Internal preparations to challenge Biden's student loan cancellation

Internal preparations to challenge Biden’s student loan cancellation

Conservative groups have launched a nationwide search for potential plaintiffs to challenge the Biden administration’s federal student loan forgiveness order in court.

Why is this important: 43 million student borrowers eligible for relief could be stuck in financial limbo if the order gets bogged down in drawn-out litigation.

What we are looking at: The Job Creators Network – a right-wing small business group advocating for lower taxes and fewer regulations – is preparing to take legal action once the Department for Education unveils the website where borrowers can apply.

  • They brought in Karen Harned of the National Federation of Independent Business to lead a team to vet potential complainants. she supervised a recent legal bid to block certain workplace COVID-19 vaccination mandates.
  • Americans for Tax Reform President Grover Norquist told Axios that his organization will take its own legal action, team up with conservative think tanks or state attorneys general, or all of the above.
  • An Oregon man who previously ran for the U.S. Senate as a Republican is representing himself in a lawsuit challenging Biden’s student loan plan in district court, arguing the relief will worsen inflation and increase the interest charges on his mortgage.

State of play: The Biden administration last month announced plans to forgive $10,000 in student loans for individual borrowers who earn less than $125,000 a year and $20,000 for those who received Pell Grants.

  • The administration has yet to roll out the site where about 35 million borrowers will have to apply for forgiveness.
  • The roughly eight million eligible borrowers for whom the Department of Education already has income information will receive automatic debt relief.

Between the lines: One of the main challenges is to prove that a plaintiff has standing to bring an action in federal court.

  • The Supreme Court has ruled that simply being a taxpayer does not provide the status necessary to challenge an allocation of public funds alleged to violate the Constitution.
  • “[Biden’s loan forgiveness plan] is unfair, but you can’t sue unfairly,” said Job Creators Network president Alfredo Ortiz.

Enlarge: One avenue some groups are exploring is to find an applicant who is a private citizen earning just above the income threshold, or who has gone to school while working and has already paid off their loans.

  • Loan servicers might seek standing arguing that the administration’s action caused them to lose money that they might otherwise have earned.
  • Some Republican state attorneys general, including Mark Brnovich in Arizona and Eric Schmitt in Missouri, expressed early interest in discussing standing, though the specifics are not yet clear.

What they say : “Standing up is a game of Whac-a-Mole,” Jed Shugerman, a law professor at Fordham University, told Axios. “If you’re the Biden administration, you have to hit every mole” but when an advocacy group is looking for a plaintiff, “all you need is an entity with concrete, direct harm that’s willing to sue.”

  • Dalié Jiménez, a professor of bankruptcy law at UC Irvine and director of the Student Loan Law Initiative, said the legal challenges amounted to an effort to intimidate people into seeking relief in the first place.
  • “Borrowers should continue to do what the ministry asks them to do, which is to complete the application until a court rules otherwise or prevents it from taking effect,” Jiménez said.

The other side: The Biden administration says a 2003 law known as HEROES, the Higher Education Relief Opportunity for Students Act, allows it to waive federal student loans to support borrowers in the event of a emergency, such as a natural disaster or war.

  • A 25-page Justice Department memo lays out the administration’s legal justification, citing “financial hardship resulting from the COVID-19 pandemic.”
  • White House spokesman Abdullah Hasan told Axios in response to this report, “Let’s be clear about what they would be trying to do here: the same people who voted for a $2 trillion tax giveaway dollars for the rich and who had hundreds of thousands of dollars of their own small business loan debt cancellation would be tantamount to trying to keep millions of working middle-class Americans in mountains of debt.”

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