Missouri Attorney General Andrew Bailey speaks with reporters outside the U.S. Supreme Court in Washington on March 18. (Jabin Botsford/The Washington Post)
Seven Republican-led states sued on Tuesday to block President Joe Biden’s new policy to reduce or eliminate the balances of millions of student loan borrowers, claiming the Education Department is illegally preparing to start debt cancellation before the rule is finalized.
The lawsuit, led by Missouri Attorney General Andrew Bailey, is the latest attempt from conservatives to dismantle Biden’s debt relief policies. It arrives days after the Supreme Court refused to intervene in an injunction that halts the administration’s new student loan repayment plan, a program that Bailey also took legal action to stop.
“We successfully halted their first two illegal student loan cancellation schemes; I have no doubt we will secure yet another win to block the third one,” Bailey said in a statement. “They may be throwing spaghetti at the wall to see what sticks, but my office is meeting them every step of the way.”
The new lawsuit involves a proposed rule designed to reach borrowers who the Education Department says are shut out of existing loan forgiveness programs or have been trapped in unaffordable debt. The proposed plan, created through the federal negotiated rulemaking process, is slated to be finalized this fall. Not a dime of debt can be forgiven under the policy before then, but the GOP-led states say they have proof the Biden administration is trying to skirt federal regulations.
The states — Missouri, Georgia, Alabama, Arkansas, Florida, North Carolina and Ohio — say they obtained documents in which the Education Department is instructing its loan servicers to start clearing the debt of borrowers on Tuesday or Saturday before the rule is finalized. The attorneys general say the department has no legal authority to take such action, which could result in $73 billion in student loan debt being forgiven overnight, according to the lawsuit.
The Education Department declined to comment on pending litigation, but a spokesperson for the agency said the department will continue to fight for borrowers who are struggling to repay their federal student loans. In July, the department gave borrowers until Aug. 30 to opt out of the proposed loan forgiveness plan.
Since the Supreme Court ended Biden’s plan to forgive up to $20,000 in federal student loans per borrower in 2023, the administration has tried to create a regulation that achieves large-scale debt cancellation through a more targeted approach than the last plan. The proposed plan, introduced in April, provides partial or full debt relief to borrowers in four circumstances: those who owe far more than they originally borrowed because of interest; those who have been paying for at least 20 or 25 years; those who attended career training programs that led to high debt loads or low earnings; and those who are eligible for existing forgiveness programs but never applied.
A central feature of the plan is the elimination of up to $20,000 in accrued interest for borrowers, regardless of their income. Single borrowers earning less than $120,000 or married couples earning less than $240,000 could qualify to have all of their accrued interest forgiven if they are enrolled in an income-driven repayment plan. The White House estimates more than 25 million people could benefit from that component alone, which will take effect this fall when the proposal is finalized. Other features will debut next year.
The new plan relies on the authority of the Higher Education Act — a different law from the one the administration cited in its unsuccessful 2022 plan. While experts say that authority could give the proposed rule firmer legal ground, it certainly hasn’t spared the plan from legal challenges from conservatives.
