MISSOURI, USA — Missouri Attorney General Andrew Bailey is seeking to squash a nearly eight-month-old program that has waived $1.2 billion in student loans for 153,000 borrowers and limited the payment amounts for 8 million others.
He is joined by the attorneys general from Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma in a lawsuit filed Tuesday in the United States District Court for the Eastern District of Missouri challenging the U.S. Department of Education’s SAVE Plan, an income-driven repayment plan launched in August of last year and is set to be fully implemented in July.
Kansas Attorney General Kris Kobach filed his own legal challenge of the SAVE Plan at the end of March alongside 10 other states. Bailey said at the time that he was “extremely pleased” to see Kobach’s lawsuit, announcing the same day that he intended to file a similar motion.
He followed through on the promise Tuesday.
“Between our two coalitions of states, we will get this matter in front of a judge even more quickly to deliver a win for the American people,” he said in a news release.
Bailey was part of a legal challenge of an earlier program for student-loan forgiveness, which culminated in the U.S. Supreme Court striking down the federal government’s plan last June.
In that lawsuit, the Department of Education had proposed using the Heroes Act to give widespread relief during the pandemic.
Included in Bailey’s argument in that lawsuit was that debt relief would hurt the Missouri Higher Education Loan Authority, or MOHELA.
The quasi-governmental nonprofit did not consent to be part of the original lawsuit, and internal communications released last year showed some of the company’s employees expressing apprehension about being involved. .
Bailey’s latest lawsuit also claims harm against MOHELA.
“By accelerating the forgiveness timeline for the typical borrower by as much as 15 years, the final rule imposes financial harm on MOHELA, and thus the State of Missouri, by depriving MOHELA of up to 15 years in servicing fees,” the attorneys general wrote in the lawsuit.
MOHELA did not respond to a request for comment.
Although some of the arguments remain, the department has used a different federal law to justify the SAVE Plan. This time around, the department is pulling its authority from the Higher Education Act, which was first enacted in 1965 but has been amended since.
The Higher Education Act authorizes need-based financial aid for college students, among other provisions.
Bailey argues that, when Congress passed the Higher Education Act, they didn’t intend for it to be used as the SAVE Plan does.
The SAVE Plan, when fully implemented, would cap borrowers’ loan payments at 5% of their discretionary income. In February, the Department of Education announced that of the 7.5 million people that had enrolled in the program, 4.3 million had a $0 monthly payment.
The SAVE Plan also promises loan forgiveness within 10 years for those who borrowed $12,000 or less. For those who initially borrowed over $12,000, the department says it will relieve debts with an additional year for each $1,000 beyond $12,000 borrowed.
Bailey argues in Tuesday’s lawsuit that the 10-year period is problematic because of another federal program, Public Service Loan Forgiveness, or PSLF, which forgives student debt for those who have worked in public service for 10 years and made payments on their loans during that period.
“PSLF is so important for government agencies because, before the Final Rule, PSLF was comparatively much more generous than any other federal loan repayment program. That gave borrowers a sizeable incentive to work for public service employers,” the lawsuit says.
Bailey repeatedly refers to the 10-year cost of loan forgiveness citing both the Congressional Budget Office’s estimate of $276 billion and the Penn-Wharton Budget Model’s $475 billion prediction.
The lawsuit mentions a debt-relief plan announced Monday by President Joe Biden but does not appear to explicitly challenge it.
The SAVE Plan is a component of the latest plan, which also relies on the Higher Education Act.
Solicitor General Josh Divine, who signed Tuesday’s lawsuit on behalf of Bailey’s office, was part of a rulemaking committee that shapes the latest debt-relief plan announced Monday. He stepped down from the committee after his peers rejected his proposal to bring in business leaders as a constituency group.
“There’s essentially no program for small business owners, people who didn’t go to college, people who went to trade schools or went through alternative career processes,” Divine told the committee in December.
Bailey, who was appointed to his position by Gov. Mike Parson, is running for a full term in office this year.
This story from the Missouri Independent is published on KSDK.com under the Creative Commons license. The Missouri Independent is a nonpartisan, nonprofit news organization covering state government, politics and policy.
