Biden’s student debt forgiveness goes to court today. Republican arguments will center on the “enormous” financial harm the relief will cause to loan companies and states.
A federal judge will hear oral arguments from six Republican-led states that sued Biden’s $20,000 debt relief announcement in late August, arguing the relief will hurt their state’s tax revenue and operations finance from the MOHELA loan company, which is based in Missouri where the lawsuit was filed. It is one of five major Tory lawsuits that have been filed so far to block the policy, and if a judge rules 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 the arguments made by GOP-led states as to why the plan should be blocked, including justifying the power of the Education Secretary to cancel student debt under the HEROES Act of 2003 and dismissing fears the relief would harm MOHELA’s operations, saying it is not legally justifiable.
But in a new court filing 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 relief, Biden’s Department of Education said borrowers from the Family Federal Education Loan (FFEL) program, which are private loans, could consolidate their debt into direct federal loans to receive a loan forgiveness. ready. But in late September, the department subsequently revised its guidelines to say that FFEL borrowers cannot consolidate debt for relief, likely in response to the impending lawsuits.
In their defense, Republicans said they still suffered 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 debt relief and any related consolidation. And to remedy “at least some of the damage already caused by widespread Department-induced consolidation”, the group recommended that borrowers be forced to repay their former lender for lost interest caused by consolidation.
Financial damage to MOHELA
Republicans have hit back at the Biden administration’s assertion that MOHELA is separate from the state and that financial damages to the company would not impact the state. They said MOHELA is accountable to the Missouri government, and because canceling student loans would impact direct loan revenue, “it reduces MOHELA’s resources to perform these essential education-promoting functions. for Missouri. It’s definitely hurting the state.”
The filing also noted that there is “concrete, direct and enormous” damage to MOHELA’s finances caused by the debt relief, citing a loss of tens of millions of dollars a year in revenue if the relief were to take place. materialize.
Financial damage to states
Republicans representing Arkansas, South Carolina, Iowa, Kansas, Nebraska and Missouri have all said they could face a loss of income due to the cancellation of student loans, even if the defense of Biden argued that any loss was “too speculative and muted.” The group said that while each state could operate under its own tax code, changing the laws to make them inconsistent with federal law would ease the burden on taxpayers and tax officials, and “force them to reverse that would frustrate those goals.” “.
Misinterpretation of the HEROES Act
The Biden administration has long defended its one-time student loan forgiveness under the HEROES Act of 2003, which gives the education secretary the ability to waive or change student loan balances in connection with a national emergency, like COVID-19. As has been argued with many Republican lawmakers and conservatives, the GOP group has argued that this policy is an excess of that authority.
They said emergencies are temporary and any action in response to them must also be temporary, referring to the continued pauses in student loan payments during the pandemic, but blanket debt cancellation is “inconsistent with the limited reason for which the HEROES Act grants authority in the first place,” the filing said. They also argued 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 listen to Wednesday’s hearing here, and a summary of Biden’s defense can be read here.