opinion | The case against cancellation of student debt hardly seems meaningful

The Biden administration’s plan to cancel up to $20,000 in debt from tens of millions of Americans is under endless pressure. This week the House of Representatives voted to withdraw it. But the lawsuit against it, brought by six Republican-led states, has received far less attention. That’s because the Supreme Court issued “certiorari before judgment,” meaning the lawsuit didn’t have to go through lower courts first. The factual claims have not been adequately tested. They haven’t even aired yet.

So we decided to do the fact-checking ourselves. We filed public records requests and reviewed nearly 1,000 pages of internal financial documents, emails and other communications from the parties to the case, as well as court documents and the transcript of oral arguments at the Supreme Court in February.

We found that the states’ most basic justification for bringing the case — that canceling student loans could render a Missouri-based loan authority unable to meet its financial obligations to the state — is flawed . As our research shows, and the lending authority’s own documents confirm, income from loan repayments will increase even with the new policy.

Under the rules of US jurisprudence, there is no right to prosecution if there is no injury. It’s called standing, and the plaintiffs don’t have it. They just said they did. That allegation was enough to take them to the nation’s highest court and may help the judges rule in their favor.

The ease with which the attorneys general were able to make claims that contradict the basic facts, without any rigorous stress testing, is all the more striking when compared to the endless hoops ordinary people have to jump through to prove they qualify for financial aid or debt relief. This is what the sociologist Howard Becker calls the “hierarchy of credibility”: Those at the top of the social hierarchy don’t have to prove their claims; they are simply taken for granted. But claims made by those at the bottom are fraught with skepticism and demand for evidence. In this case, that difference could deprive millions of people of much-needed help.

The loan agency at the center of this case is the Missouri Higher Education Loan Authority. Prosecutors allege President Biden’s policies will cost the quasi-independent agency known as MOHELA “millions of dollars in revenue each year,” which in turn could prevent it from meeting its financial obligations to a state education fund. How would this happen? The plaintiffs are pretty vague about it.

“Nearly half” of student loans will be forgiven under the Biden program, Nebraska Attorney General James Campbell told the court. “So it stands to reason that about half of MOHELA’s operating income will be reduced from direct lending, and in total that adds up to about 40 percent of operating income.”

We’ve read all the evidence the plaintiffs have submitted to support that claim – and it doesn’t make any sense, in fact. They offered a transcript of a Biden administration press conference and materials explaining the loan discharge process, but little about MOHELA’s finances or the impact of these policies on the company’s bottom line.

It turned out that MOHELA had performed these analyzes regularly leading up to and immediately following the announcement of the forgiveness program. Of course, wiping out all those loans would be a blow to one source of MOHELA’s income. But that’s not the end of the story.

Our request for public records showed that MOHELA will continue to have a top year overall. Last August, the agency projected that even after the policy went into effect, it would make $97.2 million paying off federal direct student loans — well more than the $88.9 million it made in the previous fiscal year.

That’s because while it would close some accounts, the loss would be more than offset by an infusion of new borrowers. Last July, the Department of Education awarded the agency a contract (despite apparently being terrible file) to serve a large number of new accounts associated with another loan program. This continues a recent trend: in total, MOHELA’s direct borrowers more than tripled from 2.5 million in 2020 to 7.7 million in April.

MOHELA didn’t want to talk to us about this, so to check the projection, we performed our own projection, using data from the documents we received from our filing request, as well as publicly available government records. (Part of this research was first made public via the Roosevelt Institute.) Based on that information, a conservative estimate is that the agency’s annual revenue from direct loan services would nearly double to $175.6 million even if the loan cancellation policy goes into effect. And it could make extra money in processing fees if it closes accounts.

The Supreme Court case has already drawn criticism – even from conservatives legal experts who have no love for the policies of the Biden administration. By tortured logic, the state of Missouri has declared itself an injured party, even though it is the lender, a separate entity, that would lose out on revenue. Missouri claimed it would be a secondary casualty since the loan authority owes the state $105 million.

But think about that. If Amazon fires my friend and my friend owes me $20, can I sue Amazon for making it harder for me to get my money back?

Of course not. However, in this case, the point should be moot because recent financial statements revealed MOHELA had not made those payments in the past 15 years and appears to have no plans to resume them.

Take a look at the plaintiffs’ response to a question asked by Judge Ketanji Brown Jackson about the extent to which MOHELA could be harmed by the debt relief policy given that it will receive bill clearing fees. “It is very hard to believe,” said Mr. Campbell, Nebraska’s attorney general, “and the government is not detailing in its response letter, that a one-time payment of loan forgiveness fees will offset the ongoing fee that MOHELA earns from paying off those loans.”

Justice Jackson responded with apparent disbelief. “But isn’t that your burden?” she asked. “You are filing this lawsuit and you must be given prestige. And so as far as we’re trying to assess whether MOHELA will actually get hurt, 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 status, MOHELA had only to prove that they would have fewer money.” But whether MOHELA has prestige is irrelevant; the lender is not a party to the lawsuit.

Compare that to the effort normal people have to go through to prove they are eligible for debt relief. They have to provide mountains of documentation. Their claims are often rejected because of the most trivial technical details: a form filled in green ink instead of black or blue, an electronic signature instead of ink.

Applicants to the older government loan forgiveness program must have paperwork signed by employers they had a decade ago. If a loan manager transfers the account, the borrower may lose their payment history, and with it their right to a chargeback. People who have attended predatory for-profit universities have had to file extensive applications for aid, documenting their schools’ false accusations and misrepresentations. Even the Biden plan required an application.

That is the ‘hierarchy of credibility’. Missouri says MOHELA’s forgiveness policy could hinder MOHELA’s ability to repay its debts to the state. Missouri then filed a lawsuit – not against the agency, but on behalf of the agency, to try to bolster its future earnings. How would the state act if an individual debtor said it could not make its payments?

If the judges were to uphold this claim, they would in effect be upholding a false plaintiff, false facts, and a false claim. Falsehoods about falsehoods would be a hard way to lose the debt relief the president promised 43 million Americans and their families. And a Supreme Court that fails to examine basic facts would be a further disgrace to a body already plagued by scandal.

Eleni Schirmer, a writer and postdoctoral researcher at the Concordia University Social Justice Center in Montreal, is an organizer for the Debt Collective. Louise Seamster is an assistant professor of sociology and African American studies at the University of Iowa, and a nonresident fellow in governance studies at the Brookings Institution.

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