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President Joe Biden's second try at broader student-loan forgiveness just got hit with its first legal challenge.
On Tuesday, seven GOP state attorneys general filed a lawsuit in the Southern District of Georgia to block Biden's second try at debt relief using the Higher Education Act of 1965.
The lawsuit is targeting the plan the Education Department announced last summer after the Supreme Court struck down Biden's first attempt at broad debt relief. Expected to benefit over 30 million borrowers, the plan would cancel some or all student debt for borrowers with unpaid interest, those who have been in repayment for at least 20 years, and those who attended schools that left them with too much debt compared to post-graduation earnings, among other things.
The final rule for the relief has yet to be published, and the Education Department previously announced it planned to begin implementing the relief in October. However, the lawsuit said that the department had been working on the plan's implementation prior to publishing the final rule, according to internal documents they obtained from the department to servicers, and called for the court to put a stop to the relief pending a final legal decision.
"Not only is this attempt the Secretary's most aggressive," the lawsuit said. "It is also the weakest one yet. The Secretary has already failed to mass cancel student loans with the two statutes he thought were more plausible. It is thus unsurprising that this third plan rests on the least plausible textual authority yet."
The GOP-led states said that the department was planning to enact the relief as early as September. According to the internal documents the states obtained attached alongside the lawsuit, the Education Department sent a memo to servicer MOHELA stating that "in September of 2024, the Biden-Harris Administration will launch the Federal Student Loan Debt Initiative."
The documents do not indicate which specific parts of the relief, if any, would have been implemented in September, but the lawsuit argued that the department was not adhering to the regulatory process by making plans to get the relief to borrowers prior to the final rule.
The Education Department did not immediately respond to a request for comment from Business Insider on this latest lawsuit.
The states also argued that the relief would harm student-loan company MOHELA, which is based in Missouri, one of the states leading the lawsuit. They said that MOHELA, would lose revenue through forgiven loans, and the plan would increase administrative costs for the servicer.
The Education Department has not yet commented on how this will impact its plans for broad relief. At the same time, Biden's new SAVE income-driven repayment plan is blocked in court following a lawsuit from a group of GOP state attorneys general who sued to block cheaper payments and debt cancellation, with over 8 million enrolled borrowers waiting in limbo pending a final decision.
