in march 2006 about 100 people gathered at a lake ozark mo resort to discuss the sale of a student loan organization’s assets the board of the stateaffiliated higher education loan authority of missouri or mohela had already decided once a couple of months earlier to sell 24 billion worth of student loans to generate about 450 million for state coffers the idea originally pitched by thengovernor matt blunt and scaled down was to use the proceeds generated from the sale to fund blunt’s higher education priorities the notion was controversial given that mohela was founded by state lawmakers to ensure missourians could attend college affordably through lowcost loans and the organization’s assets theoretically were earmarked for that purpose mohela’s board had initially considered and approved the idea in private drawing scrutiny from missouri’s attorney general who said the process violated the state’s open meeting laws so now they were back to debate the idea in public some university presidents spoke in favor of the plan which would use the proceeds from the sale to pay for capital improvements at colleges boost the schools’ technology profile and other higher education initiatives but critics worried it would allow mohela’s assets to drift towards a use that was distant from the reason it was established by the missouri state legislature in the first place one of critics was faith sandler the executive director of the scholarship foundation of st louis “i understand mohela’s mission to be to provide and insure access to loans for higher education for missouri residents” she told the board after apologizing for not thoroughly writing down her remarks beforehand “no matter the buildings to be constructed nor businesses to be incubated by this initiative it will not serve mohela’s purpose not enough is known about the impact your decision will have on lowincome students and other future borrowers” now the yearsold arrangement surrounding mohela’s assets is part of what the supreme court will consider when deciding whether the biden administration’s mass student loan cancellation plan is legal the six republicanled states suing the biden administration have said that the arrangement that mohela and the state of missouri ultimately reached is enough to give missouri the right to sue over the policy two friend of the court briefs filed with the supreme court wednesday argue that the claim is essentially bogus – in part because mohela hasn’t fulfilled its obligation in years about a year after mohela’s board approved the sale plan for a second time the state’s legislature codified the arrangement – requiring mohela to pay 350 million over time towards the newly created lewis and clark discovery fund which would finance the capital improvements and other projects the six republicanled states suing over the debt cancelation plan have argued that missouri has the right to challenge the policy in court in part because mohela – which now services student loans for the federal government and could lose accounts if borrowers’ debts are discharged – still owes the state money as part of this deal “mohela and missouri are also financially linked” the state attorneys general wrote in court documents “mohela owes 1051 million to the state’s lcd fund” referring to the lewis and clark fund “the states rely on mohela’s legal obligation to contribute to the lcd fund” the states’ brief continues in ruling to temporarily halt the debt relief plan a panel of judges on the the eighth circuit court of appeals found the states’ argument sympathetic writing of the possible hit that the debt cancelation could cause to mohela’s servicing revenue “this unanticipated financial downturn will prevent or delay missouri from funding higher education at its public colleges and universities” but according to legal experts the link doesn’t give missouri standing – or the right to sue over something because you’ve been harmed by it – in part because mohela hasn’t made a payment towards its obligation since shortly after the state established the lewis and clark fund in 2007 as attorneys from the center for consumer law  economic justice at uc berkeley school of law detail in one of the briefs filed wednesday on behalf of a group of missouri consumer advocates mohela first stopped making payments in 2008 during the great recession the organization cited a provision in the law creating the lewis and clark fund that it could pause payments to the fund if they would threaten mohela’s economic viability in the years since missouri has deferred mohela’s requirement to pay multiple times including in 2017 when the state authorized an extension until 2024 the brief notes in addition mohela doesn’t consider its obligation to the state as a liability on its books according to the brief “for all intents and purposes the lewis and clark discovery fund is dead missouri hasn’t showed any interest in reviving that program” said david nahmias one of the authors of the brief and a staff attorney at the center to have standing to sue in federal court a party has to demonstrate that the issue in question would cause a concrete and “an actual or imminent injury” nahmias said “in missouri’s case its assertion that it could be harmed by implementation of the secretary’s debt cancellation plan is far too speculative because it relies on a chain reaction of events” he said “they haven’t made a payment on it in so long the state has shown no interest in moving forward with it” nahmias said of the lewis and clark fund if missouri did express an interest in reviving that obligation he added the states’ argument also relies on speculation that “mohela would go to the state and say we cannot comply with our obligation to pay to the fund because of any potential loan servicing revenue loss” that mohela hasn’t made a payment to the fund in more than a decade is a “crucial” piece of information that could undermine the states’ argument that a harm to mohela is a harm to the state of missouri said luke herrine an assistant professor of law at the university of alabama who signed on to a different friend of the court brief supporting the biden administration’s plan wednesday the connection between mohela and missouri is the “strongest argument” the states have for standing herrine said but it’s tenuous the states have argued that because missouri created mohela its harms are the state’s harms but that argument has weaknesses herrine said when the missouri state legislature created mohela in 1981 lawmakers were clear that its assets and debts would be separate from the state’s according to the brief coauthored by nahmias mohela can sue and be sued on its own a representative for mohela didn’t immediately respond to a request for comment but the organization said previously that they weren’t involved in the states’ decision to file the suit if the argument that mohela’s harms are the state’s harms because it was created by the state doesn’t hold up “this other claim has to be” that “because mohela was created to further the financial and educational interest of missouri financial harm to mohela is financial harm to the state of missouri” herrine said one of the ways