25 States Sue Ed Department Over Grad Student Loan Limits

Half the states in the country and Washington, D.C., sued the Education Department Tuesday, asking a judge to vacate the agency’s decision to subject students in all but a few graduate programs to the most stringent new federal loan limits.

At stake is students’ access to their desired careers, universities’ ability to charge them what they deem a degree should cost and the nation’s supply of health-care workers, among other matters.

The states—all led by either a Democratic governor or a Democratic attorney general—that filed the lawsuit in the U.S. District Court of Maryland seek to overturn parts of ED’s rule implementing loan limits created by the One Big Beautiful Bill Act (OBBBA).

That law, which Congress passed last summer, ended the Grad PLUS program, which allowed grad students to borrow up to their full cost of attendance. OBBBA replaced that with loan caps that would limit “graduate students” to borrowing $20,500 per year, or $100,000 in total, and “professional students” to borrowing $50,000 per year, or $200,000 in total.

ED’s rule—which was finalized April 30 and is set to take effect July 1—defines which degrees go into which category. The lawsuit contends that it does so illegally, in a way that contradicts Congress’s intent.

The rule says only students in 11 degree programs can borrow at the higher, “professional” level: pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, theology and clinical psychology. ED deemed all other programs “graduate.”

The lawsuit notes that, other than clinical psychology, those 11 programs were also listed in a prior definition of professional degrees that Congress incorporated into OBBBA. But that definition said, “Examples of a professional degree include but are not limited to” before listing the programs.

“The Final Rule narrows the definition incorporated into [OBBBA] and effectively makes the illustrative list of degrees exclusive, thereby excluding many healthcare and other professional degrees that would otherwise be eligible for the higher limits,” the suit says. “Congress never intended anything of the sort.”

“The list of examples was taken from a regulation that had not been changed since the 1950s, a time when graduate programs in nursing and other healthcare professions barely existed and law students still received L.L.B.s [bachelor of laws degrees],” the suit says. The states say ED also ignored changes in degree expectations over time, including that “a Doctorate in Physical Therapy has been the required entry-level degree in that field for ten years.”

“They really willfully mischaracterized what Congress passed,” North Carolina attorney general Jeff Jackson said in a Tuesday news conference, where he was joined by the president of the American Academy of Nursing, representatives of the North Carolina Academy of Physician Associates and others. Jackson, whose state is among those suing, said Congress “gave a list of examples. It wasn’t intended to be exhaustive.”

In an emailed statement, ED Under Secretary Nicholas Kent said these “commonsense loan caps” were “created by Congress” and “are already incentivizing colleges and universities to lower tuition.”

“For years, Democrats parroted illegal student loan forgiveness to ‘end the debt crisis’ and buy votes, and now the same people are fighting against the Trump Administration’s legal efforts to drive down the cost of college,” Kent said. He added that “these Democratic governors and attorneys general are more concerned about institutions’ bottom-line rather than American students and families’ ability to access affordable postsecondary education.”

The suing states further argue that ED’s rule is arbitrary, capricious and violates the Administrative Procedure Act. They write that ED “arbitrarily relied on several factors Congress did not intend it to consider—such as whether professionals are subject to supervision and the ‘historical context’ of the Department’s regulation—and its application of those factors is inconsistent and contradictory.”

Jackson said at the news conference that “we have a major health-care workforce shortage in North Carolina. We have a very clear primary care shortage in 93 of 100 counties, in particular in rural counties.” ED’s rule could exacerbate that, he said, adding, “This is not just a workforce shortage issue, this is a respect issue. Saying that these folks earned degrees that aren’t professional degrees—it’s not true, it’s not fair and it’s unlawful.”

Debra J. Barksdale, the American Academy of Nursing president, said the rule “would strip critical loan opportunities for nurses pursuing advanced degrees, nurses who are educated to provide a higher level of patient care, particularly in areas that are rural, underserved and in desperate need of health services.”