States Seek To Block Biden’s Secret $73 Billion Student Loan Forgiveness Plan

Seven U.S. states—Missouri, Georgia, Alabama, Arkansas, Florida, North Dakota, and Ohio—have filed a new lawsuit against the Biden administration, seeking to block what they describe as a secretive plan to cancel $73 billion in student loans.

The lawsuit, filed in the United States District Court for the Southern District of Georgia, accuses the Department of Education and President Biden of unlawfully attempting to mass cancel student loans without proper legal authority.

The legal action stems from newly uncovered documents that reveal the Department of Education’s instructions to federal contractors to begin canceling loans as early as September 3, 2024. Further documents exposed potentially political communication that was to be sent out to borrowers highlighting that the Biden-Harris Administration forgave these loans, all before the upcoming election.

According to the complaint, these cancellations could start immediately, with the potential to erase over $73 billion in loan balances overnight, with hundreds of billions more at risk. This also comes on the heels of a new report from the GAO that shows the student loan program swinging from break even to a large net-loss over the coming decade.

Editor's Note: On October 2, 2024, The Georgia court ruled on a motion by the U.S. Department of Education to dismiss the case. The court found that Georgia lacks standing and therefore the Georgia courts are an improper venue. But, instead of dismissing the case, the court has decided to transfer it to the United States District Court for the Eastern District of Missouri. So, the case will continue, albeit after a slight delay and in a court that is slightly more favorable to the federal government (yet still conservative).

Related: Analysis On The Restart Of Student Loan Payments

Alleged Unlawful Student Loan Cancellation

The states argue that this plan is not only unlawful but also an aggressive attempt to bypass judicial and congressional oversight. “This is the third time the Secretary has unlawfully tried to mass cancel hundreds of billions of dollars in loans,” the complaint states, referencing earlier unsuccessful attempts blocked by the courts.

The lawsuit highlights the administration’s efforts to avoid public scrutiny by quietly instructing loan servicers to proceed with cancellations before any legal challenges could be mounted.

The Biden administration’s first major attempt to forgive student debt, which relied on the HEROES Act, was blocked by the Supreme Court in 2023. 

The administration’s subsequent plan, the SAVE Plan, which aimed to cancel nearly $500 billion in loans, was also halted by the courts earlier this year.

Biden's Third Attempt At Mass Loan Forgiveness

In this third attempt, the administration is purportedly relying on a different statute, the Higher Education Act of 1965 (HEA), to implement mass forgiveness. However, the states argue that this legal basis is even weaker than the previous ones, pointing out that the Department of Education itself concluded in 2021 that the HEA does not authorize the creation of a student loan forgiveness program.

The lawsuit seeks an immediate temporary restraining order (TRO) to halt the administration’s actions, arguing that the cancellation plan violates multiple statutes and exceeds the Department of Education’s authority. The states are requesting that the court stop the implementation of this plan before irreparable financial harm is done.

The Biden administration has yet to respond to the lawsuit, but the legal battle is setup to be another test of executive authority in the realm of student debt. 

With billions of dollars at stake and the potential for widespread impact on millions of borrowers, the outcome of this lawsuit could have far-reaching implications for the future of student loan policy in the United States. However, in the short term, individual loan borrowers will still be left in limbo.

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