Oct 25, 2022

Courts halt student debt forgiveness.

Courts halt student debt forgiveness.

Is Biden's plan in danger?

I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Today's read 12 minutes.

We're breaking down the lawsuits that threaten Biden's student loan plan. Plus, a reader question about the Republican party platform and some very important quick hits. 
Photo: Photo: Phineas Azcuy / Flickr
Photo: Phineas Azcuy / Flickr

An update...

Thank you all for the good luck wishes in the ultimate Frisbee championships over the weekend, and to those of you who tuned in and reached out with concern about my teammate. Unfortunately, my team lost in the semifinals. More importantly, one of my teammates suffered a serious head injury in a very scary collision. He is out of the hospital and recovering, but there is a long road ahead. I know we all respond differently to situations like these, but if you can send him your prayers, positive energy and healing vibes, it would be much appreciated.  

Quick hits.

  1. Rishi Sunak, the former finance minister, became Britain's new prime minister after Liz Truss's brief and chaotic tenure came to an end. Sunak, 42, becomes the youngest prime minister in over 200 years and the first person of color to hold the role. (The latest)
  2. Congressional Progressive Caucus Chair Pramila Jayapal (D-WA) is leading a group of House Democrats asking President Biden to negotiate with Russia to end the war in Ukraine. (The letter)
  3. Supreme Court Justice Clarence Thomas froze an order for Lindsey Graham to testify before a Georgia grand jury investigating the 2020 election. (The case)
  4. Former Trump adviser Steve Bannon was sentenced to four months in prison for criminal contempt of Congress. (The sentence)
  5. Two people were killed and seven others were injured when a gunman opened fire at a high school in St. Louis. (The shooting)
  6. BREAKING: In Russia, WNBA star Brittney Griner lost her appeal of her nine-year prison sentence this morning. (The appeal)

Our 'Quick Hits' section is created in partnership with Ground News, a website and app that rates the bias of news coverage and news outlets.

Today's topic.

The student loan forgiveness lawsuits. On Friday, a federal appeals court halted the immediate cancellation of student loans under President Biden's debt relief program. The ruling addressed one of several legal challenges to the president's executive action on student debt relief.

Reminder: President Biden signed an executive order to cancel up to $10,000 in federal student debt for borrowers earning as much as $125,000. The order also would allow borrowers who received Pell Grants to apply for another $10,000 of forgiveness. Around 40 million Americans with student debt would be expected to qualify for some debt cancellation. 53% of federal student debtors owe $20,000 or less, according to the Education Department. If executed, the plan would cost about $400 billion.

In August, we covered the arguments for and against student debt cancellation, and then we covered the legal arguments around the cancellation. One of the challenges for Republicans seeking to block the order was finding a plaintiff who had "standing," or could show that they had been harmed in some way by the order.

What happened: There are several lawsuits now in play. One of them involves six Republican-led states that are asking for injunctions against the debt relief program. Initially, District Judge Henry Autrey dismissed the states' lawsuit, saying they didn't have standing to stop the program. But on Friday, the U.S. Court of Appeals for the 8th Circuit granted an administrative stay while it considers the request from the states for an injunction.

Separately, U.S. Supreme Court Justice Amy Coney Barrett also denied a different request by the Wisconsin Institute for Law and Liberty to pause the program. And last month, a lawsuit filed by the Pacific Legal Foundation (PLF), a libertarian law firm, was also dismissed for lack of standing. The challenge from the six states is the first to win a stay against the program.

What it means: For now, it means the Biden administration cannot dispense any debt forgiveness. The court has said it will expedite a review of the case, and in the meantime has asked the Biden administration to hold off on beginning to discharge debt. About 22 million people have already applied for the program, and the administration was planning to start canceling debt as early as this week. Borrowers can still apply for relief and the Biden administration can continue to review those applications; it just can't begin forgiving debt yet.

