Good sign for student loan borrowers: MOHELA’s involvement in lawsuit

  • Student loan company MOHELA was central to a case trying to block Biden’s student debt relief.
  • The justices asked whether Missouri has standing to claim MOHELA’s injury as an injury to himself.
  • Some experts said the company’s involvement in the case could undermine the plaintiffs’ ability to sue.

If you didn’t think a Missouri student loan company would play such a central role in whether President Joe Biden’s debt relief plan can move forward, think again.

On September 29, GOP leaders in Missouri, along with Arkansas, South Carolina, Iowa, Kansas and Nebraska, filed a lawsuit to block Biden’s plan to cancel up to $20,000 in student debt for federal borrowers who they make less than $125,000 a year. It became one of two lawsuits that succeeded in halting Biden’s plan, and the Supreme Court heard oral arguments in the cases on Tuesday to assess whether the relief can go forward.

The states argued that Biden’s debt relief would hurt their states’ tax revenue, but that was an issue the Supreme Court justices barely disputed. They were more interested in the role of student loan company MOHELA in the case, and whether the states were allowed to implicate a separate entity in their own arguments.

Proving correctness means that the policy will injure the plaintiff, that the injury can be traced directly to the defendant, and that the relief they seek would address those injuries. If the Supreme Court finds the case to be without merit, it is dismissed and the other arguments against relief, such as executive overreach, cannot even be addressed.

“It would be hard to see how a win for the state would benefit MOHELA, or a win for MOHELA would benefit the state, if the assets are completely separate — you’re not making money off of it,” conservative Supreme Court Justice Amy Coney Barrett he told the states attorney.

“If MOHELA is an arm of the state, why didn’t you embrace MOHELA and say, ‘You have to chase this suit?’ Barrett asked.

Jim Campbell, the state’s counsel, said Missouri has “a vested interest in MOHELA’s property.”

“MOHELA is a state and state-controlled public utility that performs the core public function of providing financial aid to Missouri students,” he said. “The Secretary’s plan threatens to reduce MOHELA’s operating income by 40%. This will directly undermine MOHELA’s ability to advance its critical public purposes, and the State has the ability to pursue those damages.”

But the judges appeared skeptical of the claim that the state would be directly harmed by the company’s loss of revenue. Solicitor General Elizabeth Prelogar reiterated that MOHELA is separate from the state and can sue and be sued on its own.

David Nahmias, an attorney at the UC Berkeley Center for Consumer Law & Economic Justice, told Insider after the arguments that he was “pleased to see that attitude featured prominently in the oral arguments.”

“Multiple justices across the ideological spectrum really missed the fundamental question we’ve been stressing all along, which is: does Missouri have standing to challenge debt relief through its relationship with MOHELA?” said Nahmias.

So, as Nahmias said, MOHELA’s role in the case really called into question the plaintiffs’ position — and the judges’ skeptical line of questioning could be a good sign.

“Clearly, the issue here was MOHELA,” Nahmias said. “And their argument was really undermined. If MOHELA had been the one bringing this lawsuit, it would have been a different story.”

U.S. Supreme Court Associate Justices Amy Coney Barrett, left, and Ketanji Brown Jackson.

U.S. Supreme Court Associate Justices Amy Coney Barrett, left, and Ketanji Brown Jackson.

Chip Somodevilla/Getty Images

Judges dig MOHELA who owes his own debt

MOHELA as a separate entity from the state of Missouri is just one of the issues the judges addressed. As Insider previously reported, the company does have some debt of its own — in 2007, Missouri established the Lewis and Clark Discovery Fund, a program to finance various higher education initiatives.

MOHELA was expected to put $350 million into the fund over a six-year period, but after the 2008 financial crisis, the company received government approval to delay its payments, with the most recent extension until 2024. While the lawyers for states argued that MOHELA still has an obligation to make payments into the fund, which facilitates programs that benefit the state, Judge Ketanji Brown Jackson challenged that notion, given that the fund had been dormant for years.

“Well, we’re talking about a fund that hasn’t been contributed because the state has waived the obligation to do so for at least a temporary period, and then even if the funds were to go into that particular fund, you don’t have a set of plans that do you plan to follow along with them?” Jackson said.

Abby Safroth, the director of the Student Loan Relief Program at the National Consumer Law Center, told Insider that “the claim that the plan threatens Missouri because it makes it less likely that payments will be made to the Lewis and Clark Discovery Fund has become kind of a laughing stock at that point. It wasn’t going to happen regardless.”

While states have argued that the fund is another entity that could hurt Biden’s debt relief, the fact that MOHELA hasn’t paid into it in more than a decade is another factor that could undermine the case. their.

“It’s very speculative to think that Missouri, in 2024, will have to first collect the debt to the Lewis and Clark fund when that fund is essentially dead,” Nahmias said. “And two, that President Biden’s debt relief plan would affect MOHELA so that MOHELA could not even begin to repay its debts to the Lewis and Clark Fund.”

MOHELA’s role will be ‘the key issue’

Predictably, the conservative and liberal justices split on some issues surrounding student debt relief during their hearing. For example, conservative Justice John Roberts and Justice Neil Gorsuch addressed the question of the fairness of student loan forgiveness, which was also a common theme among Republican lawmakers who opposed the relief.

Additionally, Roberts explored whether Biden’s plan was an overreach of executive power by using the HEROES Act of 2003 to cancel large-scale student debt without congressional approval.

“We take very seriously the idea of ​​separation of powers and that power should be divided to prevent abuse,” Roberts said. “Given the posture of the case and given our historical concern with the separation of powers, you would at least recognize that this is a case that presents extremely serious, important questions about the role of Congress and the role we should play in controlling that; “

But all of the justices took up MOHELA’s holding and whether the states have standing to claim that the company’s injury is a Missouri injury.

“I think that’s going to be the key issue,” Shafroth said.

“The judges were really, really focused on the question of whether Missouri can assert standing based on claims of injuries to MOHELA, loss of revenue to MOHELA,” Safroth said. “That seemed to be the whole game. And there was a lot of skepticism about it.”

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