Amicus Curiae Brief — Alaska, et al., Applicants v. Department of Education, et al.

Supreme Court briefJul 17, 2024

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No. 24A11

In the

Supreme Court of the United States

STATE OF ALASKA, ET AL.,

Applicants,

DEPARTMENT OF EDUCATION, ET AL.,

Respondents.

On Application for

Vacatur of Stay of Preliminary Injunction

APPENDIX TO BRIEF OF AMICI STATES

ANDREW BAILEY

Attorney General

OFFICE OF THE MISSOURI

ATTORNEY GENERAL

207 West High St.

Jefferson City, MO 65101

JOSHUA M. DIVINE

Solicitor General

Counsel of Record

REED C. DEMPSEY

SAMUEL FREEDLUND

Deputy Solicitors

General

Josh.Divine@ago.mo.gov

(573) 751-3321

Counsel for Amici Curiae

July 15, 2024

TABLE OF CONTENTS

Exhibit A: Eastern District of Missouri Preliminary Injunction Order ........A-1

Exhibit B: United States Court of Appeals for the Eigth Circuit

Emergency Motion for Injunction Pending Appeal, Missouri v.

Biden (July 12, 2024) ...........................................................................A-62

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

STATE OF MISSOURI, et al.,

Plaintiffs,

JOSEPH R. BIDEN, Jr., et al.,

Defendants.

)

No. 4:24-cv-00520-JAR

MEMORANDUM AND ORDER

The State of Missouri and six other states 1 bring this suit against President Joseph R.

Biden, Jr., Secretary of Education Miguel Cardona, 2 and the United States Department of

Education challenging the Secretary’s rule, “Improving Income Driven Repayment for the

William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL)

Program,” (the “Final Rule”). The Final Rule creates a new income-driven repayment (“IDR”)

plan—referred to as the Savings on Valuable Education (“SAVE”) plan—to replace the Revised

Pay-As-You-Earn (“REPAYE”) plan. Compared to the REPAYE plan, the SAVE plan: (1)

increases the amount of a borrower’s income that is exempt from payment calculations from

150% to 225% of the federal poverty line (“FPL”); (2) decreases the maximum percentage of

discretionary income that can be used to calculate monthly payments on undergraduate loans

from 10% to 5%; (3) decreases the maximum time in repayment for borrowers with low initial

principal balances to qualify for loan forgiveness from 20 years for undergraduate loans to as

These are Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma.

Plaintiffs’ claims against the Secretary and the President are brought against them in their

respective official capacities.

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little as 10 years 3; and (4) provides that any accrued interest not covered by a borrower’s

calculated monthly payment is not charged to the borrower. The Final Rule is to take full effect

on July 1, 2024, though the Secretary has designated some provisions for early implementation,

including the early loan forgiveness provisions. Thus, the Secretary has already forgiven

hundreds of thousands of loan balances for borrowers in the SAVE plan. 4 Plaintiffs argue that

Defendants lack congressional authority to implement these changes or otherwise have violated

the law in promulgating the Final Rule. Plaintiffs seek prospective injunctive and declaratory

relief to halt any further implementation of the Final Rule.

This matter is now before the Court on several motions. On April 16, 2024, Plaintiffs

filed their Motion to Stay or, in the alternative, for a Temporary Restraining Order. ECF No. 6.

On the same day, Plaintiffs filed a Motion to Stay or, in the alternative, for Preliminary

Injunction. ECF No. 7. On May 7, 2024, Defendants filed a Motion to Dismiss and a Response

to Plaintiff’s Motions. ECF Nos. 21 and 22. On May 17, 2024, Plaintiffs filed their combined

Reply and Response to Defendants’ Motion. ECF No. 26. On May 27, 2024, Defendants filed

Under the SAVE plan, borrowers with original principal balances of $12,000 or less

become eligible for forgiveness of any remaining account balance after making at least 120

months (or 10 years) of eligible payments. For each additional $1,000 in a borrower’s initial

principal balance, the Final Rule permits full discharge of the unpaid balance after the borrower

makes an additional 12 months of eligible payments. For example, a borrower with an original

principal balance between $13,001 and $14,000 can have any remaining balance forgiven after

making 144 months (or 12 years) of eligible payments. The Final Rule sets a maximum

repayment period of 20 years for undergraduate loans or 25 years for graduate loans for

borrowers choosing the SAVE plan and permits the Secretary to fully cancel any remaining

balances after borrowers have been in repayment for the maximum repayment period.

Biden-Harris Administration Announces Additional $7.7 Billion in Approved Student

Debt Relief for 160,000 Borrowers, U.S. Dep’t of Educ. (May 21, 2024), https://perma.cc/94CJZU8B (“Today’s announcement brings total relief approved under the SAVE Plan to $5.5 billion

for 414,000 borrowers.”).

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their Reply. ECF No. 29. On June 3, 2024, the Court heard oral argument on the parties’ various

motions. ECF No. 31. All Motions are now ripe for disposition.

The Court has thoroughly reviewed the parties’ briefing and exhibits and has carefully

considered the parties’ arguments. Because the Court finds that at least one Plaintiff has standing

and that venue is proper in this district, it will deny Defendants’ Motion to Dismiss. The Court

also finds that Plaintiffs are likely to succeed on the merits of their argument that the early loan

forgiveness provisions of the Final Rule were promulgated in a manner exceeding the Secretary’s

statutory authority. And because Plaintiffs have shown that Missouri faces impending harm from

any additional loan forgiveness under the Final Rule, the Court finds it necessary to enjoin

Defendants from any further implementation of the Final Rule’s loan forgiveness provisions until

this matter can be fully litigated. All other aspects of the Final Rule were promulgated properly.

For these reasons and others set forth below, the Court will grant in part and deny in part

Plaintiffs’ Motion for Stay or, in the alternative, for Preliminary Injunction.

Background

The Higher Education Act and Accompanying Regulations

In 1965, Congress passed the Higher Education Act (“HEA”) “[t]o strengthen the

educational resources of our colleges and universities and to provide financial assistance for

students in postsecondary and higher education.” Higher Education Act of 1965, Pub. L. No. 89329, 79 Stat. 1219 (1965). The HEA authorized the Department to provide financial assistance

to students seeking a post-secondary education in the form of “Educational Opportunity Grants”

and by creating a federal loan insurance program administered by the Department to support

student loans issued by qualifying private lenders.

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In 1993, Congress passed the Student Loan Reform Act, which created the Federal Direct

Student Loan Program, 5 which for the first time allowed the federal government to issue loans

for post-secondary education. Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66,

107 Stat. 312 (1993). As amended, the HEA provided borrowers with several options of

repayment plans, one of which was an income contingent repayment (“ICR”) plan “with varying

annual repayment amounts based on the income of the borrower, paid over an extended period of

time prescribed by the Secretary, not to exceed 25 years . . . .” 20 U.S.C. § 1087e(d)(1)(D)

(1993). The 1993 amendments also provided that “[i]ncome contingent repayment schedules

shall be established by regulations promulgated by the Secretary and shall require payments that

vary in relation to the appropriate portion of the annual income of the borrower (and the

borrower’s spouse, if applicable) as determined by the Secretary.” Id. 1087e(e)(4). The

language of section 1087e(e)(4) remains the same today as it was when first passed in 1993.

In 1994, the Secretary promulgated the first regulations regarding the standards, criteria,

and procedures governing ICR plans, and these regulations became effective on July 1, 1995. 59

Fed. Reg. 61664-01. Under the authority provided by 20 U.S.C. § 1087e(e)(4), these regulations

capped the repayment amount for ICR plans at 20% of discretionary income 6 (34 C.F.R.

§ 685.209(a)(2) (1994)) and provided that “[i]f a borrower has not repaid a loan in full at the end

of the 25-year repayment period under the [ICR] plan, the Secretary cancels the unpaid portion

of the loan.” Id. § 685.209(c)(2)(iv) (1994).

Now known as the William D. Ford Federal Direct Loan Program. 20 U.S.C.

§ 1087a(b)(1).

“Discretionary income” was defined as “a borrower’s [adjusted gross income] minus the

amount of the ‘HHS Poverty Guidelines for all States (except Alaska and Hawaii) and the

District of Columbia’ as published by the United States Department of Health and Human

Services on an annual basis.” 34 C.F.R. § 685.209(a)(3) (1994).

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In 2007, Congress again amended the HEA. College Cost Reduction and Access Act,

Pub. L. 110-84, 121 Stat. 784. These amendments for the first time instructed the Secretary on

how the Department was to calculate the maximum repayment period under an ICR plan, but it

provided no specific definition of an “extended period of time” under 20 U.S.C.

§ 1087e(d)(1)(D). Nor did it prevent the Secretary from forgiving loans at the end of the

maximum repayment period. Instead, the amendments generally outline when payments under

various repayment plans qualify towards the maximum repayment period, including months in

which the borrowers are not in default or are in deferment due to an economic hardship. The

statutory limits in section 1087e(e)(7) regarding the calculation of the maximum repayment

period for an ICR plan remain the same today as they were when first passed in 2007.

The 2007 amendments also created a specific plan of loan forgiveness for public service

employees—the Public Service Loan Forgiveness (“PSLF”) program. Under 20 U.S.C.

§ 1087e(m), the Secretary “shall cancel the balance of interest and principal due . . . on any

eligible Federal Direct Loan not in default for a borrower” who has made 120 qualifying

monthly payments and has been employed in a public service job throughout the entirety of those

120 months. The statute further specifies that “the Secretary shall cancel the obligation to repay

the balance of principal and interest due as of the time of such cancellation . . . .” Id.

§ 1087e(m)(2). Outside of some amendments to the definition of a “public service job,” section

1087e(m) remains the same today as it was when first passed in 2007.

The 2007 amendments created yet another repayment plan—the income-based repayment

(“IBR”) plan. College Cost Reduction and Access Act, Pub. L. 110-84, 121 Stat. 784 (codified at

20 U.S.C. § 1098e). The IBR program permits borrowers experiencing “partial financial

hardship” to elect repayment under the IBR plan. A “partial financial hardship” is when a

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borrower’s annual loan payments as calculated under the standard repayment plan 7 are greater

than 15% of the borrower’s (and the borrower’s spouse if filing jointly) adjusted gross income

(“AGI”) less 150% of the FPL. Id. It also directed the Secretary to repay or cancel a qualified

IBR plan borrower’s outstanding loan balance after a maximum repayment period of 25 years.

Id.

In 2010, Congress amended the terms of the IBR program. Congress lowered the

“financial hardship” threshold to qualify for IBR from 15% of AGI less 150% of the FPL to 10%

of AGI less 150% of the FPL. And “with respect to any loan made to a new borrower on or after

July 1, 2014[,]” Congress decreased the maximum repayment period under the IBR plan from 25

years to 20 years. Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152,

124 Stat. 1029. Section 1098e(e) remains the same today as it was when first passed in 2010.

Congress has made no significant amendments to the HEA since 2010, but the Secretary

has promulgated regulations controlling ICR plans. In 2012, the Secretary implemented a new

ICR plan known as Pay As You Earn (“PAYE”) and incorporated some of the 2010 statutory

changes to the IBR plan into the Direct Loan and Federal Family Education Loan (“FFEL”)

program. 77 Fed. Reg. 66,088-01. Under the 2012 regulations, which became effective on July

1, 2013, borrowers of loans disbursed after October 1, 2011, 8 who could establish a partial

financial hardship could elect to repay their loan through the PAYE program. Id. at 66,137; 34

The standard repayment plan offers borrowers a “fixed annual repayment amount paid

over a fixed period of time, not to exceed 10 years[.]” 20 U.S.C. § 1078(b)(9)(A)(i).

An “eligible new borrower” under the PAYE plan was one who “[h]as no outstanding

balance on a Direct Loan Program loan or a FFEL Program loan as of October 1, 2007, or who

has no outstanding balance on such a loan on the date he or she received a new loan after

October 1, 2007; and . . . [r]eceives a disbursement of a [qualifying loan] after October 1,

2011 . . . .” making the PAYE plan available to borrowers who took out loans as far back as

2007. 34 C.F.R. § 685.209(a)(iii).

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C.F.R. § 685.209(a)(2) (2013). A “partial financial hardship” under the PAYE program is when

a borrower’s annual amount due under the 10-year standard repayment plan is greater than 10%

of the borrower’s AGI less 150% of the FPL, the same as it is under the IBR plan. Id. at 66,137;

34 C.F.R. §§ 685.209(a)(1)(v)(A) and (B). Monthly payments under the PAYE plan “are limited

to no more than 10 percent of the amount by which the borrower’s AGI exceeds 150 percent of

the [FPL] applicable to the borrower’s family size, divided by 12,” which is the same as the limit

under the IBR plan. Id.; 34 C.F.R. § 685.209(a)(2). And, as with the IBR plan, qualifying

borrowers who opted into the PAYE plan were eligible for loan forgiveness after making 20

years of qualifying payments. Id. at 66,139–40; 34 C.F.R. § 685.209(a)(6).

In 2015, the Secretary issued additional regulations creating a new ICR plan called the

Revised Pay As You Earn (“REPAYE”) repayment plan. 80 Fed. Reg. 67,204. These regulations

became effective on July 1, 2016. 34 C.F.R. § 685.209(c) (2016). Some terms of the REPAYE

plan mirror those of the PAYE plan: borrowers’ monthly payments under the plan are again

limited to no more than 10% of the borrower’s AGI less 150% percent of the FPL and borrowers

under the plan qualify for loan forgiveness after 20 years of qualifying payment for

undergraduate loans and 25 years of qualifying payments for graduate loans. 80 Fed. Reg. at

67,239, 67,241; 34 C.F.R. §§ 685.209(c)(2)(i) and (c)(5) (2016). Importantly, unlike the PAYE

plan, which requires borrowers to show financial hardship and to have received loans after

October 1, 2011, the REPAYE plan is available to all borrowers. 9 80 Fed. Reg. at 67,239; 34

C.F.R. § 685.209(c)(ii) (2016). The REPAYE plan thus has many of the same repayment

provisions as the PAYE and IBR plans but is available to more borrowers. The terms of both the

Except those borrowers who are in default and “parent borrowers” who obtained loans to

help pay for their child’s education.

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PAYE plan and the REPAYE plan remain in effect without significant alteration. 34 C.F.R.

§§ 685.209(a) and (c).

The Final Rule

On May 26, 2021, the Secretary published in the Federal Register his intent to establish

negotiated rulemaking committees “to prepare proposed regulations for programs authorized

under title IV 10 of the [HEA].” 86 Fed. Reg. 28,299-01. It published the dates, times, and

locations of public hearings on the matter and permitted public comments on or before July 1,

2021. Among the issues the Department intended to address were “[l]oan repayment plans under

34 C.F.R. . . . [§§] 685.208, and 685.209” and “[t]he Public Service Loan Forgiveness program

under 34 C.F.R. [§] 685.219.” Id. at 28,300. Virtual public hearings were held on June 21, 23,

and 24, 2021. Id.; see also 88 Fed. Reg. 1,894-01. After these public hearings, the Secretary

published in the Federal Register notice of his intent to establish a committee to propose

modifications to the HEA loan repayment programs and requested “nominations for individual

negotiators who represent key stakeholder constituencies for the issues to be negotiated to serve

on the committee.” See 86 Fed. Reg. 43,609. Individual negotiators were nominated and

selected, and the committee met several times to negotiate the subsequent rulemaking.

After concluding the negotiated rulemaking process, on January 11, 2023, the Secretary

published a notice of proposed rulemaking (“NPRM”) outlining the proposed changes to the

HEA loan repayment programs. 88 Fed. Reg. 1,894-01. The NPRM explains that:

The Secretary proposes to amend the regulations governing [ICR] plans by

amending the [REPAYE] repayment plan, and to restructure and rename the

repayment plan regulations under the William D. Ford Federal Direct Loan (Direct

Title IV refers to the “Student Assistance” section of the HEA, which includes all

sections relating to the relevant student loans plans discussed herein. See 20 U.S.C. §§ 1070–

1099d.

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Loan) Program, including combining the [ICR] and [IBR] plans under the umbrella

term of “Income-Driven Repayment (IDR) plans.”

