A group of six states filed court documents on Tuesday seeking to permanently block President Joe Biden‘s plan to forgive student loans for millions of Americans.
Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina, six conservative states, argued that the president does not have the authority to forgive large amounts of student loan debt. They also argued that they wouldn’t suffer economically if the federal government forgave billions in student loan debt.
To “seek relief from the Supreme Court,” the states asked the court to maintain the injunction on the plan for another week in the event they lost their appeal.
The Eighth Circuit Court of Appeals temporarily blocked the plan late Friday night, after an initial ruling by a federal judge in Missouri had dismissed the states’ case on the grounds that the group of six lacked the standing to sue. The court currently has 11 judges, five of whom were appointed by George W. Bush, four by Donald Trump, and one each by George H.W. Bush and Barack Obama.
Although the plan put forth by the Biden administration has been temporarily halted by the appeals court, hopeful borrowers can still submit applications to have their debts cancelled. The timing of the court’s potential next move is unclear.
In an effort to derail the massive debt forgiveness plan, conservative states and groups have come under fire from Biden.
There is no need to register or log in: There is an application for Biden’s plan to forgive student loans: So, here’s the deal:
According to Biden, “twenty-two million of you applied (in one week)” at a DNC event on Monday. What’s the GOP’s response to that? Bringing a lawsuit against the federal government to prevent that relief.
Biden’s plan would forgive up to $20,000 in student loan debt for borrowers with annual incomes of less than $125,000, or $250,000 for married couples.
The states’ opposition to the president’s plan to reduce student loan debt is puzzling.
Like they did in a lower court, the states contended that the mass debt cancellation plan would encourage borrowers with Federal Family Education Loans (FFEL), the majority of which are owned by private lenders but guaranteed by the federal government, to switch to Direct Loans. Direct loans are guaranteed by the federal government and can be forgiven by the government.
The Congressional Budget Office (CBO) has estimated that Biden’s plan to cancel student loans will cost the United States $400 billion.
There are quasi-state agencies in some of the litigating states that deal with this specific kind of debt.
Borrowers were initially prompted to consolidate their debt under Biden’s plan in order to qualify for loan forgiveness. As many as 800,000 FFEL borrowers lost access to the debt reduction plan after the federal government abruptly eliminated that option. Even before the states launched their complaint, the Biden administration acknowledged in court documents that it had eliminated the incentive to combine. Therefore, the federal government has declared that the states are in no danger.
On Tuesday, states countered the federal government by arguing that the timing of the federal government’s announcement that it would restrict relief for FFEL debtors was more important than the timing of the announcement itself. They claim it occurred after they filed suit, making the threat of consolidation an issue.
Several governments also claimed they stood to lose revenue in the long run. They claimed that state-affiliated loan servicers like Missouri’s Higher Education Loan Authority (MOHELA) would suffer financial harm if the Direct and FFEL loans they currently service were suddenly terminated.