A federal court ruling on June 25, 2026 blocked part of a new Department of Education rule just days before it was set to take effect. 

For students planning to start or continue graduate school, the decision creates short-term uncertainty around how much you may be able to borrow through federal loans. 

Key Takeaways 

• A federal judge temporarily paused part of a new Department of Education rule that would change how certain graduate programs are classified for federal student loan borrowing. The rule was scheduled to take effect on July 1. 

• Under the new regulations, most graduate students would be limited to borrowing $20,500 per year in federal loans, while students in qualifying professional degree programs could borrow up to $50,000 annually. 

• The groups challenging the policy, including the American Association of Nurse Practitioners, argued that the rule defined “professional degree” too narrowly. Their concern: some fields, including nursing and education, could be left out of the higher borrowing category, creating real funding challenges for students in those programs. 

What Happened 

A federal judge temporarily paused part of a new Department of Education rule that would change how graduate programs are classified for federal student loan borrowing. The rule was scheduled to take effect on July 1. 

Under the new rules, most graduate students would face a $20,500 annual federal borrowing cap, while students in qualifying professional degree programs could borrow up to $50,000 per year. 

The court order pauses the Department’s updated definition of “professional degree,” which had identified a limited set of degree types that could qualify for the higher borrowing limit. 

That means the definition is on hold for now, but the broader federal loan limits and Grad PLUS phaseout are still moving forward. 

What Was Changing 

The rule is part of a broader federal student loan overhaul passed in 2025. Two major changes are still in place: 

• Grad PLUS loans are being phased out for new borrowers. 

• New federal borrowing caps are being introduced based on program type. 

Under the new system: 

• Most graduate programs are limited to $20,500 per year, up to $100,000 total. 

• Professional programs, such as law or medicine, may qualify for up to $50,000 per year, up to $200,000 total. 

Why the Rule Was Challenged 

The court case was not about whether loan caps could exist. It was about how programs were categorized. 

The Department of Education created a narrower definition of “professional degree,” which left some healthcare, education, and licensed professional programs outside the higher borrowing category. 

Groups representing those programs argued that the Department went beyond what Congress intended when it rewrote the criteria. 

What Has Not Changed 

The ruling does not eliminate the new federal loan caps. 

The broader structure created by Congress, including lower overall borrowing limits and the Grad PLUS phaseout, remains in place. The court’s decision only affects how certain programs may be classified under those limits. 

What This Means for Students 

In the short term, the ruling may create more flexibility for some graduate programs that would have faced stricter borrowing limits. 

But the bigger picture has not changed: many graduate students may have access to less federal funding than in previous years. 

That means students may need to plan for: 

• Funding gaps between federal aid and total school-certified costs. 

• More reliance on scholarships, institutional aid, savings, or payment plans. 

• Private student loans as one option to help cover remaining costs. 

Learn More with Ascent 

Ascent is here to help students, families, and schools understand what is changing, ask the right questions, and plan ahead with more confidence. 

If you are trying to estimate a potential funding gap, Ascent’s Grad School Funding Calculator can help you compare your school-certified costs with the aid you may already have available. 

To better understand what the Grad PLUS phaseout could mean for students and schools, check out our blog, What Does the End of Grad PLUS Loans Mean for Higher Education?