Id. The NPRM further explained the Secretary’s intent to amend the regulations on IDR plans,

specifically to “expand the benefits of the REPAYE plan” by (1) increasing the amount of

protected income used to calculate borrowers’ monthly payments, (2) decreasing the share of

unprotected income used to calculate borrowers’ monthly payments, (3) reducing the time for

some low initial balance borrowers to receive loan forgiveness, and (4) no longer charging

borrowers accrued interest each month after borrowers make a qualifying payment. Borrowers

would also receive credit toward loan forgiveness for certain periods of deferment or forbearance

that were not previously credited. The NPRM set the date to receive public comments on the

proposed rule for February 10, 2023—30 days after the NPRM’s publication. Id.

After receiving public comments, on July 10, 2023, the Final Rule was published in the

Federal Register. 88 Fed. Reg. 43,820. In relevant part, the Final Rule’s outlines its major

provisions as follows:

The final regulations—



Expand access to affordable monthly Direct Loan payments through

changes to the [REPAYE] repayment plan, which may also be referred to as

the Saving on a Valuable Education (SAVE) plan; 11

...



Increase the amount of income exempted from the calculation of the

borrower’s payment amount from 150 percent of the [FPL] to 225 percent

of FPL for borrowers on the REPAYE plan;



Lower the share of discretionary income used to calculate the borrower’s

monthly payment for outstanding loans under REPAYE to 5 percent of

discretionary income for loans for the borrower’s undergraduate study and

10 percent of discretionary income for other outstanding loans; and an

amount between 5 and 10 percent of discretionary income based upon the

Throughout the Final Rule, REPAYE and SAVE are used interchangeably and both are

meant to refer to the changes to the REPAYE plan promulgated by the Final Rule.

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weighted average of the original principal balances for those with

outstanding loans in both categories;



Provide a shorter maximum repayment period for borrowers with low

original loan principal balances;

...



Provide that the borrower will not be charged any remaining accrued

interest each month after the borrower’s payment is applied under the

REPAYE plan;



Credit certain periods of deferment or forbearance toward time needed to

receive loan forgiveness; [and]



Permit borrowers to receive credit toward forgiveness for payments made

prior to consolidating their [FFEL] loans[.]

Id.

The HEA provides procedural rules for when rules published by the Secretary may

become effective. Under 20 U.S.C. § 1089(c)(1), the Secretary must publish the final form of

any rule by “November 1 prior to the start of the award year” for the Secretary’s rules to become

effective during the next award year. 12 The Final Rule was published on July 10, 2023, and the

Secretary plans to fully implement the Final Rule by July 1, 2024. 88 Fed. Reg. at 43,821.

Despite the Final Rule’s July 1, 2024, onset date, the Secretary designated several

portions of the Final Rule for early implementation under the procedural requirements provided

by the HEA. Under § 1089(c)(2), “[t]he Secretary may designate any regulatory provision that

affects the programs under [Title IV of the HEA] and is published in final form after November 1

as one that an entity subject to the provision may, in the entity’s discretion, choose to implement

prior to the effective date described in [§ 1089(c)(1)].” This designation of provisions for early

The “award year” is defined as “the period beginning July 1 and ending June 30 of the

following year[,]” which generally aligns the rule’s implementation date with the beginning of a

school year. 20 U.S.C. § 1088.

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implementation is accomplished by publication in the Federal Register and “shall be effective

with respect to that entity in accordance with the terms of the Secretary’s designation.” Id.

§ 1089(c)(2)(B). Under this authority, the Secretary designated several provisions of the Final

Rule for early implementation on July 30, 2023:



Adjusting the treatment of spousal income in the REPAYE plan for married

borrowers who file separately as described in § 685.209(e)(1)(i)(A) and (B);



Increasing the income exemption to 225 percent of the applicable poverty

guideline in the REPAYE plan as described in § 685.209(f);



Not charging accrued interest to the borrower after the borrower’s payment

on REPAYE is applied as described in § 685.209(h); . . .



Designating in § 685.209(a)(1) that REPAYE may also be referred to as the

Saving on Valuable Education (SAVE) plan[; and]

. . . the changes to the definition of family size for Direct Loan borrowers in

IBR, ICR, PAYE, and REPAYE in § 685.209(a) to exclude the spouse when a

borrower is married and files a separate tax return . . . .

88 Fed. Reg. at 43,820–21. The Final Rule also designated for early implementation the

provision for awarding credit toward loan forgiveness to certain periods of deferment and

provided that the Secretary “will publish a separate notice announcing the timing of the

implementation.” Id. at 43,821.

On October 23, 2023, the Department designated for early implementation a provision

that eliminated “the requirement for borrowers returning to SAVE after having previously been

on REPAYE to provide prior years’ income.” 88 Fed. Reg. 72,685-01. This effectively

eliminated the obligations of borrowers under the SAVE plan to recertify their previous year’s

income to remain on the plan.

On January 16, 2024, the Department designated for early implementation the provision

of the Final Rule permitting early forgiveness for certain borrowers with low initial principal

balances. 89 Fed. Reg. 2,489-01. Since early implementation of the forgiveness provision, the

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Secretary has forgiven hundreds of thousands of loan balances for borrowers opting for the

SAVE plan.

Biden v. Nebraska

The Supreme Court’s recent ruling regarding the Secretary’s previous student loan

forgiveness plan is instructive. Though the Secretary in that case claimed the authority to forgive

loans under a different statute not at issue here, there remains some overlap between the Supreme

Court’s analysis in that case and the issues presented here.

In 2001, following the September 11 terrorist attacks, Congress passed the Higher

Education Relief Opportunities to Students Act of 2001, which authorized the Secretary to

modify or waive provisions of the HEA student loan programs “in connection with the national

emergency.” Pub. L. 107-122, 115 Stat. 2386 (emphasis added). This statute specifically

authorized full tuition refunds “to students who are members of the Armed Forced serving on

active duty during the national emergency.” Id. In both instances, “the national emergency”

refers to the September 11 terrorist attacks.

Rather than let the Act terminate on September 20, 2003, Congress passed the Higher

Education Relief Opportunities for Students Act of 2003 (the “HEROES Act”), which again

granted the Secretary the authority to modify or waive “any statutory or regulatory provision

applicable to the student financial assistance programs under title IV of the Act as the Secretary

deems necessary in connection with a war or other military operation or national emergency

. . . .” Pub. L. 108-76, 117 Stat. 904.

The Secretary invoked this authority in the wake of the President’s declaration of a

national emergency for the COVID-19 pandemic 13 to promulgate modifications and waivers to

Presidential Proclamation No. 9994, 85 Fed. Reg. 15,337.

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the student loan repayment program. One such set of modifications and waivers was published

in the Federal Register on October 12, 2022. 87 Fed. Reg. 61,512-01. There, the Secretary

announced his intention “to discharge up to a total of $20,000 in covered loans for affected

individuals who received Pell Grants and up to a total of $10,000 in covered loans for affected

individuals who did not receive a Pell Grant” for individual borrowers making less than

$125,000 per year or married couples filing jointly making less than $250,000. Id.

Several states, including Plaintiffs Missouri and Arkansas, subsequently sought to enjoin

the implementation of the Secretary’s forgiveness plan. Nebraska v. Biden, 636 F. Supp. 3d 991

(E.D. Mo. 2022). On October 20, 2022, the district court dismissed the case for lack of standing.

Id. But on November 14, 2022, the Eighth Circuit granted the plaintiff States’ Emergency

Motion for an injunction pending appeal to the Supreme Court. Nebraska v. Biden, 52 F.4th

1044, 1048 (8th Cir. 2022).

On June 30, 2023, the Supreme Court sided with the States and held the Secretary’s loan

forgiveness plan under the HEROES Act was unlawful. The Supreme Court in a six-to-three

majority opinion authored by the Chief Justice found that the plaintiff States had standing

because the Higher Education Loan Authority of the State of Missouri (“MOHELA”) is an

instrumentality of the State of Missouri, and therefore Missouri suffered direct harm when

MOHELA suffered harm from the loan forgiveness program. Biden v. Nebraska, 143 S. Ct.

2355, 2366–68 (2023) 14 (“The Secretary’s plan harms MOHELA in the performance of its public

function and so directly harms the State that created and controls MOHELA. Missouri thus has

suffered an injury in fact sufficient to give it standing to challenge the Secretary’s plan.”). The

Unless otherwise noted, additional references to Biden v. Nebraska refer to the Supreme

Court’s Opinion at 143 S. Ct. 2355.

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Supreme Court further held that the Secretary’s forgiveness plan was unlawful under the major

questions doctrine, holding that the HEROES Act language that granted the Secretary authority

to “modify or waive” provisions of the student loan repayment plans was not “clear

congressional authorization” for the mass debt cancellation program. Id. at 2375. The decision

never directly spoke to the Secretary’s authority to implement repayment procedures under the

HEA that are at issue in this case.

The Parties’ Motions

Plaintiffs filed two motions, though their requested relief for each is essentially the same.

Recognizing that their requested forms of relief significantly overlap, Plaintiffs filed a combined

Memorandum in Support of both Motions. ECF No. 10. Plaintiffs ask this Court to stay the

Final Rule under the Administrative Procedure Act (“APA”). See 5 U.S.C. § 705. In the

alternative, Plaintiffs ask the Court to issue a temporary restraining order (“TRO”) or a

preliminary injunction to prevent Defendants from fully implementing the Final Rule.

Anticipating a challenge from Defendants regarding their standing to sue, Plaintiffs

present several arguments to support their standing. Plaintiffs then argue that they will likely be

successful on the merits. In particular, Plaintiffs contend that the Final Rule violates separation

of powers principles requiring invocation of the major questions doctrine and otherwise runs

afoul of the APA. Plaintiffs argue that these violations necessitate vacatur of the Final Rule in its

entirety. Finally, Plaintiffs argue that they face impending injury if the Final Rule is allowed to

continue and that the public interest favors a stay or other injunctive relief to prevent its further

implementation.

In their Motion to Dismiss, Defendants ask the Court to dismiss this case for two reasons.

First, Defendants argue that the Court should not reach the merits of this case because Plaintiffs

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have not established standing, and therefore the case should be dismissed under Fed. R. Civ. P.

12(b)(1). Second, Defendants argue that even if Plaintiffs have standing, this Court is not the

appropriate venue for this case and therefore it should be dismissed under Fed. R. Civ. P.

12(b)(3). Defendants also argue that President Biden should be dismissed from the case.

Because the issues briefed by the parties overlap considerably, the Court will discuss the

parties’ arguments by topic rather than in the order they were presented for the sake of clarity.

Standing

Plaintiffs allege several theories of standing, though they emphasize that if the Court

finds standing for any one of them on any theory, the case should proceed as to all Plaintiffs.

Defendants vigorously oppose all of Plaintiffs’ standing theories and insist that each Plaintiff

must separately establish standing under each alleged theory before the Court can consider

granting Plaintiffs’ requested relief.

Missouri’s Standing Via Harm to Its State Instrumentality

Plaintiff Missouri asserts that it has standing based on alleged past and future harms to

MOHELA from the implementation of the Final Rule. Under this theory, Missouri is harmed

because its public instrumentality, MOHELA, will lose revenue in two ways. First, Missouri

argues that when the Direct Loans serviced by MOHELA are forgiven under the SAVE plan,

those loan accounts will be closed and MOHELA will no longer collect administrative servicing

fees for those accounts. Second, Missouri argues that the Final Rule encourages borrowers to

consolidate FFEL loans into Direct Loans and therefore will (1) deprive MOHELA of interest

revenue from consolidated FFEL loans, (2) decrease the value of FFEL loans on the tradable

market, and (3) harm MOHELA’s ability to issue bonds. Plaintiffs emphasize that Missouri’s

theory regarding the loss of income from loan servicing fees when loans are forgiven, was

accepted by the Supreme Court in Biden v. Nebraska and should have the same force here.

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Defendants argue that the Supreme Court’s determination in Biden v. Nebraska that

Missouri had standing in that case does not mean that Missouri has standing here. Defendants

specifically attack the theory that Missouri has established that MOHELA is facing actual and

imminent financial harm from ongoing loan forgiveness under the Final Rule. Defendants point

to MOHELA’s recent request that the Department reallocate 1.5 million of its Direct Loan

accounts to other federal servicers. 15 See ECF No. 22-3. At the same time, Defendants admit

that, as of the date of its Motion to Dismiss, MOHELA had “discharged approximately 28,000

borrowers’ accounts under SAVE, and an estimated further 53,000 have been identified for

forgiveness and are being processed.” ECF No. 22 at 11; ECF No. 11-2 at ¶ 33. Defendants

argue that, because MOHELA has voluntarily requested that 1.5 million accounts be transferred

to other servicers, Missouri cannot simultaneously claim harm from the closing of fewer

accounts via loan forgiveness.

Defendants also argue that MOHELA will actually benefit from the SAVE plan. First,

Defendants argue that with fewer loans to service because of loan forgiveness, MOHELA will be

less likely to incur financial penalties, like a recent $7.2 million penalty imposed for servicing

errors. Second, the Department has already distributed to MOHELA $1.6 million in transition

costs as part of the switch to SAVE. Third, Defendants contend that the Final Rule will reduce

borrower delinquency, decreasing servicing costs and permitting MOHELA to collect additional

servicing fees on accounts that will otherwise fall into delinquency and default under previous

loan repayment programs.

The Department has indicated that it began transferring a portion of MOHELA’s accounts

to other servicers at MOHELA’s specific request. Update for MOHELA student loan borrowers,

U.S. Dep’t of Educ. (April 29, 2024), https://perma.cc/NTZ6-BVK6.

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Defendants are also highly critical of Plaintiffs’ theory that the Final Rule encourages

borrowers of FFELs to seek consolidation. Defendants argue that any harm under such a theory

is contingent on the action of independent third parties and is far from certain. Defendants also

argue that, even if FFEL consolidation were to increase because of the Final Rule, Plaintiffs have

not established with sufficient certainty that such consolidation would actually harm MOHELA.

Plaintiffs in their Reply ask that the Court to reject Defendants’ preferred balancing

approach when assessing potential harms to MOHELA. According to Plaintiffs, if MOHELA

can show that it will lose a single dollar because of the Final Rule, that is enough.

North Dakota’s Standing Via Harm to Its State Instrumentality

Plaintiff North Dakota argues it has a separate basis for standing through alleged harms to

the Bank of North Dakota (the “Bank”). The Bank provides loans to students enrolled in North

Dakota institutions of higher education. According to Plaintiffs, the Final Rule will “unlawfully

impose[] a direct competitive harm” on the Bank because the loan terms offered by the SAVE

plan are better than those offered by the Bank. Under this theory, the Bank will lose potential

revenue because fewer borrowers will choose to take out loans from the Bank and will instead

chose to take out Direct Loans to take advantage of the SAVE plan.

Defendants contest the bases of this theory. Defendants first note that North Dakota has

not clearly established that the Bank is an instrumentality of the state. Defendants further assert

that this kind of competitor standing has never been extended to situations where the government

itself was considered a competitor, but instead has been limited to cases in which government

action increased the competitive advantage of one non-governmental actor over another nongovernmental actor. Defendants also argue that North Dakota’s standing argument improperly

relies on the actions of independent third parties that are not certain to occur.

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Plaintiffs’ Recruitment Theory

Plaintiffs also contend that each of them has standing because the Final Rule harms their

ability to recruit and retain talent. According to Plaintiffs, they rely on the PSLF program’s 10year loan forgiveness timeline to recruit and retain talent for state and local government

employment. Plaintiffs allege that without the PSLF program’s comparatively strong benefits

over traditional student loan repayment plans, recruits will be lured away from government work

by the promise of higher pay in the private sector and a 10-year loan forgiveness timeline under

the SAVE plan. Plaintiffs support these contentions with sworn affidavits from State employees

who attest to the importance of the PSLF program in the recruitment and retention of

government employees. ECF Nos. 1-4, 1-5, and 1-6.

Defendants argue that Plaintiffs’ theory improperly relies on the actions of independent

third parties and is speculative. Defendants contend that the SAVE plan will continue to provide

significant benefits to borrowers seeking PSLF forgiveness in the form of lower payments and

limited interest accrual and may even increase participation in the PSLF program. Defendants

assert that any injunction preventing the additional benefits provided by SAVE plan will actually

exacerbate Plaintiffs’ concerns about recruitment.

