A group of 24 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 Trump administration argues the caps will lower tuition costs, but critics say they will worsen the nursing shortage and reduce access to healthcare, especially in rural areas.
The new rules, part of the One Big Beautiful Bill Act, limit graduate students in professional degrees such as medicine and law to borrowing $50,000 per year, with a $200,000 cap. Other graduate students, including those training as nurses and physical therapists, face a $20,500 annual limit and a $100,000 total cap. Opponents argue that capping loans without controlling tuition will simply shift costs to students.
“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, a consumer advocacy group. The administration claims the caps will prevent universities from raising tuition, noting that graduate costs have tripled since 2000. However, evidence for the so-called Bennett hypothesis—that aid drives up costs—is mixed, according to a Federal Reserve report.
Critics warn that the caps will force students to rely on expensive private loans, with interest rates up to 18%, compared to 7.9% for federal loans. This could deter people from entering essential fields like nursing, exacerbating shortages in rural areas where there are already 98 registered nurses per 10,000 people, compared to urban areas. New York Attorney General Letitia James, a plaintiff, stated: “This rule will shut talented people out of critical professions and leave communities with fewer healthcare providers they desperately need.”
