Here’s How It Could Be Blocked

Topline

A group of six Republican-led states sued the Biden Administration on Thursday, claiming its plan to forgive many borrowers’ student loans oversteps the White House’s executive authority, the third suit of its kind that threatens to derail the program before it was set to take effect in October.

Six states sued the Biden Administration on Thursday in an attempt to block his plan to forgive … [+] student loans.

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Key Facts

Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina filed suit in federal court in St. Louis, with Missouri Attorney General Eric Schmitt (R) calling it an “unconstitutional” order that will “unfairly burden working class families and those who choose not to take out loans or have paid them off with even more economic woes.”

The states allege the plan will harm their financial interests, including Missouri’s Higher Education Loan Authority, which the complaint claims will lose money it would have received from interest on loans.

The Biden Administration has based plan on the post-September-11 Heroes Act, which allows federal agencies to relieve or erase student loan debt during a “war or other military operation or national emergency,” arguing that the Covid-19 pandemic qualifies.

Republican plaintiffs in the lawsuit, however, argue the plan was issued without congressional approval—violating the federal Administrative Procedure Act—and that the Heroes Act does not apply because the plan is “not remotely tailored to address the effects of the pandemic,” pointing to President Joe Biden’s 60 Minutes interview last week in which he said the pandemic is over.

The lawsuit is the latest in a series of attempts to stop the program, following a suit filed by an Indiana attorney with the libertarian nonprofit Pacific Legal Foundation earlier this week, also arguing that Congress needs to approve a sweeping loan forgiveness program.

Daniel Laschober, a former Oregon Senate candidate, also filed a suit in a federal district court in the state earlier this month, also arguing that Biden did not clear proper congressional approval, and complaining that the program will increase inflation and raise the interest rate on his mortgage.

Contra

The question for Republican lawmakers opposed to the measure is finding a plaintiff with legal standing, or cause to challenge because they were harmed by the plan. Texas Sen. Ted Cruz (R) said in a podcast earlier this week that courts might not give an average taxpayer standing, but that a student who might face raised tuition as a result of the plan, or someone who makes too much to qualify for the relief, could bring forward a lawsuit. Legal experts expect the Indiana lawsuit could be thrown out because the plaintiff doesn’t have legal standing. Abby Shafroth, an attorney with the National Consumer Law Center, told CNN earlier this month she believes Biden does have the legal authority to issue the order and that it’s unclear who would have legal standing in a challenge. But Fordham Law School professor Jed Shugerman told Time that if a case with a plaintiff that has standing reaches the current Supreme Court, Biden’s plan would likely be struck down.

Key Background

The Biden plan, announced in August, includes $10,000 in forgiveness for student loan borrowers who earn less than $125,000 or households making less than $250,000, plus an additional $10,000 for borrowers who received federal Pell Grants–which are offered to low-income students. The White House estimates roughly 8 million borrowers will qualify for automatic loan forgiveness, while the majority of eligible borrowers will need to apply for debt relief. Biden also announced plans to extend the Covid-era pause on student loan payments through the end of the year. While many Democrats lauded the plan, Republicans have criticized it as a burden on taxpayers that could accelerate already-high inflation, while some on the left argue it doesn’t do enough to alleviate the skyrocketing cost of college tuition.

Big Number

$400 billion. That’s how much the bipartisan Congressional Budget Office estimates the program will cost, according to a report released on Monday. The CBO also estimates that 95% of student loan borrowers will qualify for the forgiveness program and that 90% will apply for debt cancellation.

Tangent

Shortly after the lawsuit was filed, the Biden Administration announced it would curtail the program for borrowers whose loans are owned by private companies, reportedly over concerns those industries could file a suit against the larger program, Politico reported.