GOP states sue Biden administration over student loan forgiveness plan
WASHINGTON — Six Republican-led states are suing the Biden administration in an effort to halt its plan to forgive student loan debt for tens of millions of Americans, accusing it of overstepping its executive powers.
It’s at least the second legal challenge this week to the sweeping proposal laid out by President Joe Biden in late August, when he said his administration would cancel up to $20,000 in education debt for huge numbers of borrowers. The announcement, after months of internal deliberations and pressure from liberal activists, became immediate political fodder ahead of the November midterms while fueling arguments from conservatives about legality.
As the lawsuit was being filed, the Biden administration quietly scaled back eligibility rules for the debt relief, eliminating a relatively small group of borrowers who are the subject of legal debate in the suit. Those borrowers, whose loans are backed by the federal government but owned by private banks — a relic of defunct lending programs — are now ineligible for Mr. Biden’s debt cancellation, the Education Department said.
In the lawsuit, being filed Thursday in a federal court in Missouri, the Republican states argue that Mr. Biden’s cancellation plan is “not remotely tailored to address the effects of the pandemic on federal student loan borrowers,” as required by the 2003 federal law that the administration is using as legal justification. They point out that Mr. Biden, in an interview with CBS’ “60 Minutes” this month, declared the COVID-19 pandemic over, yet is still using the ongoing health emergency to justify the wide-scale debt relief.
“It’s patently unfair to saddle hard-working Americans with the loan debt of those who chose to go to college,” Arkansas Attorney General Leslie Rutledge, who is leading the group, said in an interview. “The Department of Education is required, under the law, to collect the balance due on loans. And President Biden does not have the authority to override that.”
The states of Iowa, Kansas, Missouri, Nebraska and South Carolina joined Arkansas in filing the lawsuit. Iowa has a Democratic attorney general, but the state’s Republican governor, Kim Reynolds, signed on the state’s behalf. The states argue that Missouri’s loan servicer is facing a “number of ongoing financial harms” because of Mr. Biden’s decision to cancel loans. Other states that joined the lawsuit argue that Mr. Biden’s forgiveness plan will ultimately disrupt revenue to state coffers.
In particular, the suit alleges that Missouri’s loan servicer will lose revenue from loans it owns through the Federal Family Education Loan Program — a program that allowed private banks to issue and manage federally backed student loans until the program was disbanded in 2010.
The Education Department updated its website Thursday saying borrowers with federal loans that are owned by private banks, including the FFEL program and Perkins loans, will now be ineligible unless they already consolidated their loans into the government’s direct lending program before Thursday. The change will reverse eligibility for about 770,000 borrowers, the department said.
“Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, and this will allow us to achieve that goal while we continue to explore additional legally-available options to provide relief to borrowers with privately owned FFEL loans and Perkins loans,” the department said in a statement.
Still, the administration has long said it was confident the forgiveness program would survive court challenges.
Mr. Biden’s forgiveness program will cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, will get an additional $10,000 in debt forgiven.