump administration, is scheduled to take effect in July 2026 and would lower borrowing limits for those students.
A coalition of 24 states and the District of Columbia filed a lawsuit in the U.S. District Court for the District of Columbia on Tuesday, May 19, 2026, alleging that a Department of Education regulation unlawfully limits access to federal student loans for borrowers earning graduate degrees in certain health-care fields [1]. The regulation, announced by the Trump administration in early 2026, reduces the maximum loan amount available to students in programs such as nursing, physician assistance, and physical therapy, moving them from the “professional” loan limit to the lower “graduate” limit [2].
The plaintiffs include Maryland as a co-lead state, joined by 23 other states that have signed onto the lawsuit, together representing a broad geographic coalition [1]. The United States Department of Education is named as the defendant. The lawsuit contends that the rule violates statutory authority granted by Congress, which established higher loan limits for “professional” degree students, and that the administration’s action improperly reclassifies eligible programs [1][2].
Legal Challenge and Regulatory Background
The rule at issue modifies the Federal Direct Loan program by redefining which graduate programs qualify for the higher “professional” loan limit, which for the 2025-2026 award year stood at $26,500 [2]. Under the new regulation, students pursuing master’s degrees in nursing, physician assistant studies, physical therapy, occupational therapy, and related health-care disciplines would be limited to the standard graduate loan limit of $20,500 [3].
The Department of Education justified the change as a cost-containment measure and as aligning loan limits with projected earnings for graduates of those fields [4].
Legal Challenge and Regulatory Background
The rule at issue modifies the Federal Direct Loan program by redefining which graduate programs qualify for the higher “professional” loan limit, which for the 2025-2026 award year stood at $26,500 [2].
The states argue that the regulation exceeds the Department’s statutory authority because the Higher Education Act expressly authorizes separate loan limits for “professional” degree programs, a category that includes the health-care fields targeted by the rule [1][2]. Plaintiffs assert that the rule “unlawfully strips” students of access to the higher loan caps that Congress designated for professional degrees, thereby reducing financial aid options for a sizable segment of the health-care workforce pipeline [1][3]. The complaint also alleges that the rule violates the Administrative Procedure Act by failing to provide adequate notice and opportunity for public comment [2].
The lawsuit seeks a preliminary injunction to halt the rule’s implementation pending judicial review, and it requests that the court declare the regulation invalid and permanently enjoin its enforcement [1].
Timeline of Events
25 States and the District of Columbia Sue U.S. Department of Education Over New Graduate Loan Limits
Early 2026 – The Trump administration announces the proposed rule to adjust loan limits for graduate and professional degree students [4].
May 19, 2026 – Twenty-four states and the District of Columbia file the lawsuit in federal court, with Maryland identified as a co-lead plaintiff [1].
July 2026 – The regulation is scheduled to become effective, reducing loan limits for qualifying health-care graduate programs unless the court issues an injunction [2].
Post-filing – The Department of Education is expected to file a brief defending the rule; the court’s schedule for oral arguments has not been set [4].
The filing follows a series of recent legal challenges to federal education policies, reflecting heightened scrutiny of administrative actions affecting student financial aid [4].
Potential Impact on Students and Institutions
If the court grants a preliminary injunction, the existing higher loan limits for professional health-care graduate programs would remain in place for the 2025-2026 academic year, preserving current borrowing capacity for students in nursing, physician assistant, physical therapy, and related programs [1][2]. Conversely, if the rule is upheld, eligible students could face a reduction of up to $6,000 in federal loan eligibility, potentially increasing out-of-pocket costs or requiring alternative financing [3].
Higher education institutions that offer the affected programs may need to adjust financial aid counseling and budgeting guidance for prospective students [2]. State governments participating in the lawsuit have indicated that reduced loan access could exacerbate workforce shortages in critical health-care sectors, as higher tuition costs may deter enrollment in graduate health-care programs [1][3]. The litigation also signals to other states and advocacy groups that regulatory changes to student loan limits are subject to judicial review, potentially influencing future policy development [4].
Impact on Readers
25 States and the District of Columbia Sue U.S. Department of Education Over New Graduate Loan Limits
Students currently applying to or enrolled in graduate health-care programs should verify their eligibility for federal loans under the existing limits and monitor court developments that may affect borrowing capacity. Educators and financial aid officers at institutions offering nursing, physician assistant, physical therapy, and similar programs should prepare to advise students on potential changes to loan limits and explore supplemental scholarship or grant options. State policymakers and higher education administrators should consider the lawsuit’s implications for workforce planning and budget allocations for health-care education [1][2].
Department of Education Over New Graduate Loan Limits Early 2026 – The Trump administration announces the proposed rule to adjust loan limits for graduate and professional degree students [4].
What: 24 states and the District of Columbia filed a lawsuit challenging a Department of Education rule that lowers federal loan limits for certain health-care graduate programs.
When: Lawsuit filed May 19, 2026; rule set to take effect July 2026.
Impact: The case could determine whether students in nursing, physician assistant, physical therapy, and related fields retain higher federal loan caps, affecting borrowing capacity and program enrollment.
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25 States Sue Education Dept. Over Healthcare Grad Loan Cuts – https://allaboutlawyer.com/education-department-professional-degree-student-loan-limits-lawsuit-2026/
23 States Sue Over Upcoming Graduate Student Loan Caps That Take Effect … – https://thecollegeinvestor.com/80941/23-states-sue-over-upcoming-graduate-student-loan-caps-that-take-effect-july-2026/
States sue over new student loan limits on certain nursing and … – https://www.npr.org/2026/05/19/nx-s1-5826688/lawsuit-student-loans-nursing-healthcare-graduate-degree
Democratic-Led States Sue Over Trump Administration’s Student Loan … – https://www.usnews.com/news/politics/articles/2026-05-19/democratic-led-states-sue-over-trump-administrations-student-loan-restrictions
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