- Student-loan company MOHELA played a central role in one of the cases seeking to block Biden’s student-debt relief.
- All justices dug into whether the state of Missouri has standing to claim an injury to MOHELA is an injury to itself.
- Some experts said the company’s involvement in the case could undermine plaintiffs’ standing to sue.
If you didn’t think a student-loan company in Missouri would play such a central role in whether President Joe Biden’s debt relief plan can move forward, think again.
On September 29, GOP leaders in Missouri, along with Arkansas, South Carolina, Iowa, Kansas, and Nebraska, filed a lawsuit to block Biden’s plan to cancel up to $20,000 in student debt for federal borrowers making under $125,000 a year. It became one of the two lawsuits that succeeding in pausing the implementation of Biden’s plan, and the Supreme Court heard oral arguments to the cases on Tuesday to assess whether the relief can move forward.
The states argued that Biden’s debt relief would hurt their states’ tax revenues, but that was an issue the Supreme Court justices barely questioned. They were most interested in student-loan company MOHELA’s role in the case, and whether the states had the standing to involve a separate entity in its own arguments.
Proving standing means showing that the plaintiff would be injured by the policy, that the injury can be directly traced back to the defendant, and that the relief they’re seeking would address those injuries. If the Supreme Court finds the case does not have standing, it is dismissed, and the other arguments against the relief, like executive overreach, cannot even be addressed.
“It would be hard to see how a win for the state would benefit MOHELA, or a win for MOHELA would benefit the state, if the assets are completely separate — you don’t get any money out of it,” conservative Supreme Court Justice Amy Coney Barrett told the states’ counsel.
“If MOHELA is an arm of the state, why didn’t you just strong-arm MOHELA and say, ‘You’ve gotta pursue this suit?'” Barrett asked.
The states’ counsel Jim Campbell said that Missouri has an “ultimate interest in the property of MOHELA.”
“MOHELA is a state-created and state-controlled public instrumentality that performs the essential public function of providing financial aid to Missouri students,” he said. “The Secretary’s program threatens to cut MOHELA’s operating revenue by 40 percent. That will directly undermine MOHELA’s ability to further its critical public purposes, and the state has standing to assert those harms.”
But the justices appeared skeptical of the claim that the state would be directly harmed by the company’s revenue loss. Solicitor General Elizabeth Prelogar reiterated that MOHELA is separate from the state can can sue, and be sued, on its own.
David Nahmias, a staff attorney with the UC Berkeley Center, told Insider following the arguments that he was “pleased to see that standing figured prominently in the oral arguments.”
“Multiple justices across the ideological spectrum really honed in on the fundamental question that we have been highlighting the whole time, which is: does Missouri have standing to challenge debt relief through its relationship to MOHELA?” Nahmias said.
So, as Nahmias said, MOHELA’s role in the case really threw into question the plaintiffs’ standing — and the skeptical line of questioning from the justices could be a good sign.
“Clearly, the issue here was MOHELA,” Nahmias said. “And their argument was really undercut. Had MOHELA been the one bringing up this lawsuit, it would be a different story.”
Justices dig into MOHELA owing debt of its own
MOHELA as a separate entity from the state of Missouri is just one of the issues the justices drilled into. As Insider previously reported, the company actually has some debt of its own — in 2007, Missouri established the Lewis and Clark Discovery Fund, which was a program to fund various higher education initiatives.
MOHELA was expected to put $350 million into the fund over a six-year period, but after the 2008 financial crisis, the company received government approval to delay its payments, with the most recent extension going until 2024. While the states’ lawyer argued that MOHELA still has an obligation to make payments to the fund, which facilitates programs that benefit the state, Justice Ketanji Brown Jackson challenged that idea, given the fund has been dormant for years.
“So we’re talking about a fund that hasn’t been contributed into because the state has waived the obligation to do so for at least a temporary period of time, and then, even if the funds were to go into this particular fund, you don’t have a set of plans that you are planning to pursue with them?” Jackson said.
Abby Shafroth, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, told Insider that “claiming that the plan threatens Missouri because it makes it less likely that payments will be made into the Lewis and Clark Discovery Fund became sort of laughable at that point. It wasn’t going to happen regardless.”
While the states’ argued that the fund is another entity that could be harmed by Biden’s debt relief, the fact MOHELA hasn’t paid into it in over a decade is yet another factor that could undermine their case.
“It is way too speculative to believe that Missouri, come 2024, is going to first, need to collect on the debt to the Lewis and Clark fund when that fund is essentially dead,” Nahmias said. “And two, that President Biden’s debt relief plan would impact MOHELA such that MOHELA could not even start paying back its debts to the Lewis and Clark Fund.”
MOHELA’s role will be “the core issue”
As expected, the conservative and liberal justices split on some issues concerning student-debt relief during their questioning. For example, conservative Chief Justice John Roberts and Justice Neil Gorsuch took on the issue of fairness of student-loan forgiveness, which has also been a common theme among Republican lawmakers who opposed the relief.
Additionally, Roberts drilled into whether Biden’s plan was an overreach of executive authority by using the HEROES Act of 2003 to cancel a large scale of student debt without the approval of Congress.
“We take very seriously the idea of separation of powers and that power should be divided to prevent its abuse,” Roberts said. “Given the posture of the case, and given our historic concern about separation of powers, you would recognize at least that this is a case that presents extraordinarily serious, important issues about the role of Congress and about the role that we should exercise in scrutinizing that?”
But all justices took on the involvement of MOHELA, and whether the states have standing to claim that injury to the company is an injury to Missouri.
“I think that’s going to be the core issue,” Shafroth said.
“The justices were really, really targeted on the question of whether Missouri can claim standing on the basis of asserted injuries to MOHELA, loss of revenue to MOHELA,” Shafroth continued. That seemed to be the whole ballgame. And there was a lot of skepticism about that.”