Republican States Challenge Biden’s Controversial Student Debt Plan

Republican-led states are once again challenging President Biden’s student debt forgiveness plan, claiming it exceeds executive powers and burdens state economies.

At a Glance

Seven Republican-led states sue Biden administration over new student debt relief plan
Lawsuit claims the plan is unlawful and bypasses Congressional approval
Previous attempts at student loan forgiveness were blocked by courts
Nearly 8 million Americans have enrolled in the SAVE Plan, including 4.5 million with $0 monthly payments
Legal battle highlights ongoing debate over federal authority in financial policy decisions

Republican States File Lawsuit Against Biden’s Latest Student Debt Relief Plan

A coalition of Republican-led states has filed a lawsuit against President Joe Biden and Education Secretary Miguel Cardona, challenging the administration’s latest attempt to provide student debt relief. The legal action, spearheaded by Missouri Attorney General Andrew Bailey, includes Georgia, Alabama, Arkansas, Florida, North Dakota, and Ohio as co-plaintiffs.

The lawsuit targets a newly proposed regulation aimed at assisting borrowers excluded from current loan forgiveness initiatives or burdened by unsustainable debt. This marks the third attempt by the Biden administration to cancel student loans, with previous efforts blocked by the courts, including a $430 billion program halted by the U.S. Supreme Court in June 2023.

Republican-led US states sue over new Biden student debt relief plan https://t.co/8vG9ps8GzJ pic.twitter.com/KogMhgW6Oo

— Reuters (@Reuters) September 3, 2024

Legal Arguments and State Concerns

The plaintiffs argue that Biden and Cardona have “unlawfully tried to mass cancel hundreds of billions of dollars in loans.” They claim the Department of Education directed federal loan servicers to start canceling loans before the rule’s official finalization, bypassing proper procedures.

“This is the third time the Secretary has unlawfully tried to mass cancel hundreds of billions of dollars in loans,” said the filing, which was made in a federal court in Brunswick, Georgia. “Courts stopped him the first two times, when he tried to do so openly. So now he is trying to do so through cloak and dagger.”

Missouri Attorney General Andrew Bailey criticized the administration’s actions, stating, “The Biden-Harris Administration is dedicated to saddling working Americans with Ivy League debt, even if they have to break the law to do it. 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.”

Impact on State Economies and Loan Servicers

The lawsuit argues that the SAVE Plan, launched last year as a modified version of existing repayment plans, would deprive MOHELA, a Missouri-based loan servicing company, of up to 15 years in servicing fees. This potential loss of revenue is cited as harmful to the state’s economy.

Additionally, the states claim that the plan undermines the Public Service Loan Forgiveness program, affecting their ability to hire and retain employees. They argue that the SAVE Plan is effectively an unauthorized grant program that Congress has not approved.

The SAVE Plan and Its Implications

The SAVE Plan, introduced after previous legal setbacks, aims to reduce monthly payments and accelerate loan forgiveness for eligible borrowers. Nearly 8 million Americans have enrolled in the plan, including 4.5 million low-income borrowers with $0 monthly payments.

“Yet again, the President is unilaterally trying to impose an extraordinarily expensive and controversial policy that he could not get through Congress,” according to the new suit.

The Biden administration defends the plan, stating that Congress granted the Education Department the authority to define repayment plans in 1993. However, the Republican-led states maintain that the plan exceeds this authority and imposes significant costs on taxpayers without proper legislative approval.

Looking Ahead

As the legal battle unfolds, the Education Department has stated that SAVE enrollees will be placed in an interest-free forbearance while litigation continues. This latest challenge to Biden’s student debt relief efforts highlights the ongoing debate over the limits of executive power and the role of states in shaping national financial policies.

The outcome of this lawsuit could have far-reaching implications for millions of student loan borrowers and set a precedent for future attempts at federal student debt relief. As the November election approaches, the resolution of this legal dispute may become a significant factor in the political landscape.