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Iowa joins five other states in suing the Biden administration to stop student debt cancellation

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Iowa joins five other states in suing the Biden administration to stop student debt cancellation

Sep 29, 2022 | 4:19 pm ET
By Aaron Sanderford
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Iowa joins five other states in suing the Biden administration to stop student debt cancellation
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Gov. Kim Reynolds has joined a lawsuit with five other states challenging the Biden administration's student loan debt forgiveness initiative. (Photo by Catherine Lane/Getty Images)

College borrowers banking on President Joe Biden’s plan to forgive up to $20,000 in student loan debt hit a potential snag Thursday, when Iowa Gov. Kim Reynolds and Republican attorneys general in five other states filed a lawsuit challenging the Department of Education’s authority to do so.

Theirs is the second major lawsuit filed by conservatives trying to stop the student loan forgiveness plan. The first came Tuesday, from a lawyer in Indiana who argues he would be forced to pay state taxes on student loan forgiveness he didn’t seek. A judge dismissed his lawsuit Thursday afternoon, however, saying he lacked standing.

“A significant majority of Americans have already paid off their student loans or chose not to pursue a higher education degree at all,” Reynolds said in a news release. “By forcing them to pay for other people’s loans – regardless of income – President Biden’s mass debt cancellation punishes these Americans and belittles the path they chose. This expensive, unlawful plan is an insult to working people and must be stopped.” 

The lawsuit was filed by the Republican attorneys general of Nebraska, Kansas, Missouri, Arkansas and South Carolina and Reynolds’ general counsel. Iowa Attorney General Tom Miller, a Democrat, has not signed on to the case.

The lawsuit argues Congress never approved massive student loan cancellation. It asserts that the Biden administration and the U.S. Education Department aim to misuse emergency authority.

“Until now,” the lawsuit argues, “no one thought that such a power lurked within the HEROES Act, or any other existing federal law.”

The lawsuit argues the administration improperly interpreted a 2003 federal law passed to help military members and people responding to national emergencies dislodge student debt more easily.

The Justice Department argued in an August memo that the Higher Education Relief Opportunities for Students Act of 2003 allows the department to approve broader debt forgiveness during national emergencies, including the COVID-19 pandemic.

The lawsuit filed Thursday argues that the record does not reflect this reading of the law. Even if the administration proves right, the states argue that applicants should have to detail their pandemic-related losses and not have their debts forgiven automatically.

Under the administration’s program, Pell Grant recipients could receive up to $20,000 in debt relief, and other borrowers could get up to $10,000. Over 40 million borrowers nationally were estimated to be eligible for the plan.

In Iowa, an estimated 408,700 students could qualify for the debt relief, including 248,900 Pell Grant recipients, according to data from the White House.

The program requires most people seeking student debt relief to apply. The Education Department sent an email Thursday saying the first applications will go out in October. But 8 million Americans could receive relief automatically, the Washington Post has reported.

The six states are seeking an immediate injunction pausing student debt relief and have asked the U.S. federal court in the Eastern District of Missouri to clarify whether the administration lacks the legal authority to forgive the debt.

They argue potential harm to state tax revenues, student loan processors and state investment boards that handle public pensions. A University of Pennsylvania study estimated the program would cost federal taxpayers up to $519 billion over 10 years.

The lawsuit pointed to earlier statements from Biden and House Speaker Nancy Pelosi arguing for the need to pass a law to forgive student debt. National supporters of the president’s plan have said Biden’s approach is legally sound.

But legal observers have noted efforts by the U.S. Supreme Court to rein in regulatory agencies such as the Environmental Protection Agency from acting beyond their statutory authority and have said it’s possible the court might do the same to the Education Department.

This story was originally published by the Nebraska Examiner, which is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Nebraska Examiner maintains editorial independence. Contact Editor Cate Folsom for questions: [email protected]. Follow Nebraska Examiner on Facebook and Twitter.