A coalition of southern and western Republican-led states filed a new lawsuit this week, seeking to block one of President Joe Biden’s signature student loan forgiveness initiatives.
If this sounds familiar, that’s because it is. A similar coalition of states sued the Biden administration last year to block the President’s initial student loan forgiveness plan, which would have wiped out up to $20,000 in federal student loan debt for millions of borrowers. That legal challenge made its way up to the Supreme Court; the conservative majority then struck down the plan as executive overreach last summer, before any borrowers could receive relief.
“Biden is trying to twist federal law once again, and his new plan is just as illegal as the old plan,” said Kansas Attorney General Kris Kobach, who is spearheading the suit, in comments to Fox News.
Here’s the latest.
Legal Challenge To Block Student Loan Forgiveness And Other Relief Under Biden’s SAVE Plan
The states are suing to overturn President Biden’s SAVE plan. This new income-driven plan can provide affordable monthly payments to borrowers based on their income and family size, with student loan forgiveness of any remaining balance after 20 or 25 years in repayment.
The coalition of states led by Kansas — which also includes Alabama, Alaska, Idaho, Iowa, Louisiana, Montana, Nebraska, South Carolina, Texas and Utah (all with Republican administrations) — takes particular issue with a feature of SAVE that allows borrowers who took out relatively small loan amounts to qualify for student loan forgiveness in as little as 10 years. Last month, the Biden administration approved over 150,000 borrowers for relief under this “early” student loan forgiveness feature.
“Under the guise of modifying the terms of loan repayment, the Final Rule will in fact forgive billions of dollars in student debt,” says the lawsuit. “In effect, the Rule transforms the REPAYE Plan into a system of massive federal grants whereby borrowers pay only a fraction of the amount borrowed from the government. The remainder of the loan is forgiven.”
However, the lawsuit is targeting the entire SAVE program, which could jeopardize lower monthly payments for many borrowers. More than 7 million student loan borrowers have already enrolled in SAVE, according to the Education Department.
Legal Issues Differ From First Student Loan Forgiveness Challenge
While a legal battle over Biden’s student loan forgiveness plans is nothing new, the issues that will be decided in the latest lawsuit are a bit different from the first legal challenge.
Biden’s initial loan forgiveness plan was enacted through the HEROES Act, a statute that provides authority for the Education Department to “waive” requirements associated with federal student loan repayment in response to national emergencies. The Biden administration bypassed normal rulemaking procedures to establish this new plan (allowable under the HEROES Act), which would have provided upwards of $430 billion in student loan forgiveness by some estimates. The large amount of loan forgiveness triggered suspicion from the Supreme Court’s conservative majority. Chief Justice John Roberts applied the so-called Major Questions Doctrine — a judicial review approach that invites a higher amount of scrutiny when policy decisions have significant economic or political ramifications — to strike down the program as unauthorized by Congress. Justice Roberts concluded that the HEROES Act did not expressly allow for mass debt cancellation.
In contrast, the Biden administration established the SAVE plan through normal rulemaking procedures, including providing periods for public comment, under the Higher Education Act. The HEA already authorizes income-driven repayment plans with finite periods of repayment. And the statute gives the Education Department fairly broad authority to craft specific regulations defining the parameters of these IDR plans. Older IDR plans, such as the PAYE plan and REPAYE plan, were created under this same authority.
In addition, the scope of student loan forgiveness under SAVE is much smaller than Biden’s first plan, at least to start. The coalition’s lawsuit states that the SAVE plan will “abolish at least $156 billion in student debt.” However, so far the plan has only resulted in approximately $1.2 billion in loan forgiveness — a tiny fraction of the $430 billion in anticipated debt relief under Biden’s first plan. The Republican-led states are invoking the Major Questions Doctrine in this new lawsuit, hoping to invite the same level of scrutiny that ultimately let to the undoing of Biden’s first loan forgiveness plan; but it is not clear whether the doctrine would be applicable here.
Biden Administration Also Developing New Student Loan Forgiveness Plan
The Biden administration did not immediately release a public statement in response to the latest legal challenge. However, administration officials have repeatedly touted the SAVE plan as the most affordable repayment option ever.
“From day one, I promised to fix broken student loan programs,” said Biden in a statement on X earlier this week. “I’m not backing down.”
Earlier this week, President Biden announced that nearly 80,000 borrowers would get almost $6 billion in student loan forgiveness through the Public Service Loan Forgiveness program. PSLF can provide debt relief in as little as 10 years for nurses, teachers, first responders, and other public servants. PSLF is not being challenged in the latest lawsuit.
Meanwhile, the Biden administation is in the process of developing yet another student loan forgiveness plan using a different legal authority under the HEA. That plan will be targeted to borrowers who are having difficulty repaying their loans, including those facing financial hardships.
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