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- Seven states have filed suit to stop a “covert” plan by the Biden administration to cancel $73 billion in student loans.
- The lawsuit accuses the government of attempting to circumvent legal proceedings by secretly ordering loan servicers to initiate mass layoffs.
- Despite previous legal defeats, this is the Biden administration's third attempt to push through mass debt forgiveness.
Seven U.S. states – Missouri, Georgia, Alabama, Arkansas, Florida, North Dakota and Ohio – have filed a new lawsuit against the Biden administration seeking to block what they say is a secret plan to cancel $73 billion in student loans.
The lawsuit, filed in the U.S. District Court for the Southern District of Georgia, accuses the Department of Education and President Biden of unlawfully attempting to cancel student loans en masse without proper legal authority.
The lawsuit stems from newly surfaced documents showing that the Department of Education instructed federal contractors to begin forgiving loans as early as September 3, 2024. Other documents revealed potentially political communications intended to be sent to borrowers pointing out that the Biden-Harris administration had forgiven those loans – all before the upcoming election.
According to the complaint, these cuts could begin immediately and could wipe out more than $73 billion in loan balances overnight, with hundreds of billions of dollars more at risk. This also came shortly after a new report from the GAO showed the student loan program will slide from breaking even to a large net loss over the next decade.
Related: Analysis of the restart of student loan payments
Allegedly unlawful cancellation of a student loan
The states argue that this plan is not only illegal, but also an aggressive attempt to circumvent judicial and congressional oversight. “This is the third time the Secretary has unlawfully attempted to cancel hundreds of billions of dollars in loans en masse,” the lawsuit says, pointing to previous unsuccessful attempts that were blocked by the courts.
The lawsuit underscores the government's efforts to evade public scrutiny by tacitly ordering loan servicers to foreclose on loans before legal action can be taken.
The Biden administration's first major attempt to forgive student debt, which relied on the HEROES Act, was blocked by the Supreme Court in 2023.
The government's subsequent plan, the SAVE plan, which called for the cancellation of nearly $500 billion in loans, was also stopped by the courts earlier this year.
Biden's third attempt at mass debt relief
In this third attempt, the government is reportedly relying on another law, the Higher Education Act of 1965 (HEA), to push through mass student loan forgiveness. However, states argue that this legal basis is even weaker than previous ones, pointing out that the Department of Education itself concluded in 2021 that the HEA does not authorize the creation of a student loan forgiveness program.
The lawsuit seeks an immediate injunction to stop the administration's actions. It argues that the desegregation plan violates several laws and exceeds the authority of the Department of Education. The states are asking that the court stop the implementation of this plan before irreparable financial harm occurs.
The Biden administration has not yet responded to the lawsuit, but the litigation is likely to be another test of the executive branch's authority in the area of student debt.
With billions of dollars at stake and potentially far-reaching implications for millions of borrowers, the outcome of this litigation could have profound implications for the future of student loan policy in the United States. In the short term, however, individual borrowers will remain in limbo.
Don’t miss these other stories:
8th Circuit Court blocks Biden's SAVE plan entirely. Average student loan debt by state in 2024. What is the SAVE repayment plan?
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