Supreme Court case on Biden debt plan could hinge on Missouri student loan provider

Whether millions of Americans will see up to $20,000 of their student loan debt forgiven may hinge on the legal ties between the Missouri government and the Missouri Higher Education Loan Authority.

In more than two hours of oral arguments Tuesday, the U.S. Supreme Court’s conservative justices appeared skeptical of whether the Biden administration plan that would eliminate more than $400 million in student loan debt and potentially affect up to 43 million Americans.

The Biden plan focuses on people who make less than $125,000 and would wipe out up to $10,000 of their debt or up to $20,000 for those who received grants aimed at low-income families.

More than 16 million Americans, including 305,000 Missourians and 143,000 Kansans have already been deemed eligible to have some of their loans forgiven. If the high court sides with Biden, their debt would be forgiven within weeks.

But before the court can determine whether the Biden administration was allowed to make a sweeping change to the student loan program under a post-9/11 era law originally aimed at helping members of the military, it has to decide if the six Republican-leaning states challenging Biden’s policy — led by Nebraska and including both Kansas and Missouri — were harmed directly enough by the policy in order to sue.

That argument focused mostly on Missouri’s role in the case and its relationship with MOHELA, the student loan servicing provider it created in 1981.

Missouri law treats MOHELA as a separate corporation, meaning it can’t be held liable for lawsuits against the agency. U.S. Solicitor General Elizabeth Prelogar argued that Missouri specifically set the loan provider up to operate separately, as its own institution, with the ability to sue and be sued.

Justice Samuel Alito, one of the court’s conservatives, appeared skeptical that it would matter whether MOHELA is a separate corporate entity from the state.

“Shouldn’t the test be more that relationship between MOHELA and Missouri, that an injury to MOHELA will necessarily be an injury to the state?” Alito asked.

Nebraska Solicitor General James Campbell argued that there is harm to MOHELA, and by extension Missouri, if Biden’s policy goes into place. He said they would see an estimated 40% reduction to their operating revenue. He said any money the agency makes goes to scholarship programs for Missourians — so if the program lost revenue, it would no longer be able to fund scholarship programs.

The liberal justices repeatedly pointed out that MOHELA had the ability to bring a lawsuit on its own behalf and that the state didn’t have to sue for them. Justice Elena Kagan pointed out that attorneys for the states had to get information from MOHELA using Missouri’s Sunshine Law.

“Your honor, that’s a question of state politics,” Campbell said, when asked why MOHELA wasn’t the one bringing the case.

The court currently has a 6-3 conservative majority. Most of the conservative justices didn’t directly address the arguments about standing. Chief Justice John Roberts appeared to focus on whether Biden’s policy could be considered a significant economic and political action, which would mean it would need clear direction from Congress.

Justices are grappling with two big picture issues — the separation of powers and whether the executive branch has the ability to implement a policy that could cost the federal government hundreds of millions without direct Congressional approval and what states need to prove in order to challenge federal policies in a moment where Americans increasingly see the Supreme Court as a political entity.

“We really have to be concerned about jumping into the political fray unless it’s prompted by a lawsuit where someone is injured,” said Justice Ketanji Brown Jackson, the newest justice and Biden’s sole appointee to the nine-member court.

Both Republican and Democratic state attorneys general have made it a practice of suing the federal government over policies they don’t support when the opposite party controls the White House, often turning it into something they can tout on the campaign trail. Missouri joined the suit under Sen. Eric Schmitt, a Republican who was attorney general at the time and actively campaigning for U.S. Senate.

Schmitt said he thinks if the court focuses on whether the Biden administration overstepped his powers, it will have a major impact in cases before the court.

“I think long term, getting these decisions back to Congress is something I’m focused on,” Schmitt said. “Because if it’s such a good idea, this is something Congress should be voting on.”

And student loan debt is certainly political. Biden promised during his 2020 presidential campaign that he would cancel student loan debt. Advocates who support eliminating student loan debt rallied outside of the Supreme Court building on Tuesday morning, donning yellow winter hats.

One of the speakers was Kansas City Mayor Quinton Lucas, who said canceling student loan debt is equitable and the right thing for the country.

“In my city, hardworking families everyday are trying to build businesses, build careers and do they run into? Staggering debt that holds them back,” Lucas said.

Lucas’ office is officially nonpartisan, but he often clashes with state-level Republicans in Missouri and has emerged as an ally of the Biden administration.

Missouri Attorney General Andrew Bailey, a Republican who has stuck with the case after taking over for Schmitt, said the plan doesn’t cancel student debt, it just shifts who has to pay for it.

“As a combat veteran, I paid for my education in blood, sweat, and tears, so this unconstitutional redistribution of wealth is personal for me,” Bailey said. “It’s a slap in the face to every working American who made a different choice, and my office will use every legal tool at our disposal to halt any attempt by the Biden Administration to saddle Missourians with other people’s debt.”

Star reporter Jonathan Shorman contributed to this article.