Six states sue to block Biden’s $500 billion student loan bailout

Six states sue to block Biden’s $500 billion student loan bailout
(Image: QuinceCreative / Pixabay)

Six states are challenging Biden’s $500 billion student loan forgiveness plan in federal court. Iowa, Kansas, Missouri, Nebraska, South Carolina, and Arkansas sued together in a lawsuit filed today in Missouri. It makes some of the same arguments as a lawsuit challenging Biden’s plan that was filed earlier this week by Pacific Legal Foundation on behalf of Frank Garrison, an attorney with student loans:

Six Republican-led states are suing the Biden administration in an effort to halt its plan to forgive student loan debt for tens of millions of Americans, accusing it of overstepping its executive powers.

It’s at least the second legal challenge this week to the sweeping proposal laid out by President Joe Biden in late August, when he said his administration would cancel up to $20,000 in education debt for huge numbers of borrowers. The announcement, after months of internal deliberations and pressure from liberal activists, became immediate political fodder ahead of the November midterms while fueling arguments from conservatives about legality.

In the lawsuit, being filed Thursday in a federal court in Missouri, the Republican states argue that Biden’s cancellation plan is “not remotely tailored to address the effects of the pandemic on federal student loan borrowers,” as required by the 2003 federal law that the administration is using as legal justification. They point out that Biden, in an interview with CBS’ “60 Minutes” this month, declared the Covid-19 pandemic over, yet is still using the ongoing health emergency to justify the wide-scale debt relief.

The six states argue Biden’s debt forgiveness program will damage their state tax collections, and Missouri says its loan servicer will lose revenue for payments and debt collection it would normally otherwise be entitled to under federal law.

The states have legal standing to challenge Biden’s program, as it is currently structured. (I say “as currently structured,” because Biden’s plan was tweaked yesterday by the government in a way designed to deprive the Pacific Legal Foundation of standing to challenge the program, in its separate lawsuit in Indiana against the Biden student loan forgiveness program).

A constitutional lawyer at the Cato Institute notes that loan servicers also likely have standing to sue over the Biden plan, given its negative impact on their revenue. He also explains in detail why it was illegal to do what Biden did, and why it is challengeable in court by loan servicers under the HEROES Act and the Administrative Procedure Act.

As Ed Morrissey notes at Hot Air,

Interestingly, and sadly, neither of these actions can address the real constitutional elephant in the room. Biden as president has no constitutional authority to appropriate funds out of thin air for any initiative. In this case, Biden’s not even making the pretense of shifting funds from already-extant appropriations, as Donald Trump did with his border-wall funding, in large part because such funds don’t exist on the scale Biden would need. The CBO scores this Academia bailout at $400 billion, which would be between 20-25% of the discretionary spending Congress appropriates in its annual budgets these days. Biden would have to shut down entire Cabinet departments to fund his Academia giveaway in that fashion.

Unfortunately, only Congress would have standing for such a challenge on that basis. And embarrassingly, the current leadership of Congress has no interest in defending its constitutional privilege and authority. Instead of defending this basic check on executive power — through the power of the purse — Nancy Pelosi and Chuck Schumer have gutlessly chosen to cheerlead Biden’s imperial presidency in order to get the outcome they want.

In addition to this $500 billion student loan bailout, Biden also is changing income-driven repayment plans in ways that will spur colleges to raise tuition and stick taxpayers with the tab. Biden’s changes “will make college much more expensive” for taxpayers and many students, reports Reason Magazine.

Between the student loan bailout and Biden’s changes to income-driven repayment plans, the overall cost of Biden’s plan could be over a trillion dollars, according to analysts at the University of Pennsylvania’s Wharton School, taking into account changes made by Biden to income-driven repayment plans.

Other observers have said that Biden’s plan is illegal. As the College Fix notes, “An analysis from the Texas Public Policy Foundation concluded that an executive order bailout is likely illegal. Alan Dershowitz, professor emeritus at Harvard Law school, has also said that a student bailout through executive action would be illegal.”

Biden’s plan is also likely to increase college tuition and inflation.

Jason Furman, chairman of President Obama’s Council of Economic Advisers, calls Biden’s plan “reckless.” Furman says, “Pouring roughly a half-trillion dollars of gasoline on the inflationary fire that is already burning is reckless.” Biden’s plan will increase economic inequality and the national debt.

Even the liberal Washington Post calls Biden’s student-loan bailout “a regressive, expensive mistake.”

While Biden is writing off some student loans for high-income college graduates, he has left intact far more burdensome obligations imposed by the government on some working-class people who never went to college — obligations that federal law prevents from being modified, even when those obligations lead to impoverishment or, in some cases, incarceration.

Hans Bader

Hans Bader

Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department. Hans writes for and has appeared on C-SPAN’s “Washington Journal.” Contact him at


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