Coalition of attorneys general sue to block federal student loan caps

Twenty-six attorneys general filed a lawsuit Tuesday against the Department of Education over a recently finalized cap on federal student loans—the litigators, as well as health industry groups, say will hamper the clinical workforce pipeline.

The attorneys, from largely blue states and the District of Columbia, filed their suit in Maryland’s federal court. They asked the court to declare the department’s definition of “professional degrees” outlined in an April 30 final rule, as well as the rule’s handling of existing borrowers’ grandfathered limits, to be declared unlawful and vacated. 

 “Higher education is expensive, and our healthcare system is already under immense strain,” Letitia James, New York’s attorney general and one of the suit’s plaintiffs, said in a release. “This rule will shut talented people out of critical professions and leave communities with fewer healthcare providers they desperately need. We cannot afford fewer nurses, fewer providers, or fewer opportunities for working people to enter these essential fields.”

The Department of Education brought the new loan caps to comply with last summer’s One Big Beautiful Bill Act, for which the administration promised the changes would help curb rising tuition costs and protect students from overborrowing. Those borrowing limits, per statute, are $20,500 per year and $100,000 in aggregate for "graduate students," and $50,000 and $200,000 for “professional” degree programs. 

While the sums and a general definition of the terms were codified by Congress, the department had the ultimate say on what types of programs and degrees fit those two categories. In last fall’s proposed rule and early May’s final word, the administration’s definitions reserved the higher ceiling for 11 roles, including medicine, pharmacy and other specialty doctorates, leaving various advanced practice providers, such as nurse practitioners, and other adjacent roles like social workers or physical therapists at the $100,000 aggregate cap. 

The final rule goes into effect July 1.

The healthcare industry pushed back against the definitions in lockstep, telling the administration in submitted comments to use its discretion to include more advanced care roles in the “professional” degree program definition. Alongside concerns that the insufficient amounts would dissuade highly needed trainees, they cited statistics on the high average salaries these positions offer and the historically low rate of defaults among those degree owners.

The attorneys general coalition took the side of industry groups and associations. In their complaint, they wrote that the department had “never intended” for an illustrative selection of degrees outlined in the statute to be used as a narrow, exclusive list of degrees applicable for the higher limit, “thereby excluding many healthcare and other professional degrees that would otherwise be eligible for the higher limits.” 

The department’s approach, they wrote, is contrary to the statute’s plain terms in violation of the Administrative Procedures Act. It’s also arbitrary and capricious under the same law because the department inconsistently “relied on several factors Congress did not intend it to consider—such as whether professionals are subject to supervision” and failed to explain its rejection of any alternative definitions during rulemaking. 

Additionally, the complaint notes that the statute requires federal student loan borrowers, as of June 30, 2026, to be grandfathered into the previous loan limits. The final rule “with almost no explanation” ties existing borrowers to the new rates if they transfer institutions or withdraw and re-enroll, “both contrary to the statute and arbitrary and capricious,” the suit reads.