Georgia, Missouri, North Dakota, Oklahoma, and Ohio’s Lost Tax

Revenue Theory

Plaintiffs Georgia, Missouri, North Dakota, Oklahoma, and Ohio separately argue that

they have standing because the Final Rule will decrease their tax revenues. Generally, forgiven

student loan balances (besides those forgiven via PSLF) are considered taxable income under the

federal definition of AGI. 26 U.S.C. § 108(f). These Plaintiffs allege that, for the purposes of

assessing state income tax, their tax codes tie their definition of AGI to the federal government’s

definition. See, e.g., Mo. Rev. Stat. § 143.121 (“The Missouri [AGI] of a resident individual

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shall be the taxpayer’s federal [AGI] subject to the modifications in this section.”). Thus, in

these States, forgiven loan balances are generally considered taxable income. But the American

Rescue Plan Act of 2021 at 26 U.S.C. § 108(f)(5)—passed by Congress in response to the

economic hardships caused by the COVID-19 pandemic—specifically excludes discharged

student loan debt from consideration of federal AGI through the end of 2025. Therefore, these

Plaintiffs argue that the SAVE plan, by permitting accelerated loan forgiveness, will decrease

their expected tax revenues in 2026 and beyond when loans are forgiven on the SAVE plan

before 2025.

Defendants argue that such a theory of standing is self-inflicted and precluded by binding

Supreme Court precedent. Defendants assert that the alleged loss of potential tax revenue is of

the Plaintiff States’ own making and is unduly speculative. Defendants contend that these

Plaintiffs have the ultimate power over their tax codes and can, if they so desire, change those tax

codes to avoid losing tax revenue.

Venue

Defendants argue that the case should also be dismissed for the independent reason that

venue is improper in the Eastern District of Missouri. Defendants argue that under 28 U.S.C.

§ 1391(e)(1)(C), Missouri is an “entity” who “maintains its principal place of business” in

Missouri’s capital, Jefferson City, which is located in the Western District of Missouri. Under

this theory, Plaintiffs’ Complaint, which alleges that venue is proper in this Court because

“Plaintiff Missouri is a resident of this judicial district,” ECF No. 1 at ¶ 35, is insufficient to

establish venue. Defendants argue that, per the venue statute, the State of Missouri resides only

in the Western District of Missouri.

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Defendants also state that the allegation in Plaintiffs’ Complaint that “a substantial part of

the events or omissions giving rise to the Complaint occurred within this district,” id., is not

supported by any other factual allegations. According to Defendants, the Complaint merely

describes actions taken by the federal government in the District of Columbia and lists no

specific actions taken by any party in the Eastern District of Missouri. For these reasons,

Defendants request dismissal of this case for improper venue or, in the alternative, transfer to the

Western District of Missouri or the District of D.C.

Plaintiffs disagree. They point to caselaw indicating that courts have unanimously found

that venue is proper when a State brings a case in any district court within that State. Plaintiffs

also contend that venue is proper in this Court because they are bringing this suit on behalf of

MOHELA, whose principal place of business is in the Eastern District.

Defendants assert in their Reply that the Ninth Circuit and other district courts were

mistaken in finding that a State can bring a suit in any judicial district within that State.

Defendants ask the Court to reject the rationale used in the cases cited by Plaintiffs. Defendants

similarly discount Plaintiffs’ argument that Missouri’s residence has any connection to the

location of MOHELA’s principal place of business.

Dismissal of President Biden

Defendants briefly argue that Defendant Joseph R. Biden, Jr., should be dismissed

because President Biden is not subject to Plaintiffs’ requested relief. According to Defendants,

the Court lacks jurisdiction to enjoin the president.

Plaintiffs argue that the Court has the authority to issue declaratory relief and to issue

injunctive relief against the President when injunctive relief against the remaining Defendants

will not fully redress Plaintiffs’ alleged injuries. They argue that the Court can, and should, enter

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injunctive relief against the President to prevent him from pursuing loan cancellation by

executive order.

Statutory Authority and the Major Questions Doctrine

Plaintiffs assert that the Final Rule was promulgated in excess of statutory authority,

violates separation of powers principles, and implicates the major questions doctrine. Under the

major questions doctrine, when an agency takes an action touching on issues of important

economic and political significance, the agency must find clear congressional authority

delegating such action to the agency. Plaintiffs contend that the Final Rule is of such economic

and political significance that it requires clear congressional authorization and that Defendants

have no clear statutory authority to promulgate a rule with the provisions found in the Final Rule.

Plaintiffs further allege that the HEA does not permit the Secretary to forgive any loans

under any ICR program. Plaintiffs also argue that the general terms of the Final Rule unlawfully

change the ICR program from a loan repayment program into a grant program “for the typical

borrower.” Plaintiffs insist that the use of “repayment” in the statutory creation of the ICR

program requires full repayment of any student loan.

Plaintiffs also contend that the SAVE program under the Final Rule will make the IBR

program irrelevant, indicating that the Final Rule is not statutorily authorized. According to

Plaintiffs, the Secretary cannot make an ICR program more generous than the IBR program

because the IBR program was created by Congress. Plaintiffs argue that any specific conditions

set by Congress in the IBR program, like the percent of a borrower’s income considered when

calculating payments, cannot be more generous under an ICR program because Congress would

have set those conditions by statute as they did with the IBR plan. Plaintiffs use this same theory

to attack the provisions of the Final Rule providing for limits on the interest accrual as long as a

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borrower participates in the SAVE plan because the IBR plan only permits the Secretary to

subsidize a borrower’s interest for a maximum of three years.

Additionally, Plaintiffs argue that the Secretary’s interpretation of his power under the

HEA is simply too broad. Plaintiffs assert that repayment “over an extended period of time

prescribed by the Secretary, not to exceed 25 years” does not mean, as Defendants suggest, that

there is no lower limit to the length of time a borrower must remain in repayment. Plaintiffs

contend that “an extended period of time” must be at least 20 years as that is the minimum

repayment timeline to qualify for forgiveness under the IBR plan as set by Congress.

Defendants argue that the Court need not rely on the major questions doctrine to decide

this case because the issues presented can be resolved using typical tools of statutory

interpretation. And even though Defendants dispute the applicability of the major questions

doctrine, they still assert that Congress has provided clear authority for the Final Rule’s

provisions via the HEA.

Additionally, Defendants reject the applicability of the Biden v. Nebraska decision to this

case. According to Defendants, the Biden v. Nebraska decision invoked the major questions

doctrine in relation to the Secretary’s reliance on the HEROES Act to create that loan forgiveness

program but said nothing about the Secretary’s authority under the HEA. Defendants emphasize

that this plan does not rely on emergency powers like those implicated by the HEROES Act, and

that any concerns the Supreme Court may have had about executive overreach in times of crisis

are not applicable to the Final Rule.

Defendants contend that Congress has granted them statutory authority to create ICR

plans in 20 U.S.C. § 1087e(d)(1)(D). According to Defendants, the Final Rule is just another

example of the Secretary exercising that authority. Defendants point out that, despite the

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Secretary creating several ICR plans over the past three decades—including plans that allow for

forgiveness for borrowers who make 20 years of qualifying payments—Congress has never

specifically prevented the Secretary from offering loan forgiveness under ICR plans.

Defendants also question Plaintiffs’ position that the statutory provisions of the IBR plan

are implicit limitations on the Secretary’s authority to promulgate ICR plans. In Defendants’

view, if Congress wished to restrict the IBR plan’s provisions to borrowers experiencing a partial

financial hardship, Congress would have explicitly limited the ICR plan in the way Plaintiffs

suggest. And because Congress has not done so, the Court should not find the Secretary’s

authority contains this implicit limitation.

Plaintiffs argue in their Reply that Defendants’ alleged admission that the Secretary has

implied authority to forgive loans under the ICR plan is sufficient to show that there is no clear

statutory authority for the Secretary to do so. Plaintiffs further argue that, despite the Secretary

previously creating ICR plans that provided loan forgiveness, the Final Rule is of such economic

and political significance that it invokes the major questions doctrine and requires the Secretary

to established clear congressional authority for the Final Rule.

The Administrative Procedure Act and Arbitrary and Capricious Agency

Action

Plaintiffs contend that, regardless of whether the Final Rule implicates the major

questions doctrine, it is also unlawful because it is arbitrary and capricious agency action or

otherwise violates the APA.

The Final Rule’s Cost Estimate

Plaintiffs contend the Final Rule’s cost estimate is so inaccurate that its inclusion in the

Final Rule indicates that the Final Rule is arbitrary and capricious. According to Plaintiffs, the

cost estimate is flawed because it underestimates the cost of implementation and ignores that the

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Department’s previous plan for loan forgiveness was struck down as unlawful by Biden v.

Nebraska. Much of Plaintiffs’ argument on this point is based on the timing of the publication of

the Final Rule, which was 10 days after the Supreme Court issued its decision in Biden v.

Nebraska. According to Plaintiffs, because the Secretary knew that the cost estimates as

published in the Final Rule were inaccurate at the time of publication, the Secretary’s

promulgation of the Final Rule was arbitrary and capricious agency action.

Defendants dispute that the Final Rule is arbitrary and capricious despite its seemingly

inaccurate cost estimate. Defendants argue the HEA does not require any cost-benefit analysis

with respect to ICR plans. Defendants assert that the only reason the Secretary conducted a costbenefit analysis was to conform to Executive Order 12,866 16 requiring an “Impact Analysis” by

the Office of Management and Budget to determine whether any regulatory action is

“significant.” 88 Fed. Reg. 43,867. Defendants contend that Executive Order 12,866 creates “no

rights enforceable by litigation plaintiffs outside the executive branch,” and is therefore not

appropriately enforceable by these Plaintiffs. Defendants further emphasize that the Secretary

had finalized the Final Rule prior to the Biden v. Nebraska decision, so the fact that the Final

Rule was published after that decision does not undermine the Secretary’s analysis. Defendants

also cite to the Secretary’s response to a comment in the Final Rule whereby the Secretary

considered and ultimately declined the commenter’s invitation to conduct an alternative costbenefit analysis to account for the possibility that the Supreme Court would ultimately find the

loan forgiveness plan under the HEROES Act unlawful.

Additionally, Defendants argue that, regardless of whether the Court agrees that the

Secretary should have conducted an alternative cost-benefit analysis, such an error by the

58 Fed. Reg. 51,735.

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Secretary is not prejudicial. Defendants take the position that reducing the burdens of student

debt via the Final Rule was a priority of the President and the Secretary and—despite the

Supreme Court’s decision to strike down the previous loan forgiveness plan in Biden v. Nebraska

—the costs associated with that plan were known to the Secretary and were acceptable because

of its purported benefits. Defendants argue that whether the costs of the HEROES Act loan

forgiveness plan were incurred under that plan or will be incurred under the Final Rule, such

costs would not have discouraged the Secretary from promulgating the Final Rule given the

administration’s emphasis on providing borrowers with relief.

Defendants’ Alleged Failure to Consider Important Aspects

of the Final Rule

Plaintiffs assert that the Final Rule is arbitrary and capricious agency action because

Defendants allegedly did not consider Plaintiffs’ reliance on state tax revenues and the PSLF

program as part of the Final Rule. Plaintiffs also argue that Defendants did not adequately

consider the inflationary effects of the Final Rule.

Defendants dispute Plaintiffs’ contention that the Secretary did not adequately consider

the reliance interests of the States or the inflationary effects of the Final Rule. Defendants point

to the Secretary’s responses to comments in the Final Rule showing that he indeed did consider

the effect the Final Rule may have on state tax revenues, the PSLF program, and inflation.

Defendants contend that these responses definitively show that the Secretary did not act

arbitrarily and capriciously by failing to consider these effects.

Alleged Procedural Violations

Plaintiffs argue that the Final Rule violates the APA because it was promulgated in

violation of statutory procedures. Specifically, Plaintiffs take issue with the Secretary’s decision

to limit the notice and comment period to 30 days. Plaintiffs insist that a 30-day public comment

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period was too short. Plaintiffs assert that a 60-day comment period is the minimum time for

comment for a rule of this importance.

Defendants argue that there is no specific requirement under the APA for a 60-day

comment period. In fact, Defendants argue that the APA does not include any requirement

beyond giving interested parties the opportunity to participate in the rulemaking process.

Defendants cite to Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 524 (1978) for

the contention that a reviewing court has no ability to impose additional requirements on agency

rulemaking not found in the APA. In the alternative, Defendants argue that if the Court does find

that the Secretary erred by providing only 30 days for public comments, such error was harmless

as the Secretary received over 13,600 written comments, some of which cover the issues

Plaintiffs now raise in this case and were addressed in the Final Rule.

Plaintiffs’ Other Arguments

Plaintiffs make several other arguments as to why the Final Rule is arbitrary and

capricious, including that Defendants have: (1) allegedly “departed from 30 years of regulatory

practice”; (2) improperly stated the SAVE plan is a “loan” program when it is allegedly a grant

program; (3) implausibly assumed that borrowers at 100% of the FPL are statistically

indistinguishable from those at 225% of the FPL; and (4) provided for early implementation of

portions of the Final Rule without proper explanation. Plaintiffs assert that, for each of these

reasons, they are likely to succeed on the merits.

Defendants dispute Plaintiffs’ contentions on each of these issues. On each account,

Defendants refer to the Secretary’s explanations in the Final Rule itself or challenge the

adequacy of Plaintiffs’ explanations.

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Irreparable Harm

Plaintiffs argue that if they are not granted immediate relief, they will suffer irreparable

harm. They argue that MOHELA will suffer financial harm when (1) loans are forgiven under

the SAVE plan sooner than they would have been under previous ICR plans, or (2) borrowers

consolidate FFEL loans to take advantage of the SAVE program. North Dakota argues that,

without a TRO or preliminary injunction, the Bank—and thus North Dakota—will experience

competitive injury by having to compete with the federal government for student loan business.

Similarly, Plaintiffs assert that they will experience irreparable harm by the loss of competitive

advantage in the job market because of the alleged decreased appeal of the PSLF program and

the loss of tax revenue in those States that tie their State definition of AGI to the federal

definition.

Defendants’ arguments regarding Plaintiffs’ failure to establish irreparable harm mirror

those used to support their arguments against Plaintiffs’ standing. But Defendants additionally

argue that the timing of Plaintiffs’ Motions exhibits a lack of irreparable harm and weighs against

granting a TRO or preliminary injunction. Defendants assert that Plaintiffs’ nine-month’s delay

between the publication of the Final Rule and the filing of this lawsuit suggest that Plaintiffs

were not reasonably diligent in pursuing their case. Defendants believe this delay undermines

Plaintiffs’ claims of impending irreparable harm and alone is sufficient to deny Plaintiffs’

Motions.

Plaintiffs deny that they delayed bringing this suit and that such delay undermines their

assertion of impending irreparable harm. Plaintiffs argue that unreasonable delay can undermine

an argument for irreparable harm only when (1) the harms have already occurred, and (2) the

parties cannot be returned to the status quo. For Plaintiffs, neither is true in this case because a

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vast majority of the harms they complain of will occur in the future and can therefore be rectified

by the injunctive relief they seek. 17 Plaintiffs also state that there was no unreasonable delay

here because the first time they were made aware of early implementation of the Final Rule was

in February 2024, and they filed suit 48 days later.

Plaintiffs further argue that unnecessary delay cannot be a valid argument here because

Plaintiffs, specifically the Missouri Attorney General’s Office, pursued non-litigation avenues

before bringing this case. Plaintiffs allege that in December 2023, the Missouri Attorney

General’s Office participated in the negotiated rule-making process for a different student loan

rule. According to Plaintiffs, that participation was Missouri’s attempt to pursue non-litigation

avenues to resolve this dispute. Plaintiffs admit that the Missouri Attorney General’s Office

failed to make any progress during the negotiations and eventually withdrew from the process.

The Public Interest

Plaintiffs argue that the public interest heavily favors their position because they face

irreparable harm while Defendants merely face a delay in implementation. According to

Plaintiffs, “[a]n injunction will re-establish the status quo as it existed before the publication of

the Final Rule and the Department’s early implementation of various provisions.” ECF No. 10 at

49. However, Plaintiffs are asking only for a stay or injunctive relief to prevent any further loan

forgiveness and full implementation of the Final Rule. Plaintiffs also argue that borrowers

receiving loan forgiveness under the Final Rule will receive a huge windfall while the American

public will have to pay for it. Plaintiffs then state that the public interest cannot lie in keeping

Plaintiffs conceded at oral argument that they are seeking prospective relief and therefore

are not requesting that the Court turn back the clock to reverse any loan forgiveness that has

already occurred.

