A coalition of twenty-five states plus the District of Columbia filed suit yesterday against the Department of Education (“ED”), challenging portions of ED’s final “RISE” rule[1] (“Final Rule”) that dramatically narrow which graduate programs qualify for higher federal student loan limits. The case, State of Maryland, et al. v. U.S. Dep’t of Educ., No. 1:26-cv-01957 (D. Md.), alleges that the Department’s May 1, 2026 Final Rule violates the Administrative Procedure Act (“APA”) by rewriting Congress’ definition of “professional degree” adopted in the One Big Beautiful Bill Act (“OB3”) last year.
Background
In July 2025, Congress passed OB3, seeking institutional accountability and protection for taxpayers against ballooning student loan debt and defaults. OB3, inter alia, imposed separate student loan borrowing caps based on whether a student is enrolled in a “graduate” or a “professional” degree program. Effective July 1, 2026, “graduate students” may borrow up to $20,500 annually ($100,000 in aggregate), while “professional students” may borrow up to $50,000 annually ($200,000 in aggregate).
To define “professional degree,” OB3 expressly incorporated the existing definition of “professional degree” in 34 C.F.R. § 668.2, which is based on a three-part test: a degree that (1) signifies completion of academic requirements for beginning practice in a given profession, (2) signifies a level of professional skill beyond a bachelor’s degree, and (3) generally requires professional licensure. Critically, Section 668.2 further gives as examples ten different degrees that are considered “professional”: e.g., a J.D. law degree, an M.D. medical degree, and a Masters in Theology.
What the Final Rule Does
The Final Rule adds several “professional degree” requirements not found in OB3: the degree must (1) be “generally at the doctoral level” (despite a Master’s in Theology included in the Section 668.2 list); (2) require at least six academic years of postsecondary education; (3) require licensure specifically “to begin practice”; (4) fall within a four-digit CIP code in the same intermediate group as the illustrative list of degrees referenced in Section 668.2, which OB3 expressly incorporated; and (5) not lead to a profession “supervised by another professional” with “more education, training, and qualifications.”
By layering on these extra criteria, the Final Rule effectively converts Congress’s illustrative list of professional degrees into an exclusive list. The result is that many healthcare programs are excluded from the higher loan limits, including nurse practitioners, physical therapists, occupational therapists, physician assistants, anesthesiologist assistants, and speech-language pathologists—even though the Department acknowledges that several of these fields satisfy OB3’s three-part test. The Department’s approach has caused an uproar across the country from various healthcare and other fields (particularly nursing). One of the many arguments given in opposition to the Department’s approach is that many healthcare occupations are already projecting massive future labor shortages, and the new loan limits will discourage many prospective students from entering those programs if they simply cannot fund the degree, leading to even greater shortages in those professions.
The Final Rule also restricts OB3’s grandfathering provision, which protects currently enrolled students from the new loan caps for the duration of their expected time to credential. Under the Final Rule, students who withdraw and re-enroll, or who transfer to a different institution, lose grandfathered status—limitations OB3 does not impose.
The States’ Claims
The complaint asserts four APA causes of action:
- Count I: The professional degree definition is contrary to law and exceeds the Department’s statutory authority because it adds criteria Congress never authorized.
- Count II: The professional degree definition is arbitrary and capricious because it relies on factors Congress did not intend the Department to consider—such as whether an occupation is subject to supervision—and applies those factors inconsistently and fails to consider reliance interests.
- Count III: The grandfathering limitations are contrary to law because the statute’s only requirements are current enrollment and a federal loan as of June 30, 2026, and the Department lacks authority to add further conditions.
- Count IV: The grandfathering limitations are arbitrary and capricious because the Department failed to consider the harms to students who relied on existing loan availability and did not adequately explain its reasoning.
The states seek as relief (1) a declaration that the challenged provisions are unlawful because they violate the APA; (2) a permanent vacatur of the challenged provisions pursuant to 5 U.S.C. § 706; (3) a permanent injunction of the challenged portions as to Plaintiff States; and (4) attorney’s fees.