The case: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina all say that the administration cannot take action on this large a scale without an act of Congress.  Together, they argue that the policy would impose economic harm on investment entities in the states that own student loan debt. Missouri, specifically, has a state agency called the Higher Education Loan Authority of the State of Missouri (MOHELA) that services student loans, including some that qualify for forgiveness in Biden's plan. Therefore, the state argues, it will suffer economic harm by the loans being forgiven, giving it standing to sue.

One issue in the case surrounds the Federal Family Education Loan (FFEL) program. When the program ended in 2010, its debt was divided up between the Education Department and several private companies. Those privately held loans are normally not candidates for forgiveness programs, but borrowers are allowed to consolidate them into a Federal Direct loan. Borrowers recognized they could consolidate the loans and qualify for federal debt relief, and consolidations spiked after Biden announced the relief plan. The states have argued that this poses an economic threat. The Biden administration responded by scaling back eligibility so FFEL borrowers trying to consolidate their debt in federal loans would not qualify. That decision will keep about 770,000 borrowers from qualifying for any forgiveness.

The MOHELA case, along with the challenges from the Pacific Legal Foundation and the Wisconsin Institute for Law and Liberty, have drawn a lot of commentary from the right and left. Today, we are going to review some reactions to the lawsuits from the right and the left and then my take.

What the right is saying.

  • The right argues that Missouri has a strong case for standing, and hopes that the lawsuit advances.
  • Many point out that states are likely to lose money because of the cancellation.
  • Others contend that if the "standing" issue is resolved favorably, the program is in real trouble.

The Wall Street Journal editorial board said the states will "have a strong case" on appeal.

"The half-a-trillion dollar question before the Eighth Circuit is whether the states have demonstrated a concrete and particular injury that gives them standing to sue. Federal judge Henry Edward Autrey, a George W. Bush appointee, ruled they did not, but the states’ arguments deserve more consideration than his 19-page opinion provides," the board said. "Missouri argues that the loan forgiveness will lose revenue for its student-loan servicer, Higher Education Loan Authority of the State of Missouri (Mohela). State lawmakers established Mohela in 1981 to provide financial aid to Missouri students. State law deems Mohela 'a public instrumentality' that performs 'an essential public function.'

"But Judge Autrey held that Missouri lacks standing since 'the legislature intended to create a self-sustaining and financially independent agency.' If the Biden loan write-off costs Mohela, the judge wrote, the state of Missouri wouldn’t be harmed," the board added. "That’s debatable. Lawmakers often establish public agencies that are nominally independent but exercise sovereign government power and enjoy implicit taxpayer backing. Public pension funds and the U.S. Postal Service are examples. Federal courts also sometimes grant states legal standing to vindicate their sovereign interests... Missouri plausibly argues that if Mohela loses revenue, its students will get less financial aid. The judge brushed aside this sovereign interest."

In Reason Magazine, Ilya Somin said the courts' dismissal was based on "dubious" reasoning.

"Standing is a genuine problem for efforts to challenge the loan forgiveness plan in court. But, like most other observers, I thought the state lawsuit could easily get over this hurdle because at least one of the plaintiff states — Missouri — has a state agency — the Higher Education Loan Authority of the State of Missouri (MOHELA) — that services student loans, including some that will be partially or fully forgiven by the Biden plan. The Biden loan forgiveness program will predictably reduce MOHELA's revenue from those loans, and even a small financial loss is enough to qualify for standing under Supreme Court precedent," Somin said. "Importantly, Judge Autrey doesn't deny that MOHELA suffers an injury from the student loan program. Rather, he concludes that the state of Missouri lacks standing to sue on MOHELA's behalf.

"This reasoning makes little sense. As Judge Autrey acknowledges, MOHELA is a state-controlled entity, part of the state Department of Education," Somin wrote. "Missouri law describes the agency as 'a public instrumentality and body corporate' and describes its powers as 'the performance of an essential public function.' The fact that its revenues and finances are separate from those of the rest of the state's operations does not make it any less an agency of the State of Missouri. If MOHELA's revenues suffer, the state necessarily suffers, as well, because the state ultimately owns MOHELA... even if [the U.S. Court of Appeals] does not [overturn the ruling], Missouri has an easy way to fix the problem: they can simply have MOHELA file a lawsuit in its own name, rather than having the State do so on its behalf."

