Judge rejects GOP challenge to student-loan forgiveness program

A federal judge has rejected GOP efforts by six states to block the Biden administration’s plan to forgive as much as $20,000 in individual, federal student loans for more than 40 million people.

Six states led by Republicans took the administration to federal court last month, arguing that the president had no authority by creating a loan-forgiveness program without the approval of Congress.

On Thursday, U.S. District Judge Henry Autrey of the Eastern District of Missouri issued a 19-page ruling that declared the states don’t have legal standing to sue the administration over the program, despite the “important and significant challenges” they have raised in the case.

The lawsuit was filed on behalf of Iowa Gov. Kim Reynolds and by the attorneys general in Nebraska, Arkansas, Missouri, South Carolina and Kansas. They have indicated they intend to appeal Autrey’s ruling to the U.S. Court of Appeals for the 8th Circuit.

The lawsuit is one of several legal challenges faced by the loan-forgiveness plan. Another of those challenges, mounted by a conservative taxpayer-advocacy group, suffered a setback Thursday when U.S. Supreme Court Justice Amy Coney Barrett refused to put the program on hold pending the resolution of related legal issues.

Under the Biden administration’s plan, student-loan borrowers can qualify for up to $10,000 in loan forgiveness, while the recipients of Pell Grants can apply for an additional $10,000 in debt relief. The program is intended to assist borrowers who earn no more than $125,000 per year, and couples who earn up to $250,000 per year.

For the past seven days, the U.S. Department of Education has been accepting applications for student-loan forgiveness. More than 12 million applications have been filed so far, according to the White House.

In the wake of Autrey’s ruling, White House press secretary Karine Jean-Pierre said, “Republican members of Congress and Republican governors are doing everything they can to deny student debt relief even to their own constituents. The president won’t stop fighting these suits and working to help families as they recover from the pandemic.”

The Biden administration’s defense of the program is grounded in a 19-year-old federal law that gives the secretary of education the power “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.” The administration argued in court that this is the same law the Trump administration used to pause student-loan payments at the beginning of the COVID-19 pandemic.

The states argued the financial implications of Biden’s $300 million plan are so significant that congressional approval is required. They also argued that the plan would deny the states revenue that would otherwise flow to state-based student loan companies that now own the debt.

They pointed out that some states don’t consider discharged student-loan debt to be “income” that can be taxed, further depriving the states of revenue.

During oral arguments, according to the Missouri Independent, lawyers for the Biden administration said the potential loss of tax revenue isn’t enough to give the states standing in the case, especially since the states are free to expand their definition of taxable income to include the canceled student-loan debt.

In his decision, Autrey appeared to agree, saying the “tenuous nature of future income tax revenue” wasn’t sufficient to establish injury to support the states’ claim that they had standing to file their lawsuit.

Autrey had previously signaled that the states’ standing to bring the case forward was likely to be a factor in his decision.

“It is hard to make a cake if you don’t have a pan to put that cake in,” Autrey said during oral arguments. “That pan is standing. It doesn’t matter if you have all the ingredients.”

This story was originally produced by the Iowa Capital Dispatch which is part of States Newsroom, a network of news bureaus, including the Daily Montanan, supported by grants and a coalition of donors as a 501c(3) public charity.