More Republican states sue to block Biden’s student loan repayment plan
WASHINGTON — Another group of Republican-led states is suing to block the Biden administration’s new student loan repayment plan, which offers a faster path to cancellation and has already been used to forgive loans to more than 150,000 borrowers.
Seven states led by Missouri filed a federal lawsuit Tuesday against Biden’s SAVE Plan, which has become a new legal target for conservative opponents after the Supreme Court rejected the Democratic president’s first attempt at student loan cancellation. It largely mirrors another lawsuit filed last month by Republican attorneys general in 11 states, led by Kansas.
“Once again, the President is attempting to unilaterally impose an extremely expensive and controversial policy that he could not get through Congress,” the new indictment says.
The lawsuit, filed just a day after Biden announced a new proposal to cancel student loans for millions of borrowers, sets the stage for one legal battle and foreshadows another. The lawsuit does not directly challenge Biden’s latest cancellation plan, but its architect, Missouri’s attorney general, separately threatened to take action against that plan as well.
A statement from the Department of Education said Congress gave the agency the authority to set the terms of certain reimbursement plans in 1993, and that authority has been used before.
“The Biden-Harris Administration will not stop fighting to provide support and relief to borrowers across the country – no matter how many times Republican elected officials try to stop us,” the department said.
The lawsuit is a repeat of a courtroom showdown between the Biden administration and Missouri, a central figure in the Supreme Court case that overturned the Democratic president’s first attempt to cancel loans last year.
In that case, the Supreme Court ruled that loan cancellations would harm Missouri because of its ties to a quasi-state lending company, MOHELA, which would lose revenue from federal student loans.
The new lawsuit makes a similar argument. Biden’s new SAVE plan accelerates an existing path to loan cancellations, which the lawsuit says would deprive MOHELA — the Missouri Higher Education Loan Authority — of “up to 15 years of servicing costs.”
Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma are also joining the lawsuit.
The Biden administration launched the SAVE (Saving on a Valuable Education) plan last year, calling it a “student loan safety net.” It’s a modified version of other repayment plans that have been around for decades, but with more generous terms.
Congress created income-driven repayment plans in the 1990s to help borrowers who were struggling to pay off their student loans. These plans capped payments based on the borrower’s income and promised to forgive remaining debt after 20 or 25 years.
Biden’s SAVE Plan cuts monthly payments even further and forgives loans in just 10 years. The president announced the idea in 2022, but it was overshadowed by his call for widespread cancellation.
Nearly 8 million Americans have joined the plan, including 4.5 million low-income borrowers who have had their monthly payments reduced to $0.
The plan’s provisions will be phased in this year, with the faster path to cancellation originally set to take effect in July. But the Biden administration accelerated that benefit and began canceling loans for some borrowers in February.
In addition to the harm to MOHELA, the lawsuit alleges that Biden’s plan makes it more difficult for states to hire and retain workers. The repayment plan, according to the lawsuit, is so generous that it undermines the Public Service Loan Forgiveness program, which allows borrowers to have student loans forgiven after ten years of working in public service jobs.
According to the lawsuit, it is an important recruitment tool for states. Of the 13 graduates hired by the Missouri attorney general’s office last year, nearly all said Public Service Loan Forgiveness influenced their decision to work in the public sector.
“Once the Final Rule takes effect, however, PSLF will not be nearly as attractive compared to other income-driven repayment programs,” the lawsuit said. “Comparative advantage will shrink or disappear altogether.”
The states note that more than half of borrowers in the plan pay nothing. “This is not a student loan program. It is a subsidy program that Congress has never authorized,” the lawsuit states.
Separately from the repayment plan, Biden on Monday highlighted a new proposal that aims to reduce or cancel student loans for 30 million Americans. It would provide loan relief to five categories of borrowers, including those who have amassed large sums of accrued interest, those who have been paying loans for decades and those facing financial difficulties.
Hours after Biden unveiled the proposal, Bailey took to social media and called the proposal an illegal attempt to bypass Congress.
“The rule of law means something in this country,” he wrote. “See you in court.”
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