US states opposing student loan forgiveness made false claims, files reveal | US student debt

Newly uncovered documents show that the Republican states fighting Joe Biden’s student loan forgiveness plan have made false claims that they will “suffer injuries”, or rather, be financially impacted by the scheme, a debt forgiveness campaign group has claimed.

The supreme court case that will decide the fate of Joe Biden’s student loan forgiveness plan, Nebraska v Biden, rests on one of the plaintiffs, Missouri’s state attorney general, who claims Mohela – as the higher education loan authority of the state of Missouri is known – will be financially affected by the plan for the worse.

The Student Debt Collective, an organization that fights financial exploitation and unjust debts, along with the liberal thinktank the Roosevelt Institute, submitted a Freedom of Information Act request to make public documents that refute Mohela’s claim it will suffer financial consequences as a result of the plan.

Internal emails containing company calculations reveal that even after the debt cancellation is enacted, Mohela would not lose revenue. In fact, the opposite would be true, the groups said. “After President Biden’s proposal is enacted, MOHELA’s direct loan revenue will actually be larger than any prior point in the company’s existence,” the activist groups wrote in a statement.

One internal company document, called the “Forgiveness Impact Summary”, outlines what would happen if the loan forgiveness plan were enacted.

Figures from August 2022 show that if $20,000 of student loans for Pell grant recipients and $10,000 of student loans for every other borrower were forgiven, Mohela would still earn over $96m in revenue from servicing direct loans, compared with $88.9m in revenue in 2022 – a 9% increase.

The Student Debt Collective and the Roosevelt Institute argue that Mohela’s revenue after student debt cancellation would actually be over $167m – an 88% increase. The reasons for the vastly different figures is due to using more recent data from Mohela from January 2023 and taking into account the millions of new loans the student loan servicer absorbed since 2022.

According to the group’s calculations, Mohela would thus not be financially injured from Biden’s plan as it has claimed.

Eleni Schirmer is a postdoctoral researcher at Concordia University’s Social Justice Centre, and an author of the study on Mohela. She called the journey to getting the documents unsealed “frustrating”.

“We’re not financial auditors or political experts. Why is it on our shoulders to be doing this task? This is a basic investigation of ‘how many accounts Mohela services and what will be the impact of cancellation on those accounts?’”

Delivering on his campaign promises, Biden announced the federal government’s plan to forgive up to $20,000 of student loans for qualifying borrowers in 2022. But even before the announcement, the move was met with a swift backlash from conservative lawmakers.

Many Republicans argued the plan would cause states, like Missouri, to lose revenue.

Six Republican-led states – Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina – then took legal action against the Biden administration to block the legislation, claiming the president did not have such broad authority to make a decision.

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The Biden administration argued it did under the Heroes Act, which gives the secretary of education authority to make changes to any provision of laws relating to student aid programs in the aftermath of the September 11 attacks.

The case moved up through smaller courts directly to the supreme court, which will now deliver the final decision.

The result of the legal fight between the federal government and Republican-led states has been 43 million student borrowers eagerly awaiting a decision from the nation’s highest court that will determine the financial burden they bear from the cost of their higher education.

Student loans were first paused by Donald Trump in March 2020, in light of the Covid-19 pandemic, and that has been extended at various points since, to the relief of many student loan borrowers.

Payments are expected to resume soon after the supreme court decision.

Mohela did not respond to the Guardian’s request for comment.

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