WASHINGTON, June 26, 2026, 06:05 (EDT)
- A U.S. judge put a hold on the Education Department’s narrower “professional degree” test just days ahead of the July 1 loan caps taking effect.
- Graduate students are still capped at $20,500 a year, with a lifetime max of $100,000. Professional students have limits at $50,000 a year, capped at $200,000 overall.
- Some high-cost programs passing the old test could stay in federal lending for as much as $29,500 each year, or $100,000 over the course of a program, instead of moving to private credit, under the ruling.
- Regular U.S. equity trading was still closed for the morning in Washington; the Nasdaq regular session starts at 9:30 a.m. ET.
Federal judges have stopped a piece of the Trump-era graduate loan rule, which could cap growth for private student lenders betting on expensive health programs. Lenders were set to gain as these programs shifted down to a lower federal loan level.
U.S. District Judge Beryl Howell in Washington blocked and put on hold the Education Department’s new “professional degree” definition, finding the agency probably exceeded Congressional limits. “Congress removed any discretionary authority the Department may have had to narrow the definition,” Howell wrote. Reuters
The 2025 law’s caps stay in place, but the court stopped the department’s tougher rule that included a mandate for degree holders to work without oversight from another professional. For now, the previous three-part standard is back in effect as the case moves forward.
Borrowers in qualifying programs can now get $50,000 a year in federal Direct Unsubsidized Loans, up from $20,500. The lifetime loan cap rises to $200,000, double the old $100,000 ceiling. Private lenders now see a potential $100,000 drop per borrower in the financing gap before costs overtake what federal loans will cover.
Private lenders aren’t losing out completely. Grad PLUS loans, which allow graduate students to borrow for their entire cost of attendance, are still set to end for new borrowers. Howell said that students needing more than what capped federal loans offer will “must turn to private loans,” and these can have stricter terms and don’t get federal public service loan forgiveness.
Sallie Mae (NASDAQ:SLM) gives investors direct exposure to the space. In the first quarter, private education loan originations hit roughly $2.9 billion, up 5% year over year. Graduate loan originations climbed 14%. Sallie Mae said it expects private education loan origination growth of 12% to 14% in 2026.
Sallie Mae CEO Jon Witter said in April the company saw the quarter before “expected multi-year growth” from federal reforms, telling investors the new rules might push originations up as much as 70% over several years. Investing.com Nigeria
SoFi Technologies (NASDAQ:SOFI) posted record Q1 student loan volume at $2.6 billion, up 119% year-on-year. The company’s annualized student-loan charge-off rate dropped to 65 basis points. CEO Anthony Noto told Reuters, “the health of our consumer base remains strong.” SEC
Order clouds the growth argument. Judge Howell rejected a wider push to halt statutory caps and also turned down a call for the department to reclassify physician assistant students as professional students. The agency is set to use the old definition first.
Private loan demand doesn’t match up with actual approved private loan volume. Sallie Mae’s first-quarter in-school originations carried an average FICO of 754, with 95% needing a co-signer, the company said in its earnings presentation. Sara Partridge at the Center for American Progress told Business Insider that private loans usually need a co-signer, so some students “may not qualify.” MarketScreener
Groups tied to advanced practice nursing, physician assistant education and other health fields were among the plaintiffs. Skye Perryman from Democracy Forward, which represented the plaintiffs, said the federal government should help students going into those areas, “not creating barriers to vital support.” Reuters
The Education Department is reviewing the order and said it will take “appropriate action.” The agency has said the loan caps are meant to pressure schools to rein in costs. A different lawsuit from Democratic-led states over the loan caps is still pending. apnews.com
