The Biden administration and the U.S. Department of Education have a student loan forgiveness lawsuit to deal with. Apparently, seven Republican-led states decided to file the lawsuit in an attempt to stop the US government from proceeding with its new student loan forgiveness plan.
The states involved—Ohio, North Dakota, Missouri, Georgia, Florida, Arkansas, and Alabama—claim the Department of Education’s plan to proceed with sweeping student loan forgiveness is unconstitutional. These states also pointed out that such attempts have been made and turned down through litigation.
Why the Seven Republican-Led States Sued the U.S. Department of Education
The core of the GOP-7 lawsuit is that the Biden administration is trying to follow an illegal route to forgiving such a vast amount of student loans. For one, the loans in question amount to hundreds of billions of dollars. So, the protesting states opine that President Joe Biden and the U.S. Department of Education should seek congressional approval before embarking on such adventurous schemes.
In addition, the lawsuit claims that the Education Department already gave loan servicing companies a nod of approval to commence the cancellations in September. As highlighted in the lawsuit filing, all these actions are without a green light from the US Congress.
If the Department of Education follows the appropriate timeline for the rulemaking process, the white paper for the student loan forgiveness plan may not be ready until October. However, the GOP states have unraveled documents suggesting the Department is trying to circumvent constitutional guidelines.
A portion of the GOP lawsuit filed last week reads, “One would have hoped the Secretary [of the Education Department] would have learned to stick with the statutory forgiveness programs that Congress actually passed. Instead, the only lesson the Secretary learned was the need for secrecy.”
ALSO READ: Top Ten U.S. States With the Highest Student Loan Debt
The Department’s New Effort to Forgive Student Debt
The Education Department has refused to pass comments about the ongoing litigation. However, their spokesperson said, “We will continue to fight for borrowers across the country who are struggling to repay their federal student loans.”
Remember, the seven states suing claim that the proposed student loan forgiveness plan will cost hundreds of billions of taxpayer dollars. However, no official documents state the cost implication of the loan forgiveness plan. Interestingly, the College Investor pegs the price tag of the debt relief plan at $147 billion.
It has been an open secret that President Biden is taking bold steps towards reducing or wiping out the student loans of millions of Americans. However, the recent GOP-7 lawsuit is just one of many efforts by Republicans to render the loan relief plan futile. Nonetheless, political analysts project that President Biden will try to achieve his goal of waiving student loans before the election.
The Revised Relief Plan
In 2023, the Biden administration tried to rubber-stamp a similar loan forgiveness plan. However, by June of the same year, the Supreme Court tossed the proposal in the trash. However, the revised loan relief plan would benefit some 25 million Americans if successful. According to the new proposal, graduates who earned low-value degrees and those servicing student loans much heftier than they borrowed are the targets of this new relief plan. In addition, borrowers who have been struggling to repay student loans for the past 20 years will also benefit. Finally, those who are currently eligible for loan forgiveness but have not applied will be covered if the Education Department’s new relief plan scales through.
The Federal government initially succeeded in initiating an affordable student loan repayment plan called SAVE. However, that plan has also become a subject of litigation and has been put on hold. The lawsuit that picked holes in SAVE pointed to some alleged grey features of the repayment plan. First, it is a fast route to outright loan forgiveness for graduates with small balances. Second, it affords the smallest monthly repayment amount compared to other federal student loan repayment plans.
ALSO READ: Arizona Retirees Surprised by $96,000 Student Loan Debt
What is MOHELA’s Involvement in the Ongoing Lawsuit?
It turns out that the US Supreme Court may accede to the argument of the recent lawsuit by the GOP-7. The student loan forgiveness lawsuit claims that the new relief plan by the Biden administration is likely to harm MOHELA’s financial integrity. Now, MOHELA is a major loan servicer domiciled in one of the suing states, Missouri.
It turns out that the GOP-7 obtained an internal document sent by the Education Department to loan servicing companies, including MOHELA. A portion of the document reads, “In September of 2024, the Biden-Harris Administration will launch the Federal Student Loan Debt Initiative.” Experts suggest this is the trigger of the student loan forgiveness lawsuit.
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