The Washington PostDemocracy Dies in Darkness

GOP-led states urge judge to block Biden student debt relief plan

President Biden walks to the Oval Office on the South Lawn of the White House on Monday. (Demetrius Freeman/The Washington Post)
6 min

A federal judge in Missouri is deliberating on whether to stop the Biden administration from moving forward with plans to cancel up to $20,000 in student loan debt for more than 40 million people.

U.S. District Judge Henry E. Autrey heard arguments Wednesday on a motion filed by six Republican-led states seeking a preliminary injunction to halt the program until a ruling is made on the full lawsuit. The judge wrapped the two-hour hearing without issuing a decision but told attorneys to expect to hear from him soon.

Whoever loses out in the judge’s ruling on the injunction could appeal the decision.

The Biden administration is facing several lawsuits over its student debt cancellation policy. On Wednesday, the U.S. Court of Appeals for the 7th Circuit denied another request for a preliminary injunction sought by the conservative legal outfit Wisconsin Institute for Law and Liberty on behalf of a taxpayer’s association. The group had claimed, among other things, that the debt plan had an “improper racial motive” because of statements by the White House that it could help narrow the racial wealth gap and advance racial equity.

Legal experts say the GOP states’ case may pose the greatest threat of delaying or halting the implementation of Biden’s program.

The coalition of states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — sued the Biden administration in September over the debt relief policy. They accuse the president of overstepping his authority and threatening the revenue of state entities that profit from federal student loans.

“The federal government is engaged in a so-far hidden, ever-changing and increasingly crumbling escapade of lawlessness,” James A. Campbell of the Nebraska attorney general’s office said in court Wednesday. “Everything we’ve learned so far shows that the department is making this up as they go. They are acting without agency authority. And they are flouting the HEROES Act, which doesn’t give them the broad authority they claim.”

The Biden administration has been adamant that it has the legal authority to cancel student debt during a national emergency.

A prominent issue in the lawsuit is a subset of loans in the Federal Family Education Loan (FFEL) program, in which private lenders originated debt guaranteed by the federal government. Before the program ended in 2010, the portfolio was divided up between the Education Department and a handful of companies.

Those privately held loans are routinely excluded from loan forgiveness initiatives, but borrowers can often consolidate them into a federal Direct Loan to qualify. After Biden unveiled his relief plan, there was a spike in consolidations among commercial FFEL borrowers trying to take advantage of the policy.

Press Enter to skip to end of carousel
Key details on Biden’s student loan forgiveness


End of carousel

The states said that activity posed a financial threat.

Missouri Attorney General Eric Schmitt (R) said the Missouri Higher Education Loan Authority, a quasi-state outfit that owns and services FFEL debt, would be deprived of ongoing interest payments if borrowers consolidated en masse. He said the company would also lose revenue from servicing Direct Loans — those made and owned by the federal government — that are wiped away.

Widespread consolidations would also mean Nebraska, which invests in securities backed by privately held federal student loans, could lose interest income generated by the securities, Nebraska Attorney General Doug Peterson (R) argued in the complaint. He said Biden’s plan could cut that market in half.

The Biden administration scaled back eligibility for the debt relief program hours before the case was filed. The Education Department said commercial-FFEL borrowers could no longer consolidate to qualify for the one-time relief.

Biden administration narrows eligibility for student debt cancellation

That decision will shut out an estimated 770,000 people from the program, according to an administration official. About 1.5 million other borrowers who have both commercial-FFEL and Direct Loans could also receive less debt relief as a result.

The coalition of states said in a court filing Tuesday that it might pursue an order requiring borrowers who applied for consolidation before the cut-off date to pay the former owner of their loans for the lost interest.

Justice Department attorney Brian Netter on Wednesday said barring further consolidations has rendered moot the states’ arguments of harm. The department’s attorneys had said in a recent court filing that commercial-FFEL loans are fundamentally an “uncertain source of revenue,” as there is no guarantee of repayment.

But Campbell, who was arguing on behalf of the states, said there was nothing stopping the government from reversing the consolidation cutoff later.

Most of the states involved in the lawsuit argue they will lose tax revenue because of Biden’s policy. They take their cue from the federal government, which will not count discharged student debt as taxable income through January 2026. The Biden administration contends that any loss results from the states’ own decisions about how to tax federal loan discharges, not the discharge policy itself.

Biden announced $10,000 in relief for student loan borrowers making less than $125,000 annually, and an additional $10,000 for Pell Grant recipients. (Video: Michael Cadenhead/The Washington Post)

The Biden loan relief plan will cancel up to $10,000 in federal student debt for borrowers who earn up to $125,000 annually, or up to $250,000 for married couples. Borrowers who received Pell Grants are eligible for an additional $10,000 in forgiveness.

In defending the new loan forgiveness plan, the Biden administration has cited a 2003 law giving the executive branch broad authority to overhaul student loan programs. Justice Department attorneys said in a recent court filing that the policy “fits comfortably within the [Education] Secretary’s HEROES Act authority” based on “thorough economic analysis and targeted in response to the COVID-19 national emergency.”

The six states and other conservative groups argue that Biden’s policy represents illegal executive overreach because the 2003 law was created to give the president authority after a disaster such as the Sept. 11, 2001, terrorist attacks. They say there is nothing in the statute that explicitly permits sweeping debt cancellation. The states also assert that the executive branch lacks the authority to create a new forgiveness policy and is usurping Congress’s power to make law.

White House previews student loan forgiveness application

Amid the legal challenges, the administration has held off on releasing an application for the forgiveness program. In court documents, the Education Department said it would not discharge any loans before Oct. 23 to give the court time to make a decision on the injunction.

About 8 million people, whose income information is already on file with the Education Department, could have their loans automatically forgiven. The Biden administration said borrowers can opt out of the program.

Student loan forgiveness

The latest: At a hearing, conservative Supreme Court justices seemed highly skeptical of President Biden’s debt relief plan. To date, Biden’s student loan forgiveness plan is on ice after a Texas judge blocked the student debt relief plan.

Calculate your eligibility: We tackled everything you need to know about the debt relief plan. Use this calculator to see how much of your student loan debt can be forgiven. Here’s what to expect in the student loan forgiveness application.

The opponents: What is happening to student loan forgiveness? A federal appeals court temporarily halted the student debt relief program. Six Republican-led states are also suing to overturn President Biden’s student loan forgiveness plan. An Indiana lawsuit was the first significant legal action seeking to invalidate Biden’s policy.