Loan companies distance themselves from Republican-led state student-debt lawsuits

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A student loan servicer cited in a lawsuit that temporarily blocked President Biden’s debt forgiveness plan has distanced itself from one of the allegations brought by six Republican-led states challenging the program.

States — Arkansas, Iowa, Kansas, Missouri, Nebraska, South Carolina — Claim The president had exceeded his powers in crafting the Forgiveness Plan, a move that threatened the revenues of state entities that profit from federal student loans, including the Missouri Higher Education Loan Authority, popularly known as MOHELA. The quasi-state agency was not named as a party to the lawsuit, but nonetheless provoked the ire of advocacy groups and Rep. Kori Bush (D-Mo.), who questioned perceptions of its involvement. rice field.

Justice Department attorneys issued a warning to the Eighth Circuit Court of Appeals on Tuesday. Considering injunction against forgiveness plan To letter MOHELA sent a message to Bush last week clarifying that MOHELA played no role in the decision of the lawsuit by Missouri Attorney General Eric Schmidt (Republican).

“MOHELA and [the Missouri attorney general’s office] Related to student debt relief, the office recently filed a series of Sunshine Act requests with Mohera seeking copies of documents related to Mohera’s Federal Loan Services Agreement,” the company said in a letter to Bush. I am writing.

Lawsuits filed by Schmidt and five other state leaders allege that MOHELA would own debt from the defunct federal family education loan program if borrowers were merged from FFEL to take advantage of Biden’s loans. , said it was providing services but would be deprived of interest payments. forgiveness schedule. The company, which funds state scholarships, said it would also lose revenue from its federally created and owned Direct Loan service.

Bush asked MOHELA if the company supports efforts to thwart Biden’s plan to keep profits. In response, MOHELA said it was “adherently performing its obligations under the Federal Loan Service Agreement.”

The company is “a public institution of the state. As a government agency it has no shareholders and does not exist to make a profit. It can be used to help.”

their case. public function” and “its board is composed of civil servants and persons appointed by the governor.”

U.S. District Judge Henry E. Autry dismissed the state action for lack of proof. Asked the premise. Autrey said the governor appoints his five members to the company’s board of directors, whose revenues and liabilities are independent of the state.

The state appealed and sent it to the Eighth Circuit.issued by the court administrative stay Last month, the Department of Education temporarily banned debt forgiveness under the new forgiveness program.

To date, MOHELA has remained silent about the state lawsuit. The company did not respond to a request for further comment on Wednesday.

MOHELA is the primary servicer for borrowers seeking Public Service Loan Forgiveness, a federal program for teachers, firefighters, and other public employees. The company offers about $59 billion in direct federal loans and loans from the defunct FFEL program, according to court filings.

Following the state lawsuit, the Teachers Federation of America and the nonprofit Student Borrower Protection Center filed a complaint against MOHELA last month. letter of cancellationThe group accuses the company of violating California’s Student Borrowers Bill of Rights, which prohibits student loan servicers from interfering with borrowers’ rights to forgive loans. The Student Borrower Protection Center said it stands ready to take legal action if the company fails to drop the lawsuit.

SBPC Executive Director Mike Pearce said Wednesday: This is the clearest sign that right-wing state challenges to student debt relief will prove futile and ultimately futile. “

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