Student-Loan Companies Can’t Use States to Sue Over Debt Relief, Judge Says



  • A judge dismissed a lawsuit six GOP-led states filed against Biden’s student-loan forgiveness.
  • He said the states didn’t have standing to sue on behalf of student-loan company MOHELA.
  • The company is financially independent from the states and can sue on its own, the judge said.

If a student-loan company wants to sue President Joe Biden’s student-loan forgiveness, it needs to do so without the help of state leadership, a judge ruled.

On Thursday evening, Republican-appointed Judge Henry Edward Autrey dismissed a lawsuit filed in Missouri by six Republican-led states who sued to stop Biden’s debt relief, arguing it would hurt their states’ tax revenues along with that of Missouri-based student-loan company MOHELA. This case was widely regarded as one of the most serious challenges to the loan forgiveness, and while the plaintiffs filed an appeal to the conservative 8th Circuit, Autrey’s dismissal of the case is a victory for borrowers and means the debt relief can move forward.

Autrey laid out in his opinion why the GOP states did not prove they had standing, with one of the reasons being their claims that MOHELA will suffer financial losses.

“Missouri does impose some control over MOHELA, which is assigned by statute to its Department of Education, like authorization for the Governor to appoint five members of the seven-member board and requiring a yearly report on its income, expenditures, bonds, and other forms of indebtedness issued,” the opinion said. “However, when it was established, MOHELA’s revenues and liabilities were specifically and completely independent of the State of Missouri.”

“Missouri has not met its burden to show that it can rely on harms allegedly suffered by MOHELA. MOHELA, not the State, is legally liable for judgments against it,” the opinion also said, adding that “MOHELA can sue and be sued in its own name and retains financial independence from the state.”

MOHELA never publicly commented on the lawsuit, but the extent of their involvement in the case raised concerns for some borrowers and lawmakers, especially with regards to how it could impact the borrowers the company services. On Tuesday, Missouri Rep. Cori Bush wrote a letter to the CEO of MOHELA requesting additional information on any potential involvement the company has in these legal challenges, saying that it’s “unconscionable that your company — as one of the largest student loan companies in the world — would be involved in overtly political efforts to rob millions of their right to student loan debt relief.”

The dismissal of this case isn’t stopping other conservative groups from pursuing legal challenges. Earlier this week, the Cato Institute — a Koch-backed libertarian think-tank — filed its own lawsuit against student-loan forgiveness, and next week, a federal judge is holding a hearing for a lawsuit filed by conservative group the Job Creators Network. 

Still, Biden’s administration is moving forward with its loan forgiveness plan. On Monday, Biden officially launched the student-loan forgiveness application, which requires borrowers to take just five minutes to go to the site on studentaid.gov and fill out basic information like their names and Social Security numbers to receive up to $20,000 in debt relief. Biden said over 8 million people had applied so far, and the Education Department will continue to ensure the process works “as smoothly as possible” for all borrowers.



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