Major student loan company undermines GOP lawsuit ending debt relief

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  • Six GOP-led states said in a lawsuit that Biden’s student debt relief would hurt loan company MOHELA.
  • In response to their appeal, the 8th Circuit temporarily suspended the relief.
  • But MOHELA recently said he was not involved in the lawsuit, undermining the GOP argument.

A conservative group may have succeeded in temporarily suspending President Joe Biden’s student loan forgiveness, but new information could call into question the ability of his defense to hold up in court.

On October 21, the 8th Circuit Court of Appeals placed a temporary stay over Biden’s student loan forgiveness, in response to a Missouri lawsuit filed by six Republican-led states that argued debt relief would hurt their state’s tax revenue, as well as those of the MOHELA student loan company based in Missouri.

Prior to the stay, lawmakers and attorneys raised concerns about MOHELA’s potential involvement in the lawsuit, prompting Missouri Representative Cori Bush to send a letter to the company asking it to clarify its position in the legal challenges.

“It is unconscionable that your company – as one of the largest student loan companies in the world – is involved in overtly political efforts to deprive millions of people of their right to student debt relief” , Bush said. wrote in his letter of October 18.

On October 28, the Ministry of Justice informed the court that MOHELA replied to Bush and undermined a basic argument in the GOP-led case.

“MOHELA executives were not involved in the Missouri Attorney General’s Office’s decision to seek the preliminary injunction in federal court on September 29, 2022,” the company wrote in its response.

In response to Bush’s question about whether the company supports blocking debt relief for millions of Americans, MOHELA said it was “faithfully fulfilling its obligations under its Federal Loan Service Agreement As mentioned above, MOHELA is a public instrument of the state. As a government entity, it has no shareholders and does not exist to make a profit. All funds available beyond need reasonable operating expenses and reserves are dedicated by MOHELA for student financial assistance.

While GOP states have used MOHELA as the primary reason debt relief should be blocked, even Republican-appointed Judge Henry Edward Autrey dismissed the lawsuit on October 21, in part because of their dispute over the financial losses that MOHELA would suffer.

“Missouri has failed in its obligation to prove that it can rely on the harms allegedly suffered by MOHELA. MOHELA, not the state, is legally liable for judgments against it,” said the opinion of Autrey, adding that “MOHELA can sue and be sued in its own name and retains its financial independence from the State.

Even with this new information, it’s unclear when the 8th Circuit will make a decision on whether debt relief can go ahead. In the meantime, borrowers can keep applying for loan forgiveness through the online form at studentaid.gov, and although the Department of Education can review applications, it cannot actually discharge any student loans.

“MOHELA has cut the thread of this frivolous lawsuit,” Braxton Brewington, spokesperson for advocacy group The Debt Collective, said in a statement. a single penny of student debt they promised to cancel so working-class communities can get the financial help they desperately need.”

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