Alejandro Alvarez/Sipa USA via AP Images
Signs support President Joe Biden’s student debt cancellation plan outside the U.S. Supreme Court in Washington, February 28, 2023.
Internal documents from the company at the heart of the Supreme Court case on student debt cancellation reinforce that it did not file, did not solicit, and indeed had nothing to do with the case at all.
The documents are internal emails from the Missouri Higher Education Loan Authority (MOHELA), a student loan servicer that conducts day-to-day operations on federal student loans. Its role in the student debt case is central: The state of Missouri, one of the plaintiffs, is claiming that MOHELA will lose revenue as a result of debt cancellation, and therefore would be unable to repay money into a Missouri state fund that funds in-state schools.
That claim has been called into question. In Supreme Court oral arguments, it was revealed that MOHELA hasn’t made a contribution to that fund in 15 years; MOHELA has also said in its own financial documents that it doesn’t plan to make any payments in the future. Furthermore, an analysis from the Roosevelt Institute and the Debt Collective shows that MOHELA stands to gain revenue if debt cancellation goes forward, because it received additional servicing rights and its liability on certain accounts would be extinguished.
Nevertheless, the MOHELA situation has been the only successful standing argument that the coalition of six states suing the Biden administration over student debt cancellation has put forward. Standing is central to jurisprudence; a plaintiff has to show harm in order to make a case. The six states have come up empty in all federal courts on standing except with respect to the dubious notion of MOHELA losing revenue.
Meanwhile, last October, MOHELA admitted in a letter to Rep. Cori Bush (D-MO) that its executives “were not involved with the decision of the Missouri Attorney General’s Office to file for the preliminary injunction in federal court.” The Missouri attorney general had to obtain documents from MOHELA through state sunshine law requests in order to use them in the lawsuit. As I wrote last month, if this is successful, “the Supreme Court would be allowing the plaintiffs to win their case thanks to an unwilling conspirator.”
The internal documents from MOHELA reinforce this. They were obtained through those same state sunshine laws by the Student Borrower Protection Center.
MOHELA officials appear to have found out about the lawsuit on September 29, 2022, the day it was filed, from Scott Buchanan, the executive director of the Student Loan Servicing Alliance, the lead trade group for the loan servicing industry. One MOHELA employee, Richy (the last name is redacted), asks why a write-up of the lawsuit cites “a number of ongoing financial harms” at MOHELA. “Why do these states care about us?” Richy asks.
“I think MOHELA was opposed to this move, but couldn’t do anything about it,” replies Chris (last name also redacted), another MOHELA employee. “The MO state AG needed to claim that our borrowers were harmed for standing, so they’re making us look bad by filing this not only with MO on it, but especially bad because they filed it in MO.”
“Did we know in advance this was going to happen?” Richy asks. “Have complaints been made to the AG about us or is he making that up to give him cause for calling us out?”
“We knew the AG was looking into it,” says Chris. “It has nothing to do with us, except that they’re using the MO consumers harm as standing. No complaints about MOHELA that I’m aware of had anything to do with this.” Richy responds that he’s going to go talk to some “journalist friends” to set the record straight.
This all but confirms that MOHELA was being used, against its will, as a pretext for conservative politicians to nullify student debt relief.
In another email exchange on October 3, 2022, Chris grouses about an NPR write-up of the lawsuit, calling it a “poorly written article that makes it sound like MOHELA was responsible for filing the lawsuit that was in fact filed by the MO AG.”
On October 11, MOHELA employees react to news of a cease and desist letter sent their way, accusing them of “interfering with student loan borrowers’ right to cancellation,” a violation of a student borrower bill of rights in California. Chris says in the email, “Are we not going to give a statement? Silence in the face of this type of criticism just makes us look like we actually did file this lawsuit.”
The next day, another MOHELA employee, Eileen (last name redacted), explains the lawsuit to a colleague. “MOHELA is not party to this suit. However, the complaint refers to MOHELA and the supposed impact,” she writes.
Several other MOHELA employees were asking around about the lawsuit. “Just out of curiosity, is MOHELA a part of the lawsuit going on to prevent the loan forgiveness?” writes one employee, Nicholas (last name redacted). “Are we the bad guys?”
The Supreme Court case on student debt relief, Nebraska v. Biden, will be decided before the end of its term, likely sometime in the next two weeks. Standing will likely be a major point of contention, and the linchpin of the argument for standing has now been confirmed not only to be helped rather than harmed by cancellation, but also to be an unwilling participant in the case.
A footnote in an opinion issued last week in Haaland v. Brackeen, which upheld the Indian Child Welfare Act, offers some hope to proponents of debt cancellation. The ruling, written by Justice Amy Coney Barrett, rejects Texas’s attempt to assert “third-party standing on behalf of non-Indian families.” The footnote explains that Texas relied on case law allowing a state to represent individuals, but Barrett writes, that case “was not a suit against the Federal Government; moreover, it involved a ‘concrete injury’ to the State and ‘some hindrance to the third party’s ability to protect its own interests,’ neither of which is present here.” As University of Texas law professor Steve Vladeck wrote on Twitter, a similar dynamic may apply to Missouri and MOHELA.
Barrett raised the issue of standing in oral arguments of the student debt case; however, it’s unclear whether she would have a majority for that point of view, as none of the other conservatives on the Court raised the issue.
Regardless of the outcome, the government plans to resume student loan payments for tens of millions of borrowers in October, with interest beginning to accrue on September 1. Earlier this month, I wrote about how difficult it will be to restart payments without widespread errors and numerous defaults. The Consumer Financial Protection Bureau reinforced that in a report showing that around 8 percent of student loan borrowers are delinquent on other credit accounts, and that nearly 1 in 5 have risk factors that could lead to delinquency on their student loans when they resume.
Allowing the debt cancellation to go through would alleviate much of this foreseeable injury, in addition to the harm to the broader economy from burdening tens of millions of consumers with debt payments. Advocates have insisted that the administration has other options to cancel debt, even if the Supreme Court strikes this case down.
But that could be avoided if the Court simply decides to not allow MOHELA to be dragged into a case it manifestly wants no part of.
