US President Joe Biden speaks in the South Court Auditorium of the White House in Washington, DC, … [+] September 3, 2024. The Biden administration is facing a new lawsuit over student loan forgiveness this week. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)
A group of Republican-led states has filed a new legal challenge against the Biden administration, warning that officials are on the cusp of implementing a brand new student loan forgiveness initiative that would cost billions.
Claiming to have uncovered documents of the Education Department’s intentions, the states claim that the Biden administation “is unlawfully trying to mass cancel hundreds of billions of dollars of loans” in a matter of days, according to the lawsuit. The states are asking a federal judge to halt the program before any relief can begin.
Here’s what’s going on, and what borrowers should know.
Biden’s Latest Student Loan Forgiveness Plan Could Help 25 Million Borrowers
The latest challenge centers on what the Biden administration has characterized as “Plan B” student loan forgiveness — a new effort to cancel large swaths of student debt after Biden’s first mass debt relief initiative was rejected by the Supreme Court last summer.
The new plan is being developed under a different legal authority, and has gone through a formal rulemaking process that lasted a year. Officials hope this will distinguish the program from the one the Supreme Court struck down, and place it on firmer legal footing.
The initiative will focus relief on four groups of borrowers based on their circumstances. This includes those who first took out student loans prior to July 2005 (for undergraduates) or July 2000 (for graduate school borrowers), and borrowers who owe more now than what they started with due to runaway interest. Borrowers can also qualify for relief if they went to a school that lost access to federal financial aid programs due to its failure to meet federal standards, or if they qualify for existing loan forgiveness programs but never applied.
Borrowers were formally notified of the program last month when the Education Department sent mass out mass emails to more than 25 million Americans who could benefit. The notices include an opt-out date of August 30. Most relief is expected to be implemented automatically, if the program launches as planned.
GOP Legal Challenge Could Halt Biden’s New Student Loan Forgiveness Program
But the new legal challenge threatens to put a stop to Biden’s latest effort at mass student loan forgiveness before it even gets off the ground. Seven Republican-led states — Missouri, Georgia, Alabama, Arkansas, Florida, North Dakota, and Ohio — filed suit yesterday alleging that the Biden administration is planning on enacting the new loan forgiveness plan in just days.
The Education Department “has quietly instructed federal contractors to ‘immediately’ begin cancellation as early as September 3, 2024 (but possibly beginning on September 7),” warns the lawsuit, which was filed in federal district court in the southern district of Georgia. The suit alleges that states, and state-affiliated loan holders and servicers like MOHELA, would be financially harmed by mass student loan forgiveness, and that the department is violating federal law both in the program’s creation and in its implementation.
“The States respectfully request immediate relief pending further briefing and argument on the merits in order to avoid unlawful forgiveness of $73 billion overnight,” warn the states, arguing that documents the states obtained contain instructions to loan servicers to start cancelling debt. The states are asking the court to halt the program before the Education Department can even answer the suit.
The Biden administation has not formally responded to the challenge, and has declined to publicly comment on it, according to the Washington Post.
Latest Attempt To Block Biden Student Loan Forgiveness Efforts
The new lawsuit is just the latest effort by Republican-led states, spearheaded by Missouri, to block the Biden administration’s attempts to implement student debt relief.
Missouri successfully sued by the Biden administration over the first student loan forgiveness plan, which would have authorized $10,000 or up to $20,000 in relief for most borrowers who earned income below certain thresholds. The 8th Circuit Court of Appeals enjoined the program, and after further appeal, the Supreme Court overturned it.
The 8th Circuit is also considering a second legal challenge led by Missouri involving Biden’s new SAVE plan, an income-driven repayment program that reduces payments, halts excess interest, and fast-tracks student loan forgiveness for certain borrowers. Last month, the 8th Circuit blocked SAVE while the litigation continues, and it threatened to end student loan forgiveness for other IDR plans, as well. The dispute is likely to return to the Supreme Court in the coming months.
In each of its challenges, Missouri has argued that MOHELA, a state-related organization that services federal student loans on behalf of the Education Department, would be harmed by student loan forgiveness. And that, in turn, would harm state finances — an argument that the Supreme Court’s conservative majority signed onto last year when it overturned Biden’s first debt relief plan in a 6 to 3 ruling, with the Court’s liberal justices dissenting. The latest Complaint references MOHELA 55 times.
“Our latest lawsuit challenges their third and weakest attempt to mass-cancel student loans in the dark of night without letting Congress – or the public – know about it. That’s illegal,” said Attorney General Bailey in a statement on Tuesday. “We successfully halted their first two illegal student loan cancellation schemes; I have no doubt we will secure yet another win to block the third one.”
