Judge Dismisses GOP States’ Lawsuit to Block Student Loan Forgiveness

• Republican attorneys general in six states claimed debt forgiveness would decrease tax revenues and hurt loan servicers.
• The lawsuit asked for an immediate injunction to stop debt cancellation before it goes into effect.
• A federal judge dismissed the lawsuit, emphasizing that the decision was based on the states' lack of standing, not a comment on the legality of Biden's plan.

A federal judge has tossed a lawsuit from six Republican-led states that sought to block President Joe Biden's federal student debt forgiveness plan.

Judge Henry Edward Autrey of the Eastern District of Missouri late Thursday denied a motion for a preliminary injunction to stop debt forgiveness from going into effect. In his 19-page decision, the George W. Bush appointee stated that the six states and their attorneys general don't have the standing to sue.

While Plaintiffs present important and significant challenges to the debt relief plan, the current Plaintiffs are unable to proceed to the resolution of these challenges, Autrey wrote.

Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina on Sept. 29 filed a joint federal lawsuit against the president and the Department of Education (ED). Their central claim was that the president's plan to wipe out wide swaths of student debt will cost these states revenue from servicing loans and taxes. They also claimed that ED doesn't have the authority to carry out Biden's plan.

The Higher Education Loan Authority of the State of Missouri (MOHELA) and the Arkansas Student Loan Authority (ASLA) are both servicers for the Federal Family Education Loans (FFEL) program. The suit argued Biden's plan would harm these servicers because ED incentivized borrowers to consolidate out of the FFEL program and into the Direct Loan program to qualify for forgiveness.

However, ED reversed course on this shortly after the states filed their lawsuit so that only those borrowers who consolidated loans on or before Sept. 29 are eligible for forgiveness.

That reversal proved to be key in this case, the ruling shows.

The lack of the ongoing incentive to consolidate [FFEL] loans into Direct Loans defeats standing, Judge Autrey wrote. There is no longer an ongoing injury to ASLA's revenue stream that could be a consequence of the department's student debt relief plan.

Autrey likewise ruled that Missouri does not have the standing to sue ED on behalf of loan servicer MOHELA. Instead, MOHELA would have to file its own suit against the department.

This is a point that Brian Netter, a lawyer from the Department of Justice representing ED, argued during an Oct. 11 hearing, noting that the plaintiffs relied on Sunshine Laws to obtain MOHELA documents provided to the court.

In my experience, it's not the ordinary course that when you are representing the interest of a client, that you have to resort to… some sort of Sunshine Act to obtain information about that client, Netter said.

The judge also ruled that the remaining states cannot sue on the basis that they may potentially lose out on future tax revenue. Autrey wrote that the effect on future taxation is uncertain, and an injunction should only be applied if a threat of injury is impending.

These future lost tax revenues are merely speculative, he wrote. Moreover, there is nothing imminent about what may happen several years in the future.

The six plaintiff states filed for an appeal to the U.S. Court of Appeals for the 8th Circuit shortly after the judge dismissed the motion.

The decision dropped hours after U.S. Supreme Court Justice Amy Coney Barrett denied an emergency request to halt the debt relief plan in a separate lawsuit brought by a conservative group in Wisconsin.

The Brown County Taxpayers Association filed a suit in a Wisconsin court on Oct. 4 that alleged debt forgiveness would unfairly benefit Black and other borrowers of color.

A U.S. district judge in Green Bay had previously tossed the suit.

The two court victories for Biden's student debt relief plan come days after the website to apply for federal student loan forgiveness went live.