The Biden administration’s plan to erase up to $20,000 in debt for tens of millions of Americans has faced endless pressure. Just this week, the House of Representatives voted to repeal it. But the lawsuit against it, brought by six Republican-led states, has received much less scrutiny. That’s because the Supreme Court issued “certiorari before judgment,” meaning the lawsuit didn’t have to go through lower courts first. Its factual claims have not been adequately tested. They’ve barely even been aired.
So we decided to do the fact-checking ourselves. We submitted public records requests and reviewed nearly a thousand pages of internal financial documents, emails and other communications from the parties in the case, as well as court documents and transcripts of oral arguments in the Supreme Court in February.
We found that the states’ most basic rationale for bringing the case—that canceling student loans could cause a Missouri-based loan officer to default on its financial obligations to the state—is false. As our research shows, and the loan authority’s own documents confirm, income from servicing loans will increase, even with the new policy in place.
According to the rules of American jurisprudence, if there is no injury, there is no right to sue. That’s called standing, and the plaintiffs don’t have it. They simply said they did. That claim has been enough to get them to the nation’s highest court, and may help persuade the justices to rule in their favor.
The ease with which prosecutors were able to make allegations that contradict basic facts, without any rigorous stress testing, is all the more striking when compared to the endless hoops ordinary people must jump through to prove they qualify for financial aid or debt relief. This is what sociologist Howard Becker calls the “hierarchy of credibility”: Those at the top of the social hierarchy do not have to prove their claims; they are just taken for granted. But claims from those at the bottom are weighed down by skepticism and demands for evidence. In this case, this difference could deprive millions of people of much-needed emergency aid.
The loan agency at the center of this case is the Missouri Higher Education Loan Authority. The plaintiffs claim that President Biden’s policy will cost the quasi-independent agency, known as MOHELA, “millions of dollars in revenue per year,” which in turn could prevent it from meeting its financial obligations to a state education fund. How would this happen? The plaintiffs are quite vague about it.
“Almost half” of the student loans will be written off under the Biden program, Nebraska’s attorney general, James Campbell, told the court. “So it is natural that about half of MOHELA’s operating income from direct loans will be cut and in total it amounts to about 40 percent of operating income.”
We have read all the evidence the plaintiffs submitted to support this claim – and it is factually unsubstantiated. They offered a transcript of a Biden administration news conference and material explaining the loan release process, but little about MOHELA’s finances or the impact of this policy on the bottom line.
As it turns out, MOHELA had been running these analyzes regularly in the run-up to, and then immediately after, the announcement of the loan forgiveness program. Of course, wiping out all these loans would mean a hit to one source of MOHELA’s income. But that is not the end of the story.
Our public records request revealed that overall, MOHELA will continue to have a banner year. Last August, the agency estimated that even after the policy took effect, it would earn $97.2 million servicing federal direct student loans — well above the $88.9 million it earned in the previous fiscal year.
That’s because even if it would be to close some accounts, the loss would be more than offset by an influx of new borrowers. Last July, the Department of Education awarded the agency a contract (despite its apparently terrible record) to service a large number of new accounts linked to another loan program. This continues a recent trend: Overall, MOHELA’s direct loan borrowers have more than tripled from 2.5 million in 2020 to 7.7 million as of April.
MOHELA wouldn’t talk to us about any of this, so to double-check the projection, we ran our own, using data from the documents we received from our records request, as well as publicly available public records. (Some of this research was first made public through the Roosevelt Institute.) Based on this information, a conservative estimate is that the agency’s annual revenue from direct loan servicing will nearly double to $175.6 million even if the loan cancellation guidelines go into effect. can make extra money from processing fees as it closes accounts.
The case before the Supreme Court has already drawn criticism — even from conservative legal experts who have no love for the Biden administration’s policies. Through tortured logic, the state of Missouri has declared itself the injured party even though it is the loan servicing company, a separate entity, that would lose revenue. Missouri argued that it would be a secondary victim, since the borrowing authority owes the state $105 million.
But think about it. If Amazon fires my friend, and my friend owes me $20, can I sue Amazon to make it harder for me to get my money back?
Of course not. In this case, however, the point should be moot, because recent accounts revealed that MOHELA had not made these payments for the past 15 years, and appears to have no plans to resume them.
Consider the plaintiffs’ response to a question posed by Justice Ketanji Brown Jackson about the extent to which MOHELA might be harmed under the debt relief policy, given that it would receive fees for closing accounts. “It is very hard to believe,” said Mr. Campbell, the Nebraska attorney general, “and the government provides no detail in its response, that a one-time payment of loan origination fees will offset the ongoing fee that MOHELA earns from servicing these loans. »
Justice Jackson responded with apparent disbelief. “But isn’t that your burden?” she asked. “You bring this lawsuit and you have to establish standing. And so to the extent that we’re trying to assess whether or not MOHELA is actually going to be harmed, I don’t think you can answer ‘but the government hasn’t said anything.’
Even now, the loan agency would not answer our questions or discuss our research, despite written requests and telephone inquiries. The Missouri attorney general’s office told The Times: “To establish standing, MOHELA only had to prove that they wanted less money.” But whether MOHELA has standing is irrelevant; the loan agency is not a party to the lawsuit.
Compare that to the lengths normal people have to go to prove they qualify for debt relief. They must deliver mountains of documentation. Their claims are often rejected for the most trivial technicalities – a form filled out in green ink instead of black or blue, an electronic signature instead of an ink one.
Applicants to the older public service loan forgiveness program must get paperwork signed by employers they had a decade ago. If a loan broker transfers the account, the borrower may lose their payment history and thus their eligibility for relief. People who attended predatory colleges have had to file extensive applications for relief, documenting the schools’ false claims and misrepresentations. Even the Biden plan required an application.
It is the “hierarchy of credibility.” Missouri says the loan forgiveness policy could hamper MOHELA’s ability to repay its debt to the state. Missouri then filed a lawsuit — not against the agency, but on its behalf — to try to shore up future revenue. How would the government act if an individual debtor said she could not pay?
Should the judges uphold this claim, they would in effect uphold a false plaintiff, false facts and an unfair claim. Falsehoods about falsehoods would be a difficult way to lose the debt relief the president promised to 43 million Americans and their families. And a Supreme Court that does not scrutinize basic facts would be a further disgrace to a body already plagued by scandal.
Eleni Schirmer, a writer and postdoctoral fellow at the Concordia University Social Justice Center in Montreal, is an organizer of the Debt Collective. Louise Seamster is Assistant Professor of Sociology and African American Studies at the University of Iowa, and a Non-Resident Fellow in Governance Studies at the Brookings Institution.
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