GOP States’ Student Loan Cancellation Lawsuit Survives Questionable Court Ruling - The American Spectator | USA News and Politics
GOP States’ Student Loan Cancellation Lawsuit Survives Questionable Court Ruling
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President Joe Biden speaks about student loan cancellation plan, Oct. 21, 2022 (NowThis News/YouTube)

Fans of President Joe Biden’s illegal loan cancellation plan were cheering last Thursday when U.S. District Court Judge Henry E. Autrey denied a request by six GOP states to block the plan and dismissed the states’ lawsuit.

The champagne corks may have popped prematurely. Friday night, the United States Court of Appeals for the 8th Circuit granted the states’ emergency request to block any debt discharges until the court rules on the states’ motion for injunction pending the appeal.

Under the administration’s plan, individuals earning less than $125,000 are eligible. Pell grant recipients get $20,000 of their student debt cancelled, while other federal loan borrowers will have $10,000 eliminated.

Married borrowers get the same windfall as long as their household income is one penny less than one-quarter of $1 million, the income limit for married couples being $250,000.

The price tag could be as much as $1 trillion. Americans who paid their loans, have privately owned student loans, or financed college without education loans, along with those who didn’t go to college in the first place, will finance this handout — which must be what Democrats mean by “equity.”

Team Biden contends that the Higher Education Relief Opportunities for Students Act (HEROES), a 2003 law meant to give limited relief to student loan borrowers serving in Iraq and Afghanistan, authorizes the cancellations.

Which needs a separate column. (Spoiler alert: Even if the administration is right that its endless COVID national emergency declaration triggers the education secretary’s powers under HEROES, the authority to categorically cancel student debt, let alone on such as massive scale, is not provided by the act.)

Autrey never reached the HEROES question, dismissing the case over standing, the same issue that has stymied other challenges to the plan.

More specifically, he concluded that the six states (Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina) failed to show “injury in fact,” an essential ingredient of standing.

As the Supreme Court has explained, injury in fact “helps to ensure that the plaintiff has a ‘personal stake in the outcome of the controversy.’”

The injury “must be ‘concrete and particularized’ and ‘actual or imminent,’ not ‘conjectural’ or ‘hypothetical.’ An allegation of future injury may suffice if the threatened injury is ‘certainly impending,’ or there is a ‘substantial risk’ that the harm will occur” (Susan B. Anthony List v. Driehaus, 2014).

The states met this threshold and then some. One example is lost tax revenues. Under the federal tax code, discharged student loan debt, such as from an income-driven repayment plan (loans are discharged after 20 to 25 years of income-adjusted payments), is included in income — except from Dec. 31, 2020, to Jan. 1, 2026, due to the American Rescue Plan of 2021.

Beginning in 2026, and as a direct result of the administration’s actions, Nebraska, Iowa, Kansas, and South Carolina, which all use federal-adjusted gross as their state tax baseline, will earn less tax revenue from loan discharges, as there will be significantly less debt being discharged due to the cancellation plan.

Not good enough, said Autrey. “The tenuous nature of future income tax revenue is insufficient to establish a cognizable injury,” he wrote.

But in Wyoming v. Oklahoma, the Supreme Court held that the loss of “specific tax revenues” (as opposed to a “decline in general tax revenues”) suffices for standing.

The states briefed Wyoming, but Autrey’s ruling doesn’t mention it. Instead, his conclusory 19-page decision makes a general reference to Clapper v. Amnesty Int’l USA.

In Clapper, activist groups and media organizations challenged a law allowing the government to intercept certain international electronic communications sent from non-U.S. persons located abroad, claiming that confidential communications with clients and sources could be targeted.

Plaintiffs presented no evidence that this would happen, though. “Instead, [they] merely speculate and make assumptions about whether their communications … will be acquired,” the court observed in ruling that they lacked standing.

But the states don’t “merely speculate and make assumptions.” They specifically articulate how the loan cancellation will result in lost tax revenues.

Autrey misses the mark even more in concluding that Missouri has no standing. The Higher Education Loan Authority of the State of Missouri (MOHELA) is a major holder and servicer of student loans nationally, and the agency helps fund Missouri’s public colleges and universities.

As detailed in the plaintiffs’ pleadings, the loan cancellation plan will impair MOHELA’s loan portfolio, reducing its servicing fees and hurting its access to debt markets — thus impacting its ability to contribute to the postsecondary education of Missourians. (READ MORE from Ken Sondik: Remembering Lori Lightfoot’s Legal Misconduct)

Autrey, adopting the arguments made in court by Department of Justice lawyers, concluded that the injuries are MOHELA’s, not Missouri’s. “Missouri cannot establish standing to bring its claims or establish standing through any arguments relating to MOHELA,” he wrote.

His ruling cites a DOJ-mentioned district court case, Dykes v. MOHELA, which held that MOHELA is not an “Arm of the State” because it can sue and be sued, can raise funds, and has its revenues and liabilities separate from Missouri’s.

Courts have differed on whether MOHELA is an Arm of the State. Another district court case, Good v. U.S. Department of Education, reasoned that since MOHELA’s board is appointed primarily by the governor, its focus is on statewide education, and it is otherwise interconnected with state government, it is an Arm of the State.

Walker v. MOHELA reached a similar conclusion. (MOHELA has a “colorable argument” that it is an Arm of the State.)

But the question in Arm of the State cases is whether a state agency is entitled to the sovereign immunity provided states under the 11th Amendment — the agency gets such immunity only if deemed to be an Arm of the State.

Autrey’s ruling conflates two analytically distinct questions. Even assuming that MOHELA is not an Arm of the State (and therefore is not entitled to immunity from suits), it does not follow that Missouri cannot vindicate injuries to MOHELA.

By Autrey’s logic, the feds can impose a rule that eviscerates a state agency — one whose mission is vitally important to the state itself — yet the state should not be allowed to sue to vindicate the agency’s interests.

This also overlooks the practical realities that MOHELA and like agencies may be in too tenuous a position to sue. Just consider MOHELA’s situation. It works closely with the U.S. Department of Education as well as individual borrowers. Forcing MOHELA to sue here puts the agency in a precarious place.

Missouri, moreover, is also suing to vindicate its own interests in the form of contributions to its educational system.

There is no guarantee as to how the 8th Circuit will rule. A decision on the injunction motion is expected soon. Under the court’s Oct. 21 order, briefing must be completed by Tuesday, Oct. 25, the day this article is being submitted for publication.

We can only trust in the court — and hope that the president and his handlers are disappointed by the forthcoming ruling.

Ken Sondik is an attorney in Zionsville, Indiana. Reach him at kensondik@gmail.com.

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