In National Review, Andrew McCarthy explained why the lawsuit from the states is so important.

"In essence, standing is what claimants need to show in order to get their case heard in court," McCarthy said. "It is worth stressing that standing question, though preliminary, is being argued vigorously in litigation over Biden’s program because the program is blatantly lawless. If litigants get over the standing hurdle, Biden’s program is in deep trouble. Standing was undoubtedly a major factor in Justice Amy Coney Barrett’s peremptory rejection of another challenge to the Biden boondoggle – an emergency request by a group of Wisconsin taxpayers to block President Biden’s unconstitutional and fiscally reckless student-loan cancellation program... The Wisconsin claimants urged that Biden’s gambit would cause ‘a gargantuan increase in the national debt accomplished by a complete disregard for the limitations on the constitutional spending authority.’

"That is true, but it is not a basis for a lawsuit," McCarthy wrote. "To have standing, claimants have to demonstrate that they have some unique, concrete injury. It’s not enough to be a citizen angered — however justifiably — by governmental lawlessness. It is not the place of the judiciary in our system to address [or] oversee the political branches; courts may legitimately address only cognizable claims of individual harm, not general claims of societal harm. Consequently, Justice Barrett was right to give the petition the back of her hand, without need to refer the matter to the full court. The states, by contrast, have cognizable damage claims beyond simply recognizing that the student-loan cancellation gambit is dreadful policy."

What the left is saying.

  • Many on the left are concerned about the challenges, and praise the Biden administration for navigating them.
  • Some criticize Republicans for challenging a program that could help millions of people.
  • Others call out the lawsuits for being convoluted and poorly constructed.

In American Prospect, David Dayen noted that MOHELA's best argument for standing is still only a hypothetical one.

"The plaintiffs have made three standing arguments. First, some states own privately issued student debt, directly or indirectly, and if those loans are consolidated into direct loans that are then forgiven, they lose revenue," Dayen said. "Second, the Missouri Higher Education Loan Authority (MOHELA) services direct loans on behalf of the federal government, and it would lose revenue if the loans it services are discharged, as well as taking on costs from facilitating debt cancellation. And third, some states would lose tax revenue if loans are forgiven and, per the American Rescue Plan, those forgiveness actions are not taxable events, meaning they don’t show up in federal adjusted gross income, on which these states rely for tax revenues.

"The government changed its program by putting a deadline of September 29, the day the lawsuit was filed, for eligibility for debt relief from consolidation from private loans into direct loans," Dayen wrote. "That would seem to foreclose the first standing argument. The third one, involving lost tax revenue, isn’t even about the debt cancellation program itself but a provision of the American Rescue Plan, so it’s hard to see how that would bear on the program. But MOHELA is certainly a servicer of direct loans, and therefore cancellation would affect its revenues. And only one form of standing would be required in order to get the case into court. In response, the government stated that the state of Missouri hasn’t established it can sue over MOHELA’s injuries, pointing out that Missouri had to file a state public records request to even find out what injuries MOHELA would suffer."

In Slate, Mark Joseph Stern praised the Biden administration for navigating the first of several legal challenges to the program.

"Six red states led by Missouri sued using a convoluted theory that Biden’s plan will harm them financially," Stern said. "Some of these states have quasi-public loan servicers that hold debt from an old program that doesn’t qualify for relief. They worry that Biden’s plan will spur borrowers to consolidate their old loans into a new program that does qualify for relief. So the states’ servicers will have fewer loans to sell 'on the secondary markets' and thus generate less revenue.

"If your head is spinning, don’t worry: This theory is very silly. It rests on mere speculation that Biden’s plan might spur debt consolidation that might lower revenue for the handful of states that created loan servicers — but a 'speculative' injury does not establish standing," Stern wrote. "More lawsuits will arise. The Supreme Court’s conservative majority might eventually find an excuse to strike down the program! If that happens, Biden has other tools at his disposal to forgive billions in loans, including a more narrowly tailored approach to mass relief. The federal government holds this debt. And in the end, the federal government will decide what to do with it."

