The Volokh Conspiracy
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New Report on State Standing in Student Loan Case Comes Up A Few Dollars Short
A new report purporting to show that Missouri's arguments for standing in Nebraska v. Biden are based on a lie fails to deliver.
Biden v. Nebraska, the legal challenge to the Biden Administration's student loan forgiveness program, is likely to be decided on standing. If the justices reach the merits, there is little question they will conclude that Congress did not authorize this sort of wholesale loan forgiveness by executive branch decree. But it is not clear that the justices will reach the merits, as it is not clear the plaintiffs have standing.
This week, the Roosevelt Institute and the Debt Collective issued a new report purporting to challenge the factual basis for state standing in Nebraska v. Biden. Specifically, the report purported to show that Missouri's argument that it has standing because student loan forgiveness will cause MOHELA—a student loan servicer created by Missouri—"to lose financial revenue, thereby harming the state" is "fundamentally false."
Progressive commentators rushed to proclaim that the report blew a hole in the arguments for state standing to challenge student loan forgiveness. Tori Otten of The New Republic proclaimed that the report shows "the main argument at the heart of the lawsuit is utterly false." University of Texas law professor Steve Vladeck tweeted that the study revealed "MOHELA won't be injured by the program at all" (emphasis in original).
The entire (untested) theory of standing in the red state challenge to President Biden's student loan debt relief program is based on a claimed injury to MOHELA. Even if that would be enough (and it shouldn't be), it turns out that MOHELA won't be injured by the program *at all.* https://t.co/ZNmTV1jBex
— Steve Vladeck (@steve_vladeck) May 2, 2023
Yet if one reads the study, one sees that it shows no such thing. To the contrary, it demonstrates quite conclusively that the Biden Administration's student loan forgiveness plan will result in MOHELA receiving millions of dollars less in revenue than it would have otherwise. Whether or not harms to MOHELA should be considered harms to Missouri, there is no way to read the report as showing that MOHELA "won't be injured at all" by student loan forgiveness.
The report's key claims is that "After President Biden's proposal is enacted, MOHELA's direct loan revenue will actually be larger than at any prior point in the company's existence, doubling from the previous year." This is a carefully worded claim, phrased in terms of sequence, rather than causality. This is no accident, for while the report documents that MOHELA's revenues have increased in recent years (due to factors that may relate to other debt-relief initiatives but have nothing to do with the loan forgiveness plan at issue in the case), it also shows conclusively that MOHELA will lose millions of dollars if student loan forgiveness is upheld because MOHELA receives significantly more in servicing fees than from the one-time fees associated with loan termination.
As shown in the report's Appendix 3, MOHELA projects to lose over $5 million per month in service fee revenues from loan forgiveness—an approximately 40 percent decline in such revenue. This is not offset by termination fees. As the report also notes, MOHELA gets $24-$35 per year per loan in service fees (based on a $2 or $2.90 per month fee), as compared to a one-time $11.49 loan discharge fee. Forgiving student loans will cause MOHELA's revenue to be lower than it would be if loans are not forgiven.
Despite these facts, the authors still try to claim that it is false to say "MOHELA will lose money" from loan cancellation. This is silliness. As the facts presented in the report amply demonstrate, student loan forgiveness will cause MOHELA's revenues to be substantially lower than they would otherwise be. The authors of the report are essentially trying to argue that because MOHELA revenues are higher than they used to be, it does not matter that, without loan cancellation, they would be higher still. This is not only nonsensical, it also fundamentally misunderstands the nature of the relevant legal inquiry.
The most one could make of the report's findings is a claim that, because MOHELA revenues are up, significant financial losses to MOHELA will not result in financial harm to Missouri. Whether this argument works, however, depends on how one conceives of the Missouri-MOHELA relationship and Missouri's ability to sue over harms to MOHELA.
The states' brief argues harms to MOHELA are harms to Missouri for two reasons:
(1) MOHELA is a Missouri-created and -controlled public instrumentality, so its
harms are harms to the State; and
(2) MOHELA's losses jeopardize its financial contributions to Missouri.
The first of these claims is not even implicated by the report's findings. What about the second one? According to the states' brief, MOHELA owes over $105 million to the state's Lewis and Clark Discovery Fund and also contributes substantial sums (approximately $100 million over the past twelve years) to various state scholarship and grant programs within the state. This provides a basis for standing, the states claim, because a substantial reduction in MOHELA's revenue will reduce MOHELA's ability to provide such funding going forward. Contrary to what the study authors suggest, their findings do nothing to undermine this argument.
Reasonable people can differ on whether the harms to MOHELA are sufficient to establish Missouri's standing in this case. Will Baude and Sam Bray, for instance, think there is no standing here. Given how solicitous courts have become to state standing claims I disagree, but it is certainly a close case. Ilya Somin is more bullish on standing (see also here and here), though he also supports far looser standing rules across the board. What is not reasonable, however, is to claim that this report somehow eviscerates the arguments for standing in Biden v. Nebraska, or to claim they are based on "lies."
To recap: There is no question that the Biden Administration's student loan forgiveness results in MOHELA losing millions of dollars in loan processing fees that it would otherwise have received, and it is undisputed that MOHELA's net revenue is supposed to serve state purposes. These facts create serious arguments for standing that have not been undermined in the least by the latest report. To the contrary, the report documents the veracity of the claim that student loan forgiveness will reduce MOHELA revenues. There are serious arguments to make against state standing in Biden v. Nebraska, but they are not to be found in this report.