Education

25 states and DC sue Education Department over loan limits, citing health system strain

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by Max Rego - 05/19/26 6:44 PM ET

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by Max Rego - 05/19/26 6:44 PM ET

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Democratic attorneys general in more than 20 states and Washington, D.C., on Tuesday filed suit against the Education Department over new limits set to go into effect for graduate student loan borrowers.

The lawsuit, filed in U.S. District Court in Maryland, states that the new limits will strain the healthcare workforce by discouraging students from pursuing degrees in the medical field.

Starting on July 1, graduate students can borrow up to $20,500 in federal loans annually and $100,000 in aggregate under the One Big Beautiful Bill Act, which President Trump signed into law last July. Professional students, meanwhile, will be able to borrow up to $50,000 annually and $200,000 in aggregate under the law.

The Education Department will also begin phasing out the Graduate PLUS program in July, which is unsubsidized and has no annual or aggregate limits.

The lawsuit, filed by 24 Democratic attorneys general along with Kentucky Gov. Andy Beshear (D) and Pennsylvania Gov. Josh Shapiro (D), says that the borrowing caps will “drive up costs” by reducing the supply of health professionals and entice graduate students to take out more expensive private loans.

The interest rates associated with private loans can vary, with some exceeding 18 percent, according to Pennsylvania State University. For federal loans, on the other hand, interest rates are fixed.

“Direct Loans also make graduate and professional programs more accessible at public institutions of higher education, and thereby enable Plaintiff States to increase enrollment and address their respective workforce needs,” the lawsuit states.

Education Undersecretary Nichiolas Kent told The Hill that the lawsuit shows that the Democratic officials “are more concerned about institutions’ bottom-line rather than American students and families’ ability to access affordable postsecondary education.”

Kent added, “After decades of unchecked student loan borrowing that gave schools no reason to control costs, these commonsense loan caps — created by Congress — are already incentivizing colleges and universities to lower tuition.”

Under the Education Department’s new guidance, certain professional degree programs are subject to higher loan limits. In a rule it published in the Federal Register, the department listed an array of degrees as “professional,” including those in pharmacy, dentistry, veterinary medicine, chiropractic, optometry and theology.

But it did not include nursing, although Education Secretary Linda McMahon told the House Education and Workforce Committee last week that it was because the majority of nursing programs do not require enrollees to take out loans that do not approach the $50,000 cap.

The lawsuit, though, states that the Education Department’s definition of a professional degree will have adverse consequences for students.

“As a result, if the restrictive definition of ‘professional degree’ is maintained, then many students will face the prospect of exceeding the federal-loan caps,” the lawsuit states. “Some of those students will be unable to obtain private loans; others will determine that the higher costs of private loans outweigh the benefits of a graduate degree and decline to enroll altogether.

“The result will almost certainly be fewer graduates joining the excluded professions each year and shortages for Plaintiff States’ residents, especially in rural and impoverished areas.”

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