WASHINGTON (AP) — Another group of Republican-led states is suing to block the Biden administration’s new student loan repayment plan, which offers a faster path to cancellation and has already been used to forgive loans for more than 150,000 borrowers.
Seven states, led by Missouri, filed a federal lawsuit Tuesday challenging Biden’s SAVE planwhich became a new legal target for conservative opponents after the Supreme Court overturned the decision of the Democratic president first attempt when canceling a student loan. It largely mirrors another suit filed last month by Republican attorneys general in 11 states, led by Kansas.
“Once again, the president is unilaterally trying to impose an extremely expensive and controversial policy that he has been unable to push through Congress,” according to the new lawsuit.
Filed just a day after Biden trumpeted a new proposal to cancel student loans for millions of borrowers, the case kicks off one legal battle and heralds another. The lawsuit does not directly challenge Biden’s latest repeal plan, but its architect, Missouri’s attorney general, has separately threatened to sue that plan as well.
A statement from the Department of Education said that in 1993, Congress gave the agency the authority to set the terms of certain repayment plans, 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 case repeats a courtroom clash between the Biden administration and Missouri, which was a central figure in the Supreme Court case that overturned the Democratic president’s first attempt to cancel the loan last year.
In that case, the Supreme Court found that canceling a loan would harm Missouri because of its relationship with a quasi-public loan servicing company, MOHELA, which could have lost revenue generated by federal student loans.
The new lawsuit makes a similar argument. Biden’s new SAVE plan accelerates an existing path to loan cancellation, which the suit says would deprive MOHELA — the Missouri Higher Education Loan Authority — of “up to 15 years of service fees.”
Also joining the lawsuit are Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma.
The Biden administration launched the SAVE (Saving Valuable Education) plan 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.
In the 1990s, Congress created income-driven repayment plans to help borrowers who were struggling to make student loan payments. These plans cap payments based on the borrower’s income and promise to cancel any remaining debt after 20 or 25 years.
Biden’s SAVE plan lowers monthly payments even further and forgives loans for just 10 years. The president floated the idea in 2022, but it was overshadowed by his call for widespread repeal.
Almost 8 million Americans have enrolled in the plan, including 4.5 million low-income borrowers whose monthly payments are reduced to $0.
The plan’s provisions are being phased in this year, with the faster path to cancellation originally scheduled to take effect in July. But the Biden administration accelerated that benefit and started canceling loans for some borrowers in February.
Along with harming MOHELA, the lawsuit claims Biden’s plan makes it harder for states to hire and retain employees. The repayment plan is so generous, according to the lawsuit, that it undermines the Public Service Loan Forgiveness Program, which allows borrowers to have their student loans canceled after 10 years of public service work.
It’s an important recruiting tool for states, according to the lawsuit — of 13 law school graduates hired by the Missouri attorney general’s office last year, nearly all said public service loan forgiveness influenced their decision to work in the public sector.
“After the final rule goes into effect, however, PSLF will not be as attractive compared to other income-driven repayment programs,” the suit says. “Its comparative advantage will diminish or disappear altogether.”
States note that more than half of borrowers in the plan pay nothing. “This is not a student loan program. This is a grant program that Congress never authorized,” according to the lawsuit.
Separate from the repayment plan, Biden on Monday highlighted a new proposal that aims to reduce or cancel student loans for 30 million Americans. It will offer loan relief to five categories of borrowers, including those who have accumulated large amounts of accrued interest, those who have been paying loans for decades and those who are facing financial hardship.
Hours after Biden unveiled it, Bailey took to social media to call the proposal an illegal attempt to circumvent Congress.
“The rule of law means something in this country,” he wrote. – I will see you in court.
___
Associated Press education receives financial support from numerous private foundations. AP is solely responsible for all content. Find the AP standards to work with philanthropists, list of supporters and funded coverage areas of AP.org.
