WASHINGTON (AP) 鈥 Another group of Republican-led states is suing to block the Biden administration鈥檚 new student loan repayment plan, which offers a faster path to cancellation and has already been used to forgive loans for more than 150,000 borrowers.
Seven states led by Missouri filed a federal lawsuit Tuesday challenging Biden鈥檚 , which has become a new legal target for conservative opponents after the Supreme Court toppled the Democratic president鈥檚 at student loan cancellation. It largely mirrors another suit by Republican attorneys general in 11 states, led by Kansas.
鈥淵et again, the President is unilaterally trying to impose an extraordinarily expensive and controversial policy that he could not get through Congress,鈥 according to the new suit.
Filed just a day after Biden to cancel student loans for millions of borrowers, the lawsuit sets the stage for one legal battle and foreshadows another. The suit doesn鈥檛 directly challenge Biden鈥檚 newest plan for cancellation, but its architect, Missouri鈥檚 attorney general, separately threatened to bring action against that plan, too.
A statement from the Education Department says Congress gave the agency power to define terms of certain repayment plans in 1993, and that authority has been used before.
鈥淭he Biden-Harris Administration won鈥檛 stop fighting to provide support and relief to borrowers across the country 鈥 no matter how many times Republican elected officials try to stop us,鈥 the department said.
The lawsuit reprises a courtroom showdown between the Biden administration and Missouri, which was a central figure in the Supreme Court case that overturned the Democratic president鈥檚 first try at loan cancellation last year.
In that case, the Supreme Court found that loan cancellation would harm Missouri because of its affiliation with a quasi-state loan servicing company, MOHELA, that stood to lose revenue generated by federal student loans.
The new lawsuit makes a similar argument. Biden鈥檚 new SAVE Plan speeds up an existing path to loan cancellation, which the suit says would deprive MOHELA 鈥 the Missouri Higher Education Loan Authority 鈥 of 鈥渦p to 15 years in servicing fees.鈥
Also joining the suit are Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma.
The Biden administration launched the SAVE (Saving on a Valuable Education) Plan last year, calling it a It鈥檚 a modified version of other repayment plans that have been around for decades, but with more generous terms.
Congress created income-driven repayment plans in the 1990s to help borrowers who were struggling to make payments on student loans. Those plans capped payments based on a borrower鈥檚 income and promised to cancel any remaining debt after 20 or 25 years.
Biden鈥檚 SAVE Plan reduces monthly payments even further and forgives loans in as little as 10 years. The president announced the idea in 2022, but it was overshadowed by his call for widespread cancellation.
Almost 8 million Americans have enrolled in the plan, including 4.5 million low-income borrowers who have had their monthly payments reduced to $0.
The plan鈥檚 provisions are being phased in this year, with the faster path to cancellation originally scheduled to take effect in July. But the Biden administration accelerated that benefit and for some borrowers in February.
Along with the harm to MOHELA, the lawsuit alleges that Biden鈥檚 plan makes it harder for states to hire and retain employees. The repayment plan is so generous, according to the suit, that it undermines the Public Service Loan Forgiveness program, which allows borrowers to get student loans canceled after 10 years of work in public service jobs.
It鈥檚 an important recruiting tool for states, according to the lawsuit 鈥 out of 13 law school graduates hired by the Missouri attorney general鈥檚 office last year, almost all said Public Service Loan Forgiveness influenced their decision to work in the public sector.
鈥淥nce the Final Rule takes effect, however, PSLF will not be nearly as attractive compared to other income-driven repayment programs,鈥 the suit says. 鈥淚ts comparative advantage will shrink or disappear entirely.鈥
The states note that more than half of borrowers in the plan are paying nothing. 鈥淭his is not a student loan program. It is a grant program that Congress never authorized,鈥 according to the suit.
Separate from the repayment plan, Biden on Monday highlighted a new proposal that aims to reduce or cancel student loans for 30 million Americans. It would offer loan relief to five categories of borrowers, including those who have amassed large sums of accrued interest, those who have been paying loans for decades, and those who face financial hardship.
Hours after Biden unveiled it, Bailey took to social media, calling the proposal an illegal attempt to bypass Congress.
鈥淭he rule of law means something in this country,鈥 he wrote. 鈥淪ee you in court.鈥
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