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the allegedly unlawful Final Rule in place because the public has an interest in ensuring lawful

agency rulemaking.

Defendants argue that the public interest favors keeping the Final Rule in place.

Defendants assert that the public will experience several impending harms if the Final Rule were

to be put on hold, including loan defaults, delinquency, adverse effects on borrowers’ credit

scores, decreased borrower liquidity to make important purchases, decreased enrollment in

higher education, slowed national economic growth, and increased reliance on federal welfare

programs. In Defendants’ view, these harms are certain to occur if the Final Rule is put on hold,

while Plaintiffs have only presented speculative injuries. Defendants also contend that the status

quo is that portions of the Final Rule have already gone into effect and that injunctive relief at

this time would “result in chaos and uncertainty . . . .” ECF No. 22 at 55.

Scope of Relief

Defendants assert that Plaintiffs’ requested relief is overbroad. Defendants suggest that,

if the Court finds that the Final Rule is unlawful, it should grant limited relief only to those

Plaintiffs that can establish standing and only as to provisions of the Final Rule that are found to

be harmful. Defendants also suggest that the provisions of the Final Rule are severable such that

the Court in its discretion can grant injunctive relief only as to the specific provisions of the rule

found to be unlawful.

Plaintiffs argue that their ultimate requested relief, i.e., vacatur of the entire rule, is

required under the APA. Plaintiffs argue that if the Court finds that Missouri has standing under

Biden v. Nebraska, then all Plaintiffs have standing and that vacatur of the final rule is the only

statutorily appropriate remedy. Plaintiffs further argue that, under the APA, if the Court finds

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that the Final Rule is unlawful agency action, then it must vacate the rule in its entirety or

postpone the Final Rule’s effective date until the conclusion of this litigation.

Similarly, while Plaintiffs agree with Defendants that regulations can sometimes be

severed, Plaintiffs contend that severability is the exception and not the rule. According to

Plaintiffs, the limited severability exception is not applicable here because Defendants have

failed to show that the Secretary would have adopted the Final Rule if only the unchallenged

portions remained. Plaintiffs also contend that the remaining portions of the regulation would

not function sensibly without the provisions Plaintiffs seek to strike.

Legal Standard

Motion to Dismiss

When a party challenges the Court’s subject matter jurisdiction, at issue is the Court’s

“very power to hear the case.” Osborn v. United States, 918 F.2d 724, 730 (8th Cir. 1990)

(citation omitted). The Court has substantial discretion and is “free to weigh the evidence and

satisfy itself as to the existence of its power to hear the case.” Little Otters of Love, LLC v.

Rosenberg, 724 F. App’x 498, 501 (8th Cir. 2018) (per curium) (citation omitted).

In deciding a motion under Rule 12(b)(1) regarding its jurisdiction to the hear the case,

the Court “must distinguish between a facial attack—where it looks only to the face of the

pleadings—and a factual attack—where it may consider matters outside the pleadings.” Croyle

ex rel. Croyle v. United States, 908 F.3d 377, 380 (8th Cir. 2018) (citing Osborn, 918 F.2d at 729

n.6). In either case, Plaintiffs bear the burden of proving that subject matter jurisdiction exists.

Buckler v. United States, 919 F.3d 1038, 1044 (8th Cir. 2019).

Defendants have not made clear whether they are lodging a facial or factual attack to

Plaintiffs’ standing. See ECF No. 21 and 22. But in reviewing Defendants’ arguments, and

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despite the Defendants’ submission of additional exhibits for the Court’s consideration, the Court

interprets Defendants’ arguments as raising a facial challenge to Plaintiffs’ standing. Thus, the

Court must accept as true all facts alleged in Plaintiffs’ Complaint as it would on any motion to

dismiss raised under Rule 12(b)(6). Carlsen v. GameStop, Inc., 833 F.3d 903, 908 (8th Cir.

2016).

Defendants moving to dismiss under Rule 12(b)(3) generally must demonstrate that the

plaintiff’s choice of venue is improper through affidavits or other evidence. Gross & Janes Co.

v. Jeff Neill Timberland Mgmt., Inc., No. 4:15-cv-1058-JAR, 2016 WL 4665954, at *2 (E.D. Mo.

Sept. 7, 2016) (citations omitted). Plaintiffs allege that venue is proper in this Court under 28

U.S.C. §§ 1391(b)(2) and (e)(1). ECF No. 1 at ¶ 35. The general federal venue statute, in

relevant part, provides that:

(b) . . . A civil action may be brought in—

...

(2) a judicial district in which a substantial part of the events or omissions giving

rise to the claim occurred, or a substantial part of property that is the subject of the

action is situated;

...

(e)(1) . . . A civil action in which a defendant is an officer or employee of the United

States or an agency thereof acting in his official capacity or under color of legal

authority, or an agency of the United States, or the United States, may, except as

otherwise provided by law, be brought in any judicial district in which (A) a

defendant in the action resides, (B) a substantial part of the events or omissions

giving rise to the claim occurred, or a substantial part of property that is the subject

of the action is situated, or (C) the plaintiff resides if no real property is involved in

the action.

28 U.S.C. §§ 1391(b)(2) and (e)(1).

Plaintiffs allege that Defendants are agencies or officers of the United States sued in their

official capacities. Plaintiffs further allege that Plaintiff Missouri is a resident of the Eastern

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District of Missouri and a substantial part of the events or omissions giving rise to the Complaint

occurred within this district. ECF No. 1 at ¶ 35. In analyzing Defendants’ Motion to Dismiss,

the Court must determine whether Plaintiff Missouri resides within this district or whether a

substantial part of the events giving rise to this case occurred within this district. If venue is

improper, the Court may either dismiss the action or transfer it to the proper district. 28 U.S.C.

§ 1406(a).

Motions for Stay or, in the alternative, for TRO or Preliminary Injunction

Plaintiffs seek a stay of the Final Rule, or, in the alternative, a TRO or a preliminary

injunction enjoining Defendants from any further implementation of the Final Rule. At this stage

in the litigation, the Court will determine whether a stay or a preliminary injunction is

appropriate.

As to the Court’s authority to issue a stay of the Final Rule, Section 705 of the APA

provides that when a plaintiff shows that a stay or preliminary injunction would be necessary to

prevent irreparable injury, the Court “may issue all necessary and appropriate process to

postpone the effective date of an agency action or to preserve status or rights pending conclusion

of the review proceedings.” 5 U.S.C. § 705. The Court’s power under section 705 to issue a stay

on agency action is limited “to the extent necessary to prevent irreparable injury . . . .” Id.; see

also Texas v. EPA, 829 F.3d 405, 435 (5th Cir. 2016).

The Court has the discretion to issue a stay and considers four factors: “(1) whether the

stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether

the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will

substantially injure the other parties interested in the proceeding; and (4) where the public

interest lies.” Nken v. Holder, 556 U.S. 418, 434 (2009) (citation omitted). The mere possibility

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of irreparable injury is not sufficient. Id. at 434–35 (citation omitted). When the government

opposes the stay, the final two factors merge into an assessment of the public interest. Id. at 435.

Besides its authority to issue a stay under the APA, the Court may alternatively issue a

preliminary injunction under traditional equitable principles. This Court has broad discretion

when ruling on preliminary injunctions. Lankford v. Sherman, 451 F.3d 496, 503 (8th Cir. 2006)

(citation omitted). “A preliminary injunction is an extraordinary remedy, and the burden of

establishing the propriety of an injunction is on the movant.” Ng. v. Bd. of Regents of Univ. of

Minn., 64 F.4th 992, 997 (8th Cir. 2023) (quoting Turtle Island Foods, SPC v. Thompson, 992

F.3d 694, 699 (8th Cir. 2021)). Its “primary function . . . is to preserve the status quo until, upon

final hearing, a court may grant full, effective relief.” Ferry-Morse Seed Co. v. Food Corn, Inc.,

729 F.2d 589, 593 (8th Cir. 1984). “[W]hether a preliminary injunction should issue involves

consideration of (1) the threat of irreparable harm to the movant; (2) the state of balance between

this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the

probability that movant will succeed on the merits; and (4) the public interest.” Dataphase Sys.,

Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc); see also Winter v. NRDC, 555

U.S. 7, 24 (2008). These factors are essentially identical to those the Court must analyze when

considering issuing a stay. No single factor is dispositive, but the Court should afford substantial

weight to the movant’s likelihood of success on the merits. Home Instead, Inc. v. Florance, 721

F.3d 494, 497 (8th Cir. 2013).

“A movant shows a likelihood of success on the merits when it demonstrates a ‘fair

chance,’ not necessarily ‘greater than fifty percent,’ that it will ultimately prevail under

applicable law.” Cigna Corp. v. Bricker, ___ F.4th ___, 2024 WL 2839930, at *3 (8th Cir. June

5, 2024) (citing Heartland Acad. Cmty. Church v. Waddle, 335 F.3d 684, 690 (8th Cir. 2003)).

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“Irreparable harm occurs when a party has no adequate remedy at law, typically because

its injuries cannot be fully compensated through an award of damages.” Gen. Motors Corp. v.

Harry Brown’s, LLC, 563 F.3d 312, 319 (8th Cir. 2009). Plaintiffs “must show more than the

mere possibility that irreparable harm will occur.” Ng, 64 F.4th at 997 (quoting Sessler v. City of

Davenport, 990 F.3d 1150, 1156 (8th Cir. 2021)). Rather, “[t]o demonstrate irreparable harm,

[the movant] must show harm that is certain and great and of such imminence that there is a clear

and present need for equitable relief.” H&R Block, Inc. v. Block, Inc., 58 F.4th 939, 951 (8th Cir.

2023) (internal quotation marks omitted).

Discussion

Standing

“The law of Article III standing, which is built on separation-of-powers principles, serves

to prevent the judicial process from being used to usurp the powers of the political branches.”

Clapper v. Amnesty Int'l USA, 568 U.S. 398, 408 (2013) (citations omitted). Article III of the

Constitution limits the jurisdiction of federal court to “Cases” and “Controversies.” U.S. CONST.

art. III, § 2. “For there to be a case or controversy under Article III, the plaintiff must have a

‘personal stake’ in the case . . . .” TransUnion LLC v. Ramirez, 594 U.S. 413, 423 (2021). To

establish this personal stake, plaintiffs must show: (1) they have suffered an “injury in fact” that

is concrete, particularized, and actual or imminent, (2) that there is a causal connection between

the alleged injury and the defendant’s conduct, and (3) that judicial relief will likely redress the

injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). “The party invoking

federal jurisdiction bears the burden of establishing these elements.” Id. at 561. Plaintiffs,

therefore, “must support each element in the same way as any other matter on which they bear

the burden of proof.” Animal Legal Def. Fund v. Vaught, 8 F.4th 714, 718 (8th Cir. 2021) (citing

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Lujan, 504 U.S. at 561) (internal quotation marks omitted). Therefore, on a motion to dismiss,

“plaintiffs must allege sufficient facts to support a reasonable inference that they can satisfy the

elements of standing.” Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) and Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 555–56 (2007)).

An injury in fact is “‘an invasion of a legally protected interest’ that is ‘concrete and

particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Spokeo, Inc. v. Robins,

578 U.S. 330, 339 (2016) (quoting Lujan, 504 U.S. at 560). “A concrete injury must be de facto;

that is, it must actually exist” in reality rather than in the abstract. Id. at 340 (cleaned up). “For

an injury to be particularized, it must affect the plaintiff in a personal and individual way.” Id. at

339 (cleaned up).

“Although imminence is concededly a somewhat elastic concept, it cannot be stretched

beyond its purpose, which is to ensure that the alleged injury is not too speculative for Article III

purposes—that the injury is certainly impending.” Clapper, 568 U.S. at 409 (emphasis in

original and citations omitted). “[A]llegations of possible future injury are not sufficient.” Id.

(emphasis in original).

“For causation to exist, the injury has to be fairly traceable to the challenged action of the

defendant, and not the result of the independent action of some third party not before the

court.” Agred Found. v. U.S. Army Corps of Eng’rs, 3 F.4th 1069, 1073 (8th Cir. 2021) (citation

omitted). This “requires the plaintiff to show a sufficiently direct causal connection between the

challenged action and the identified harm. That connection cannot be overly attenuated.” Id.

(citation omitted).

“[W]hen the plaintiff is not himself the object of the government action or inaction he

challenges, standing is not precluded, but it is ordinarily substantially more difficult to establish.”

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Lujan, 504 U.S. at 562 (citation and internal quotation marks omitted). “To satisfy that burden,

the plaintiff must show at the least that third parties will likely react in predictable

ways.” California v. Texas, 593 U.S. 659, 675 (2021) (citation and internal quotation marks

omitted).

Redressability requires the plaintiff to show that “it is likely, as opposed to merely

speculative, that the injury will be redressed by a favorable decision.” Lujan, 504 U.S. at 561

(cleaned up). In assessing redressability, the court must “consider the relationship between the

judicial relief requested and the injury suffered.” California v. Texas, 593 U.S. at 671 (citation

and internal quotation marks omitted).

“If at least one plaintiff has standing, the suit may proceed.” Biden v. Nebraska, 143 S.

Ct. 2355, 2365 (2023) (citing Rumsfeld v. Forum for Acad. and Institutional Rights, Inc., 547

U.S. 47, 52 n.2 (2006)).

Here, Plaintiffs have established standing through the alleged injuries to MOHELA and

thus to Missouri. The allegations in the Complaint are substantially similar to, if not identical to,

those the Supreme Court held were sufficient to establish Missouri’s standing just last year in

Biden v. Nebraska. The Court finds no reason to reach a different result here.

The Final Rule calls for accelerated loan forgiveness for a set of borrowers with low

initial principal balances who elect repayment through the SAVE plan and make a set number of

qualifying payments. To the extent MOHELA services accounts subject to this early

forgiveness—and there is no dispute that MOHELA does service such accounts—MOHELA will

lose revenues from administrative servicing fee when those accounts are forgiven. For

forgiveness to occur, borrowers must first opt into the SAVE program and make the necessary

number of qualifying payments. There is some question of whether such a theory of harm relies

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too heavily on the actions of third-party borrowers who may decide to not choose the SAVE

program or who may otherwise not qualify for early forgiveness because they have failed to

make the necessary payments. But in reality, thousands of loans once serviced by MOHELA

have already been forgiven by the Secretary under the early implementation of the Final Rule.

Thousands more are primed for forgiveness in the coming weeks and months, making the alleged

harm to MOHELA from early loan forgiveness certain to occur. “This financial harm is an injury

in fact directly traceable to the Secretary’s plan . . . .” Biden v. Nebraska, 143 S. Ct. at 2366.

And “[t]he [Final Rule’s] harm to MOHELA is a harm to Missouri” because “MOHELA is a

‘public instrumentality’ of the State.” Id. (citing Mo. Rev. Stat. § 173.360). Granting Plaintiffs’

requested injunctive relief would redress this impending harm by stopping any additional

forgiveness.

To the extent Defendants ask this Court to assess the alleged harms to Missouri by

conducting a balancing test by weighing the Final Rule’s potential benefits to MOHELA against

the loss of administrative fees, the Court declines to do so. Defendants have cited no case law

from this Circuit indicating that any court has dismissed a case for lack of standing because a

plaintiff could potentially benefit from the alleged injurious actions of a defendant even though

those alleged harms appear certain to occur.

Defendants cite to Bueno v. Experian Information Sols., Inc., 664 F. Supp. 3d 800, 806

(N.D. Ill. 2023) for the contention that a plaintiff’s windfall is not an injury. But the plaintiff in

Bueno alleged harm from a false—but ultimately beneficial—statement on her credit report. The

district court found that because the false statement actually provided the plaintiff with a benefit,

the plaintiff failed to establish an injury sufficient to establish standing. Defendants argue that

the same can be said for MOHELA here because MOHELA has requested that the Secretary

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reallocate 1.5 million of its Direct Loan accounts to other loan servicers and MOHELA may

receive additional benefits under the Final Rule. The Court does not agree, and again rejects the

invitation to conduct a balancing test. Under Biden v. Nebraska, it is enough that MOHELA has

shown that it has been and will be harmed by the Final Rule’s loan forgiveness provisions. Any

potential “benefits” MOHELA receives are incidental and do not affect the Court’s standing

analysis.

