A coalition of 24 attorneys general and two governors has sued the Department of Education over a new rule that could sharply limit federal student loan access for students pursuing nursing, physician assistant, physical therapy, occupational therapy, speech-language pathology, and other healthcare-related graduate programs. The lawsuit argues the Department unlawfully narrowed the federal definition of “professional degree,” potentially forcing students into higher-cost private loans or pricing them out of advanced healthcare education entirely.
Congress passed legislation in 2025 creating new borrowing caps for graduate and professional students after eliminating Graduate PLUS loans. Under the law, graduate students became subject to annual federal borrowing caps of $20,500 and aggregate caps of $100,000, while students enrolled in “professional degree” programs could still borrow up to $50,000 annually and $200,000 total.
The lawsuit says Congress intentionally adopted an existing federal definition of “professional degree” that included programs preparing students for licensed professions beyond a bachelor’s degree and specifically stated the listed examples were “not limited to” certain fields like medicine and law.
But the complaint alleges the Department’s final rule effectively transformed that illustrative list into a restrictive one by adding new requirements Congress never approved. The states argue the rule improperly excludes programs such as advanced nursing, physician assistant studies, occupational therapy, physical therapy, audiology, athletic training, and speech-language pathology, even when the Department acknowledged some of those programs satisfy the statutory test Congress adopted.
One of the more notable operational points for the credit and collection industry is the lawsuit’s repeated emphasis that affected students may be pushed toward private credit markets. Several attorneys general argued students unable to access larger federal loan amounts may have to rely on private loans with higher rates, underwriting requirements, or cosigner obligations.
The states also argue the rule could materially reduce enrollment in healthcare programs at a time when many states are already dealing with nursing and provider shortages. The complaint specifically points to concerns that reduced federal financing could shrink the pipeline of healthcare workers and even reduce the number of future instructors available to train additional students.
The lawsuit additionally challenges the Department’s handling of “grandfathering” protections for currently enrolled students. Congress had delayed implementation of the new caps for certain existing borrowers, but the states claim the Department unlawfully stripped those protections from students who transfer schools or temporarily withdraw and later re-enroll.
