Biden Administration Defends Student Loan Plan Amidst Growing Legal Challenges

Another group of states led by Republicans is trying to stop the Biden administration’s new plan for paying off student loans. This plan offers a faster way to get loans forgiven and has already been used to help more than 150,000 people.

Seven states, led by Missouri, sued the federal government on Tuesday against Biden’s SAVE Plan. This is the second case that conservatives have filed against the plan since the Supreme Court threw out the first attempt by a Democratic president to cancel student loans. It’s a lot like another suit that was filed last month by 11 Republican attorneys general, led by Kansas.

It says in the new claim, “Yet again, the President is trying to impose an extremely expensive and contentious policy that he could not get through Congress.”

The lawsuit was filed the day after Biden announced a new plan to forgive millions of student loans. It sets the stage for one legal fight and hints at another. The lawsuit doesn’t directly go after Biden’s latest plan to stop the plan, but the attorney general of Missouri, who led the lawsuit, has threatened to go after that plan too.

According to a statement from the Education Department, Congress gave the agency the power to set the terms of some payback plans in 1993. This power has been used before.

The department said, “The Biden-Harris Administration won’t give up on helping and relieving the stress of debt for borrowers across the country, no matter how many times Republican politicians try to stop us.”

The lawsuit is a rematch of a court battle between the Biden administration and Missouri, which was a key player in the Supreme Court case that threw out the Democratic president’s first attempt to cancel the loan last year.

The Supreme Court said that Missouri would lose money if federal student loans were canceled because the state was connected to MOHELA, a company that handles loans for the state but is not quite a state. The new case makes the same point. Biden’s new SAVE Plan speeds up a way to get rid of a loan faster. The lawsuit says that this would cost MOHELA (the Missouri Higher Education Loan Authority) “up to 15 years in servicing fees.”

Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma have also joined the suit.

Last year, the Biden administration started the SAVE Plan, which stands for “Saving on a Valuable Education.” They called it a “student loan safety net.” It’s a changed form of other repayment plans that have been around for a long time, but the terms are better.

In the 1990s, Congress made income-driven repayment plans to help people who were having a hard time paying back their student debts. Those plans limited payments based on a borrower’s income and said they would forgive any debt after 20 or 25 years.

With Biden’s SAVE Plan, monthly payments are cut even more, and loans can be forgiven in as little as 10 years. The president brought up the idea in 2022, but it was trumped by his call for a lot of things to be canceled.

Almost 8 million Americans have signed up for the plan. Of those, 4.5 million are low-income users whose monthly payments have been lowered to $0.

The plan’s features are being rolled out slowly this year. The faster way to stop was supposed to start in July. But the Biden government sped up that benefit and in February began canceling some borrowers’ loans.

The lawsuit also says that Biden’s plan makes it harder for states to hire and keep workers, which is bad for MOHELA. The suit says that the payback plan is too easy and weakens the Public Service Loan Forgiveness program, which lets people get their student loans forgiven after 10 years of working in public service.

The case says it’s an important way for states to hire people. For example, almost all of the 13 law school graduates hired by the Missouri attorney general’s office last year said that Public Service Loan Forgiveness made them want to work in the public sector.

However, the suit says that once the Final Rule is in place, PSLF will not be nearly as appealing as other income-based repayment plans. “Its comparative advantage will get smaller or go away completely.”

The states say that more than half of the people who borrowed money through the plan are not paying anything. “This is not a fund for student loans.” The suit says that Congress never permitted this grant scheme.

Along with the plan to pay back the loans, Biden announced on Monday a new plan to lower or get rid of 30 million Americans’ student debts. It would help five types of borrowers with their loans: those who have a lot of interest built up; those who have been paying their loans for decades; and those who are having a hard time with money. A few hours after Biden announced it, Bailey went on social media and said the plan was an illegal attempt to get around Congress.

He wrote, “The rule of law means something in this country.” “See you at court.”