If you are pursuing an advanced nursing degree, a doctorate in physical therapy, or a nurse anesthesia credential, the federal government has just placed a hard cap on how much you can borrow to finish that program. A coalition of attorneys general from half the states believes the cap is illegal.
Twenty-five states and the District of Columbia filed a lawsuit on May 19, 2026, in U.S. District Court in Maryland, challenging an Education Department rule that restricts how much graduate students in healthcare and other professional fields can borrow through federal loan programs.
The lawsuit targets a regulation that took a congressional list of example degree programs and treated it as exhaustive.
The stakes extend far beyond campus financial aid offices, touching anyone who relies on nurses, physical therapists, or other advanced healthcare providers, especially in rural and underserved areas already struggling to recruit qualified professionals.
New Education Department rule caps graduate student borrowing at $20,500 per year
The rule at the center of the lawsuit stems from the Education Department’s implementation of graduate loan provisions in the One Big Beautiful Bill Act, which Congress passed in 2025.
That law eliminated the Grad PLUS program, which previously let graduate students borrow up to their full cost of attendance, and replaced it with two tiers of borrowing limits, U.S. News reported.
Students classified as pursuing “graduate” degrees can now borrow up to $20,500 per year, with a $100,000 lifetime cap, while those in designated “professional” programs retain the higher limits of $50,000 per year and $200,000 overall.
The Education Department finalized the rule on April 30, 2026, with the final rule taking effect May 1, 2026, and full implementation set for July 1, 2026.
The critical dispute is which degrees qualify for the higher “professional” tier, a determination that could define whether tens of thousands of healthcare graduate students can afford to complete their programs or must turn to costlier private lenders with stricter credit requirements.
The Education Department limits professional degree exemptions to just 11 programs
Under the finalized rule, only students enrolled in 11 specific degree programs qualify for the higher borrowing tier: chiropractic, clinical psychology, dentistry, law, medicine, optometry, osteopathic medicine, pharmacy, podiatry, theology, and veterinary medicine.
Every other graduate program falls under the lower cap, Inside Higher Ed reported.
The lawsuit contends that the Education Department’s restricted list relies on an existing federal definition of ‘professional degree’ that was crafted decades ago, before graduate programs in nursing and other healthcare fields took their modern form.
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The states argue Congress incorporated an existing regulatory definition stating that professional degrees include, but are not limited to, the listed example programs.
The plaintiffs also note that a Doctorate in Physical Therapy has been the required entry-level degree in that field for a full decade, making its exclusion from the professional category particularly difficult to justify on substantive grounds.
The omission extends beyond physical therapy and nursing. Programs such as physician assistant studies, occupational therapy, and speech-language pathology all require graduate-level clinical training that mirrors the rigor and cost structure of degrees on the approved list, yet none qualify for the higher borrowing tier under the finalized rule.
State attorneys general say the loan rule will deepen the healthcare worker shortage
“Higher education is expensive, and our health care system is already under immense strain,” New York Attorney General Letitia James said in a statement. “This rule will shut talented people out of critical professions and leave communities with fewer health care providers they desperately need,” James warned, NPR reported.
Congress has already been explicit and said ‘Here are the degrees that constitute professional degrees.’ But the Department of Education said, ‘No, we’re not going to listen to what Congress said. We’re going to come up with our own list, and we’re going to exclude all nursing and all physical therapists and all physician assistants.’ That is wrong. It is unfair, and it is unlawful.
North Carolina Attorney General Jeff Jackson framed the issue as both a workforce crisis and a problem of professional respect at a May 19 news conference. Jackson noted that North Carolina faces a primary care shortage in 93 of its 100 counties, with rural communities bearing the heaviest burden from limited access to qualified providers.
Debra J. Barksdale, president of the American Academy of Nursing, said the rule would remove critical access to loans for nurses pursuing advanced degrees, particularly those trained to deliver higher levels of patient care in rural and underserved communities.
The Education Department defends the graduate loan caps
The Education Department pushed back on the lawsuit, with Under Secretary Nicholas Kent calling the borrowing caps “commonsense” measures that Congress created and that are already encouraging colleges and universities to reduce tuition. Nicholas Kent accused Democratic officials of prioritizing institutional revenue over student affordability in their legal challenge.
The department also issued a fact sheet noting that the new caps apply only to graduate programs and do not affect undergraduate nursing pathways, including four-year bachelor of science in nursing degrees and two-year associate programs.
Private loans remain available for graduate study, though those options typically carry stricter credit requirements and may not cover the programs in question, the report noted.
What the lawsuit outcome could mean for graduate students and healthcare access
The lawsuit’s outcome will determine whether graduate students in excluded healthcare programs can continue borrowing at the professional level or must find alternative financing for degrees that increasingly require doctoral-level training.
If the court grants an injunction before July 1, the current borrowing structure would remain in place while the legal challenge proceeds.
For the millions of Americans who depend on nurse practitioners, physical therapists, and other advanced-practice providers for their care, whether the lawsuit succeeds will determine the pipeline of new advanced-practice providers in the years ahead, plaintiffs argue.
Related: Education Department blindsides student loan borrowers
