On May 19, 2026, a coalition of 25 states and the District of Columbia filed suit against the U.S. Department of Education in federal court in Maryland. The lawsuit challenges a rule finalized April 30 that classifies nursing, physician assistant, and physical therapy programs as "graduate" rather than "professional" under the One Big Beautiful Bill Act. That classification means students in those fields face a $20,500 annual federal loan cap — not the $50,000 limit available to law, medicine, and dentistry students. The rule takes effect July 1, 2026. The states are asking the court to block it before that date.

Six weeks before new federal loan limits hit hundreds of thousands of graduate students, half the states in the country went to court to stop them.

The lawsuit was filed May 19 in U.S. District Court for the District of Maryland, co-led by Maryland Attorney General Anthony Brown and New York Attorney General Letitia James. The complaint charges that the Education Department's interpretation of the One Big Beautiful Bill Act contradicts what Congress actually passed and was imposed without proper legal authority.1

What the Rule Does

The One Big Beautiful Bill Act, signed in 2025, created a two-tier borrowing system for graduate and professional students taking effect July 1, 2026:

  • Professional students (medicine, law, dentistry, pharmacy, veterinary medicine, and others): $50,000 per year, $200,000 total
  • Graduate students (all others): $20,500 per year, $100,000 total

The law's text listed ten example professions but stated the list was not exhaustive — professional degrees "include but are not limited to" those fields. The Education Department's final rule, published April 30, added four requirements not found in the statute: the degree must be "generally at the doctoral level," require at least six years of postsecondary coursework, require licensure "to begin practice," and share a four-digit classification code with the listed fields.1

Under those four requirements, nursing, physician assistant, physical therapy, and several other advanced healthcare programs do not qualify as professional — even though those programs require licensure and lead to licensed clinical careers.

The Maryland Example

The lawsuit points to a concrete example: the University of Maryland School of Nursing's entry-level Master of Science in Nursing program. In-state tuition and fees run $77,155 per year. Under the new rule, a student in that program can borrow only $20,500 federally per year — a loss of $29,500 compared to what they would be eligible for if classified as a professional student.1

Previously, Grad PLUS loans allowed graduate students to borrow up to the full cost of attendance from federal sources. That option ends July 1 for all graduate students. For nursing students, the remaining gap between tuition and maximum federal borrowing must be filled by private loans, savings, or employer assistance.

$29,500

For a full breakdown of how the new caps work and which programs are affected, see how the nursing graduate loan cap affects students.

What the States Argue

The 25-state coalition argues that the Education Department's rule is "unlawful" on two grounds.2

First, the states say the statute's definition of "professional degree" is broad enough that nursing and PA programs should qualify — and that the department invented restrictions Congress never wrote.

Second, the states argue the rule will worsen healthcare workforce shortages already straining hospitals and clinics. Multiple states contend that limiting access to federal loans for nursing and allied health students will reduce the supply of new clinicians, particularly in rural areas and underserved communities.

The lawsuit does not automatically pause the rule. Unless a court grants an emergency injunction before July 1, 2026, the new borrowing caps will take effect on schedule. Students starting healthcare graduate programs in fall 2026 should plan finances based on current rules and treat any court relief as a potential future development, not a guaranteed one.

Who Is Affected

The programs most directly affected by the rule include:

  • Master of Science in Nursing (MSN) and Doctor of Nursing Practice (DNP)
  • Physician assistant (PA) programs
  • Physical therapy (PT) and occupational therapy (OT) programs
  • Social work master's programs
  • Some master's-level education programs

Students pursuing law, medicine, dentistry, pharmacy, and veterinary medicine are classified as professional students under the rule and face the higher $200,000 aggregate cap.

Understanding the difference between federal and private loans matters more than ever as these gaps widen. The federal vs. private student loans guide breaks down the repayment protections you give up when you shift to private borrowing.

For those weighing whether graduate school is worth the cost under the new rules, how much student debt is too much offers a practical framework for making that decision.

What to Do Right Now

If you are planning to enter or continue a nursing, PA, or allied health graduate program in fall 2026:

  • Contact your school's financial aid office now — ask what your expected annual costs will be and how the new caps affect your aid package
  • Check your employer's tuition reimbursement benefits before taking on any private loans. Many hospital systems offer substantial tuition assistance for nurses seeking advanced credentials
  • Look into program-specific scholarships; the scholarships for college guide covers sources well beyond the FAFSA process
  • Do not count on the lawsuit to resolve before July 1 — courts can take weeks to schedule emergency hearing motions, let alone issue rulings
  • Review the RAP repayment plan overview to understand how your repayment options are changing under the new law regardless of how the lawsuit proceeds

The case is moving quickly given the July 1 deadline. Court filings and any injunction rulings will emerge in the coming weeks.

Footnotes

  1. Maryland Attorney General. (2026, May 19). Attorney General Brown Sues U.S. Department of Education Over Unlawful Rule Limiting Access to Student Loans for Professional Degree Programs. Office of the Attorney General of Maryland. https://oag.maryland.gov/News/pages/Attorney-General-Brown-Sues-U.S.-Department-of-Education-Over-Unlawful-Rule-Limiting-Access-to-Student-Loans-for-Profession.aspx ↩ ↩2 ↩3

  2. The Hill. (2026, May 19). 25 states and DC sue Education Department over loan limits, citing health system strain. https://thehill.com/homenews/education/5885968-states-sue-education-department-graduate-student-loans/ ↩