By Megan Walter, Senior Policy Analyst

With July 1 just a week away, two federal lawsuits are pressing courts to act before a wave of student aid rule changes from the One Big Beautiful Bill Act (OBBBA) take effect.

The lawsuits challenge the Reimagining and Improving Student Education (RISE) negotiated rulemaking (neg reg) committee’s final rule's definition of “professional degree” and its consequences for some workers in the healthcare industry.

Prior to the OBBBA, there was no meaningful distinction between graduate and professional students for federal student loan borrowing purposes. All graduate-level students had access to the same annual Unsubsidized loan limit of $20,500 and, critically, could borrow up to the full cost of attendance through the Graduate PLUS loan program.

The OBBBA created a two-tier system, treating “professional” students differently from “graduate” students for loan limit purposes. Starting July 1, 2026, only eleven degree programs qualify as "professional degrees": the ten included in an earlier regulatory definition's illustrative list — fields like medicine, pharmacy, dentistry, law, and optometry — plus doctoral degrees in clinical psychology, which was added during RISE committee negotiations. A program with the same four-digit Classification of Instructional Programs (CIP) code as one of the eleven programs could also qualify as a professional degree if it meets certain licensure and program length requirements.

The law set the loan limits at two different levels: professional students could now borrow up to $50,000 annually, while graduate students remained capped at $20,500 under the Unsubsidized loan program. In addition to establishing new annual loan limits, the OBBBA eliminated the Graduate PLUS loan program for new borrowers, a program that effectively filled the gap between the Unsubsidized loan limits and the actual costs of attendance for many students.

The lawsuits filed against the Department of Education (ED) argue that the department misinterpreted the statute and, during the negotiated rulemaking process and in the final rule, manufactured excessive exclusivity in its definition of a professional program.

The first lawsuit was filed by a coalition of 25 states and the District of Columbia, challenging four specific provisions of the RISE rule. First, the narrowed definition of "professional degree" itself. Second, regarding the rule's treatment of students who withdraw and re-enroll, the lawsuit argues that OBBBA's limited exception provision requires only that a student be enrolled as of June 30, 2026, and that ED added a re-enrollment disqualification with no basis in the statute. Third, and related to the limited exception as well, ED interprets a transfer to a new institution as the start of a new program of study, and the states argue the statute does not require this interpretation. Fourth, ED's refusal to exercise existing authority under HEA Section 428H(d), which they’ve used to set higher loan limits for high-cost health profession programs, despite plaintiffs' argument that the preamble's claim that ED "lacked authority" to use it is simply wrong.

The states are seeking a declaration that these provisions are unlawful, national vacatur of the challenged provisions [which would strike the rule from existence entirely with nationwide effect], and a permanent injunction [which would leave the provisions intact, and would only affect the parties named in the suit] limited to public institutions within the plaintiff states. Critically, the states have not yet filed a motion for a preliminary injunction [a temporary pause on enforcement while the case proceeds, which affects only the parties named in the lawsuit], meaning the July 1 implementation date will proceed as scheduled unless they do so.

The second lawsuit, a consolidation of two lawsuits originally filed separately, was made by professional associations representing nurse practitioners and physician associates. The lawsuit argues that the final rule violates the Administrative Procedure Act (APA) by unlawfully limiting access to federal Direct Loans for students pursuing healthcare-related professions.

The coalition is seeking five forms of relief. First, a stay of the rule pending resolution of the case [pausing the rule from taking effect while litigation is pending, which would likely be limited to the association plaintiffs and their members]. Second, a preliminary injunction blocking the provisions from taking place on July 1 [which, if granted, would likely be limited to the association plaintiffs' members]. Third, a permanent injunction [issued after the case is heard in full, directing ED not to enforce the professional degree definition against parties associated with the association plaintiffs until ED promulgates a lawful replacement rule; the rule would technically still exist but be unenforceable against those covered]. Fourth, vacatur of the professional degree definition [which would strike it from existence entirely with nationwide effect]. Fifth, a declaration that the challenged provisions are unlawful.

Given that the healthcare association lawsuit sought a preliminary injunction to stop the rule from taking effect as of July 1, 2026, the court heard the plaintiff's arguments on June 23. Though the cases were consolidated, the two parties decided to present their arguments separately before the court.

During the hearing, presided over by Judge Beryl Alaine Howell, the plaintiffs emphasized that their challenge is not directed at Congress's decision to eliminate Grad PLUS loans or impose new borrowing limits through the OBBBA. Instead, they argued that ED unlawfully implemented those statutory changes by adopting a definition of "professional degree program" that excludes programs Congress never intended to exclude.

