Davenport joins 22-state coalition challenging July 1 rule that voids loan access for students who pause enrollment.
TRENTON, N.J. — The federal rule published May 1 looks like it protects students already enrolled. It does not protect students who pause.
The U.S. Department of Education's final amendment to 34 CFR §668.2 narrows which graduate programs qualify for federal student loans. The rule takes effect July 1.
Students in continuous enrollment keep their existing loan access. The department calls this grandfathering. The grandfathering becomes voids on any withdrawal, transfer, or unapproved leave of absence. The break is the break, and the protection does not return.
New Jersey's graduate nursing programs enroll high percentages of students who cannot afford uninterrupted study. The New Jersey Collaborating Center for Nursing reports 13,334 applicants competed for 7,780 seats in state nursing programs in 2023. The center does not track how many of those 7,780 enrolled students work full-time, care for children or elders, or attend part-time. Those students face a federal deadline they did not choose.
The Department of Education says 95 percent of nursing students already borrow below the new caps. The department calls the rule a tuition-pressure mechanism. The American Council on Education, citing Federal Reserve Bank of Philadelphia data, disputes this: 39 percent of master's health students and 67 percent of doctoral health students borrow above the new limits. The department's 95 percent figure applies to all nursing students, not the graduate APRN and doctoral students the rule actually targets.
The mismatch matters because New Jersey cannot afford enrollment losses. The New Jersey Collaborating Center for Nursing projects a 24,450-nurse deficit by 2036. New Jersey ranks fourth-worst nationally for nursing shortage severity. The center reports 27 percent of New Jersey nurse practitioners, 3,500 of 12,995 surveyed, practice out-of-state. New York, Delaware, and Connecticut allow those nurse practitioners full practice authority without career-long physician collaboration. New Jersey requires that collaboration.
The federal rule adds financial pressure to a workforce already drawn to neighboring states by broader practice authority. New Jersey trains the workers, and neighboring states employ them. The federal government reduces its loan portfolio. Each actor's incentives predict the outcome.
Attorney General Jennifer Davenport filed suit against the Department of Education on May 19, joining 21 other states, Washington, D.C., and the governors of Kentucky and Pennsylvania. The coalition seeks to block the rule before the July 1 effective date. Davenport called the rule an affordability crisis that would worsen healthcare worker shortages.
The suit is Davenport's second major education litigation since February. She secured a $1 billion Title VI funding settlement with the Trump administration that month.
The Department of Education built the rule to withstand judicial challenge. The final text includes a severability clause, anticipating litigation. Even if a court strikes the grandfathering provision, the core loan limits remain.
A bipartisan bill, H.R. 6718, would reverse the narrow professional-degree definition. The American Council on Education is lobbying for passage. House Republicans, including subcommittee chair Burgess Owens of Utah, defended the loan limits as putting "reasonable" caps on federal loans and restoring "market incentives to higher education." No New Jersey Republican officeholder responded to requests for comment on Davenport's lawsuit.
The non-traditional student faces a choice that the rule forces. A student who pauses enrollment to address childcare, a medical issue, or a household financial shock loses grandfathered status permanently. That student must then borrow privately at higher rates with no income-driven repayment or public service forgiveness eligibility, abandon the degree, or transfer to a program in a neighboring state.
The Department of Education's public summary calls the grandfathering a form of protection. It does not mention the voiding conditions. The summary says the rule pressures tuition downward, but does not mention that New Jersey nursing programs turn away more than 5,500 applicants annually because they lack seats irrespective of tuition prices. Clinical program costs are externally fixed by hospital partnerships, lab fees, and accreditation requirements, limiting tuition elasticity even where demand exceeds supply.
The rule's 11 approved "professional" fields include clinical psychology, which Congress did not list in the One Big Beautiful Bill Act, and exclude physician assistant, physical therapy, and occupational therapy. The Department excluded PA programs based on scope-of-practice analysis: PAs must generally work under physician supervision, which the Department determined disqualifies the field from professional-degree status.
A New Jersey student who transfers to Stony Brook to escape the cap finds the same restriction. The Department excluded the profession nationwide, so every physician assistant program faces the same loan limit in every state. The student gains nothing by crossing the Hudson, and the state loses the enrollment either way.
The grandfathering clause functions as a selection mechanism. Students with uninterrupted enrollment, family financial support, and stable housing can complete their education and never have to face the new loan terms. Students with employment obligations, childcare needs, eldercare duties, or medical interruptions face disqualification, and the potential loss of funding. Meanwhile, the federal loan portfolio becomes cleaner, the state's healthcare workforce pool shrinks, and the neighboring states' labor markets absorb the outflow.
Davenport's lawsuit names this harm. The complaint, filed in Maryland federal court, argues the Department of Education exceeded statutory authority and violated the Administrative Procedure Act. The coalition wants a preliminary injunction before July 1.
Rutgers School of Nursing sets July 1 as the final deadline for fall admission to its DNP and post-master's nurse practitioner programs. The federal rule takes effect the same day.
Students who lose grandfathering status after July 1 must secure alternative funding before that deadline. What the lawsuit means for these students remains pending in court.
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Sources
• NJ Office of the Attorney General, "AG Davenport Sues to Protect Access to Student Loans for Professional Degree Programs" (May 19, 2026)
• NJ Office of the Attorney General, "Acting AG Davenport Secures Settlement with Trump Administration That Will Protect 1 Billion in Education Funding for New Jersey" (Feb. 9, 2026)
• U.S. Department of Education, "Myth vs. Fact: The Definition of Professional Degrees" (Nov. 24, 2025)
• Federal Register, Final Rule, 34 CFR §668.2 (May 1, 2026)
• American Council on Education, "Education Department's Final Rule on Financial Aid Locks in Restrictive Graduate Loan Limits" (May 21, 2026)
• New Jersey Collaborating Center for Nursing, "2025 Nursing Data and Analysis Report" (Mar. 21, 2025)
• George N. Saliba, NJ Business Magazine, "Combating NJ's Healthcare Worker Shortage" (Jan. 13, 2026)
• Law Offices of David S. Rich, "I Am A Nurse Practitioner. Do I Have Full Practice Authority In New Jersey?" (Mar. 25, 2024)
• Jill Desjean, National Association of Student Financial Aid Administrators, "You Have Questions; We Have Answers: Making Sense of the Student Loan Changes from OBBBA's RISE Committee" (Nov. 20, 2025)
• Congress.gov, H.R. 6718, "Professional Student Degree Act," 119th Congress
• Congressional Research Service, R48768, "The Department of Education's Proposed Rule to Define 'Professional Student': Frequently Asked Questions" (Feb. 24, 2026)
• Rutgers School of Nursing, "Graduate Admissions Deadlines" (2026)
• Maria Carrasco, National Association of Student Financial Aid Administrators, "After Passage of OBBBA, Lawmakers Debate Solutions to Counter Increasing College Costs" (Feb. 5, 2026)