States Sue Education Department Over Graduate Student Loan Restrictions for Health Care Programs

Case Snapshot

• Court: U.S. District Court for the District of Maryland
• Case: State of Maryland et al. v. U.S. Department of Education et al.
• Filing Date: Complaint filed May 19, 2026
• Core Issue: Challenge to the Department of Education’s limits on federal borrowing eligibility for certain graduate healthcare programs
• Key Allegation: States argue the rule unlawfully narrows which programs qualify for higher federal student loan caps
• Notable Detail: Plaintiffs argue the rule could worsen healthcare workforce shortages and reduce funding for public universities

A coalition of 24 states and Washington, D.C., filed suit against the U.S. Department of Education over a new federal rule that limits access to higher federal student loan borrowing caps for several healthcare graduate programs, arguing the policy conflicts with congressional intent and could deepen shortages of medical professionals.

The complaint, filed May 19 in the U.S. District Court for the District of Maryland, challenges a May 1 Department of Education final rule implementing portions of the One Big Beautiful Bill Act enacted in 2025.

Under the law, graduate students generally face annual federal borrowing limits of $20,500 and aggregate limits of $100,000 beginning July 1, 2026. Students enrolled in qualifying “professional degree” programs can access higher borrowing caps of up to $50,000 annually and $200,000 in aggregate.

The lawsuit argues the Department unlawfully narrowed the definition of “professional degree” by effectively limiting eligibility to programs closely resembling a historical list of professions such as medicine, law, and dentistry. According to the states, the rule excludes many modern healthcare programs, including nurse practitioners, physician assistants, physical therapists, occupational therapists, and speech-language pathologists.

“The Final Rule narrows the definition incorporated into [OBBBA] and effectively makes the illustrative list of degrees exclusive,” the complaint states.

The states argue Congress intended the original regulatory definition to remain broader and nonexclusive. The complaint notes that the underlying regulatory language specifically stated that professional degree examples “include but are not limited to” the listed fields.

States Say Rule Could Harm Healthcare Workforce Pipeline

The coalition contends the reduced borrowing limits could make advanced healthcare education financially unattainable for some students, forcing them toward higher-cost private loans or out of graduate programs entirely.

According to the complaint, the Department acknowledged some excluded programs still satisfy the regulation’s traditional three-part test for professional degrees but declined to classify them as eligible based on additional “contextual” criteria, including supervision requirements and historical treatment of the profession.

Oregon Attorney General Dan Rayfield criticized the rule in a public statement cited by state officials.

“Oregon is already short on nurses, therapists, and other critical healthcare workers, and this rule makes that problem worse,” Rayfield said.

The lawsuit also argues the rule could financially impact public colleges and universities that rely on federal loan-backed tuition revenue for graduate healthcare programs. Plaintiffs claim institutions may face enrollment declines and increased pressure to reduce tuition for programs with high operating costs, including clinical training requirements.

Rule Comes Amid Broader Student Loan Changes

The challenge comes as federal student loan performance continues to deteriorate following the expiration of pandemic-era payment accommodations.

A May 12 report from the Federal Reserve Bank of New York found that more than 10% of federal student loan balances are now past due, approaching pre-pandemic delinquency levels.

Supporters of the borrowing restrictions argue that tighter caps may help curb tuition inflation by limiting universities’ access to effectively unlimited federal lending. Critics counter that the changes disproportionately affect specialized healthcare programs that require costly clinical and graduate-level training.

The lawsuit seeks to vacate portions of the rule under the Administrative Procedure Act and block the Department from enforcing the challenged provisions before the July 1 implementation date.