Plaintiffs repeatedly stressed that "we don't challenge the One Big Beautiful Bill Act. We don't challenge the statute. We don't challenge the elimination of Grad PLUS loans." Rather, they contend that affected nursing, physician associate, and other health profession programs "should have been subject to the higher caps and are only subject to the lower caps because of the Department's implementation of this rule."

To demonstrate the practical impact, plaintiffs cited evidence that more than 80% of nursing school deans expect enrollment declines as a result of the rule and that roughly 75% of students at those institutions may be deterred from pursuing their degrees because of the new borrowing restrictions. They also argued that students forced to rely on private loans could lose access to federal borrower protections, including PSLF, even if they pursue careers in public service.

Howell focused on a central question: because the loan limits themselves are established by statute, how would halting the department's rule provide meaningful relief if the plaintiffs are not challenging the law enacted by Congress?

In response, plaintiffs argued that the statutory distinction between graduate and professional degree programs is not self-executing, meaning the law does not automatically identify which degree programs qualify as "professional" programs. Plaintiffs argued that ED had to make those determinations itself and, in doing so, imposed requirements that are not found in the statute. 

According to the plaintiffs, Congress relied on ED to establish a lawful framework for determining which programs qualify as professional degree programs and therefore receive the higher loan limits. Because ED adopted an allegedly unlawful definition that excludes certain programs, plaintiffs contend there is currently no valid mechanism for applying the statutory distinction. As a result, they argued that the court should prevent the department from enforcing the challenged definition and the lower borrowing caps that flow from it, until the agency adopts a lawful replacement.

ED then took its turn largely defending the challenged rule on two grounds: that the plaintiffs' alleged injuries are speculative and that the department reasonably interpreted Congress’s statutory language. ED counsel added that any court-ordered relief, if granted, should be narrowly tailored. 

ED acknowledged that a loss of members or membership dues could constitute an injury for the plaintiff organizations; however, it argued that the claims are speculative as there is no certainty that the borrowing limits will reduce enrollment in the affected programs. Department counsel argued that a variety of outcomes are possible, including students turning to private loans or pursuing alternative financing options, making it difficult to establish a causal connection at this moment in time. 

Howell appeared skeptical of the department’s approach to defining professional degree programs, highlighting what she described as a contrast between the agency’s insistence that it lacked authority to consider certain policy concerns raised in the proposed rule comments, while simultaneously adding criteria, such as a reliance on four-digit CIP codes, that Congress did not expressly include in the statute. ED defended its use of CIP codes as an administrative tool, arguing that they are widely used throughout higher education and student aid administration. 

ED repeatedly emphasized that Congress deliberately imposed borrowing limits on professional degree programs where none had previously existed. Counsel argued that the department’s rule simply operationalizes that congressional decision, even if the resulting changes are significant and potentially disruptive. 

The hearing ended with a discussion of what should happen if the plaintiffs prevail. The department urged the court to limit any relief to the specific provisions of the rule challenged in the lawsuit. Counsel also indicated that if the court invalidates any part of the professional degree definition, the department could move relatively quickly to reclassify affected programs and implement a revised approach without undertaking a new rulemaking process, although no specific timeline was provided.

If the typical procedure for preliminary injunction hearings is followed, Howell has a few options: issue a ruling within days; issue a short order first granting or denying the injunction briefly, with a longer explanation to follow; or request supplemental briefing, meaning asking for additional information from the two parties. At this stage, Judge Howell is not deciding the ultimate legality of the rule; she is deciding if the plaintiffs have met the requirements for a preliminary injunction. 

If the court grants the preliminary injunction, it would block implementation of the "professional degree" definition for the affected parties represented by the plaintiffs only. If the court does not grant the injunction, it does not end the case; it simply means the plaintiffs did not meet the standard required to obtain emergency relief before the case is fully litigated. The court could also grant partial relief, blocking only certain aspects of the professional degree definition, such as the department’s use of the CIP code as a criterion.

Howell did not issue a decision at the conclusion of the hearing but instead requested supplemental information specifically regarding the CIP code portion of the final rule. She has also asked the plaintiffs to provide more evidence on the legal standing of a stay being issued. Given the July 1, 2026, implementation date for the provisions at issue, a decision is expected shortly.

NASFAA will continue to monitor the cases and will provide updates as courts potentially issue rulings before the July 1 effective date.

Publication Date: 6/24/2026