Twenty-four Democratic-led states and the District of Columbia have filed a lawsuit against the federal government to block new restrictions on federal student loans for graduate students, set to take effect on 1 July. The rules, part of the One Big Beautiful Bill Act, limit borrowing for 'professional' degrees like medicine and law to $50,000 per year ($200,000 total), while other graduate students—including nurses and physical therapists—face caps of $20,500 per year ($100,000 total).
The Trump administration argues the caps will lower tuition costs by curbing the ability of universities to raise fees. However, critics warn the measures will worsen the US nursing shortage, particularly in rural areas. 'Capping federal loans without capping tuition is like putting less gas in the tank of a car and still wanting to go the same distance,' said Jennifer Zhang of Protect Borrowers.
Evidence for the so-called Bennett hypothesis—that increased aid drives up tuition—is mixed, according to a 2022 Federal Reserve report. Beth Akers of the American Enterprise Institute, which supports the caps, admitted there is no proof they will reduce costs, as 'we have never gone in this direction with policy.' Zhang argued the act may actually raise tuition by cutting Medicaid and food assistance, leading states to reduce higher education funding.
Students may turn to private loans with interest rates up to 18%, compared to 7.9% for federal loans. A study in Health Affairs Scholar found that over a quarter of advanced practice nurses with loans exceeded the $100,000 cap. New York Attorney General Letitia James, a plaintiff, said: 'This rule will shut talented people out of critical professions and leave communities with fewer healthcare providers they desperately need.'
