These Are The States Suing The Education Department For Pushing New Policy Limiting Student Loans

June 1, 2026 - 18:06

A coalition of Democratic governors and state attorneys general has filed a lawsuit against the U.S. Department of Education, challenging a new policy that restricts federal funding for certain graduate programs. The legal action, brought by officials from more than a dozen states, argues that the department overstepped its authority by imposing limits on loans for students pursuing professional degrees.

The policy in question targets what the Education Department calls "gainful employment" rules, specifically aimed at programs that leave graduates with high debt and low earning potential. Under the new guidelines, federal student loans would be capped or denied for students enrolling in professional master's degrees, such as those in law, business, and the arts, if the programs fail to meet specific debt-to-income thresholds.

The plaintiffs claim the rule unfairly penalizes students at public universities and community colleges, and that it undermines state efforts to train teachers, social workers, and other essential professionals. They argue the department lacks the legal authority to unilaterally limit loan access without congressional approval.

The lawsuit, filed in a federal court, seeks to block the policy from taking effect. It contends the rule would disproportionately harm low-income and minority students who rely on federal loans to afford graduate education. The Education Department has defended the policy as a necessary step to protect borrowers from predatory programs and rising default rates.

This legal battle marks the latest clash between state governments and the Biden administration over student loan policy, following earlier disputes over broad debt cancellation and income-driven repayment plans. A ruling on the injunction is expected in the coming weeks.