[Supreme Court Strikes Down Student Loan Forgiveness In Case With Nonexistent Plaintiff] - The American Prospect

[Today, the Supreme Court] decided that a program based on a statute intended to modify student loan balances in the event of an emergency could not modify student loan balances in the event of the COVID-19 emergency. And they did it by claiming that a plaintiff was injured by this program, when that plaintiff did not petition the Court over its injury, had no involvement in the case, and would likely not be injured by the program.

[In] American law, at least in theory, you have to have standing to sue: A party would have to be harmed by 43 million people getting debt relief, and eliminating the debt relief would have to redress this harm.

The Roberts Court, with the chief justice writing for the majority, believes they found one [such party] in the Missouri Higher Education Loan Authority (MOHELA), a student loan servicer that stands to lose $44 million in servicing fees from debts that would be wholly canceled, according to the state of Missouri’s calculations. There’s one problem: MOHELA is not a plaintiff in the case. MOHELA in fact didn’t know about the case until hearing news reports, played no role in the case, opposed the case from being brought, and would not give the state of Missouri evidence for the case until required by state sunshine laws. We know all this from internal documents and public statements by MOHELA.

Even if MOHELA went ahead and sued, the contract they signed to accept federal student loans for servicing stipulates explicitly that the government has “sole discretion” to remove contracts from servicers, that the contractor cannot “object or protest,” and that the contractor “waives and releases all current or future claims” related to this. Perhaps this is why MOHELA did not sue in this case. Moreover, MOHELA stood to gain from debt cancellation on net, because it would get an estimated $61 million in fees to process forgiveness (more than Missouri said they would lose), and it would eliminate legal liability from botching Public Service Loan Forgiveness (PSLF) claims, and many of those loans would have been extinguished in debt cancellation.

Roberts dismisses MOHELA’s lack of involvement, and ignores its lack of injury. To him, a “harm to MOHELA is also a harm to Missouri.” He writes that it is a “public instrumentality” established by the state, with a board that has state officials and others appointed by state officials, which oversees MOHELA and can abolish it. Therefore, MOHELA didn’t have to get involved with the lawsuit, because it’s part of the state itself.

[Justice Elena Kagan rebuts this argument in her dissent, noting] that MOHELA has the power under state law to file suit, yet it was explicitly not involved in this case. MOHELA is also “financially independent from Missouri—as corporations typically are, the better to insulate their creators from financial loss,” Kagan writes. MOHELA’s assets are its alone, as are its debts. “So MOHELA’s revenue decline—the injury in fact claimed to justify this suit—is not in fact Missouri’s.”

Regardless, John Roberts and his colleagues, at odds with prior precedent (the Missouri Supreme Court in a nearly identical case ruled that a public instrumentality was, in fact, separate from the state), allowed the state to assert the rights of an unwilling third party.

Read the full story here

The American Prospect

Events: COVID-19 Pandemic 

Locations: Missouri 

Organizations: Supreme Court Missouri Higher Education Loan Authority (MOHELA) 

People: John Roberts Elena Kagan 

Tags: Student Loan Lawsuit Biden v. Nebraska 

Type: Headlines