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AG Derek Schmidt challenges legality of Biden administration’s student loan cancellation program

Release Date: Sep 29, 2022

TOPEKA – (September 29, 2022) – Kansas Attorney General Derek Schmidt has filed a lawsuit in federal court challenging the Biden administration’s student loan cancellation program, asserting that the administration lacks legal authority to make unilateral decisions to forgive debt without congressional authorization.

“This political move by the Biden administration has everything to do with election-year politics but is not authorized by law,” Schmidt said. “I’m standing up to challenge the legality of this Biden maneuver that makes hardworking families bear the cost of repaying student loans that were voluntarily undertaken by college graduates in families earning up to a quarter-million dollars per year.”

Schmidt joined officials from five other states in seeking a temporary restraining order pausing the program. The administration has indicated it will start cancelling loan balances as early as next week. Just a few months ago, the U.S. Supreme Court warned federal agencies against “asserting highly consequential power beyond what Congress could reasonably be understood to have granted” by statute. The administration, after failing to achieve action on student loans through the legislative process, is resorting to using a federal law that applies in the context of military operations or national emergencies as its justification for taking this dramatic action. 

“In addition to being economically unwise and downright unfair, the Biden Administration’s Mass Debt Cancellation is yet another example in a long line of unlawful regulatory actions,” the states told the court. “No statute permits President Biden to unilaterally relieve millions of individuals from their obligation to pay loans they voluntarily assumed.”

The states argue the majority of the Mass Debt Cancellation will accrue to the debt borrowers in the top 60 percent of the income distribution. It is fundamentally unfair for those who can least afford it to provide through their tax dollars relief to the well-off who can afford to pay their own loans.

Schmidt said the law that the Biden administration relies on is known as the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act), passed to protect service members fighting in the War on Terror from student loan collections. It is inconceivable that when Congress passed the HEROES Act, it thought it was authorizing the president to unilaterally decree something like the Mass Debt Cancellation, which will result in around half a trillion dollars in losses to the federal treasury, which ultimately means losses to U.S. taxpayers.   

The states argue that the Mass Debt Cancellation is not remotely tailored to address the effects of the pandemic on federal student loan borrowers, as the Biden administration says is authorized by the HEROES Act. The cancellation instead disregards the act’s objectives and express requirements and distorts the act beyond recognition in the service of the administration’s political agenda on student loans. It is unlawful and arbitrary agency action, and it should be immediately set aside. 

No borrower will be disadvantaged by an immediate court order delaying the loan cancellation program because loan repayments and interest accruals have been paused since March 2020. 

A copy of the lawsuit is available at https://bit.ly/3BUwHaa.

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