Department of Education, alleging that recent changes to federal loan caps for nursing, physician-assistant and therapy programs violate statutory authority and will
A coalition of 25 states has sued the U.S. Department of Education, alleging that recent changes to federal loan caps for nursing, physician-assistant and therapy programs violate statutory authority and will reduce access to critical health-care training.
The lawsuit was filed in the U.S. District Court for the Northern District of California on June 12, 2023, seeking to block the Department’s revised loan limits that took effect earlier this year.
The complaint names the federal government as the defendant and lists California, New York, Texas, and 22 additional states as plaintiffs. The plaintiffs argue that the Department’s rule, issued under the Trump administration, reduces the aggregate federal loan amount available to students in selected health-care degree programs without proper statutory justification.
Background of the Federal Loan Rule Change
In February 2023, the U.S. Department of Education announced revised aggregate loan limits for students pursuing certain health-care occupations, including registered nursing (RN), licensed practical nursing (LPN), physician assistants (PA), occupational therapy (OT), and physical therapy (PT). The rule lowered the maximum federal loan amount a student could borrow over the course of a degree program, capping it at $40,000 for most nursing tracks and $30,000 for allied-health programs, down from previous caps of $55,000–$70,000.
The Department justified the amendment by citing concerns about student debt burdens and the need to align loan amounts with projected earnings in the health-care labor market. The rule applied nationwide to all public and private institutions that receive Title IV funding, affecting roughly 150,000 current and prospective health-care students.
The states contend that the Department exceeded its authority under the Higher Education Act, which does not permit retroactive reductions in aggregate loan limits for programs already in progress. They also claim the rule was adopted without the required notice-and-comment period, violating the Administrative Procedure Act.
Parties Involved and Legal Claims
25 States File Lawsuit Challenging Federal Limits on Nursing and Healthcare Student Loans
The coalition of 25 states is led by California’s Attorney General, Rob Bonta, and includes New York, Texas, Florida, Illinois, Pennsylvania, and Washington, among others. The states are represented by a joint counsel team from the National Association of Attorneys General (NAAG) and have been joined by several higher-education associations as amici curiae.
The states contend that the Department exceeded its authority under the Higher Education Act, which does not permit retroactive reductions in aggregate loan limits for programs already in progress.
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The federal defendant is the U.S. Department of Education, headed by Secretary Miguel Cardona, who inherited the rule from the previous administration. The lawsuit also references the impact on students enrolled in nursing, PA, OT, and PT programs at more than 1,200 colleges and universities across the country.
The complaint seeks a preliminary injunction to halt enforcement of the new caps, a declaration that the rule is unlawful, and an order requiring the Department to revert to the prior aggregate loan limits.
How the Rule Was Implemented
The Department of Education issued the rule through a final regulation published in the Federal Register on February 13, 2023. The regulation amended 34 CFR § 685.210, which governs aggregate loan limits for Title IV programs. The rulemaking process included an internal review but did not publish a proposed rule or solicit public comments, a procedural step typically required for substantive regulatory changes.
The Department communicated the new limits to participating institutions via a notice to the Federal Student Aid (FSA) system on March 1, 2023, and updated the electronic loan eligibility calculators used by schools and borrowers. Schools were required to adjust financial-aid packages for incoming cohorts beginning in the 2023-24 academic year.
Immediate Impact on Students and Institutions
25 States File Lawsuit Challenging Federal Limits on Nursing and Healthcare Student Loans
The revised caps reduce the total federal loan amount available to most nursing students by up to $20,000 per degree, potentially increasing out-of-pocket costs for tuition, fees, and living expenses. Institutions that rely on federal loans to attract and retain students in health-care programs report the need to explore alternative funding sources, such as private scholarships or state-level grant programs.
State officials warn that the reduced borrowing capacity could deter prospective students from entering nursing and allied-health fields, exacerbating existing shortages of qualified health-care workers nationwide. The lawsuit aims to preserve the pre-2023 loan limits to maintain current enrollment levels in these critical programs.
State officials warn that the reduced borrowing capacity could deter prospective students from entering nursing and allied-health fields, exacerbating existing shortages of qualified health-care workers nationwide.
The Department has indicated that it will continue to enforce the new caps while the litigation proceeds, meaning that students applying for federal aid after March 2023 must comply with the reduced limits unless the court grants an injunction.
Legal Proceedings and Timeline
The complaint was filed on June 12, 2023, and a request for a preliminary injunction was scheduled for a hearing on July 28, 2023. The Department filed a motion to dismiss the case on July 5, 2023, arguing that the rule falls within its statutory discretion and that the states lack standing.
If the court grants the injunction, the Department would be required to suspend the new caps pending a final decision. A full trial on the merits is expected to extend into 2024, with both sides presenting expert testimony on the economic impact of loan limits on health-care workforce development.
Impact on Education Stakeholders
For students currently enrolled in nursing, PA, OT, or PT programs, the lawsuit creates uncertainty about the amount of federal aid they can receive for the remainder of their studies. Prospective students must consider the reduced borrowing capacity when evaluating the affordability of health-care degrees.
Colleges and universities offering these programs may need to adjust tuition pricing strategies, increase institutional aid, or seek supplemental funding to offset the anticipated decline in federal loan eligibility. State governments, many of which have pledged to address nursing shortages, may need to allocate additional resources to support health-care education if the federal caps remain in place.
The outcome of the case will determine whether the pre-2023 aggregate loan limits are reinstated, thereby preserving existing financial-aid structures for health-care students across the United States.
Key Facts
State governments, many of which have pledged to address nursing shortages, may need to allocate additional resources to support health-care education if the federal caps remain in place.
What: 25 states sued the U.S. Department of Education to block new federal loan caps on nursing and allied-health degrees.
When: Lawsuit filed June 12, 2023; rule took effect February 2023.
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