Missouri Attorney General Andrew Bailey is spearheading a 23-state coalition challenging the Biden Administration’s latest student loan forgiveness rule, accusing it of overstepping its authority. The coalition’s letter, signed by representatives from states including Alabama, Texas, and Florida, argues that the Department of Education’s fourth attempt to forgive student debt illegally shifts financial burdens onto American taxpayers without proper Congressional approval.
Why It Matters: The letter highlights a continued battle over the Department of Education’s authority to implement broad student loan forgiveness. Collection industry professionals need to understand potential changes in debt relief policies, as this could impact consumer communications, debt collection strategies, and operational processes if borrowers are encouraged to delay or default on their obligations.
- Back in October, the Department proposed new rules that could bring debt relief to nearly 8 million borrowers experiencing financial hardships. The rulemaking aims to provide targeted loan forgiveness for those struggling due to medical costs, childcare expenses, or the impact of natural disasters.
The Details:
- The coalition argues the Department of Education’s proposed rule improperly seizes authority beyond what the Higher Education Act allows.
- The States also argue that the proposed rule violates the separation-of-powers principle under the major questions doctrine, a legal principle that has been a recurring theme in recent Supreme Court cases.
- The coalition points out flaws in the rule’s cost estimates and describes the rulemaking process as insufficiently inclusive of dissenting opinions.
- The rule seeks to allow the Secretary of Education to forgive student loans under various conditions, which the coalition argues exceed his statutory powers.
What’s Next: If implemented, the rule could be finalized before the new administration takes office in January 2025. Attorney General Bailey and his counterparts have indicated they are prepared to challenge the rule in court, just as they have with previous attempts. Debt collection professionals should prepare for a possible increase in borrower confusion and challenges related to collections if this new forgiveness plan moves forward.
