A coalition of 25 Democratic-led states and the District of Columbia sued the Education Department on Tuesday over new graduate student loan limits, arguing the restrictions will worsen the health care workforce shortage.
“Higher education is expensive, and our health care system is already under immense strain. This rule will shut talented people out of critical professions and leave communities with fewer healthcare providers they desperately need,” New York Attorney General Letitia James, who is leading the coalition, said in a statement.
The lawsuit, filed in federal court in Maryland, comes nearly three weeks after the Education Department finalized rules that lower the amount of money graduate students can borrow from the federal government. The rules, which take effect July 1, are a feature of the One Big Beautiful Bill that President Donald Trump signed into law last summer. They implement borrowing caps based on whether students are pursuing a degree in what is designated as a professional or graduate program.
Students in professional programs can borrow up to $50,000 a year and $200,000 total, while those in graduate programs will face annual limits of $20,500 and a lifetime limit of $100,000.
The law listed examples of professional programs, including pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry and theology.
Before now, all graduate students could borrow up to the full cost of attendance, which conservative lawmakers blamed for high program costs and high student debt.
In the fall, the Education Department and a committee of higher education experts negotiated the details of the loan caps, but the terms sparked a backlash over the exclusion of some professions from the higher loan limits, including nursing, physical therapy and social work. The department received more than 80,000 comments on the proposed rule, with many industry groups challenging the professional designation and warning that students would be shut out of critical fields.
Professional degrees are not limited to the list, the regulation says, but the Education Department held fast to the examples — only agreeing to add clinical psychology after intense debate with experts. The Education Department refused to further expand the list of degrees deemed professional in the final rules.
In the lawsuit, the states claim the department exceeded its authority with an arbitrary definition of “professional degree” that Congress never envisioned.
“The Department heavily relied on ‘its own historical practice’ in defining ‘professional degrees’ … as well as whether a worker was ‘supervised by another professional who has … more education, training, and qualifications,’ … neither of which Congress intended it to consider,” the legal complaint states.
The coalition of states fears the rules will force many students to rely on more expensive private loans, delay completing their education or abandon their pursuit of an advanced degree altogether. The group worries the rules will worsen workforce shortages and make it harder for patients, especially those in rural and underserved communities, to access health care. The states are asking the court to block the rules.
The Education Department did not immediately respond to requests for comment on the lawsuit.
When the department drafted the rules, it primarily relied on the text of the One Big Beautiful Bill, which defines a professional student based on a federal classification from the 1970s. A degree is considered “professional” under that classification if the field requires skills beyond those needed to receive a bachelor’s degree, and licensure is generally required — terms that could describe a range of professions.
Nursing groups have been among the most vocal critics of the “professional” definition, arguing that the restrictions could shrink the pool of people who pursue the degrees needed to teach the next generation of nurses. The Education Department has said 95 percent of nursing students borrow below the annual limit and would not be affected by the new caps.
Education Secretary Linda McMahon referenced that data point during a House Education Committee hearing this month, when Democrats and a few Republicans raised concerns that the graduate loan limits will exacerbate the shortage of health care workers.
“It is our overall goal to bring down the cost of college and education,” McMahon said, after Rep. Randy Fine (R-Florida) questioned the potential impact of the loan caps on workforce shortages. “And I do think that, relative to the shortages we’re having, if we can bring down the cost for nurses in schools, we can get more students to apply.”
McMahon noted that a handful of colleges have reduced their graduate program prices in response to the loan limits, but Democratic lawmakers pointed out that the list is short and does not include nursing degrees.
A group of Democratic lawmakers in the House and Senate is seeking to overturn the student loan rules through the Congressional Review Act, which allows lawmakers to overturn recent regulatory actions of federal agencies with a simple majority vote in both chambers. Their campaign will be an uphill battle with Republicans, who championed the spending bill and control the House and Senate.
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