Colleges Weigh Limiting Graduate Loans Amid Cap Litigation

After a federal judge halted the Department of Education’s definition of “professional” programs, the department said it stood by its original definition—which included just 11 degrees. But following the court order, the agency released a new list of 29 programs that will be considered “professional” while litigation continues.

The department, which appears to be planning to fight the order, stressed that the list was temporary and encouraged universities to limit their lending to students whose programs don’t fall under the original, narrower definition.

Institutions have long wanted the ability to limit lending in order to protect their students from overborrowing, but for as long as federal loans have existed, they haven’t been permitted to. The One Big Beautiful Bill Act changed that last summer, allowing institutions to set their own lending limits for the first time ever.

Now, ED is encouraging institutions to use that lever. The department’s argument is that, if the court order is reversed, anyone who borrowed up to the professional program limit whose program was then redefined as graduate would be in a difficult situation: They would have borrowed $50,000, the single-year cap for professional students, but would then be subject to the $100,000 lifetime borrowing limit for those categorized as graduate students. That’s especially tricky for programs like nurse anesthesia, which is typically a three-year program.

But it’s not such a straightforward decision, said Karen McCarthy, vice president of public policy and federal relations for the National Association of Student Financial Aid Administrators.

“It is a little bit of a lose-lose, because if you have needy students who could really use additional loan eligibility, who are struggling, or perhaps can’t enroll in the fall because of the lower loan limit, [and] you choose to stay where you are right now and set that lower loan limit, there may be students that are harmed by that right now,” she said.

In addition, McCarthy noted that the provision in OBBBA that allows colleges to set institutional loan limits wasn’t what financial aid administrators had been asking for. The legislation allows institutions to extend lower loans for entire programs and majors, but doesn’t offer any flexibility to raise those limits for students who need the additional support.

“We haven’t seen a lot of eagerness from institutions to jump right into this because of that the fact that they don’t have the ability to take unusual circumstances into account and increase for an individual student,” she said.

McCarthy said NASFAA hasn’t given its member institutions across-the-board guidance about whether they should set institutional limits or not, advising them to consult with their general counsel to make a decision.

The American Council on Education is also not yet advising colleges on how to proceed. Emmanual Guillory, the council’s senior director of government relations, said that the goal of the Higher Education Act is to increase access to college.

“So, while institutions do have the ability to limit loan borrowing, we are not encouraging institutions to do that in a way that is going to have a negative impact on those students who need the resources the most in order to attend,” he said.

Some advocates for students aren’t sure that allowing students to borrow beyond the lower cap is the right path.

David Kafafian is the chief operating officer at Clasp, a financial tech company that helps connect health-care students with clinical employers who will help pay off their loans. He said that while the recent court order may appear to be an “incremental” win at face value, “the answer can’t just be that these students are just allowed to indebt themselves further and further.

“Now, again, these health-care programs have pretty darn good ROI, no matter how you look at the math on them,” he added. “But if the biggest legislative intent [of OBBBA] was clearly ‘Let’s not allow students to borrow endlessly,’ then let’s not allow schools to [maintain high] price in the backdrop of that.”

But some faculty and administrators in fields on the expanded list of professional programs say they believe students should be allowed to borrow up to the $50,000-a-year cap. Before the court order, ED’s rule only allowed students outside of the initial 11 programs to borrow up to $20,500 a year. (Students in professional programs can borrow up to $200,000 in their lifetime, while graduate students are limited to half of that.)

Greg Collins, an assistant professor of professional practice of nurse anesthesia at Texas Christian University, said that, since the loan limits were finalized, he’s been concerned about the yearly limits especially. Nurse anesthesia students can’t hold a job outside of school, he said, so they rely on their loans to pay for not just their tuition, but also all their living expenses.

Michelle Canale, director of the nurse anesthesiology program at the University of South Florida, said she even sees the professional cap as too low for most nurse anesthesiology students.

“Just the tuition and program fees is $75,000 for the three years, and so if they got $150,000 in loans for the three years, they’d have to live [on] $75,000,” she said. Previously, students could borrow up to the cost of attendance under a program known as Grad PLUS, “and they were able to make the case for additional expenses that fall outside the federal student aid guidelines, but all of that is going away under this new law.”

Collins said he believes incoming nurse anesthesia students should receive the professional-level loans, especially at a time when there’s such high demand for nurse anesthetists. Many of the fields in the list of 29 programs train much-needed health-care professionals.

“Particularly in anesthesia, we have a true workforce crisis in terms of numbers of providers retiring and those seats not being filled,” he said. Lower limits may dissuade students from entering the field—though he noticed that the debate over loan caps hasn’t diminished the number of applications TCU’s program has received in the current application cycle.

Both Collins and Michael Roscoe, director of the University of Tampa’s physician assistant program and president-elect of the Physician Assistant Education Association, noted that their particular programs have default rates under 1 percent.

“These are the safest loans you could ever make,” Roscoe said.

The problem isn’t just whether colleges should lower loan limits or not, McCarthy noted: It’s also unclear when institutions will get a clear answer. The court case could take weeks or months, and summer is when most colleges disburse loans for the coming fall semester, so there’s no real option to wait and see.

But Roscoe argued that institutions shouldn’t let their fear of what will happen if the court order is reversed affect their decisions.

“To me, this fear of the unknown—the problem is today. The students’ need is today. Our health-care access is a today problem. If we pulled back … that is absolutely going to reduce the workforce,” he said. “We don’t know what the future holds. We know today, it’s $50,000.”