Defendants next cite to Texas v. United States for the contention that some courts

recognize an exception where a court considers “offsetting benefits that are of the same type and

arise from the same transaction as the costs.” 809 F.3d 134, 155 (5th Cir. 2015). But directly

thereafter, the Fifth Circuit recognized that:

[o]nce injury is shown, no attempt is made to ask whether the injury is outweighed

by benefits the plaintiff has enjoyed from the relationship with the defendant.

Standing is recognized to complain that some particular aspect of the relationship

is unlawful and has caused injury. Our standing analysis is not an accounting

exercise.

Id. at 155–56 (citations, footnotes, and internal quotation marks omitted).

MOHELA’s loss of administrative fees when loans it services are forgiven by the

Secretary is not of the same type nor does it arise from the same transaction as the loss of

administrative fees when the Secretary reallocates Direct Loans held by MOHELA to other

servicers. Similarly, the other purported benefits of the Final Rule to MOHELA do not offset the

alleged and actual harms experienced by MOHELA. Taking Plaintiffs’ allegations as true,

Missouri has adequately alleged that the Final Rule has and will harm Missouri via early

forgiveness of loans serviced by MOHELA.

Because the Court finds that Plaintiff Missouri has standing, it need not address Plaintiffs’

other theories of standing. This suit may proceed “[i]f at least one plaintiff has standing.” Biden

v. Nebraska, 143 S. Ct. at 2365. Even so, the Court notes that Plaintiffs’ other theories of

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standing are tenuous at best. But because it finds that at least Missouri has standing, the Court

will deny Defendants’ Motion to Dismiss on the grounds that Plaintiffs lack standing.

Venue

In what appears to be an issue of first impression in this Circuit, Defendants argue that

this case should be dismissed for improper venue, or, in the alternative, this case should be

transferred to the Western District of Missouri or the District of D.C. Defendants argue that the

rules of venue require Missouri to file cases as a plaintiff only in the Western District of Missouri

because Missouri’s capital, and thus its principal place of business, is located in that district. In

support, Defendants cite instances where courts have dismissed cases for improper venue when

plaintiffs sued State officials in the federal judicial district that does not include the State’s

capital. The Court agrees that when a plaintiff seeks to sue Missouri officials for official actions,

the Western District is the proper venue for such a case generally. But that is not the case here,

where Missouri, and not a Missouri state official, is a plaintiff. Defendants cite to no cases

where a court found venue improper when a plaintiff State sued in a district within that State

where the State’s capital does not sit.

On the contrary, Defendants’ argument has been rejected by every court where it has been

raised. See Utah v. Walsh, No. 2:23-cv-016, 2023 WL 2663256, at *3 (N.D. Tex. Mar. 28, 2023)

(“[Plaintiff] Texas resides everywhere in Texas.”); see also California v. Azar, 911 F.3d 558, 570

(9th Cir. 2018) (“A state is ubiquitous throughout its sovereign borders.”). In line with other

courts considering this argument, the Court finds that the State of Missouri resides everywhere in

Missouri and thus resides in this district. Cases where “a defendant is an officer or employee of

the United States or an agency thereof . . . or an agency of the United States . . . may . . . be

brought in any judicial district in which . . . the plaintiff resides . . . .” 28 U.S.C. § 1391(e)(1).

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The State of Missouri resides in the Eastern District of Missouri, and therefore venue is proper in

this Court. The Court will therefore deny Defendants’ Motion to Dismiss for improper venue.

President Biden

Defendants argue that President Biden should be dismissed as a Defendant because the

Court lacks the authority to issue injunctive relief against the President. Plaintiffs agree that the

Court lacks the authority “in general” to issue an injunction against the President. But Plaintiffs

also argue that the Court has such authority in limited circumstances when an injury “cannot be

‘redressed fully by injunctive relief against the remaining Defendants.’” ECF No. 26 at 54

(quoting Hawaii v. Trump, 859 F.3d 741, 788 (9th Cir. 2017), vacated on other grounds, 583 U.S.

941 (2017)). Plaintiffs specifically point to statements made by President Biden indicating his

intent to, in Plaintiffs’ words, “evade the Supreme Court.” Id. Plaintiffs contend that without

entering declarative relief against President Biden, he will simply attempt to enforce the same

student loan forgiveness via executive action. Therefore, Plaintiffs say declaratory and

injunctive relief against President Biden are both proper and necessary.

At this early stage in the litigation, the Court cannot conclude that Plaintiffs will not

prevail against President Biden. In so deciding, the Court makes no determination of whether

such relief will be appropriate once Plaintiffs’ claims have been fully litigated. But, at this time,

the Court will deny Defendants’ request to dismiss President Biden as a Defendant.

Likelihood of Success on the Merits

Satisfied that it has jurisdiction over this case, the Court will next discuss the likelihood

that Plaintiffs will be successful on the merits. The Court will first discuss whether Plaintiffs are

likely to succeed on their argument that the HEA does not provide the Secretary with the

authority to promulgate the Final Rule, and what effect, if any, the major questions doctrine may

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play in this analysis. The Court will then discuss whether Plaintiffs are likely to succeed on their

arguments that Defendants’ actions in promulgating the Final Rule were arbitrary and capricious

agency action or otherwise violate the APA.

The Secretary’s Authority Under the HEA

On its face, the HEA provides the Secretary with significant authority to promulgate

regulations related to ICR repayment plans. Under the HEA, the Secretary has significant

discretion to determine the amount of time that borrowers can participate in repayment under

ICR plans. The only express limitation of that authority is that repayment under ICR plans

cannot exceed 25 years. 20 U.S.C. § 1087e(d)(1)(D). Similarly, the Secretary has significant

authority to determine repayment schedules for ICR programs through promulgated regulations.

Id. § 1087e(e)(4) (“Income contingent repayment schedules shall be established by regulations

promulgated by the Secretary and shall require payments that vary in relation to the appropriate

portion of the annual income of the borrower . . . as determined by the Secretary.”). The

Secretary also enjoys broad discretion regarding how and when interest can be capitalized on

loans in repayment under ICR plans. Id. § 1087(e)(5) (“The Secretary may promulgate

regulations limiting the amount of interest that may be capitalized on such loan, and the timing

of any such capitalization.”).

Faced with these statutory provisions, Plaintiffs argue that the Secretary’s authority to

promulgate rules for ICR plans under the HEA is implicitly limited by the terms of the

congressionally created IBR plan. Plaintiffs rely on this reasoning to question (1) the Secretary’s

ability to consider as exempt from payment calculations any AGI below 225% of the FPL under

the SAVE plan as opposed to 150% of the FPL in the IBR program; (2) the Secretary’s ability to

cap payments under the SAVE plan at 5% of discretionary income rather than the 10% cap

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provided by the IBR program; (3) the Secretary’s ability to prevent borrowers from being

charged additional interest after making payments under the SAVE program as opposed to the 3

year limit on interest subsidization in the IBR program; 18 and (4) the Secretary’s ability to

forgive loans under the SAVE program in as little as 10 years instead of the 20 year forgiveness

timeline provided for under the IBR program. On that final point, it is Plaintiffs’ contention that

the Secretary has absolutely no authority to forgive loans under the ICR plan, let alone the

authority to forgive loans in as little as 10 years.

The Court finds that Plaintiffs’ arguments regarding the Secretary’s authority to set

payment schedules and interest accrual limitations are unlikely to succeed on the merits. A

reading of the plain language of the statute supports the Secretary’s promulgation of the Final

Rule as to the modified ICR repayment schedules and interest accrual under the SAVE program.

Student loan repayment programs are well within the wheelhouse of the Secretary and the

Department. Congress, in passing the HEA and its many amendments, has consistently tasked

the Secretary and the Department with promulgating regulations regarding ICR plans that are

“necessary to implement effectively income contingent repayment.” 20 U.S.C. § 1087e(e)(1).

Under this authority, the Secretary has significant discretion to promulgate rules to effectively

implement ICR plans, including the ability to (1) determine what constitutes discretionary

income, (2) set the cap on the amount of discretionary income that can qualify for payment

calculations, and (3) limit interest accrual and capitalization. As more thoroughly outlined

Plaintiffs contend that “[t]he ICR program expressly forbids subsidizing interest

payments” and cites to 20 U.S.C. § 1098e(b)(3) and § 1087e(b)(9) for support. ECF No. 10 at

35. But § 1098e(b)(3) only controls the IBR plan and on its face does not appear to forbid

interest subsidization under the ICR plan. Similarly, § 1087e(b)(9) deals with the Secretary’s

authority regarding reducing interest rates for loans disbursed before July 1, 2012. But as

pointed out by Defendants, the Final Rule does not make any attempt to reduce interest rates, so

§ 1087e(b)(9) is not relevant to the Secretary’s claimed authority here.

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above, the Secretary has promulgated such regulations for decades. Though the SAVE plan is

the first time that payments under an ICR plan are likely lower than payments under the IBR

plan for most borrowers, Congress does not appear to have either explicitly or implicitly limited

the Secretary’s ability to create such a comparatively generous plan. The same is true for interest

accrual and capitalization, which again fall within the express discretion of the Secretary.

Further, the Secretary’s discretionary changes to the ICR program here appear reasonably

tailored to accomplish the Secretary’s stated goal. The Secretary explains that the Final Rule was

promulgated in an attempt to curb the tremendous rise in student loan balances and to ease the

burdens borrowers face in paying off loans under existing repayment plans. The Secretary also

states that the Final Rule’s goal is ensuring that fewer borrowers fall into delinquency and

default. Having the SAVE plan offer low-income borrowers a repayment plan that permits low

payment amounts—as low $0 per month—and limits additional interest accrual and

capitalization appear as two reasonable ways of accomplishing these goals. To find that the

terms of the IBR plan somehow limit the Secretary’s broad discretion to shape rules that

reasonably address these matters is not supported by the history and plain language of the HEA.

Plaintiffs have failed to establish that they are likely to succeed on the merits of their challenges

to these specific provisions of the Final Rule.

The Final Rule’s loan forgiveness provisions present a more difficult issue. According to

Defendants, Congress intended to grant the Secretary authority under the HEA to forgive

balances on loans in the ICR program by creating a maximum repayment period of 25 years or

“an extended period of time prescribed by the Secretary.” 20 U.S.C. § 1087e(d)(1)(D). The

Secretary’s claimed authority here is not new. Under this alleged authority, the Secretary has

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been providing loan cancellation for loans in the ICR plan since the first ICR regulations became

effective in 1995.

Despite this history, the plain text of the statute does not support Defendants’ position.

The Court is not free to replace the language of the statute with unenacted legislative intent.

Thigulla v. Jaddou, 94 F.4th 770, 777 (8th Cir. 2024) (citation omitted); see also Iverson v.

United States, 973 F.3d 843, 849 (8th Cir. 2020) (“The case must be a strong one indeed, which

would justify a court in departing from the plain meaning of words in search of an intention

which the words themselves did not suggest.”) (quoting Bouie v. City of Columbia, 378 U.S. 347,

362–63 (1964)) (cleaned up); Argus Leader Media v. U.S. Dep’t of Agric., 740 F.3d 1172, 1176

(8th Cir. 2014) (“Congress expresses its purpose by words. It is for [courts] to ascertain—neither

to add nor to subtract, neither to delete nor to distort.”) (citation and internal quotation marks

omitted). It is true that offering forgiveness of loan balances after 25, or even 10, years of

repayments to borrowers under the SAVE plan will ensure that fewer borrowers will default or

become delinquent. These loan forgiveness provisions thus comport with the Secretary’s

expressed purpose for creating the Final Rule. But because the statute is silent on loan

forgiveness under the ICR program, it is at least equally as likely that the HEA’s time limitations

in the ICR program refer to the maximum period that borrowers can be in repayment before the

entire loan amount must be repaid or borrowers must default.

Plaintiffs’ alternative reading—that § 1087e(d)(1)(D)’s language does not permit loan

forgiveness under the ICR program—finds support in other portions of the HEA that explicitly

permit loan forgiveness. Congress has made it clear under what circumstances loan forgiveness

is permitted, and the ICR plan is not one of those circumstances. See Biden v. Nebraska, 143 S.

Ct. at 2363 (“[The HEA] authorizes the Secretary to cancel or reduce loans, but only in certain

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limited circumstances and to a particular extent.”). 19 Defendants counter that Congress required

forgiveness under programs like IBR and PSLF but left forgiveness under ICR up to the

discretion of the Secretary. But considering the loan repayment scheme under the HEA in its

entirety, the Court finds Defendants’ interpretation is questionable. Plaintiffs, therefore, have a

“fair chance” of success on the merits on their claim that the Secretary has overstepped its

authority by promulgating a loan forgiveness provision as part of the SAVE program. Cigna

Corp v. Bricker, ___ F.4th ___, 2024 WL 2839930, at *3 (8th Cir. 2024 June 5, 2024).

The Major Questions Doctrine

Plaintiffs assert that the Final Rule violates separation of powers principles. As part of

this argument, Plaintiffs state that this case requires the Court to invoke the major questions

doctrine.

The major questions doctrine has been recently invoked by the Supreme Court in several

decisions relating to actions taken by various executive agencies. In these cases, the Supreme

Court explains that when the agency action complained of involves a matter of “vast economic

and political significance,” the agency must find clear congressional authority approving of such

action. Alab. Ass’n of Realtors v. Dep’t of Health and Hum. Servs., 594 U.S. 758, 764 (2021)

(finding no clear congressional authority for the CDC to issue a nationwide eviction

moratorium); see also Nat’l Fed’n of Indep. Bus. v. OSHA, 595 U.S. 109, 114 (2022) (per

Earlier this year, the Fifth Circuit came to a similar conclusion. “Congress, after all,

unambiguously authorized the Department to ‘cancel’ or ‘discharge’ student debt obligations in

limited circumstances. See, e.g., 20 U.S.C. § 1078-11(a)(2)(B) (authorizing the Department to

‘cancel a qualified loan amount’ for individuals employed full time ‘in an area of national need’)

(emphasis added); id. § 1087e(m)(1) (stating that the Department ‘shall cancel the balance of

interest and principal due’ for borrowers employed in a public service job) (emphasis

added); id. § 1087j(b) (directing the Department to ‘cancel[] the obligation to repay a qualified

loan amount’ for teachers) (emphasis added).” Career Colls. & Schs. of Texas v. United States

Dep’t of Educ., 98 F.4th 220, 241 (5th Cir. 2024) (emphasis in original).

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curium) (finding that OSHA had no clear congressional authority to issue a vaccine mandate

during the COVID-19 pandemic and stating that “[a]dministrative agencies are creatures of

statute [that] accordingly possess only the authority that Congress has provided.”); West Virginia

v. EPA, 597 U.S. 697, 723 (2022) (finding that the EPA had no clear statutory authority to

implement regulations that would have brought more sources of greenhouse gas emissions under

the EPA’s authority and stating that “in certain extraordinary cases, both separation of powers

principles and a practical understanding of legislative intent make us ‘reluctant to read into

ambiguous statutory text’ the delegation claimed to be lurking there. To convince us otherwise,

something more than a merely plausible textual basis for the agency action is necessary. The

agency instead must point to ‘clear congressional authorization’ for the power it claims.”)

(quoting Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 324 (2014)); Biden v. Nebraska, 143 S. Ct.

at 2374 (finding that the Secretary did not have clear authority under the HEROES Act to

promulgate its previous loan forgiveness program and stating that “[a] decision of such

magnitude and consequence on a matter of earnest and profound debate across the country must

rest with Congress itself, or an agency acting pursuant to a clear delegation from that

representative body.”) (cleaned up).

Here, there is no real dispute that the Secretary’s Final Rule touches on issues of vast

economic and political significance and therefore may implicate the major questions doctrine.

But to the extent it is necessary to invoke the major questions doctrine here at this stage of

litigation, it merely confirms what the Court has found using the typical tools of statutory

interpretation. Under the express terms of the HEA, the Secretary has clear congressional

authority to promulgate the vast majority of the provisions of the Final Rule. The HEA is not

ambiguous regarding its grant of discretion to the Secretary as to setting ICR repayment

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schedules and determining the extent of interest capitalization as to loans in an ICR repayment

plan like SAVE. But Defendants have failed to point to a clear congressional authorization for

the loan forgiveness provisions of the Final Rule, and the Court has found none. While the

Secretary does not appear to be expressly precluded from forgiving loans under his ICR

authority, it is far from clear that Congress has expressly granted the Secretary such authority.