the organization furthers those interests is through the lewis and clark fund but if “mohela hasn’t put money in it for over a decade then there’s no reason to think that this is actually going to affect whether there’s money in that fund or not” herrine said two law professors who say they believe the biden administration’s debt relief plan is unlawful echoed herrine and nahmias’s argument that mohela’s connection to missouri isn’t enough to give the state standing samuel l bray of notre dame law school and william baude of university of chicago law school wrote in a friend of the court brief in support of the department of justice wednesday that “the standing theories that have been thrown at the wall in these cases are wrong and many of them would have dangerous implications” a “quick reading of mohela’s latest financial statement” they wrote shows that the organization has received many extensions on its payments to the fund “so it is far from certain or even a substantial risk that loan forgiveness is going to be the reason mohela misses a payment” they wrote illustrates how borrowers’ debts pass from entity to entity whether the arrangement between missouri and mohela that created the lewis and clark fund is enough of a link to give missouri the right to sue over the policy will ultimately be decided by the supreme court but the story surrounding it illustrates the ways in which policymakers and stakeholders in the student loan program have used borrowers’ debts as a way to achieve their political and financial goals said louise seamster an assistant professor of sociology and african american studies at the university of iowa “it’s really unfortunate that this time federal student borrowers are being brought into that political drama and essentially their economic stability is hanging on it” she said adding that she’s been concerned for some time about how state governments public universities and stateaffiliated student loan organizations are invested in student debt continuing “this is a relatively unusual case and yet it also tells us a lot about how student debt kind of gets recycled and flipped and passed around from entity to entity” the arrangement that would ultimately become the lewis and clark fund first came about because missouri’s thengovernor floated the idea of selling all of mohela’s assets to fund the capital improvements and other higher education initiatives in response mohela officials hastily developed an alternative to the governor’s plan to sell half the organization’s assets to generate funding for the state and quietly approved it that process is what prompted missouri’s attorney general at the time to file a lawsuit against mohela and force the organization’s board to vote on the proposal again in public in exchange for contributing to the fund mohela received access to the state’s taxexempt bond authority allowing the organization access to cheap capital to make student loans at the time mohela was one of many stateaffiliated organizations that were part of the bankbased student loan program where the government would guarantee student loans made by private entities lawmakers got rid of that program in 2010 providing little incentive for mohela to continue making payments into the fund seamster said to sandler who protested the arrangement at the time it was never about furthering the educational interests of missourians she said recently “it was a fight amongst interests that were operating like private not public interests” sandler said of the battle over mohela’s assets “nowhere in this mix” were they discussing “what is our obligation to students what is our mission” she said when sandler went to the ozarks to testify about the proposed deal in 2006 she remembered feeling that “the people who are supposed to be benefitting are not even in the room” she said referring to missouri students sandler who has helped lowincome students access college affordably for more than 30 years through her work as the executive director of the scholarship foundation of st louis drafted an oped at the time drawing attention to the distance between the arrangement and mohela’s mission to provide missourians with affordable student loans “no matter the means chosen for sale of student loans the dollars are not a windfall” sandler wrote “they are a public trust fund generated by the hard work and sacrifice of students looting the student loan fund is not a morally defensible means to biotech development” reflecting on the fight now sandler says that at the time if you’d asked students how they wanted the proceeds of the sale of the loans they were paying towards to be used “i feel fairly certain it would be to address the front end issue” of college costs “and support the neediest students more fully” she said “not capital improvements on campuses” ‘at this higher level debt is much more abstract’ many of the projects that received funding through the initiative weren’t even priorities for the state’s public college and university leaders at the time according to a 2010 audit of the fund three projects that were recommended by the missouri department of higher education which is responsible for the goals and administrative duties of missouri’s public colleges didn’t get any money from the lewis and clark fund while 19 projects that were not recommended by the organization did when auditors contacted officials at schools where some of those projects were located “two officials stated they did not know why these projects were eventually selected by the general assembly” the auditors wrote referring to missouri’s state legislature once the missouri governor froze spending on the lewis and clark funded projects because mohela wasn’t making its payments the missouri department of higher education wasn’t “directly involved” in deciding what projects should be prioritized the auditors wrote now the money mohela still owes to the fund which was touted as a means to support education initiatives but which focused on capital improvements over student scholarships according to sandler paid for projects that weren’t priorities for the state’s higher education institutions according to the audit and which mohela hasn’t paid towards in years is being cited as a reason why missouri can sue to block the student debt cancelation plan for seamster the story highlights how a lack of state funding for public higher education has both made college more expensive for students pushed them towards debt to afford it and steered schools and states towards “strange deals” with lack of public oversight like mohela’s arrangement with missouri to fund schools’ coffers it also shows how the obligations of organizations benefiting from the student loan program are treated differently from those belonging to borrowers “the crux of it is that a debt that both the state and mohela have acknowledged is unlikely to be repaid is being used to try and force student borrowers in a much more precarious economic position to repay their debt” she said “at this higher level debt is much more abstract it’s all part of a game and political gamesmanship but at the end of that all the cost gets passed on to the borrower”