State AGs Challenge Biden Admin over Student Debt Cancellation
Six state attorneys general on Thursday filed a legal challenge to the Biden administration’s move to cancel student loan debt for millions of Americans across the country.
Led by Arkansas Attorney General Leslie Rutledge (R), the attorneys general of Iowa, Kansas, Missouri, Nebraska, and South Carolina sued in a Missouri federal court for an immediate temporary restraining order pausing the Student Loan Debt Relief Plan that President Biden announced last month. The suit argues that President Biden’s attempt to cancel student loan debt is in violation of federal law, the constitutional principle of separation of powers, and the Administrative Procedure Act.
“President Biden does not have the power to arbitrarily erase the college debt of adults who chose to take out those loans,” noted Rutledge in a statement. “[His] unlawful political play puts the self-wrought college-loan debt on the backs of millions of hardworking Americans who are struggling to pay their utility bills and home loans in the midst of Biden’s inflation,” she added.
In late August, the president announced his plan for the U.S. Department of Education to provide up to $20,000 in debt cancellation to eligible Pell Grant recipients with loans held by the Department, and up to $10,000 in debt cancellation to eligible non-Pell Grant recipients. To be eligible, a borrower’s individual income must be less than $125,000, or $250,000 for married couples. According to the White House, up to 43 million borrowers would qualify for debt cancellation.
To justify the move, the Biden administration has cited the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act), passed after the 9/11 attacks, that grants the Secretary of Education authority to waive or modify any requirement or regulation applicable to the student financial assistance programs during a war, military operation, or national emergency. But the state attorneys general argue that mass debt cancellation is not remotely tailored to address the effects of the pandemic on federal student loan borrowers.
“This political move by the Biden administration has everything to do with election-year politics but is not authorized by law,” Kansas Attorney General Derek Schmidt (R) said in a statement. “I’m standing up to challenge the legality of this Biden maneuver that makes hardworking families bear the cost of repaying student loans that were voluntarily undertaken by college graduates in families earning up to a quarter-million dollars per year.”
When asked how his debt cancellation plan would be paid for, President Biden has repeatedly stated that the plan is paid for by the reduction of the federal deficit.
“We pay for it by what we’ve done,” he said in announcing his plan on August 24, highlighting last year’s deficit reduction by more than $350 billion.
Notably, however, the Congressional Budget Office had expected the budget deficit to decline $875 billion in 2021 following the emergency pandemic spending in 2020. But that figure shrank to $360 billion after the president enacted additional COVID-19 relief packages and other new policies.
President Biden has also prided himself for being on track to cut the deficit by more than $1.7 trillion by the end of this fiscal year — the “single-largest deficit reduction in a single year in the history of America,” as he noted in his August 24 announcement. But, as many have pointed out, this year’s projected deficit reduction is larger than any previous one-year reduction because of the government’s unprecedented government spending amid the COVID-19 pandemic.
On Thursday, the Education Department released its estimate of the costs of the Student Debt Relief Plan, anticipating that it will cost an average of $30 billion a year over the next decade, assuming that 81% of eligible borrowers will participate.
“This estimate does not take into consideration the broader economic benefits those actions would bring and does not include President Biden’s historic record lowering the federal deficit by over $300 billion last year and an expected $1+ trillion dollars this year,” the department added, reiterating the president’s argument.
However, an analysis produced by the Wharton School of the University of Pennsylvania has concluded that the Education Department’s mass debt cancellation alone will cost up to $519 billion over ten years, and the overall cost could rise to more than $1 trillion when factoring in the other components of the Biden administration’s three-part plan.
“The Biden Administration’s unlawful edict will only worsen inflation at a time when many Americans are struggling to get by,” Missouri Attorney General Eric Schmitt (R) noted in his statement.
Also on Thursday, the Education Department quietly changed its guidance around who qualifies for the student debt relief plan. The guidance now states, “As of Sept. 29, 2022, borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans.”
According to NPR, an administration official said the change would directly affect about 800,000 borrowers. And multiple legal experts explained the reversal in policy was likely made out of concern that the private banks managing old Federal Family Education Loans could file lawsuits to stop the debt cancellation, arguing that the president’s plan would cause them financial harm.
This argument was among those made in the lawsuit filed by the state attorneys general. One of the plaintiffs, Missouri, is home to the Higher Education Loan Authority of the State of Missouri, which the attorneys general said is “enduring injury in the form of compliance costs by undertaking significant efforts to comply with the unlawful Mass Debt Cancellation.”
A copy of the lawsuit is available here.
Kenneth Chan is Director of Communications at Family Research Council and serves as an editor at The Washington Stand.