Loan company distances itself from GOP-led states student debt lawsuit

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A student loan officer named in a lawsuit that temporarily blocked President Biden’s debt forgiveness plan is distancing himself from one of the claims raised by six Republican-led states challenging the program.

The states – Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina – say the president exceeded his authority in creating the pardon plan and that the move threatened the revenues of state entities that benefit from federal student loans, including including the Missouri Higher Education Lending Authority. The quasi-state entity commonly known as MOHELA is not a named party to the lawsuit, but nonetheless has drawn the ire of advocacy groups and Rep. Cori Bush (D-Mo.), who challenged question his perceived involvement.

On Tuesday, Justice Department attorneys alerted the United States Court of Appeals for the 8th Circuit which weighs an injunction against the pardon plan to a letter MOHELA sent to Bush last week stating that she had no role in Missouri Attorney General Eric Schmitt’s (R) decision to prosecute.

“The only communications between MOHELA and [the Missouri attorney general’s office] with respect to student debt relief, is that the Bureau recently filed a series of Solar Law Requests on MOHELA requesting copies of documents relating to MOHELA’s Federal Loan Service Agreement,” wrote the society in his letter to Bush.

The lawsuit filed by Schmitt and the leaders of the other five states said MOHELA, which holds and manages debt from the former federal Family Education Loan program, would be deprived of interest payments if borrowers bundled out of FFEL to take advantage of Biden. forgiveness to plan. He said the company, which funds state scholarships, would also lose revenue from servicing direct loans — those made and held by the federal government — that are wiped out.

Bush had asked MOHELA if the company supported efforts to block Biden’s plan to preserve his profits. In response, MOHELA said he was “faithfully performing his obligations under his Federal Loan Service Agreement.”

The company said it was “a public instrument of the state. As a government entity, it has no shareholders and does not exist to make a profit. All available funds beyond operating needs and reasonable reserves are dedicated by MOHELA for student financial aid.

In their case, the states argued that Missouri had the right to sue on MOHELA’s behalf because it “performs” an essential task. public and “its board is made up of public officials and governor appointees.”

U.S. District Judge Henry E. Autrey, who dismissed the States case for lack of standing, questioned this premise. Autrey said that while the governor appoints five members of the corporation’s board of directors, its revenues and liabilities are independent of the state.

The States appealed, sending it to the 8th Circuit. The court last month issued an administrative stay temporarily barring the Department of Education from paying any debt under the new rebate scheme.

So far, MOHELA has remained silent on the States lawsuit. The company did not respond to requests for additional comment on Wednesday.

MOHELA is the primary service provider for borrowers seeking loan forgiveness from the Civil Service, a federal program for teachers, firefighters and other public servants. The company handles about $59 billion in direct federal loans as well as loans from the former FFEL program, according to court documents.

Following the states lawsuit, the American Federation of Teachers and the nonprofit Student Loan Protection Center sent MOHELA a cease and desist letter last month. The group accused the company of violating California’s Student Borrowers Bill of Rights, which prohibits student loan officers from interfering with borrowers’ rights to loan forgiveness. The Student Loan Protection Center said it was prepared to take legal action if the company did not drop the lawsuit.

On Wednesday, SBPC Executive Director Mike Pierce said, “It appears these states have just been caught misleading a federal appeals court in a ruthless effort to score political points against the president. . It is the clearest sign yet that the right-wing state challenge to student debt relief has no legal basis and will ultimately prove unsuccessful.

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