The case to block Biden's student-loan forgiveness keeps getting weaker, legal experts say

• Student-loan company MOHELA is central to one of the lawsuits blocking Biden's student-debt relief.
• Two amicus briefs filed to SCOTUS highlighted how MOHELA actually owes some debt of its own.

The nation's highest court is just over a month away from hearing cases challenging President Joe Biden's student-loan forgiveness — and some experts think the challengers shouldn't be too confident.

On February 28, the Supreme Court will take on two lawsuits that have slammed the brakes on Biden's plan to cancel up to $20,000 in student debt for federal borrowers. One case was filed by two student-loan borrowers who sued because they did not qualify for the full $20,000 amount of relief, and the other was filed by six Republican-led states who argued the relief would hurt their states' tax revenues, along with that of student-loan company MOHELA, which is based in Missouri where the lawsuit was filed.

The latter case has had some legal experts particularly confounded due to the central role MOHELA has taken in the case. While MOHELA has explicitly denied being involved in the states' decision to sue, the states have continued to write in legal filings that the company would suffer a loss of revenue from loans that it would have serviced prior to any broad debt relief. They also claim that loss would harm the state of Missouri.

Biden's Justice Department has denied those claims, saying that MOHELA is a separate entity from the state and can sue and be sued on its own. A series of amicus curiae briefs by over a dozen legal experts, advocates, and scholars recently filed to the Supreme Court supported the Justice Department's arguments and elaborated on the standing, or lack thereof, the plaintiffs have.

One brief, filed by the UC Berkeley Center for Consumer Law and Economic Justice on behalf of Missouri consumer advocates, highlighted how MOHELA actually owes some debt of its own. This is significant because Missouri cannot claim it would suffer from MOHELA's failure to pay into a state fund, given that payments have not been made for years and there has not been any apparent harm because of it.

As the brief explained, Missouri established the Lewis and Clark Discovery Fund in 2007, which was a program to fund various capital projects and higher education institutions. The idea was that MOHELA would fund those programs — and according to the Office of the Missouri State Auditor, MOHELA was expected to put $350 million into the fund over a six-year period.

But the 2008 financial crisis hit, and MOHELA received government approval to delay those payments again, and again, and again. The company has since received an extension on making those payments until 2024, and David Nahmias, a staff attorney with the UC Berkeley Center, told Insider that it "goes down to the question of the states' theory of harm being too speculative."

"Missouri has not made a payment on the Lewis and Clark Fund in so long, and the state has shown no interest in moving forward with it," Nahmias said. "The history of the Lewis and Clark Fund, for over a decade, shows that Missouri is not suffering any particular injury from MOHELA's failure to pay into the fund."

The lawsuit relies on "a tenuous, speculative chain of events"

When the Supreme Court hears arguments for this case next month, it will consider whether the lawsuit has standing — which means the plaintiff would be injured by the policy, that the injury can be directly traced back to the defendant, and that the relief they're seeking would address those injuries.

But, Nahmias said, the six GOP-led states are relying on a "tenuous, speculative chain of events" to prove Biden's debt relief is legal, and MOHELA's failure to pay into the Lewis and Clark fund should only serve to weaken the states' case.

"There's no threat that Missouri may suffer harm to the Lewis and Clark fund when the Lewis and Clark fund hasn't been paid into for over a decade," Nahmias said.

Even two law professors who believe Biden's plan to cancel student debt broadly is illegal aren't convinced by the states' lawsuit. Samuel L. Bray and William Baude, professors at the Notre Dame Law School and the University of Chicago Law School, respectively, filed an amicus brief explaining why they think the states "utterly lack standing."

"MOHELA's ability to sue and be sued means that it can vindicate its own injuries if it chooses," the professors wrote. "To the extent that the loss of servicing fees is a cognizable injury, MOHELA is far and away the most interested plaintiff, and Missouri's claim is entirely derivative."

Bray and Baude also referenced the Lewis and Clark fund in their brief, saying that "just a quick reading of MOHELA's latest financial statement reveals that it has already received numerous extensions for payment to the Lewis and Clark discovery fund... So it is far from certain, or even a substantial risk, that loan forgiveness is going to be the reason MOHELA misses a payment."

"Missouri is trying to have it both ways"

When MOHELA was created by Missouri in 1981, the state legislature designed it to be a separate entity from the state — its operations are separate, and its finances are separate. That's why, Nahmias said, that "it looks like Missouri is trying to have it both ways."

"On one hand, when the state created MOHELA over 40 years ago, it made clear that MOHELA is separate," Nahmias said. "But now with this lawsuit, Missouri is trying to argue that the state will lose income by virtue of the fact that student debt cancellation possibly could cause MOHLEA to lose some loan servicing revenue that possibly could be passed along to the state of Missouri."

Biden's Justice Department called out the states' argument in its legal filing to the Supreme Court, writing that it's "pure speculation that, if the plan causes a reduction in MOHELA's revenues, MOHELA will respond by defaulting on its obligations rather than, say, cutting its other expenditures."

Dalié Jiménez, a law professor at University of California Irvine and director of the Student Loan Law Initiative, previously told Insider that Biden's legal defense "did a really good job in saying that if A causes financial harm to B, and B owes money to C, then C can sue... and that's bonkers."

It's now up to the Supreme Court to decide what's legal — and whether millions of Americans will see a reduction to their student-loan balances this year.