WASHINGTON, June 27, 2026, 10:03 EDT
- A judge has put the Education Department’s new “professional degree” rule on hold, just days before loan caps were set to begin July 1.
- The caps still block new Grad PLUS loans, keeping most grad students at $20,500 per year.
- Federal figures say health-care programs accounted for about $7.87 billion in 2023-24 borrowing above the new yearly caps.
- Sallie Mae had told investors that federal reforms might bring in $4.5 billion to $5 billion more in yearly originations.
WASHINGTON, June 27 (Reuters) – A judge’s decision on graduate student loans could keep some expensive health-care school debt in the federal system. That’s a blow to private lenders who were expecting the end of Grad PLUS loans next week would drive more borrowers to bank loans.
U.S. District Judge Beryl Howell in Washington late Wednesday stopped the Education Department from applying a stricter “professional degree” standard that would have dropped nursing, physician assistant, therapy, public health and teacher trainees into lower federal loan limits. The order leaves the new July 1 borrowing caps in place. Grad students stay at $20,500 per year and $100,000 in total, while those in professional degrees can still borrow up to $50,000 annually and $200,000 overall. Reuters
Investor concerns go beyond just legal questions. The real problem is the loan volume now stuck. Education Department figures in the final rule said 429,320 grad and professional borrowers in 2023-24 got $12.34 billion in federal disbursements over the new annual caps. Of these, health-care borrowers made up 223,970 people and $7.87 billion, or about 64% of the excess dollars.
Private lenders may have looked to this pool first. In 2023-24, physician assistant master’s programs had 19,580 borrowers taking out $812 million over the new annual limit. Physical therapy doctoral and professional programs saw 19,310 borrowers and $633 million above the cap. Registered nurse master’s programs had 11,140 borrowers with $241 million in loans above the limit.
SLM Corp NASDAQ:SLM, which owns Sallie Mae, pitched the federal pullback as a growth chance. In a June filing to investors, SLM said the move could push originations up as much as 70% over several years. Annual originations might jump by $4.5 billion to $5 billion once the transition away from federal lending wraps, according to the company. SLM’s own numbers in the filing show $7.4 billion in projected 2025 private loan originations.
Court decision leaves most of the thesis intact. Judge Howell did not block the caps or bring back uncapped Grad PLUS loans. She said plaintiffs were mostly upset about Congress ending uncapped borrowing, not just how the department defined the rule. The Education Department had restricted professional status to 11 fields like law, medicine, dentistry, pharmacy, theology and clinical psychology.
“This order allows ED to enforce the statutory professional degree definition and loan caps. ED is reviewing the order and will take appropriate action,” the department said to Inside Higher Ed. Josie Eskow Skinner, partner at Sligo Law Group, told the outlet the broader statutory language covers “more than just those 11 professions,” but said she wouldn’t be surprised to see an appeal. Inside Higher Ed
Skye Perryman, president of Democracy Forward and lawyer for the plaintiffs, said the decision will help students heading into nursing, public health, education, and marriage and family therapy. “These are key services that the federal government should be supporting,” Perryman said. Reuters
Dr. Deborah Trautman, who leads the American Association of Colleges of Nursing, said AACN was “encouraged by this initial action” and supported keeping federal funding for nursing students in master’s and doctoral tracks. aacnnursing.org
Schools are still up against tight timing. NASFAA said the ruling is nationwide, but there’s “significant uncertainty” with no appeal or guidance from the Education Department as of its June 25 update. Parties have a July 2 deadline to propose next steps for the court. nasfaa.org
