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25 States and Washington, D.C. Sue U.S. Department of Education Over Graduate‑Student Loan Limits and Outsourcing Plan
The suit argues that the agency’s actions exceed statutory authority and could restrict federal financial aid for students in fields such as nursing. The lawsuit was filed in the U.S.
A coalition of 25 states and the District of Columbia filed a federal lawsuit on May 19, 2026 challenging the Education Department’s new loan‑limit rules for graduate students and its proposal to outsource key K‑12 and higher‑education programs. The suit argues that the agency’s actions exceed statutory authority and could restrict federal financial aid for students in fields such as nursing.
The lawsuit was filed in the U.S. District Court for the District of Columbia on May 19, 2026, targeting the U.S. Department of Education’s recent regulations that impose stricter loan caps on most graduate programs and outline a plan to shift delivery of certain education services to other federal agencies. The filing seeks a judicial order vacating the loan‑limit rule and declaring the outsourcing proposal unlawful.
The plaintiffs include the attorneys general of 25 states—Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming—and the District of Columbia. The Department of Education, led by Secretary Miguel Cardona, is the sole defendant. Graduate students, particularly those pursuing professional degrees in nursing, education, and allied health, are directly affected by the loan‑limit changes.
Legal Challenge Over Graduate‑Student Loan Limits
The coalition alleges that the Education Department’s definition of “professional student” expands beyond the statutory language of the Higher Education Act, thereby limiting access to federal Direct Unsubsidized Loans for students in most graduate programs. Under the new rule, only students in a narrow list of “critical need” fields—such as nursing, teacher preparation, and certain health professions—retain full loan eligibility, while others face reduced borrowing caps.
Plaintiffs contend that the rule was issued without the required notice-and-comment rulemaking and lacks congressional authorization, violating the Administrative Procedure Act. The lawsuit seeks an injunction to halt enforcement of the loan caps pending a full trial on the merits.
If successful, the court could restore existing loan limits for all graduate students, preserving the current borrowing framework that allows up to $20,500 per academic year for most professional degree seekers.
If successful, the court could restore existing loan limits for all graduate students, preserving the current borrowing framework that allows up to $20,500 per academic year for most professional degree seekers.
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Read More →Dispute Over Outsourcing of Education Programs
Separately, the same coalition asserts that the Department’s plan to outsource core K‑12 and higher‑education services to other federal entities contravenes the Department’s statutory mandate to administer these programs directly. The proposal would shift responsibilities for initiatives such as Title I funding, student loan servicing, and certain workforce‑development grants to agencies like the Department of Health and Human Services and the Department of Labor.
The lawsuit claims the outsourcing strategy lacks statutory authority and could disrupt established funding streams, jeopardizing program continuity for schools and colleges nationwide. Plaintiffs argue that the Department’s action circumvents congressional oversight and may lead to inefficiencies and reduced accountability in the delivery of federal education resources.
Context of Ongoing Litigation Against Federal Education Policies
The current suit adds to a growing docket of legal challenges to the Education Department’s policies under the Biden administration, which inherited and expanded several initiatives from the previous Trump administration. As of June 10, 2026, Education Week cataloged 95 lawsuits contesting federal education actions dating back to the Trump era, reflecting a broader pattern of state and institutional resistance to rapid regulatory changes.
Previous cases have addressed issues ranging from the repeal of the “public charge” rule for international students to challenges against the Department’s “gainful employment” regulations. The present lawsuit is the most extensive coalition effort to date, uniting a majority of state attorneys general in a coordinated legal front.
Immediate Impact on Students and Institutions
Graduate students in affected programs may experience reduced borrowing capacity, potentially limiting enrollment in fields that already face workforce shortages, such as nursing. Reduced loan eligibility could increase out‑of‑pocket costs, prompting some students to seek alternative financing or defer enrollment.
As of June 10, 2026, Education Week cataloged 95 lawsuits contesting federal education actions dating back to the Trump era, reflecting a broader pattern of state and institutional resistance to rapid regulatory changes.
Higher‑education institutions that rely on federal loan revenue to fund graduate programs may need to adjust financial‑aid budgeting and recruitment strategies. The outsourcing dispute, if upheld, could alter the administrative landscape for federal education funding, requiring colleges and K‑12 districts to navigate new inter‑agency processes for grant applications and compliance reporting.
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Read More →Stakeholders—including students, university financial‑aid offices, and state education agencies—are advised to monitor court filings and prepare contingency plans for potential changes in loan eligibility and program administration.
Key Facts
What: 25 states and Washington, D.C. filed a lawsuit challenging the Education Department’s graduate‑student loan limits and outsourcing plan.
When: Lawsuit filed May 19, 2026; broader litigation context includes 95 lawsuits identified by June 10, 2026.
filed a lawsuit challenging the Education Department’s graduate‑student loan limits and outsourcing plan.
Impact: The case could restore existing loan caps for graduate students and affect the administration of federal education programs nationwide.
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Read More →Sources
- US Education Department outsourcing unlawful, lawsuit claims, threatens … – Times of India
- States sue over Education Department’s professional student definition – HigherEd Dive
- 25 States Sue Ed Department Over Grad Student Loan Limits – Inside Higher Ed
- See All the Lawsuits Filed Over Trump’s Education Policies – Education Week