In The Washington Post, Paul Waldman called it an "upside-down class war."

"The most significant obstacle conservatives faced was finding a plaintiff with 'standing' to sue, since you have to show you were harmed in some way by the measure that you are asking the courts to nullify. Who exactly is harmed by forgiving people’s debt?" Waldman wrote. "The GOP has attacked the plan from multiple, sometimes contradictory directions. In one telling, people who need loan forgiveness are contemptible losers; Sen. Ted Cruz (R-Tex.) characterized the average recipient as ‘that slacker barista who wasted seven years in college studying completely useless things, now has loans and can’t get a job.’ Being a barista is, of course, a job, and if Cruz could last an entire shift at a busy Starbucks, it would be a shock.

"In another telling, the recipients of loan forgiveness are not contemptible losers but contemptible winners. They’re fancy-pants elitists getting money they don’t need, or as Senate Minority Leader Mitch McConnell (R-Ky.) called them, 'elites with higher salaries.'... And yet, you will probably not be surprised to learn that the billionaire Koch brothers have given millions of dollars to the Pacific Legal Foundation. It’s nothing if not an instrument of America’s actual financial elite, crusading on behalf of the values and goals of its well-heeled donors. The threat that elites face from student loan forgiveness isn’t immediate; it’s long-term. They might be taxed to pay for it, but, just as important, it reinforces the idea that government should be active and generous, which undermines the case for a limited government that taxes the wealthy as lightly as possible."

My take.

Reminder: "My take" is a section where I give myself space to share my own personal opinion. It is meant to be one perspective amid many others. If you have feedback, criticism, or compliments, you can reply to this email and write in. If you're a paying subscriber, you can also leave a comment.

  • The MOHELA challenge seems to have the best shot of stopping the forgiveness program from going into effect.
  • While their case for standing seems relatively straightforward, there are two significant complicating factors in the lawsuit.
  • If the standing hurdle is cleared, I don't think it’s unreasonable to suspect a court challenge could sink the program.

Back when we first covered the potential legal challenges to this program in August, I made a few broad points: 1) I thought the Biden administration was very obviously using the HEROES Act in a context that Congress didn't originally intend. 2) I thought the Biden administration had not defined program eligibility narrowly enough. 3) I imagined the plaintiff issue (finding someone with standing) would be a big problem for Republicans.

I think all three of those ideas have borne out.

One of the disadvantages for the Republican-led plaintiffs in this case is that the student debt forgiveness hasn't actually begun. That has given the Biden administration opportunities to amend their plan and course-correct in small ways to navigate any potential lawsuits. In simple terms, the Biden administration now has a very good idea of what the legal challenges will look like, and can adjust their plan accordingly.

But I think the program is still at pretty serious risk. Again: This is not a question of whether we should or should not be forgiving student debt (though I've written about that, too). It's about whether this program is legal and about whether it does any tangible harm to anyone.

MOHELA clearly seems to have the best argument. If you're a loan servicer who can't collect on loans because the debt has been canceled, it strikes me as a pretty direct relationship. Whether Missouri can clear the bar on MOHELA’s behalf or not seems questionable, but MOHELA could always sue on its own. And if MOHELA can clear the legal bar for standing, then it would just have to prove that the Biden administration was exceeding its authority by canceling the debt through executive action. I've already explained why I think that argument will hold up, too.

There are other complicating factors, though. For one, MOHELA's pursuit of this case could put them in their own legal trouble. As David Dayen noted, student loan services violate the law if they interfere with a borrower's right to loan forgiveness. The American Federation of Teachers (AFT) and the Student Borrower Protection Center (SBPC) agree, and further accuse MOHELA of understaffing its call centers so borrowers can't get information about cancellation. AFT and SBPC wrote a demand letter saying they would seek damages of up to $55 billion if MOHELA didn't ramp up staffing and back off the lawsuit.