Thus, Plaintiffs have a “fair chance” of success on the merits on their claim that the Final Rule

violates separation of powers principles. Cigna Corp, 2024 WL 2839930, at *3.

Alleged Arbitrary and Capricious Agency Action

“Under the APA, review of an agency decision is limited[, and the Court] gives ‘agency

decisions a high degree of deference.’” Mandan, Hidatsa & Arikara Nation v. U.S. Dep’t of the

Interior, 95 F.4th 573, 579 (8th Cir. 2024) (quoting Sierra Club v. EPA, 252 F.3d 943, 947 (8th

Cir. 2001)). “If an agency’s determination is supportable on any rational basis, then a reviewing

court must uphold it.” Id. (quoting Org. for Competitive Mkts. v. U.S. Dep’t of Agric., 912 F.3d

455, 459 (8th Cir. 2018)) (internal quotation marks omitted). “Arbitrary and capricious review,

at its core, measures if an agency action was irrational.” Id. (citation omitted). “Federal

administrative agencies are required to engage in ‘reasoned decisionmaking.’” Michigan v. EPA,

576 U.S. 743, 750 (2015) (citation omitted). Agency action must rely on its consideration of

relevant factors, which are set by Congress. Mandan, 95 F.4th at 579 (citation omitted).

Agency action is arbitrary and capricious if:

the agency has relied on factors which Congress has not intended it to consider,

entirely failed to consider an important aspect of the problem, offered an

explanation for its decision that runs counter to the evidence before the agency, or

is so implausible that it could not be ascribed to a difference in view of the product

of agency expertise.

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Id. at 580 (quoting Missouri ex rel. Bailey v. U.S. Dep’t of Interior, 73 F.4th 570, 576–77 (8th Cir.

2023)). The court must also consider if an agency is acting within its sphere of expertise. Id.

(citations omitted).

Plaintiffs allege that the Final Rule is arbitrary and capricious agency action under the

APA for several reasons, some of which are more developed and relevant than others. The Court

finds that none of these arguments are likely to be successful on the merits and will discuss the

most salient of them below.

The Final Rule’s Cost Estimate

First, Plaintiffs argue that the Final Rule’s cost estimate is arbitrary because it failed to

account for the potential that the Supreme Court would strike down its previous loan forgiveness

program in Biden v. Nebraska. The Final Rule estimates the costs of its implementation to be

$156 billion over the first ten years. 88 Fed. Reg. 43,820. This cost estimate does not consider

the potential effect of the Supreme Court finding that the previous loan forgiveness program

under the HEROES Act was unlawful even though the Final Rule was not published until after

the Supreme Court decided Biden v. Nebraska. Id. at 43,875.

Plaintiffs contend that the cost of the Final Rule is much higher. Plaintiffs cite to the

Congressional Budget Office’s estimate that the program would cost $230 billion over the first

ten years. 20 Plaintiffs also cite an independent cost analysis conducted by the Penn Wharton

Budget Model estimating the 10-year cost of the Final Rule at $475 billion. 21 Finally, Plaintiffs

Re: Costs of the Proposed Income-Driven Repayment Plan for Student Loans,

Congressional Budget Office (March 13, 2023), https://perma.cc/CTJ5-XBSV.

Biden’s New Income-Drive Repayment (“SAVE”) Plan: Budgetary Cost Estimate,

University of Pennsylvania, Penn Wharton Budget Model (July 17, 2023),

https://perma.cc/GSC2-WP3F.

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cite to a promotional blog post from an independent student loan planning organization that

estimates the ten year cost to be over $1 trillion. 22

Plaintiffs claim that the Secretary’s decision to promulgate the Final Rule under such an

inaccurate estimate means that the Secretary did not act reasonably. In this view, the Secretary’s

decision to publish the Final Rule without conducting an additional analysis was arbitrary and

capricious and requires vacatur. For support, Plaintiffs cite to two cases from outside this district

in which an executive agency action was found to be arbitrary and capricious because it relied on

outdated environmental data. ECF No. 10 at 39 (citing Dow AgroSciences LLC v. Nat’l Marine

Fisheries Servs., 707 F.3d 462, 473 (4th Cir. 2013) (finding that reliance on outdated water

monitoring data that was not representative of current environmental conditions indicated

arbitrary and capricious decision-making because the agency “chose to continue relying on the

outdated data without explaining why.”); and Sierra Club v. EPA, 671 F.3d 955, 966–68 (9th Cir.

2012) (finding that the EPA’s use of outdated emissions data when promulgating a rule was

arbitrary and capricious because it “did not analyze this new data or explain why it chose not to

analyze the data . . . .”). Neither case is particularly relevant to the question of whether the

Secretary’s cost estimate, which Plaintiffs conceded at oral argument that the Secretary is under

no obligation to conduct, means that the Final Rule is arbitrary and capricious.

Defendants contend that, despite the inaccuracy of the cost estimate and failure to

conduct an additional cost estimate after Biden v. Nebraska, there is no basis to find that the Final

Rule was arbitrary and capricious. Defendants contend that that the Secretary’s cost estimate is

unreviewable because it is under no obligation to conduct one, let alone an accurate one. They

Travis Hornsby, New REPAYE Plan Could Save Borrowers Over $1 Trillion Over 10

Years, Student Loan Planner (last updated on December 30, 2023), https://perma.cc/B5DUW5S2.

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also argue that the Secretary finalized the Final Rule before the publication of Biden v. Nebraska

and support this contention with an affidavit of an employee who attests to have knowledge of

the Final Rule being signed by the Secretary and submitted for publication on June 24, 2023.

ECF No. 22 at 43; ECF No. 22-1 at ¶ 3. Defendants also contend that the Secretary acted

reasonably by not considering the effects of a negative decision in Biden v. Nebraska because,

when the Final Rule was finalized, the Secretary believed the Supreme Court would uphold its

authority to promulgate the loan forgiveness plan under the HEROES Act. Finally, Defendants

argue that Plaintiffs have failed to establish that, if there was an error, that such an error was

prejudicial. Defendants state that because the Secretary knew of the estimated costs of the

HEROES Act forgiveness plan and approved that plan, he would just as easily have approved the

Final Rule if those costs were associated with the Final Rule instead of the previous plan.

The Court finds that Plaintiffs are not likely to succeed on the merits of this argument.

Despite the allegedly inaccurate cost estimate, the Secretary’s reliance on that cost estimate in

promulgating the Final Rule was not unreasonable. Congress has never required the Secretary to

consider costs when promulgating rules for the ICR plans, and the Secretary cannot be said to

have entirely failed to consider the cost of the Final Rule.

There is also no indication that the Secretary’s reasoning for creating the Final Rule is

somehow invalidated by Plaintiffs’ preferred cost estimates. Defendants have explained that

their priority in promulgating the Final Rule was to “reduc[e] the crushing burdens of studentloan debt.” ECF No. 22 at 45. Plaintiffs seemingly have shown that the cost of such actions are

high but have not established that a high cost somehow would fail to reduce the burdens of

student loan debt. As Defendants have explained, whether costs were to occur under the Final

Rule or would be spread between the Final Rule and the HEROES Act forgiveness plan, the

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Secretary found that the need to provide relief to borrowers outweighs the estimated costs. And

though the Secretary knew there was a risk that the Supreme Court would find its HEROES Act

forgiveness plan unlawful when the Final Rule was finalized, it was reasonable for the Secretary

to rely on his belief that he had the authority to promulgate the stricken rule. On this record, the

Court has not found a sufficient basis to conclude that the Secretary’s cost estimate in the Final

Rule makes the entire Final Rule arbitrary and capricious agency action.

Plaintiffs urge the Court to find that Defendants’ harmless error arguments evince an

“unalterably closed mind,” indicating that the Secretary’s action was not “rationally considered.”

Under this theory, because the Secretary would have promulgated the Final Rule despite its

increased cost, the Secretary’s actions were not reasonable. Plaintiffs cite to a completely

inapposite case from the D.C. Circuit in support of this standard. ECF No. 26 at 40 (citing Air

Trans. Ass’n of Am., Inc. v. Nat’l Mediation Bd., 663 F.3d 476, 487 (D.C. Cir. 2011)). Plaintiffs

have cited no cases endorsing this “unalterably closed mind” approach. In fact, the Supreme

Court appears to have recently rejected a substantially similar test. Little Sisters of the Poor

Saints Peter and Paul Home v. Pennsylvania, 591 U.S. 657, 685 (2020) (“We decline to evaluate

the final rules under the open-mindedness test.”). The Court finds no authority or reasoned basis

to use such a test here.

The Court therefore finds that Plaintiffs have failed to show that they are likely to

succeed on the merits of their claim that the Final Rule’s cost estimate constitutes arbitrary and

capricious agency action.

The Secretary’s Alleged Failure to Consider Certain Issues

Plaintiffs assert that the Secretary failed to consider the Final Rule’s implications on State

tax revenues, the State’s reliance on the PSLF program as a recruiting tool, and the Final Rule’s

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alleged inflationary effects. But the Final Rule in fact does consider and respond to comments

that dealt with these issues. See 88 Fed. Reg. 43,877 (responding to comments about the Final

Rule’s effect on State tax revenues); Id. at 43,879–80 (responding to comments about the effect

of the Final Rule on the appeal of the PSLF program); Id. at 43,879 (responding to comments

about the Final Rule’s potentially inflationary effects). Therefore, the Final Rule is not arbitrary

and capricious for failing to consider these issues, and the Court finds that such an argument has

little chance of success on the merits.

The Secretary’s Findings Regarding Income-Exemption

Plaintiffs argue that the Final Rule’s explanation for an increase in income-exemption

under the SAVE plan from 150% of the FPL to 225% is based on unlikely and implausible

conclusions. Plaintiffs take issue with the Final Rule’s statement that, in the Secretary’s analysis,

people with incomes at 100% of the FPL and those with incomes at 225% of the FPL are

“statistically indistinguishable.” The Final Rule states that:

[t]he Department chose the 225 percent threshold based on an analysis of data from

the U.S. Census Bureau’s Survey of Income and program Participation (SIPP) for

individuals aged 18–65 who attended postsecondary institutions and who have

outstanding student loan debt. The Department looked for the point at which the

share of those who report material hardship—either being food insecure or behind

on their utility bills—is statistically different from those whose family incomes are

at or below the FPL.

88 Fed. Reg. 43,832.

Plaintiffs decry this conclusion as implausible. According to Plaintiffs, a person or

family with an income at 100% of the FPL cannot experience the same financial difficulties of a

person or family making 225% of the FPL. But this is not the reasoning the Secretary used.

Instead, the Secretary conducted an analysis of SIPP data to determine at what income level

Americans who previously attended college begin to experience material economic hardships

like food instability and inability to pay utility bills. According to this analysis, Americans at

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225% of the FPL report these economic hardships to a similar degree as those at 100% of the

FPL. This is a reasonable explanation of the statistical analysis the Secretary relied on as its

basis to set the income expectation under the SAVE plan at 225% of the FPL.

Plaintiffs offer no reasonable basis to question the Secretary’s analysis. Plaintiffs’ do not

present an alternative analysis of SIPP data that undermines the Secretary’s conclusions. Nor do

Plaintiffs offer a cogent critique of the Secretary’s statistical methodology. Plaintiffs do not even

cite a single point in the SIPP data that may call the Secretary’s use of this data into question.

Having failed to contend with the Secretary’s analysis on its terms, Plaintiffs’ argument falls flat.

Accordingly, Plaintiffs’ point here is not well taken, and the Court finds that Plaintiffs are

unlikely to succeed on the merits under this theory.

The Secretary’s Alleged Failure to Explain Early Implementation

Plaintiffs argue that the Secretary has failed to adequately explain the reasons why certain

portions of the Final Rule were designated for early implementation. Plaintiffs primarily dispute

the Secretary’s publication in the Federal Register of his intention to implement the early

forgiveness provision in January 2024 rather than waiting until July 1, 2024, for full

implementation. Defendants dispute Plaintiffs’ position and point to an explanation published on

the Department’s website five days before the publication in the Federal Register. 23 More

importantly, Plaintiffs have cited to no case, statute, or regulation that would require the

Secretary to provide a more robust explanation. In fact, under the HEA, publication in the

Federal Register appears to be the only requirement for early implementation. 20 U.S.C. §

Biden-Harris Administration to Shorten Path to Debt Cancellation for Some SAVE

Borrowers, U.S. Dep’t of Educ. (Jan. 11, 2024), https://perma.cc/M5ND-VFEM.

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1089(c)(2). That is exactly what the Secretary did here. This argument is not likely to succeed

on the merits.

Alleged Procedural Violations

Plaintiffs allege that the Final Rule was promulgated in violation of the APA’s procedural

requirements because it did not provide for sufficient time for public comments. Under this

theory, Plaintiffs argue that a 30-day comment period “was patently insufficient in light of the

complexity and staggering significance of the Final Rule.” ECF No. 10 at 50.

The Supreme Court has “repeatedly stated that the text of the APA provides the maximum

procedural requirements than an agency must follow in order to promulgate a rule” and has

“repeatedly rejected courts’ attempts to impose judge-made procedures in addition to the APA’s

mandates.” Little Sisters of the Poor, 591 U.S. at 685 (cleaned up) (collecting cases). Thus, this

Court is in no position to impose a greater procedural requirement on the Secretary than those

included in the APA.

Under the APA, executive agencies are required to give general notice of proposed

rulemaking (5 U.S.C. § 553(b)) and “[a]fter notice . . . , the agency shall give interested persons

an opportunity to participate in rule making through submission of written data, views, or

arguments with or without opportunity for oral presentation.” Id. § 553(c). Plaintiffs insist that

this “requires the opportunity to be meaningful,” but the Court finds no reason to read this

requirement into the statute. Plaintiffs have simply not pointed to any provision of the APA

requiring a comment period be longer than 30 days. And without an APA provision requiring

something more, the Court has no authority to require the Secretary to follow Plaintiffs’ preferred

timeline. Accordingly, the Court finds that Plaintiffs’ argument for a procedural violation of the

APA is not likely to succeed on the merits.

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Irreparable Harm

The Court’s analysis of irreparable harm largely overlaps with its analysis of injury in

fact for Plaintiffs’ standing. The Court finds that Plaintiff Missouri has adequately pled an injury

in fact to grant it standing to sue. The question now is whether Plaintiffs face irreparable harm

without the imposition of their requested injunctive relief. The Court believes that Plaintiffs

have shown impending irreparable harm to MOHELA via impending loan forgiveness under the

Final Rule. 24

“[T]he United States, as sovereign, is generally immune from suits seeking money

damages.” Dep’t of Agric. Rural Dev. Rural Housing Serv. v. Kirtz, 601 U.S. 42, 48 (2024)

(citation omitted). But 5 U.S.C. § 702 permits suits “seeking relief other than money damages”

against federal agencies.

Here, Plaintiffs seek injunctive relief, not money damages. As mentioned above,

Plaintiffs clarified at oral argument that they specifically seek prospective relief to enjoin

Defendants from putting the Final Rule into full effect on July 1, 2024, and to prevent

Defendants from forgiving any additional loan balances under the early implementation of the

Final Rule’s loan forgiveness provisions. By their own admissions, Defendants have already

forgiven tens of thousands of loan balances under early implementation of these provisions.

Thousands of additional loans are primed for forgiveness in the coming months. Defendants do

Missouri also alleges it is harmed when borrowers consolidate FFELs owned by

MOHELA. Missouri’s allegations related to consolidation focus on the incentives created by the

loan forgiveness provisions of the Final Rule and not on any other provisions. Because an

injunction preventing any further loan forgiveness will adequately address any alleged harm

from loan consolidation, the Court need not separately address whether Missouri faces

impending harm from such consolidation.

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not dispute this. Instead, Defendants assert that Plaintiffs’ unexplained delay in bringing suit

undermines their claims of imminent harm.

