we’re still in the early stages of legal challenges to president joe biden’s plan to cancel student debt for a wide swath of borrowers but the threat of litigation is likely already limiting some borrowers’ ability to receive relief the white house’s debt forgiveness plan faced its first major legal challenge thursday as six republicanled states filed a lawsuit asking a federal court to block the debt relief plan on the same day the department of education changed the eligibility requirements for the onetime forgiveness potentially cutting hundreds of thousands of borrowers out of the initiative but possibly mitigating the plan’s exposure to litigation biden announced in august that his administration would cancel up to 10000 in student debt for borrowers earning up to 125000 and 20000 in student loans for borrowers who used pell grants to attend college almost immediately opponents of the plan began strategizing legal challenges the suit filed thursday by nebraska missouri arkansas iowa kansas and south carolina argues that the biden administration doesn’t have the legal authority to cancel student debt and that the states will be harmed if officials are able to move forward with discharging the loans it’s one of multiple filed in a week over the debt relief plan including a separate suit filed by arizona’s attorney general  “this is a much more credible lawsuit than anything we’ve seen so far” luke herrine an assistant professor of law at the university of alabama said of the suit filed by the coalition of six states nonetheless “i still think they have all kinds of issues” he added the major hurdle the states or any challenger has to overcome to keep the lawsuit moving forward is establishing standing or the right to sue by proving studentloan cancellation will cause the parties harm the state ags offered multiple reasons why their participation in the lawsuit is justified but perhaps the most relevant claims to standing are related to the ways that entities linked to state governments which both service and hold federal student loans could be harmed by the debt relief some of these concerns are vestiges of the bankbased loan program when students borrowed from lenders to attend college and the government guaranteed that money in 2010 the government stopped making new loans under this system known as the federal family education loan program and instead only made loans directly to students going forward before that during the financial crisis the government bought up some ffel loans in an effort to help capitalize lenders and keep student loan money flowing but the feds didn’t buy all of those loans the result is that now there are three different types of federal student loan debt loans made directly by the government to students or direct loans loans originally made by other lenders and backed by the government but now owned by the feds and loans from the ffel program still owned by other lenders the last category of debt is known as commerciallyheld ffel loans borrowers with ffel loans have historically been blocked from many federal student loan benefits including the payment pause but up until thursday the department of education had said borrowers with commerciallyheld ffel loans could access the broadbased debt cancellation if they consolidated their loans into ones held by the department of education much of the complaint filed thursday by the state attorneys general is focused around alleged harm that borrowers’ decision to consolidate could cause to a staterelated entity the missouri higher education loan authority or mohela the attorneys general filed the suit in federal court in missouri they claim that allowing borrowers to consolidate the loans owned by mohela “harms the entity by depriving it of the ongoing interest payments that those loans generate” the loan holders get paid off when borrowers consolidate but “they incur what’s called prepayment risk” herrine said “they’re expecting a stream of payments over time and they can borrow against that stream and the timing of payments matters” but the argument that mohela would be hurt by borrowers’ decision to consolidate their mohelaowned loans into ones that qualify for debt relief no longer seems plausible herrine said that’s because the department of education changed the eligibility rules for the onetime debt cancellation thursday going forward borrowers with commerciallyheld ffel loans like those owned by mohela won’t be able to consolidate their loans to access the relief getting rid of that option which will impact an estimated 770000 borrowers will allow the biden administration to “provide relief to as many eligible borrowers as quickly and easily as possible” while still exploring “additional legallyavailable” routes to providing borrowers with commerciallyheld ffel loans relief a department of education spokesperson said that decision “is possibly an effort to eliminate certain types of harm that in turn could be the basis for a legal challenge” said david rubenstein a professor at washburn university school of law but it likely won’t eliminate all of the alleged harm rubenstein said for the purposes of standing the harm doesn’t have to be large rubenstein said instead what matters is “actual or imminent harm not the size of the alleged harm” indeed herrine said he believes the most plausible of the legal arguments the attorneys general have laid out to establish standing is the claim that as a servicer in the direct loan program mohela will incur costs to comply with the debt relief “there i think it’s not an open and shut case” he said if a plaintiff is able to establish standing and the case begins moving through the courts that could pose a threat to the debt cancellation program overall “that’s the reason that the department of education is depriving all of these borrowers of relief” herrine said of the decision to eliminate the consolidation option “it’s trying to preserve the cancellation for the other borrowers their chances are better on the standing question than the merits question” when officials announced the debt relief plan they released two legal memos arguing that the heroes act gives the secretary of education the authority for broadbased debt cancellation the law signed in 2003 allows the secretary to provide debt relief to borrowers affected by a natural disaster or national emergency and to ensure they’re not put in a worse position financially by that event when the trump administration first started the covidera pause on student loan interest interest and collections officials invoked the heroes act authority to do so still the lawsuit filed thursday argues that the department is using an overly broad interpretation of the heroes act to legally justify the plan “it is inconceivable when it passed the heroes actthat congress thought it was authorizing anything like the administration’s acrosstheboard debt cancellation” the attorneys