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GOP states sue Biden administration to overturn student debt relief

Meanwhile, Education Department says, in a reversal, that some privately held loans will be excluded from forgiveness

Republican U.S. Senate candidate and Missouri Attorney General Eric Schmitt listens to an attendee at the Missouri State Fair in Sedalia, Mo., in August. (Charlie Riedel/AP)

Seven Republican-led states sued on Thursday to overturn President Biden’s plan to cancel up to $20,000 in student debt for millions of borrowers, as conservatives advance legal challenges to one of the administration’s signature economic policy initiatives.

The new lawsuits come two days after a conservative attorney in Indiana filed a separate lawsuit against the administration seeking to reverse the policy. The latest suits — one filed by a coalition of six states and another by Arizona — ask a court to block the forgiveness program immediately to prevent the Biden administration from canceling loan balances as early as next week.

The Washington Post previously reported that GOP attorneys general from states including Arizona and Missouri had met privately to discuss a strategy that could deliver multiple cases filed in different courts around the country.

Lawsuit aims to stop Biden’s student loan forgiveness plan

“Republican officials from these states are standing with special interests, and fighting to stop relief for borrowers buried under mountains of debt,” White House spokesman Abdullah Hasan said. “The President and his administration are lawfully giving working and middle-class families breathing room as they recover from the pandemic and prepare to resume loan payments in January.”

The White House’s policy would cancel up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 per year, or less than $250,000 for married couples, or up to $20,000 for those who received federal Pell Grants. The Biden administration has been adamant that it has the legal authority to cancel student debt, citing a 2003 law giving the executive branch broad authority to overhaul student loan programs.

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Key details on Biden’s student loan forgiveness

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GOP lawmakers and conservative advocacy groups have pushed back on that claim, arguing Biden’s move represents illegal executive overreach because the 2003 law was created to give the president authority after a disaster like the Sept. 11, 2001, terrorist attacks. Instead, Republicans such as Sen. Ted Cruz (Tex.) have said their biggest challenge in successfully overturning the policy is finding someone who can demonstrate “standing” before the court, or the grounds to sue.

The Indiana lawyer suing over the policy claimed he has standing because debt cancellation could push up his state tax bill, since Indiana plans to tax federal debt relief as a form of income. White House press secretary Karine Jean-Pierre dismissed that claim on Tuesday, pointing out to reporters that “anyone who does not want to get debt relief can opt out.”

On Thursday, a federal judge denied the Indiana lawyer’s request for a preliminary injunction in that case, citing the opt-out provision. He granted the attorney time to amend the suit.

The lawsuits filed by the states takes a different tack, arguing that debt cancellation will hurt them in numerous ways.

One of the complaints — filed by Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolinaemphasizes that Missouri’s student loan servicer, which is part of its state government, could see a drop in revenue because borrowers are likely to consolidate their loans under the Federal Family Education Loan program.

On Thursday, however, the administration said it would exclude FFEL from the loan forgiveness program, a move first reported by Politico. That change could help head off legal claims against the policy. But it will mean that about 770,000 of the more than 40 million otherwise eligible borrowers will not qualify for relief, an administration official said Thursday evening. Some earlier estimates had been higher.

Anyone who applied before Thursday to consolidate their commercial FFEL debt into the Direct Loan program — where loans are made and held directly by the federal government — will be eligible for forgiveness, according to the department. But everyone else with those loans will be shut out for now.

“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, including whether FFEL borrowers could receive one-time debt relief without needing to consolidate,” the Education Department said in a statement.

Scores of commercial FFEL borrowers consolidated their loans to be eligible for Biden’s debt relief plan after it was announced in August. But earlier this month, the department told borrowers there was no need to take immediate action, as the agency would find a way forward.

People with student loans from defunct federal program seek relief

That assurance led Christopher Martin, 50, to hold off on applying to consolidate his $29,341 in student loans. Martin, who lives in Jersey City, was happy with the low interest rate on his education debt, which would have gone up if he consolidated. If he knew the administration would impose a deadline to consolidate, Martin said he would have applied already.

Martin accused the White House of lying, adding some expletives. “To tell people that don’t necessarily need to consolidate and then one day say, you needed to do it yesterday, is just despicable,” he said.

Missouri Attorney General Eric Schmitt, who is also the Republican nominee for a U.S. Senate seat in this fall’s election, said in a statement that the forgiveness policy will worsen inflation for Americans who do not benefit from student debt cancellation.

“No statute permits President Biden to unilaterally relieve millions of individuals from their obligation to pay loans they voluntarily assumed,” six states say in their lawsuit.

Tony Romm contributed to this report.

Student loan forgiveness

The latest: The Supreme Court will review the legality of President Biden’s debt relief plan, after another appeals court rejected a bid to revive it. 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.

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