Biden's student-loan relief plans could face lawsuits from conservative business groups and GOP attorneys general, but borrowers shouldn't be too concerned about it

• Biden announced up to $20,000 in student-loan forgiveness for some federal borrowers.
• GOP attorneys general and conservative groups have threatened legal action on the relief.

President Joe Biden's student-loan forgiveness might have its day in court — but there's little reason for alarm.

Toward the end of August, Biden announced up to $20,000 in student-loan forgiveness for federal borrowers making under $125,000 a year. While many Democratic lawmakers, advocates, and borrowers lauded the move, Republican lawmakers and conservative groups didn't hold back their criticism, with some even threatening legal action.

Missouri Attorney General Eric Schmitt, for example, told Fox News that he's "actively looking into legal options to halt the Biden Administration's abuse of power and assault on working-class Americans." Alfredo Ortiz, CEO of the Job Creators Network — a conservative advocacy group — said in a statement that the organization is "weighing its legal options to block President Biden's illegal student loan bailout."

"This move is fundamentally unfair to the tens of millions of hardworking Americans who never went to college and are now forced to shoulder loan forgiveness for the consultant class," Ortiz said. "It's also unfair to those who have scrimped and saved to repay their student loans. They already paid back their student debt, and now they will be forced to pay back the growing national debt as a result of this bailout."

This isn't new criticism — for months leading up to Biden's announcement, critics of the plan called it unfair and costly, and said the president doesn't have the authority to cancel student debt. But the White House has maintained it can waive or modify loan balances under the HEROES Act of 2003. Even if groups try to challenge that authority, Abby Shafroth — staff attorney at the National Consumer Law Center — said they're unlikely to prevail.

"It's very unlikely that any of these groups can prove they've suffered any legally cognizable injury that would provide them standing to challenge those actions," Shafroth told Insider.

Student-loan companies bringing legal action is also a possibility, but Shafroth noted they would have to prove "concrete injury" to their operations, which would be difficult in terms of what their contractual rights and terms are. Additionally, those companies make their money through contracts with the federal government.

"Do they want to bite the hand that feeds them?" Shafroth said. "Also, I think the administration is in regular contact with the servicers and talks to them about what the administration is doing, and tries to find ways to design relief programs that are not going to really upset their services. So I think that there are a lot of sort of pragmatic reasons that I wouldn't expect a servicer to bring a suit."

While it's unlikely any potential lawsuit would succeed, there is the possibility a group could seek a preliminary injunction, meaning a court would require Biden's administration to hold off on implementing any student-loan forgiveness until the legal authority question is decided. But that's not easy to achieve, Shafroth said, and borrowers "shouldn't be overly concerned" about it.

The debate on the legality of student-loan forgiveness

Before announcing broad relief, Biden himself expressed hesitancy with his authority to implement debt cancellation. Early in his term, he asked the Education and Justice Departments to prepare memos on that authority. They each concluded that the authority is there under the HEROES Act, which allows the Education Secretary to waive or modify balances in connection with a national emergency, like COVID-19.

But critics of the relief have said it's an abuse of the authority. Former Education Secretary Betsy DeVos, for example, called it "100% illegal." Many Republican lawmakers have said this kind of student-loan forgiveness is something that needs congressional approval — going so far as to call on Speaker of the House Nancy Pelosi to condemn the president.

"This is an illegal act by a President desperate for a political win," GOP lawmakers wrote in a letter. "We hope you will heed your own words and act to defend the Constitution and the rule of law," they added, referring to comments Pelosi made last year when she said the authority is not there for broad debt cancellation.

Still, Biden's White House believes it has firm standing to carry out out what it said is "one-time" blanket relief and doesn't believe potential lawsuits will threaten that.

"Part of what the legal authority is being used to do here, in a targeted way, is to make sure that those borrowers who are at highest risk of distress after the restart happens, those are the people who are going to get the relief," Bharat Ramamurti, the deputy director of the National Economic Council, said during a recent press briefing. "The legal authority gives the Secretary the ability to make sure that the pandemic and the emergency does not cause a net financial harm to those folks."