The Eighth Circuit has found that “delay is only significant if the harm has occurred and

the parties cannot be returned to the status quo.” Ng. v. Bd. of Regents of Univ. of. Neb., 64 F.4th

992, 998 (8th Cir. 2023) (alterations accepted and internal quotation marks omitted) (quoting

McKinney ex rel. NLRB v. S. Bakeries, LLC, 786 F.3d 1119, 1125 (8th Cir. 2015)). “[T]he

reasonableness of delay is context dependent.” Id.

Here, the Final Rule was published on July 10, 2023, and Plaintiffs filed this case nearly

nine months later on April 9, 2024. Plaintiffs then waited another week before filing their

Motions for Stay, TRO, or Preliminary Injunction. Plaintiffs explain that their delay was

reasonable because had they brought the case earlier, it would have been dismissed as unripe.

According to Plaintiffs, it was only when the government announced in February 2024 that it had

forgiven loans under the early implementation of the Final Rule that they believed they had a

basis to sue. The Court questions the bases of Plaintiffs’ arguments. Because of Plaintiffs’ delay,

some alleged harms have already occurred, which also weighs against Plaintiffs’ position.

Even so, because Plaintiffs have explained that they seek only prospective relief, their

delay does not undermine a finding that they are facing irreparable harm. What Plaintiffs

ultimately seek is an injunction preventing the full implementation of the Final Rule on July 1,

2024, and any additional loan forgiveness under the SAVE plan. Plaintiffs’ alleged harms are

entirely focused on the Final Rule’s early loan forgiveness provisions, and this is what they seek

to stop. The status quo is where we are now with borrowers already making payments under

early implementation of the SAVE plan and expecting impending loan forgiveness. Though their

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delay in bringing this case diminishes Plaintiffs’ claims of imminent harm, Plaintiff Missouri has

adequately alleged a threat of irreparable harm in the form of this early loan forgiveness.

The Public Interest

Plaintiffs argue that the public interest favors a stay or preliminary injunction because the

costs of the Final Rule will fall on the shoulders of the American public and that it is

fundamentally unfair to ask taxpayers to shoulder the burden of student loan debt owned by a

relatively small portion of the population. Plaintiffs also argue that there is no public interest in

allowing the Defendants to promulgate an allegedly unlawful rule.

Defendants counter that the public at large faces several impending harms if Plaintiffs are

granted injunctive relief, including increased default and delinquency on student loans, adverse

effects on credit scores, decreased liquidity, decreased enrollment in higher education, drags on

economic growth, and increased reliance on federal welfare programs. According to Defendants,

these harms would result if implementation of the Final Rule is enjoined, though Defendants

presented very limited evidence that such harms would occur.

The Court must, of course, also consider the practical impacts of enjoining the Final

Rule’s implementation because, again, there are millions of borrowers who have already

switched to the SAVE plan. These borrowers have already made payments under the program,

have already had those payments calculated under the early implementation of certain provisions

of the Final Rule, and some borrowers anticipate imminent forgiveness. These borrowers and

the public have an interest in ensuring consistency in loan repayment programs, and any

preliminary injunction would harm their expectations of such consistency.

Taking these factors under consideration, the Court finds that there are serious public

interest concerns favoring both parties’ arguments. While there are clear effects on taxpayers

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who have never received student loan benefits or have already repaid their loan balances in full,

the benefits to the economy from the SAVE plan and increased educational opportunities it offers

may outweigh these generalized public burdens. Similarly, while the public has an interest in

consistency in student loan repayment programs and borrowers have a vested interest in knowing

how the provisions of those repayment programs will affect their repayment timelines and

monthly bills, the public at large has an interest in ensuring that those repayment programs are

lawful. Given these competing, albeit speculative, public interests, the Court finds that the

public interest factor does not particularly weigh in favor of either party.

Appropriate Relief

Plaintiffs request a stay in implementation of the Final Rule, or in the alternative, a TRO

or preliminary injunction. Plaintiffs argue that eventual vacatur of the entire Final Rule is

statutorily mandated under the APA. But at this time, the Court finds that Plaintiffs’ request to

vacate the entire rule is not appropriate on the record before the Court. Rather, at this stage, only

a stay or preliminary injunction is appropriate.

The question then is: what is the appropriate scope of a preliminary injunction, if any, at

this time? Defendants argue that any relief should be limited to the redressing only the

cognizable injuries of only those Plaintiffs who have established standing. In Defendants’ view,

if the Court has found that only Missouri has standing, then any relief should be directed towards

those harms that Missouri has been able to adequately connect to specific portions of the Final

Rule.

In the Court’s analysis, Plaintiffs have only alleged impending harm from the Final

Rule’s loan forgiveness provisions. At this time, Plaintiffs have not stated a cognizable injury

related to the other provisions of the SAVE program, and they conceded at oral argument that

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they are primarily seeking relief only from the Final Rule’s loan forgiveness provisions.

Plaintiffs’ claims under the APA are unconvincing, and in any event vacatur of the entire Final

Rule under the APA would be premature. But Plaintiffs do appear to have a colorable argument

that the Secretary lacks the statutory authority to forgive loans as part of the ICR plans and that

continuing to permit such loan forgiveness would likely harm Missouri by decreasing the

administrative fees collected by MOHELA for servicing Direct Loans.

This brings the Court to the issue of severability. Defendants contend that, under the

APA, the Court may sever and enjoin only those provisions of the rule that are found to be

unlawful. The D.C. Circuit has recognized that portions of regulations found unlawful may be

severable under certain circumstances. In making this determination, the D.C. Circuit has

considered (1) whether the agency intended portions of the regulation to be severable, and (2)

“whether the remainder of the regulation could function sensibly without the stricken provision.”

MD/DC/DE Broadcasters Ass’n v. FCC, 236 F.3d 13, 22 (D.C. Cir. 2001) (citing K Mart Corp. v.

Cartier, Inc., 486 U.S. 281, 294 (1988)); see also Carlson v. Postal Regul. Authority, 938 F.3d

337, 351 (D.C. Cir. 2019) (“[T]he APA permits a court to sever a rule by setting aside only the

offending parts of the rule.”).

Severability makes sense in the context of the APA, which defines an “agency action” as

“the whole or a part of an agency rule . . . .” 5 U.S.C. § 551(13). Under 5 U.S.C. § 701, “agency

action” has the definition given to it under 5 U.S.C. § 551. Therefore, when looking at what

relief is available pending review under 5 U.S.C. § 705, the Court “may issue all necessary and

appropriate process to postpone the effective date of an agency action[,]” which suggests that the

Court has the authority to enjoin only the potentially offending portions of the Final Rule.

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Here, the Secretary made clear his intention that each portion of the Final Rule is

severable. “[E]ach of the components of this final rule can operate in a manner that is

independent and severable of each other. The analysis used to justify their inclusion are all

different. And while they help accomplish similar goals, they can contribute to those goals on

their own.” 88 Fed. Reg. 43,828. The fact that Defendants now argue for the severability of the

provisions of the Final Rule provide additional support for the proposition that the Department

intended for portions of the Final Rule to be severable. Thus, the first element of the severability

test is satisfied.

The Court also finds that, on this record, the Final Rule can function sensibly if the

Secretary is enjoined from enforcing only the offending portions of the Final Rule. Here, the

Court has found that the only argument for which Plaintiffs are likely to be successful on the

merits is that the Secretary lacks the requisite congressional authority to forgive loans under the

SAVE plan. Without the provisions allowing for loan forgiveness under the SAVE plan, the

Final Rule still provides a vast majority of borrowers with a plan that is likely to lower their

payments and limit interest accrual. At this stage of the litigation, Plaintiffs have not shown that

these provisions harm them, and these pieces of the Final Rule still appear to function

adequately even if participants in the SAVE plan cannot receive forgiveness under the plan.

Thus, the Court finds that it is appropriate to limit a preliminary injunction to only those

provisions of the SAVE plan that permit loan forgiveness. As litigation progresses, the Court

can determine whether that preliminary injunction should become permanent or if any other

portions of the Final Rule require additional injunctive relief.

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Conclusion

Accordingly,

IT IS HEREBY ORDERED that Plaintiffs’ Motion to Stay or, in the alternative, a

Preliminary Injunction (ECF No. 7) is GRANTED in part and DENIED in part.

IT IS FURTHER ORDERED that Plaintiffs’ Motion to Stay or, in the alternative,

Motion for Temporary Restraining Order (ECF No. 6) is DENIED as moot.

IT IS FURTHER ORDERED that Defendants are preliminarily enjoined from any

further loan forgiveness for borrowers under the Final Rule’s SAVE plan until such time as this

Court can decide the case on the merits.

IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss (ECF No. 21) is

DENIED.

Dated this 24th day of June, 2024.

________________________________

JOHN A. ROSS

UNITED STATES DISTRICT JUDGE

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CASE NOS. 24-2332, 24-2351

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

STATE OF MISSOURI, et al.,

Plaintiffs-Cross-Appellants,

JOSEPH R. BIDEN, JR., in his official capacity as the President of the

United States of America, et al.,

Defendants-Appellees.

On Appeal from the United States District Court

for the Eastern District of Missouri

The Honorable District Court Judge John A. Ross

Case No. 4:24-cv-520-JAR

EMERGENCY MOTION FOR

INJUNCTION PENDING APPEAL

ANDREW BAILEY

Attorney General of Missouri

JOSHUA M. DIVINE

Solicitor General

REED C. DEMPSEY

Deputy Solicitor General

SAMUEL FREEDLUND

Deputy Solicitor General

ATTORNEY GENERAL’S OFFICE

Post Office Box 899

Jefferson City, MO 65102

(573) 751-1800

josh.divine@ago.mo.gov

Appellate Case: 24-2332

Page: 1

Date Filed: 07/12/2024 Entry ID: 5412901

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TABLE OF CONTENTS

INTRODUCTION AND SUMMARY OF ARGUMENT ........................... 1

BACKGROUND ........................................................................................ 5

II.

III.

IV.

The Higher Education Act and previous rulemakings. ................... 5

Defendants’ first and second attempts at mass cancellation. ......... 8

Two district courts declare the Final Rule unlawful. .................... 12

Defendants create a new “hybrid” rule to evade the injunction,

and the district court refuses to block Defendants from

continuing to forgive loans. ............................................................ 14

ARGUMENT ........................................................................................... 15

II.

The States have a strong likelihood of success on appeal. ............ 16

The States easily have standing. .......................................... 16

The States are likely to prevail on their claim that

Defendants are exceeding statutory authority. .................... 17

Defendants’ forgiveness actions flout the majorquestions doctrine. ....................................................... 17

Defendants’ forgiveness actions exceed statutory

authority. ...................................................................... 18

Defendants cannot evade accountability by

creating a new rule without notice and comment. ...... 22

The unlawful payment thresholds should be

enjoined. ....................................................................... 24

The States face irreparable harm, and the equities strongly

favor the States. ............................................................................. 25

CONCLUSION ........................................................................................ 28

CERTIFICATE OF COMPLIANCE ........................................................ 31

CERTIFICATE OF SERVICE................................................................. 32

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TABLE OF AUTHORITIES

Cases

Page(s)

Alabama Assn. of Realtors v. Dept. of Health and Human Services,

594 U.S. 758 (2021) ........................................................................ 17, 18

Alaska v. Dep’t of Educ.,

No. 24-1057, Doc. No. 68 (June 7, 2024) ............................................. 14

Alaska v. Dep’t of Educ.,

No. 24-3089, Doc. No. 010111072742 (10th Cir. June 30, 2024) ........ 13

Biden v. Nebraska,

143 S. Ct. 2355 (2023) .......................................................... 8, 11, 16, 26

Bittner v. United States,

598 U.S. 85 (2023) ................................................................................ 20

N.Y. Progress & Prot. PAC v. Walsh,

733 F.3d 483 (2d Cir. 2013) ................................................................. 27

Nebraska v. Biden,

52 F.4th 1044 (8th Cir. 2022) .............................................................. 25

Shrink Missouri Gov’t PAC v. Adams,

151 F.3d 763 (8th Cir. 1998) ................................................................ 16

Taggart v. Lorenzen,

587 U.S. 554 (2019) .............................................................................. 19

Van Buren v. United States,

593 U.S. 374 (2021) .............................................................................. 20

Rules

Fed. R. App. P. 25(c)(2)............................................................................ 32

Fed. R. App. P. 27(d)(2)(A) ...................................................................... 31

Fed. R. App. P. 32(a)(5) ........................................................................... 31

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Fed. R. App. P. 32(a)(6) ........................................................................... 31

Fed. R. App. P. 32(f) ................................................................................ 31

Regulations

59 Fed. Reg. 66,132 ................................................................................... 6

77 Fed. Reg. 66,088. .............................................................................. 6, 8

88 Fed. Reg 43,820. ......................................................... 6, 8, 9, 10, 11, 25

89 Fed. Reg. 2,489 ................................................................................... 11

Other Authorities

Adam Minsky, Student Loan Payments Paused for Millions as Biden

Is Poised to Slash Bills in July, Forbes (June 13, 2024) ..................... 28

Biden’s New Income-Driven Repayment (“SAVE”) Plan: Budgetary

Cost Estimate Update, Penn Wharton (July 17, 2023) ....................... 11

Biden-Harris Administration Announces Additional $7.4 Billion in

Approved Student Debt Relief for 277,000 Borrowers, U.S. Dep’t of

Ed. (Apr. 12, 2024) ............................................................................... 12

FACT SHEET: President Biden Cancels Student Debt for More Than

150,000 Student Loan Borrowers Ahead of Schedule, The White

House (Feb. 21, 2024) .......................................................................... 10

SAVE Plan Announcement (last visited July 11, 2024) ......................... 23

Scott, Secretary of Education and Biden-Harris Administration

Committed to Helping Student Loan Borrowers, KQTV News (July

11, 2024) ............................................................................................... 26

State of the Union Address at 5 (Jan. 27, 2010) ....................................... 7

Statement from President Joe Biden on Supreme Court Decision on

Student Loan Debt Relief, The White House (June 30, 2023) .............. 9

iii

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INTRODUCTION AND SUMMARY OF ARGUMENT

Just ten days after the Supreme Court struck down Defendants’

unlawful attempt to mass cancel $430 billion in student loan debt,

Defendants rolled out Plan B. This newest plan relies on a different

statute—the Higher Education Act (“HEA”), but carries an even higher

price tag: $475 billion. Worse, this plan asserts a statutory interpretation

that would give the Secretary of Education unrestricted power to cancel

every penny of every federal student loan.

The district court correctly concluded: (1) the Plaintiff States easily

have standing; (2) the Secretary has no authority to forgive loans under

Defendants’ stated statutory provision; and (3) both the plain text of the

HEA and the major questions doctrine compel this merits conclusion. Yet

the district court nonetheless declined to stop Defendants from using this

statute to forgive loans. As a result, MOHELA stands to lose more than

$250 million from just one year of lost servicing fees caused by

Defendants’ brazenly unlawful mass cancellation.

This harm is

imminent and irreparable. Defendants are cancelling loans every day.

The Final Rule challenged in this litigation relies on the HEA’s

“Income-Contingent Repayment” or “ICR” program.

That program

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permits the Secretary to create a “repayment plan” lasting for a period

“not to exceed 25 years” where payment amounts are set based on the

income of an individual borrower. 20 U.S.C. § 1087e(d)(1)(D). So instead

of paying fixed monthly amounts over 10 years on a “standard repayment

plan,” ICR borrowers pay amounts that can vary each year, and ICR

borrowers can take up to 25 years to pay back their loans.

But Defendants used this authority for something much more

ambitious—and illegal. They created a “repayment plan” that does not

require “repayment” at all.

It slashes payment amounts well below

actual repayment thresholds. For millions of people, it sets payment

amounts to $0.

Then it directs the Secretary to forgive all unpaid

balances after between 10 and 25 years of (potentially $0) “payments.”

Unsurprisingly, millions flocked to sign up for this giveaway.

The district court correctly concluded that this is illegal, holding

that “Congress has made it clear under what circumstances loan

forgiveness is permitted, and the ICR plan is not one of those

circumstances.”

R. Doc. 35, at 44 (App.438). So it issued an order to

“enjoin Defendants from any further implementation of the Final Rule’s

loan forgiveness provisions.” Id.

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But Defendants responded by immediately (and unlawfully)

creating a new plan, which they call a “hybrid” plan, and announced they

are continuing to use the ICR statute to forgive loans. R. Doc. 52 at 4–5,

9 (App.480–81).

