September 29, 2022 | WASHINGTON, D.C. — Today, six Republican state attorneys general filed a lawsuit in Missouri seeking to block the Biden Administration’s historic effort to cancel student debt for more than 40 million Americans. This lawsuit was filed on behalf of state entities that own federally backed student loans, including the Missouri Higher Education Loan Authority, or MOHELA.
Mike Pierce, the executive director of the nonprofit Student Borrower Protection Center and a former federal regulator for the student loan industry, released the following statement:
“Missouri Attorney General Eric Schmitt, acting on behalf of student loan giant MOHELA, joined with five other Republican state AGs to bring a sham lawsuit to keep tens of millions of student loan borrowers trapped in debt. This suit is just the latest chapter in a long history of student loan companies like MOHELA and their Republican allies cheating people with student debt out of their rights.
“The student loan industry has made it painfully clear to the American people that they will stop at nothing to protect their profits. For decades, borrowers, advocates, and law enforcement officials have raised the alarm on the student loan industry’s illegal and deceptive practices—including in a scathing report from a federal regulator unveiled just today exposing new evidence of mismanagement and abuse across the student loan system.
“Governments have given billions of dollars to companies like MOHELA since they were created by state legislatures decades ago. This must end now. As President Biden cancels student debt for tens of millions, state governments need to pull the plug on their failed experiments with student lending and unwind student loan companies like MOHELA.”
Background
Today’s lawsuit, Nebraska v. Biden, appears to have been filed in Missouri, where MOHELA is headquartered, in part because of a lucrative federal contract won by MOHELA to manage millions of student loan borrowers’ accounts on behalf of the U.S. Department of Education. In their lawsuit, these Republican attorneys general allege that the State of Missouri has suffered irreparable harm because of the expected “compliance costs” incurred by MOHELA, a federal contractor, as a result of this action.
The same day as this lawsuit was filed, the Consumer Financial Protection Bureau (CFPB) published a shocking new report documenting widespread abuses by student loan companies across the industry, including private-sector companies serving as federal contractors and companies servicing privately held, federally backed loans like those owned by the States of Missouri, Arkansas, Nebraska, Kansas, and South Carolina.
The CFPB’s Press Release, CFPB Supervisory Examinations Find Violations of Federal Law by Student Loan Servicers and University-Owned Lenders, is available here: https://www.consumerfinance.gov/about-us/newsroom/cfpb-supervisory-examinations-find-violations-of-federal-law-by-student-loan-servicers-and-university-owned-lenders/
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About Student Borrower Protection Center
The Student Borrower Protection Center (SBPC) is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.