A federal judge in Missouri dismissed a case brought by six conservative states that broadly charged that President Joe Biden had acted beyond its authority in its plan to cancel student loan debt for millions of borrowers.
The six states – Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina – failed to establish they had standing, with the judge saying Thursday that “the Court lacks jurisdiction to hear this case.”
The states also had argued they would lose money from future tax revenues and via quasi-state agencies that service student loans.
However, the legal bickering between the president and these six states will continue. Suzanne Gage, spokeswoman for Nebraska Attorney General Doug Peterson, told the Associated Press the states will appeal, saying the states “continue to believe that they do in fact have standing to raise their important legal challenges.”
The federal government had responded to the suit by saying it could cancel debt under a 2003 law that allows it to pause or reduce borrowers’ payments on their loans during national emergencies. And, it said, the states failed to prove they would suffer damage because of its debt cancellation.
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About 43 million people hold $1.6 trillion in federal student loans, and about 40 million are expected to qualify for Biden’s offer of one-time debt cancellation. About 20 million may see their balances erased entirely, but it’s still unclear how many people will apply for debt relief. Borrowers will have to file out a simple form – though some may need to further prove their income – and others may opt-out.
During a hearing earlier this month, Autrey questioned whether Biden should be included as a defendant in the lawsuit. James Campbell, a lawyer with the attorney general’s office in Nebraska representing the states, said all they had were, “press releases and announcements, and all of that came and originated from the president.”
“So filing a lawsuit including the president we believed was a legitimate argument, because if we could get an injunction then that would stop all of the harm from happening,” Campbell said.
The hearing also centered around the federal government’s decision to trim the number of borrowers eligible for the program. Specifically, they cut borrowers with FFEL loans. They’re commercially held, but backed by the federal government, and borrowers holding these loans don’t qualify for debt relief. Prior to Sept. 29th, they had been able to consolidate these loans into balances owned by the Education Department, but the federal government has since barred that practice. The cut is expected to affect about 800,000 borrowers.
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The states have argued the president had acted beyond his authority and canceling student debt would hurt quasi-state agencies that service student loans. The Higher Education Loan Authority of the State of Missouri, better known as MOHELA, also services the now-defunct FFEL loans, and the suit argued borrowers would be encouraged to consolidate these loans into accounts owned directly by the federal government to qualify for debt relief. The states called the federal government’s decision to cut FFEL borrowers from the program arbitrary and an attempt to “avoid judicial oversight.”
The administration said that point is moot given that those borrowers no longer can qualify for the one-time debt relief, and that it had decided to remove the FFEL borrowers before the states’ lawsuit was filed.
“This is in part the peril of filing a lawsuit based on a press statements before the policy details have all come out,” said Brian Netter, a U.S. Department of Justice attorney representing the federal government.
In responding to the federal government’s arguments, Autrey said no one had defined what qualified as a “national emergency” in the context of canceling student loan debt and asked Netter to clarify. When Netter didn’t, Autrey said Netter should be more familiar with what qualifies.
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The states also argued the federal government had options besides widespread debt cancellation. They said the department could have continued a freeze on student loan payments that began early on in the pandemic, extended the repayment window while lowering monthly payments or improved marketing around the federal government income-based repayment plans. They also suggested the federal government reduce a set percentage of borrowers’ debts rather than canceling a set amount.
“It is the height of unreasonableness to rush to the most drastic option – the mass elimination of debt – when numerous other alternatives could have alleviated Defendants’ professed concerns about borrower delinquency and default,” according to a legal filing from the states.
The federal government said in a response filed with the court that no loan servicer is guaranteed a fixed amount of money from the loans they service. The government added that loan servicers’ portfolios are usually in flux as borrowers pay off their balances, request forbearance, or apply for different debt relief programs like the Public Service Loan Forgiveness program. The federal government also challenged the idea that its actions were causing harm to the states.
“Many of Plaintiffs’ claims turn on the theory that the states will be better off economically if more students remain in debt, because they make profits from administering debt obligations,” they wrote. “Those theories fail to describe any concrete injury traceable to the Department’s loan relief policy.
Also Thursday, the Supreme Court denied an emergency appeal from a Wisconsin taxpayer group also challenging Biden’s loan forgiveness program.
More:Supreme Court denies challenge to Biden’s student loan forgiveness program
Associate Justice Amy Coney Barrett denied the request to temporarily block the program’s implementation a day after it was filed without explanation, as is often the case on the court’s emergency “shadow” docket. Barrett declined the request without referring the appeal to the full court.
Arizona Attorney General Mark Brnovich has also sued the Biden administration to stop what he described as an “illegal student loan cancellation program.” Brnovich filed in the U.S. District Court of Arizona and also challenged the administration’s use of the HEROES act to cancel student loan debt.
