College borrowers banking on President Joe Biden’s plan to forgive up to $20,000 in student loan debt hit a potential snag Thursday, when Missouri and five other states filed a lawsuit challenging the Department of Education’s authority to do so.
Theirs is the second major lawsuit filed by conservatives trying to stop the student loan forgiveness plan. The first came Tuesday, from a lawyer in Indiana who argues he would be forced to pay state taxes on student loan forgiveness he didn’t seek.
The lawsuit filed by the Republican attorneys general of Missouri, Nebraska, Iowa, Kansas, Arkansas and South Carolina argues that Congress never approved massive student loan cancellation. It asserts that the Biden administration and the U.S. Education Department aim to misuse emergency authority.
“Until now,” the lawsuit argues, “no one thought that such a power lurked within the HEROES Act, or any other existing federal law.”
The Justice Department argued in an August memo that the Higher Education Relief Opportunities for Students Act of 2003 allows the department to approve broader debt forgiveness during national emergencies, including the COVID-19 pandemic.
The lawsuit filed Thursday argues that the record does not reflect this reading of the law. Even if the administration proves right, the AGs argue that applicants should have to detail their pandemic-related losses and not have their debts forgiven automatically.
Under the administration’s program, Pell Grant recipients could receive up to $20,000 in debt relief, and other borrowers could get up to $10,000. More than 40 million borrowers nationally were estimated to be eligible for the plan.
The program requires most people seeking student debt relief to apply. The Education Department sent an email Thursday saying the first applications will go out in October. But 8 million Americans could receive relief automatically, the Washington Post has reported.
The attorneys general are seeking an immediate injunction pausing student debt relief and have asked the U.S. federal court in the Eastern District of Missouri to clarify whether the administration lacks the legal authority to forgive the debt.
They argue potential harm to state tax revenues, student loan processors and state investment boards that handle public pensions. A University of Pennsylvania study estimated the program would cost federal taxpayers up to $519 billion over 10 years.
The lawsuit pointed to earlier statements from Biden and House Speaker Nancy Pelosi arguing for the need to pass a law to forgive student debt. National supporters of the president’s plan have said Biden’s approach is legally sound.
But legal observers have noted efforts by the U.S. Supreme Court to rein in regulatory agencies such as the Environmental Protection Agency from acting beyond their statutory authority and have said it’s possible the court might do the same to the Education Department.