TC’s Take
First, it is an interesting case politically. Plaintiffs are twenty-five (25) states plus the District of Columbia, twenty-three of which are considered traditionally “blue” states politically. Two Plaintiffs are states traditionally considered “red” states – Kentucky and North Carolina. In nearly all state-led litigation challenging the current Administration’s initiatives, Kentucky and North Carolina have not been plaintiffs. Their decision to join this particular lawsuit underscores the significance of the Final Rule and the implications it will have for schools and students across the country.
Second, this case has drawn the Honorable Adam Abelson, United States District Court Judge for the District of Maryland. Judge Abelson is the judge who enjoined last year’s January 2025 DEI Executive Orders, Ending Radical And Wasteful Government DEI Programs and Preferencing and Ending Illegal Discrimination and Restoring Merit-Based Opportunity before that injunction was stayed and then overturned by the Fourth Circuit. Judge Abelson is also the judge assigned to the recent lawsuit challenging the Trump Administration’s latest DEI executive order, Addressing DEI Discrimination by Federal Contractors, where plaintiffs are also seeking an injunction of the executive order.
Third, the Final Rule’s July 1, 2026 implementation date is just around the corner. Students are anxiously wondering how they will fund their educations, and institutions are anxiously wondering how they will help these students and whether their programs will soon be empty due to lack of funding. Yet Plaintiff States have not yet moved for preliminary injunctive relief to prevent the Final Rule from becoming effective on July 1. Instead, the Plaintiff States seek a “permanent injunction,” a remedy available only after a final ruling on the merits, which will not stop the Final rule from going into effect on July 1. If the Plaintiff States want to stop that from happening, they must file a motion for preliminary injunction soon.
Fourth, it is interesting to note that Plaintiffs, following last year’s Trump v. CASA decision,[2] which held that universal or “nationwide” injunctions are unlawful, seek relief as to Plaintiff States – and “their instrumentalities and subdivisions” – only. Thus, a permanent injunction may insulate public institutions within these Plaintiffs States from the effects of the challenged portions of the Final Rule, but not private institutions in these states, nor any institutions in the other twenty-five non-Plaintiff States, many of which are considered “red” states.
Fifth, one way for private institutions and all institutions located in states other than Plaintiff States to benefit from any injunction entered is for an association representing them to intervene as plaintiffs. An association could request that any relief awarded to the Plaintiff States be extended to its member institutions. This is what happened last month in Mass., et al. v. U.S. Dep’t of Educ., 1:26-cv-11229-FDS (D. Mass), which challenged the Government’s roll-out of the Admissions and Consumer Transparency Supplement (ACTS) survey to the IPEDS data collection system. The motion to intervene can be found here.
Sixth, Plaintiffs have a good argument that the Final Rule overreaches by imposing additional requirements for a “professional degree” that are not included in OB3, particularly in the wake of the decision in Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024), which held that courts should not defer to an agency’s interpretation of a statute, and that if an agency’s interpretation is not the best interpretation, it is not permissible.
We expect that the Maryland District Court will eventually enjoin and/or vacate the challenged portions of the Final Rule, though not before July 1, 2026 unless the States elect to pursue expedited relief by filing a motion for preliminary injunction. A permanent injunction would ultimately give public institutions located in Plaintiff States, and institutions located elsewhere if an association representing them intervenes on their behalf, reprieve from the challenged portions of the Final Rule. The Government no doubt will appeal to the Fourth Circuit (where it has had some success) and, eventually, the United States Supreme Court may decide these issues.
We will continue to monitor the docket for any preliminary injunction motion. If one is filed, this case could move quickly considering the July 1, 2026 implemental deadline. Please let us know if your institution has specific questions about how it may be affected or possible intervention.
[1] U.S. Dep’t of Educ., Final Rule, Reimagining and Improving Student Education, 91 Fed. Reg. 23,768 (May 1, 2026).
[2] 606 U.S. 831 (2025).
