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If six Republican states win their lawsuit against President Joe Biden's student loan forgiveness plan, it could eliminate the loan relief for borrowers nationwide. However, one legal expert believes Biden and the U.S. Department of Education have a strong legal case for canceling debt.
In late August, Biden's administration announced the Student Debt Relief Plan, which eliminates up to $10,000 in debt for borrowers making less than $125,000 a year. The relief is only available for those with federal loans rather than private loans, but some states are arguing that any student loan relief could harm their incomes by eliminating profits from interest. The plan eliminates $20,000 in debt for Pell Grant recipients.
Arkansas, South Carolina, Iowa, Kansas, Nebraska and Missouri have since filed a joint lawsuit alleging Biden didn't have the legal right to eliminate student loans, with Arkansas Attorney General Leslie Rutledge leading the complaint.
Assistant professor of law at the University of Alabama Luke Herrine told Newsweek that he believes the U.S. Department of Justice is within its legal bounds when canceling student loans. However, uncertainty surrounds the lawsuit, so the final decision on student loan forgiveness remains to be seen.
"The nature of the case is that the attorneys general of these states are saying the Department of Education is not legally authorized to cancel debt...and therefore is acting unlawfully and the court should stop the cancellation," Herrine said.
Further legal hurdles presented themselves in hearings on Wednesday. Missouri Attorney General Eric Schmitt is representing the Missouri Higher Education Loan Authority (MOHELA), but a major legal question of whether Schmitt can represent MOHELA was discussed in court. MOHELA is claiming damage from the student loan forgiveness because if its borrowers qualify for the relief, MOHELA misses out on income gleaned from interest associated with paying the loans off over time.
"MOHELA alleges that although they are getting paid in full, they won't collect interest in full so it's harm to them," Herrine said.
MOHELA also could lose any fines or fees associated with the loans.
Part of the lawsuit requests a temporary restraining order on Biden's moving forward with the plan, but Herrine said he doubts a judge will grant the order.
"That means probably the program will at least get started," he said.
A decision is likely to come this week or next on the temporary restraining order. If the temporary restraining order is granted, Herrine said that's a sign that could predict cancelation of the entire program.
"It may well mean no student gets student loan forgiveness. [The six states] are looking to shut down the whole program," he said.
For the rest of the arguments, Herrine said litigation could take several months. Newsweek reached out to Arkansas Attorney General Leslie Rutledge's office for comment.
About the writer
Anna Skinner is a Newsweek senior reporter based in Indianapolis. Her focus is reporting on the climate, environment and weather ... Read more