For decades, lawmakers shaped policy to benefit for-profit companies, nonprofits and state-affiliated organizations that earned money from the federal student-loan system, sometimes to the detriment of borrowers. Now, threats to these organizations’ bottom line could derail the Biden administration’s debt-cancellation plans, according to a MarketWatch.com analysis. In their lawsuit asking the court to strike down the debt forgiveness plan, six Republican-led states are arguing that they’ll be harmed by the cancellation program — and therefore have the right to sue over it — in part because it will cut into the revenue of state-affiliated entities that earn money from owning old student loans and servicing new ones. Attorneys representing the states cite potential harm to more than one of these entities as well as other claims as reasons why they have standing or the right to bring a lawsuit over the debt-cancellation plan. More than anything, it’s the risk to the financial interests of the Higher Education Loan Authority of the State of Missouri (MOHELA) that appears to have convinced a panel of appellate court judges in the 8th circuit to grant the states’ request to temporarily block the Biden administration’s program while they hear the case. The suit is one of many filed by opponents of the loan forgiveness plan, including one that led a north Texas judge to declare it unconstitutional earlier this month. But since the states filed their suit in September, advocates and critics of the Biden administration’s debt relief plan have been watching it closely both because of the high-profile nature of the plaintiffs and because their claim for standing is arguably the strongest. The Biden Administration plans to ask the Supreme Court to restore the debt relief plan, according to a recent legal filing. Officials at MOHELA, which services student loans on behalf of the federal government, have said they weren’t involved in the states’ decision to file the lawsuit. Still, the litigation is the latest example of how the interests of these state-affiliated organizations and nonprofits that earn millions of dollars through their participation in the student loan system can impact policy surrounding it — and the fate of millions of borrowers.
