State Attorney General Anne Lopez joined 21 other attorneys general in filing an amicus brief in support of the Biden administration’s policies on student loan debt cancellation and the COVID-19 pandemic response.
Last August, the administration announced plans to grant $10,000 in debt relief to student loan borrowers who make less than $125,000 per year and $20,000 for those who got a Pell Grant, which is based on financial need.
Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina subsequently filed a lawsuit arguing that they would be adversely affected by the policy because the American Rescue Plan Act prohibits them from taxing loans that have been discharged for the last three years due to the pandemic. The plaintiffs claim the policy violates the separation of powers and that its establishment did not meet the requirements of the Administrative Procedure Act.
Two borrowers who did not meet the requirements for debt forgiveness filed a separate suit, also on the basis that they were unable to argue against the policy via the notice-and-comment process required by the Administrative Procedure Act.
The policy has been held up by court-ordered injunctions pending a ruling by the Supreme Court. Last month, the Supreme Court agreed to jointly hear both cases at its February sitting.
The coalition’s brief asserts that U.S. Secretary of Education Miguel Cadona acted appropriately within his authority under the HEROES Act to provide limited debt cancellation to prevent student loan borrowers from experiencing grave financial hardship as a result of the pandemic.
The attorneys general emphasized the ongoing financial harm the pandemic has caused student borrowers and the likelihood of a spike in pandemic-related defaults once the current three-year pause on student-loan repayment is lifted.
“Borrowers who default on their federal student loans face wide-ranging economic consequences,” the brief states. “Their credit is damaged, their wages are garnished, their tax refunds are offset, and they lose access to certain federal benefits. As a result, these borrowers have a harder time finding employment and obtaining housing, and they are more likely to require state assistance to pay for basic necessities such as food, clothing and medicine.”
The brief also argues that states have an interest in ensuring the well-being of their residents, explaining that state economies benefit when residents are protected from suffering preventable harms stemming from student loan defaults that could imperil their job prospects, housing security, and access to some federal benefits.
“Studies of the macroeconomic effects of student debt cancellation show that cancellation lifts GDP and decreases unemployment in a manner that improves state fiscal health,” the brief states. “Reductions in student debt facilitate homeownership and small business formation, and contribute to increased consumption growth. And student debt cancellation removes a financial burden that causes borrowers to postpone important life decisions, like getting married or starting a family. These outcomes both improve the lives of individual borrowers and contribute to robust state economies.”
The brief was led by Massachusetts Acting Attorney General Bessie Dewar. In addition to Lopez, the brief was joined by the attorneys general of California, Colorado, Connecticut, Delaware, the District of Columbia, Illinois, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington and Wisconsin.
Michael Tsai covers local and state politics for Spectrum News Hawaii.