general wrote in the complaint influential courts are likely to be sympathetic to that argument because they’ve indicated they’re skeptical of providing executive agencies with broad authority herrine said that view could mean that if any legal challenge to debt relief is able to establish standing the program would be knocked down herrine said “the people who determine that question are ideologically opposed to it” he said in their suit the attorneys general rely on at least two legal theories to argue that the biden administration’s interpretation of its authority is overly broad the first is related to the recent supreme court decision in west virginia vs epa which the complaint cites –in which the court found that when agencies take action with significant political or economic implications they’re overreaching unless it’s obvious that congress intended for the executive branch to have that authority that threshold is known as the major questions doctrine if the court determines that at least one plaintiff has standing then the major questions doctrine “will likely take center stage in the litigation and perhaps its resolution” rubenstein said the attorneys general also argue that the biden administration’s decision is “arbitrary and capricious” or that the reasons officials are pursuing the debt relief aren’t related to their legal authority in the heroes act but are instead political and pretextual rubenstein said the government’s lawyers would still have to prove that their reasons for pursuing the cancellation are valid even if a court decides that debt relief isn’t a major question and therefore the biden administration has the authority to undertake it he said ‘borrowers could get stuck in a holding pattern’ but before the court rules formally on the key legal questions the litigation could play a role in delaying the debt relief the states are seeking to block the roll out of the administration’s plan while the court decides on the case that would require something called injunctive relief and in order for a judge to grant it they would have to find that there’s at least a likelihood the plaintiffs could win the case to pause the debt cancellation process the court would also have to determine that it would cause “irreparable harm” to the states that could be a challenging hurdle for them to overcome given that if the states ultimately win the lawsuit they could be compensated financially so the harm likely wouldn’t be irreparable both herrine and rubenstein said still it’s become more common and controversial – in recent years for lower federal court judges to enact a nationwide injunction in cases like these rubenstein said “a single judge can have that much power over something that is as significant as affecting millions of people across the country” he said in the past that kind of action would be extraordinary and instead lower court judges might have typically limited the injunction to the parties in the case for example the six states that filed this lawsuit rubenstein said now “it’s become much more common in highprofile cases” for lower courts to issue nationwide injunctions and tee up “appellate level review not of the merits” but of the geographic scope of the injunction instead if that happens or if the case continues to wind through the legal system in other avenues borrowers seeking relief could be left in limbo said david bergeron a former department of education official who has supported debt cancellation but preferred it be done through congress “hopefully it’s resolved quickly hopefully it’s resolved to the benefit of the borrowers and hopefully at that point the people who filed the lawsuit will not decide to go ahead and appeal it and drag it out even longer” he said “my fear all along has been that borrowers could get stuck in a holding pattern for an extended period of time if there’s litigation and the litigation results in appeals” the threat of litigation and the changes to the requirements to deal with that threat also increases the risk of “operational failures” said scott buchanan the executive director of the student loan servicing alliance which represents student loan servicers “it creates uncertainty” he said “we’re perhaps planning for an outcome that won’t occur” still he said servicers will continue getting ready to deliver debt relief “servicers work for the federal government” he added “that is our client and that is our boss and we do what they tell us to do until a judge intervenes and tells us not to” servicers say they will be taking those steps even as the interests of one of their own is implicated in the state attorneys general suit though mohela isn’t a plaintiff in the case the alleged harm the debt relief would cause to the organization is at the suit’s core in a statement abdullah hasan a white house spokesperson noted the role student loan organizations’ bottom line play in the case “republican officials from these states are siding with special interests and fighting to stop relief for borrowers buried under mountains of debt” he said “the president and his administration are lawfully giving working and middle class families breathing room as they recover from the pandemic and prepare to resume loan payments in january” shortly after the biden administration announced the debt relief plan buchanan said it was unlikely that servicers would sue to block it “we’ve been focused on working with the department to try to figure out a way to navigate providing this loan forgiveness directly to borrowers” he said nonetheless “it’s factually the case that servicers and holders of these loans are being harmed financially” he added “if the ag makes that assertion they ain’t wrong” though the suit largely centers around the threat the debt relief poses to student loan organizations the rhetoric surrounding it has also been political to arkansas residents expecting to receive debt relief leslie rutledge the republican attorney general had a message “you took out that loan with the promise that you would pay it back” she said during a press conference thursday “do what i did and pay that loan back don’t put your loan on the backs of someone else who didn’t benefit from a college degree like you did” tom miller a democrat and the iowa attorney general didn’t sign onto the suit though the state’s republican governor joined on its behalf in his decadeslong career as iowa’s top law enforcement official miller has focused on student loanrelated issues including forprofit college enforcement “the governor has a statutory right to join these lawsuits and our office has the responsibility to assist her in doing so” miller said in a statement “had she not made this request our office would not have joined this lawsuit in any way as a policy matter i believe student loan forgiveness will provide much needed relief to thousands of iowans who have felt the enormous crush of student debt”