Republican states file lawsuit to block Joe Biden’s student loan repayment plan

Another group of Republican-led states is suing to block Biden administration’s new student loan repayment planwhich provides a faster path to cancellation and has been used to forgive the loans of more than 150,000 borrowers.

Seven states, led by Missouri, filed a federal lawsuit on Tuesday challenging Biden’s SAVE Plan, which has become a target of conservative opponents after the Supreme Court struck down the Democratic president’s first attempt to cancel student loans. New legal goals. That largely mirrors another lawsuit filed last month by Republican attorneys general in 11 states, including Kansas.

“The President has once again unilaterally attempted to implement an extremely expensive and controversial policy that he was unable to pass in Congress,” the new lawsuit states.

The lawsuit was filed just one day after Biden touted new proposals to cancel the student loans of millions of borrowers, setting the stage for a legal battle and foreshadowing another. The lawsuit does not directly challenge Biden’s latest cancellation plan, but its architect, Missouri’s attorney general, has separately threatened action against it.

A statement from the Department of Education said Congress gave the agency the authority to determine the terms of certain repayment plans in 1993 and that authority has been used before.

“The Biden-Harris administration will not stop fighting to provide support and relief to borrowers across the country — no matter how many times Republican elected officials try to stop us,” the department said.

The lawsuit replays a court showdown between the Biden administration and Missouri, which was at the center of a Supreme Court case that overturned the Democratic president’s first attempt to cancel the loans last year.

In that case, the Supreme Court held that canceling the loans would harm Missouri because of its ties to MOHELA, a state loan servicing company that could lose revenue generated by federal student loans.

The new lawsuit makes similar arguments. Biden’s new SAVE plan speeds up existing paths to loan cancellation, which the lawsuit says would deprive MOHELA (Missouri Higher Education Loan Authority) of “service fees for up to 15 years.”

Also joining the lawsuit are Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma.

The Biden administration launched the SAVE (Save a Valuable Education) program last year, calling it a “student loan safety net.” This is a modified version of other repayment plans that have been around for decades, but with more generous terms.

Congress created income-driven repayment plans in the 1990s to help borrowers struggling to repay their student loans. These plans cap repayments based on the borrower’s income and promise to cancel any remaining debt after 20 or 25 years.

Biden’s savings plan would further reduce monthly payments and forgive loans in just 10 years. The president announced the idea in 2022, but it has been overshadowed by his calls for widespread cancellations.

Nearly 8 million Americans have enrolled in the program, including 4.5 million low-income borrowers, and their monthly payments have been reduced to $0.

The terms of the scheme will be phased in this year, with the faster cancellation route originally scheduled to come into effect in July. But the Biden administration accelerated the benefit and began canceling loans for some borrowers in February.

In addition to harming Mohla, the lawsuit claims Biden’s plan makes it harder for states to hire and retain workers. The lawsuit alleges that the repayment plan is so generous that it undermines the Public Service Loan Forgiveness Program, which allows borrowers to have their student loans canceled after 10 years in public service.

It’s an important recruiting tool for states — nearly all of the 13 law school graduates hired by the Missouri Attorney General’s Office last year said Public Service Loan Forgiveness prevented them from working in the public sector, the lawsuit says decision.

“However, once the final rules take effect, PSLF will be significantly less attractive than other income-driven repayment plans,” the lawsuit states. “Its comparative advantage will shrink or disappear entirely.”

States noted that more than half of the borrowers in the program paid nothing. “This is not a student loan program. This is a funding program that Congress never authorized,” the lawsuit states.

In addition to the repayment plan, Biden on Monday highlighted a new proposal to reduce or cancel the student loans of 30 million Americans. It would provide loan relief to five categories of borrowers, including those who have accumulated large amounts of accrued interest, borrowers who have been paying off their loans for decades and borrowers facing financial hardship.

Hours after Biden unveiled the proposal, Bailey took to social media to call the proposal an illegal attempt to bypass Congress.

“The rule of law is of great importance in this country,” he wrote. “See you in court.”