The second complicating factor is that no harm has actually been done yet. Until the debt relief actually happens and the state can actually show that MOHELA is losing revenue or being harmed, it may have trouble winning its standing argument. That hurdle is by no means insurmountable — especially given that the consolidation is already happening — but the Biden administration's tweak to the eligibility and the lack of any tangible harm done already may be enough to stave off the lawsuit until the program gets off the ground.

Your questions, answered.

Q: Am I wrong that it seems the Right has no clear policy alternatives to Biden's or the Left's agenda? I see constant criticisms of the way things are going, but no solutions presented (see inflation). Republican midterm campaigns seem to be culturally oriented and as a moderate I would love to hear more about what they would do differently rather than just about what is going wrong.

— Logan, California

Tangle: In broad terms, yes, I think that is incorrect. While it is true they did not present a party platform for the 2020 presidential election, Republicans have very clear policy alternatives on energy and climate change, immigration, crime, and abortion, all of which are major issues in the midterms. Climate change: Limited government intervention and robust private sector investments. Energy: Deregulation domestically. Immigration: Border walls, and increased enforcement and deportations. Crime: More police funding, no cash bail reform, and fewer prisoners released before their sentences are complete. Abortion: At the state level, imposing restrictions. At the national level, some Republicans want abortion bans while others simply do not want to pass laws protecting abortion rights.

These are all very significant and major policy differences. So while I often see people on the left claim Republicans have "no policy alternatives," I don't think it is true at all. As with any minority party in the midterms, you gain a lot more politically by running on what the party in power is doing wrong than you do by proposing things you might do when in office.

That being said, I do think there are two areas where Republicans could use some tangible ideas. The first is health care. Infamously, President Trump promised “a better, cheaper” health care bill back in 2015, and Republicans have been calling for an end to the Affordable Care Act for longer still, but they have yet to provide their alternative.

The second is inflation. This one is trickier, because it is more about what they wouldn't do (more government spending) than what they would do. But there are Republicans who loudly opposed the second wave of Covid-19 stimulus and warned it would juice inflation. Energy policy is also an obvious inflation-related issue, but there too Republicans have struggled to explain exactly what their inflation plan would be.

All that being said: Yes, I think there are very clear policy alternatives from Republicans, even if there are some significant issues where Republicans have not proposed concrete policy alternatives.

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Under the radar.

The Biden administration is intensifying efforts to put the spotlight on alleged covert operations by the Chinese government in the U.S., according to Politico. On Monday, the Justice Department unveiled three criminal cases, including one in which Chinese operatives were accused of attempting to pay bribes for inside information about the prosecution of the Chinese telecommunications giant Huawei. In separate cases, seven Chinese citizens were charged with scheming to force a Chinese-born U.S. resident to return to China, and four Chinese nationals were charged with conspiring to act as illegal agents on behalf of China when they sought to obtain sensitive information about a U.S. academic institution. Just two of 13 people involved in the cases have been arrested; the others appear to be overseas. Politico has the story.


  • 22 million. The number of people who have already applied for student debt relief.
  • 14. The number of days until election day.
  • 8.2 million. The number of early votes that have already been cast.
  • 51-45. Democrat John Fetterman's current polling lead over Republican Mehmet Oz in the Pennsylvania Senate race, according to the latest numbers.
  • 50-49. Republican Ron Johnson's current polling lead over Democrat Mandela Barnes in the Wisconsin Senate race, according to the latest numbers.
  • 50,396. The number of people now subscribed to the Tangle newsletter, the first time we've eclipsed 50,000 subscribers.

Have a nice day.

Scott Legried was driving down a gravel road in Minnesota when a German Shepherd jumped in front of his car. Legried swerved to avoid the puppy, but drove off the road and into a cornfield, suffering a concussion, collapsed lung, broken shoulder blade, and seven broken ribs. Legried, a farmer, was hospitalized and couldn't drive his tractor for months. But when his community heard what had happened, they sprang into action: A dozen farmers from his small town and the surrounding areas showed up with combines, trucks and grain wagons to harvest his soybean crop for him. The Washington Post has the story.

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Isaac Saul
I'm a politics reporter who grew up in Bucks County, PA — one of the most politically divided counties in America. I'm trying to fix the way we consume political news.