- Six Republican-led states are seeking to block Biden’s student loan forgiveness.
- A federal judge will hear their arguments on Wednesday.
- They say the relief will hurt state and corporate revenues.
Wednesday could be a turning point for President Joe Biden’s plan to cancel student loans.
A federal judge will hear oral arguments from six Republican-led states that sued Biden over his decision to implement debt relief of $20,000 per borrower, arguing that the relief would hurt their states’ tax revenues and to the financial operations of the MOHELA loan company in Missouri, where the lawsuit was filed. It is one of at least five major lawsuits against the GOP that were filed in an attempt to block the policy. If a judge ruled in favor of the group, the long-awaited loan forgiveness would not move forward.
Late last week, the Biden administration filed its first legal defense of the plan and pushed back against all arguments from GOP-led states on why the plan should be blocked, including justifying the Secretary of Education’s authority to forgive student debt under the HEROES Act of 2003 He also dismissed fears the aid would harm MOHELA’s operations, saying it is not legally justifiable.
In a filing in court On Tuesday, the group argued otherwise.
“If there was any doubt about the illegality of the cancellation before, there is now none,” the filing said. “The defendants’ show cause memo, which the secretary approved early the same morning it was completed, does not address key statutory elements of the HEROES Act, does not contemplate a single alternative to the forgiveness of billions in debt and does not even attempt to justify the central eligibility requirements contributing to the mind-boggling scope of Cancellation.”
Here are the main points the Republican group will likely address in court, according to the filing:
The financial damage suffered by debt consolidation
After announcing the relief, the Department of Education said borrowers of the Federal Family Education Loan Program, which facilitated private lending, could consolidate their debt into direct federal loans to receive relief. loan forgiveness. But in late September, the department revised its guidelines to say FFEL borrowers could not consolidate debt for relief, likely in response to the impending lawsuits.
The Republicans filing suits said they still bear the financial losses from the consolidation as the process may be underway for borrowers who made the switch before the September guidelines, and they called for a pause on the debt relief and any related consolidation.
They said that to remedy “at least some of the damage already inflicted by widespread Department-induced consolidation”, borrowers should be forced to repay their lenders for lost interest caused by the consolidation.
Financial damage to MOHELA
Republicans hit back at the Biden administration’s assertion that MOHELA was separate from the state and that any financial loss to the company would not affect the state. They said that MOHELA was accountable to the Missouri government and that because canceling student loans would influence direct loan revenue, “it reduces MOHELA’s resources to perform these essential educational advancement functions for Missouri”.
They added: “It is unquestionably harmful to the state.”
The filing also says that the debt relief caused “concrete and direct – and enormous” harm to MOHELA’s finances, adding that there would be an annual loss of tens of millions of dollars in revenue if the relief goes ahead. materialized.
Financial damage to states
Republicans representing Arkansas, South Carolina, Iowa, Kansas, Nebraska and Missouri have all said the states could suffer a loss of revenue due to student loan forgiveness, even if the defense of Biden said any loss was “too speculative and muted.” While each state can operate under its own tax code, changing its laws to conform to federal law would ease the burden on taxpayers and tax officials, Biden’s team said, adding, “Forcing them to cancel it will frustrate those goals.”
Misinterpretation of the HEROES Act
The Biden administration has long defended its one-time student loan waiver under the HEROES Act of 2003, which gives the Secretary of Education the ability to waive or change student loan balances in the event of a national emergency, such as COVID-19. Like many Republican lawmakers and conservatives, the GOP group said the policy was an excess of that authority.
Emergencies are temporary, he said, adding that any response to them must also be temporary, referring to the ongoing pauses in student loan payments since the start of the pandemic. The filing also said blanket debt forgiveness was “inconsistent with the limited purpose for which the HEROES Act grants authority in the first place.” He added that Biden failed to show how up to $20,000 in relief was the amount needed to avoid financial harm to borrowers.
The public can tune in to Wednesday’s hearing hereand a summary of Biden’s defense can be read here.