A major student-loan company just undermined the GOP-led lawsuit that temporarily halted Biden's debt cancellation

• Six GOP-led states said in a lawsuit that Biden's student-debt relief will hurt loan company MOHELA.
• In response to their appeal, the 8th Circuit placed a temporary stay on the relief.

A conservative group may have succeeded in temporarily halting President Joe Biden's student-loan forgiveness, but new information could challenge whether its defense will keep holding up in court.

On October 21, the 8th Circuit Court of Appeals placed a temporary stay on Biden's student-loan forgiveness, in response to a lawsuit filed in Missouri by six Republican-led states who argued the debt relief would hurt their states' tax revenues, along with that of Missouri-based student-loan company MOHELA.

Prior to the stay, lawmakers and advocates expressed concerns with MOHELA's potential involvement in the lawsuit, prompting Missouri Rep. Cori Bush to send a letter to the company asking it to clarify its position in the legal challenges.

"It is unconscionable that your company—as one of the largest student loan companies in the world—would be involved in overtly political efforts to rob millions of their right to student loan debt relief," Bush wrote in her October 18 letter.

On October 28, the Justice Department informed the court that MOHELA responded to Bush and undermined a core argument in the GOP-led case.

"MOHELA's executives were not involved with the decision of the Missouri Attorney General's Office to file for the preliminary injunction in federal court on September 29, 2022," the company wrote in its response.

In response to Bush's question on whether the company supports blocking debt relief for millions of Americans, MOHELA said that it's "faithfully fulfilling its obligations pursuant to its federal loan servicing contract. As mentioned above, MOHELA is a public instrumentality of the state. As a governmental entity it does not have shareholders and does not exist to make profits. Any available funds above reasonable operating needs and reserves are devoted by MOHELA to student financial aid."

While the GOP states used MOHELA as a primary reason as to why the debt relief should be blocked, even Republican-appointed Judge Henry Edward Autrey dismissed the lawsuit on October 21, partly because of their argument on the financial losses MOHELA would suffer.

"Missouri has not met its burden to show that it can rely on harms allegedly suffered by MOHELA. MOHELA, not the State, is legally liable for judgments against it," Autrey's opinion said, adding that "MOHELA can sue and be sued in its own name and retains financial independence from the state."

Even with this new information, it's unclear when the 8th Circuit will make a decision on whether the debt relief can move forward. In the meantime, borrowers can keep applying for loan forgiveness through the online form at studentaid.gov, and while the Education Department can review the applications, it cannot actually discharge any student loans.

"MOHELA has cut the single thread this frivolous lawsuit was hanging by, Braxton Brewington, spokesperson for advocacy group the Debt Collective, said in a statement. "As soon as the Eighth Circuit ends this temporary stay, the Biden administration needs to immediately discharge every single penny of student debt they promised to cancel so that working-class communities can get the financial relief they desperately need."