This new “hybrid” plan combines the forgiveness

provision from a now-defunct, previous ICR program with the slashed

payment amounts of the new plan (amounts the district court declined to

enjoin). Defendants admit nobody has ever been on this new “hybrid”

plan before, and that they created it two weeks ago “due to this

litigation.” Id. This new “hybrid” plan is brazenly unlawful not only

because it was created without notice and comment, but also because it

was done for the transparent purpose of evading a preliminary

injunction.

Plaintiff States moved to block this new plan. But in a one-page

order, the district court declined, saying that the States’ complaint

challenged only the plan created by the Final Rule. R. Doc. 54 (App.498).

The district court did not dispute that the new “hybrid” plan was only

created after the district court’s preliminary injunction, expressly to

evade the injunction.

As a result, Defendants continue cancelling

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hundreds of billions of dollars in loans despite the district court’s

declaration that they lack authority to do so.

The district court erred in two additional ways that warrant

immediate relief.

First, it declined to enjoin the Rule provision that forgives accrued

interest, citing a statute giving the Secretary authority to determine

whether interest should be capitalized.

The district court wrongly

conflated forgiving interest with declining to capitalize interest. Because

Defendants lack authority to forgive, they can forgive neither principal

nor interest.

Second, having concluded that the Secretary lacks authority to

forgive loans using ICR authority, the district court failed to take the next

logical step and enjoin the Rule’s slashing of payment amounts.

Defendants cannot forgive loans, they necessarily cannot set payment

amounts well below what is needed for borrowers to repay loans.

Forgiveness is the cornerstone of the Final Rule. Without it, payment

amounts must be set high enough for actual repayment within 25 years.

Defendants’ actions are lawless—brazenly so. The district court

already concluded that Defendants lack authority to forgive loans under

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the ICR statute.

And yet the district court’s order lets them do so

anyway—to the tune of nearly $500 billion. Just as this Court did last

time Defendants tried to mass cancel nearly $500 billion in student loan

debt, this Court should enter an immediate administrative stay and then

an injunction pending appeal.

BACKGROUND

The Higher Education Act and previous rulemakings.

The Higher Education Act of 1965 provides two forms of financial

assistance—grants and loans—to students pursuing post-secondary

education. 20 U.S.C. §§ 1070 to 1087-4. Initially, it gave the Federal

Government authority only to guarantee loans issued by private

organizations.

In 1993, Congress amended it to authorize the Federal Government

to issue loans directly and to create several “repayment plans” for those

direct loans. §§ 1087a et seq. The first three plans were a “standard

repayment plan” (10 years, fixed payment amount); a “graduated

repayment plan” (10 years, gradually increasing amounts); and an

“extended repayment plan” (25 years, fixed or graduated). § 1087e(d)(1).

The fourth repayment plan, an “income contingent repayment plan”

(“ICR”), allows payments to vary based on a borrower’s annual income.

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It is the basis for Defendants’ actions here. 88 Fed. Reg. 43,826–27. It

allows for “varying annual repayment amounts based on the income of

the borrower, paid over an extended period of time prescribed by the

Secretary, not to exceed 25 years.” § 1087e(d)(1)(D).

No text in the ICR statute expressly authorizes forgiveness or

cancellation of student loans. Indeed, like the first three plans (which

also do not authorize forgiveness), the ICR plan requires “repayment of

such loan, including principal and interest.” Id. It further requires that

the “balance due” from each borrower “shall equal the unpaid principal

amount of the loan, any accrued interest, and any fees.” § 1087e(e)(5).

Nonetheless, in 1994 the Department promulgated an ICR plan to

forgive remaining balances after 25 years of payments. But the rule also

required borrowers to pay 20% of income above the federal poverty line.

See 59 Fed. Reg. 66,132, -135. So there was “low participation” in the

program, with few people ever receiving forgiveness. 77 Fed. Reg. 66,116.

In 2007, Congress amended the HEA to create a second plan where

payment amounts depend on annual income: the “income-based

repayment program” (“IBR”).

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IBR is unlike ICR in two relevant respects. First, IBR expressly

authorizes forgiveness—to “cancel any outstanding balance” after 25

years—but only for borrowers statutorily eligible for the program.

§ 1098e(a)(3), (b)(7). Second, IBR enshrines specific payment amounts

into the statutory text: 15% of income above 150% of the poverty line.

§ 1098e(a)(3)(B), (b)(1).

The 2007 amendments also established the Public Service Loan

Forgiveness (“PSLF”) program, which gives the Secretary express

authority to “cancel the balance of principal and interest” of ICR

borrowers (and some others) who make 10 years of payments while

employed in a “public service job.” § 1087e(m)(1). Participants in that

program first elect an eligible repayment plan (such as ICR or IBR), and

commit to public service for 10 years. Id.

In 2010, President Obama urged Congress to lower the IBR

payment amount from 15% to 10% of discretionary income and accelerate

forgiveness to 20 years, down from 25. State of the Union Address at 5

(Jan. 27, 2010).1 Congress did so. § 1098e(e).

1 https://www.govinfo.gov/content/pkg/DCPD-201000055/pdf/DCPD-

201000055.pdf

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The Department later undertook two rulemakings that updated the

ICR program to match the payment thresholds and 20-year forgiveness

timeline (for undergraduate borrowers) of the statutory IBR program. 77

Fed. Reg. 66,088; 88 Fed. Reg. 43,820. Although the Department still

lacked ICR authority to forgive, those rulemakings unsurprisingly went

unchallenged. After all, they simply altered ICR “consistent with the

statutory changes to IBR.” 77 Fed. Reg. 66,116.

II.

Defendants’ first and second attempts at mass cancellation.

In 2022, Defendants for the first time asserted authority to mass

cancel student debt. Both this Court and the Supreme Court rejected

that as lawless. The Supreme Court stressed the “staggering” “economic

and political significance” of the action and noted that Defendants not

only lacked “clear” textual authority for their actions; but they did not

even have plausible authority. See Biden v. Nebraska, 143 S. Ct. 2355,

2370, 2373 (2023).

Beyond “the ordinary tools of statutory

interpretation,” Defendants’ efforts were unlawful because “‘the basic

and consequential tradeoffs’ inherent in a mass debt cancellation

program ‘are ones that Congress would likely have intended for itself.’”

Id. at 2375 (alterations accepted) (citation omitted).

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Undeterred, the Secretary that same day announced he was

finalizing a Plan B—a topic of this lawsuit—which he published 10 days

later. 88 Fed. Reg. 43,820. Defendant Biden similarly declared he would

“stop at nothing” to circumvent the Supreme Court’s ruling. Statement

from President Joe Biden on Supreme Court Decision on Student Loan

Debt Relief, The White House (June 30, 2023).2

The Final Rule creates the “SAVE” plan, which Defendants say is

“intended to amend and fully replace” the previous ICR plan that was

called REPAYE. R. Doc. 52 at 2 (App.478). This new plan rests on a

never-before-adopted interpretation of the Secretary’s ICR authority. It

asserts that the Secretary has unfettered “discretion as to how much a

borrower must pay, specifying only that payments must be set based

upon the borrower’s annual adjusted gross income.” 88 Fed. Reg. 43,826–

27.

Indeed, the Secretary acknowledges—and Defendants’ have not

denied—that this interpretation would permit the Department to cancel

every penny of every student loan.

2 https://www.whitehouse.gov/briefing-room/statements-releases/2023/

06/30/statement-from-president-joe-biden-on-supreme-court-decisionon-student-loan-debt-relief/

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Unlike the previous ICR plan that SAVE replaces, this new plan

creates mass forgiveness for the vast majority of borrowers. It does so

through two steps. First, it slashes payment amounts by hiking the

income exemption to 225% of the family-adjusted poverty line and by

slashing the maximum payment amounts to just 5% of income above that

exemption.

Then it directs the Secretary to forgive unpaid interest

monthly and unpaid principal after 10 to 25 years in repayment status,

depending on the amount of original principal borrowed. 88 Fed. Reg.

43,856–57, -888, -900–05.

These changes mean almost nobody will actually repay their loans.

The income exemption is set so high that millions of borrowers enrolled

in the plan “pay” $0 per month. FACT SHEET: President Biden Cancels

Student Debt for More Than 150,000 Student Loan Borrowers Ahead

of Schedule, The White House (Feb. 21, 2024).3 And for those who do pay

something greater than $0, the Final Rule says the “average”

undergraduate borrower will pay back only 61 cents per dollar borrowed.

88 Fed. Reg. 43,823, -80. Including graduate borrowers, the “average”

3 https://www.whitehouse.gov/briefing-room/statements-

releases/2024/02/21/fact-sheet-president-biden-cancels-student-debt-formore-than-150000-student-loan-borrowers-ahead-of-schedule/

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borrower still pays back only 71 cents on the dollar. Id. Even borrowers

with incomes higher than 98 percent of other Americans receive a

financial break under this plan, id. at 43,831, meaning associates at “Big

Law” firms are subsidized.

Last time Defendants attempted mass forgiveness, the Supreme

Court credited the Penn Wharton school’s estimate that the rule would

cost $430 billion. Biden v. Nebraska, 143 S. Ct. at 2373. The same source

estimates the cost of the SAVE plan to be even higher: $475 billion.

Biden’s New Income-Driven Repayment (“SAVE”) Plan: Budgetary Cost

Estimate Update, Penn Wharton (July 17, 2023).4

Though the Final Rule was generally forbidden, by statute, to come

into effect before July 1, 2024, Defendants decided to forgive billions of

dollars early. On January 16, 2024, the Department published a halfpage notice in the Federal Register stating that some forgiveness would

be implemented early. See 89 Fed. Reg. 2,489.

Defendants proceeded to cancel at least $4.8 billion in loans, nearly

$1 billion in Plaintiff States.

See Biden-Harris Administration

4 https://budgetmodel.wharton.upenn.edu/issues/2023/7/17/biden-

income-driven-repayment-budget-update

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Announces Additional $7.4 Billion in Approved Student Debt Relief for

277,000 Borrowers, U.S. Dep’t of Ed. (Apr. 12, 2024) (reflecting “$4.8

billion for almost 360,000 borrowers” under this rule).5

III. Two district courts declare the Final Rule unlawful.

The district court granted (partial) preliminary injunctive relief

against these actions. R. Doc. 35 (App.455). It first found that the States

easily satisfied standing.

“The allegations in the Complaint are

substantially similar to, if not identical to, those the Supreme Court held

were sufficient to establish Missouri’s standing just last year in Biden v.

Nebraska.” Id. at 36.

The court then accepted the States’ argument that Defendants lack

any authority under the ICR statutory provisions to forgive loans. As the

court put it, “Congress has made it clear under what circumstances loan

forgiveness is permitted, and the ICR plan is not one of those

circumstances.”

Id. at 44.

It thus “enjoin[ed] Defendants from any

further implementation of the Final Rule’s loan forgiveness provisions.”

Id. at 3, 61.

https://www.ed.gov/news/press-releases/biden-harris-administrationannounces-additional-74-billion-approved-student-debt-relief-277000borrowers

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The court declined, however, to grant two other forms of relief.

First, it declined to enjoin Defendants from forgiving student loan

interest. The court cited a statute permitting the Secretary to determine

whether interest should be capitalized but offered no explanation why

that statute permits forgiveness. Id. at 42–43. Second, the court declined

to enjoin the changes to the payment amounts. Id. It did not explain

why Defendants could continue refusing to collect payments from

millions of borrowers even though the court had just ruled that

Defendants lack authority to forgive loan balances. The States sought an

injunction pending appeal on these issues, which the court denied. R.

Docs 41, 45.

The District Court of Kansas, in contrast, declared the entire rule

unlawful in a challenge brought by other States. Alaska v. Dep’t of Educ.,

No. 24-1057, Doc. No. 76 (June 24, 2024). The Tenth Circuit, in a split 21 decision, stayed the injunction pending appeal. Alaska v. Dep’t of

Educ., No. 24-3089, Doc. No. 010111072742 (10th Cir. June 30, 2024).6

That decision most likely rested on standing grounds. The States in that

6 https://storage.courtlistener.com/recap/gov.uscourts.ksd.151881/gov.

uscourts.ksd.151881.76.0_1.pdf

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litigation advanced a theory different from the one advanced here, and

the district court there concluded that those States “just barely” had

standing under that new theory. Alaska v. Dep’t of Educ., No. 24-1057,

Doc. No. 68 at 2 (June 7, 2024).7

IV.

Defendants create a new “hybrid” rule to evade the

injunction, and the district court refuses to block

Defendants from continuing to forgive loans.

Plaintiff States then discovered that Defendants were continuing to

forgive student loans for borrowers who had enrolled in the SAVE plan.

So the States urged that Defendants inform the district court why they

were not complying with the injunction. R. Doc. 41 at 3 n.3 (App.458).

After the States’ prodding, Defendants explained that they stopped

forgiving loans after between 10 and 19 years in repayment but are still

forgiving loans after 20 to 25 years. R. Doc. 44 (App.466). They said they

created a new “hybrid” plan “due to this litigation” and that this new plan

combined the new payment thresholds from the SAVE plan with the

forgiveness provision in the now-defunct REPAYE plan. They claimed

they could rely on the forgiveness provision from the REPAYE plan even

7https://storage.courtlistener.com/recap/gov.uscourts.ksd.151881/gov.

uscourts.ksd.151881.68.0_3.pdf

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though they admit REPAYE was “fully replace[d]” by SAVE. R. Doc. 52

at 2, 4–5, 9 (App.478–485). They also offered no justification for why they

could create a new plan without notice and comment—or without even

publication. And while they tried to call this a “preexisting” plan, nobody

had ever been on this new “hybrid” plan before June 24.

Indeed,

Defendants admitted “[i]t is true” that “they are trying to forgive loans

between 20 and 25 years for borrowers who were never in any previous

ICR program.” Id. at 12.

The States moved to block this new “hybrid” plan and, in the

alternative, sought an injunction pending appeal. R. Docs. 48, 53. In a

one-page order, the district court rejected relief solely on the ground that

the States’ complaint challenged only the plan created by the Final

Rule—even though the new “hybrid” plan did not exist until after the

injunction. R. Doc. 54 (App.498).

ARGUMENT

“To be entitled to an injunction pending appeal, appellants … must

show (1) the likelihood of success on the merits; (2) the likelihood of

irreparable injury to appellants absent an injunction; (3) the absence of

any substantial harm to other interested parties if an injunction is

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granted; and (4) the absence of any harm to the public interest if an

injunction is granted.” Shrink Missouri Gov’t PAC v. Adams, 151 F.3d

763, 764 (8th Cir. 1998). The States meet all these factors.

The States have a strong likelihood of success on appeal.

The States easily have standing.

As the district court correctly concluded, the States proved the same

exact theory of standing that prevailed in the Supreme Court last year in

Biden v. Nebraska. R. Doc. 35, at 36 (App.430). Specifically, when

Defendants cancel loans, that closes millions of accounts processed by

Missouri’s instrumentality, MOHELA, which gets paid servicing fees per

account serviced.

MOHELA services more than 8 million accounts,

nearly all of which will be eligible for forgiveness under Defendants’

SAVE plan and new “hybrid” plan. R. Doc. 22-2 ¶ 3 (App.296). At the

current base contract rate of $35.64 per account per year, MOHELA

stands to lose up to $285 million if all these accounts are cancelled. And

that is just the harm for one year.

When an account is cancelled,

MOHELA is deprived of fees for every year the account otherwise would

have existed.

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The States are likely to prevail on their claim that

Defendants are exceeding statutory authority.

Under the APA, a reviewing court shall “hold unlawful and set

aside agency action” that is “in excess of statutory … authority.” 5 U.S.C.

§ 706(2)(A)–(C). Defendants assert authority under the ICR program,

which authorizes the Secretary to establish a plan for “varying annual

repayment amounts based on the income of the borrower, paid over an

extended period of time prescribed by the Secretary, not to exceed 25

years.” 20 U.S.C. § 1087e(d)(1)(D). This does not authorize forgiveness.

Defendants’ forgiveness actions flout the majorquestions doctrine.

As both district courts concluded, Defendants’ assertion that they

have unlimited discretion to unilaterally cancel every penny of every

single student loan—and their decision to exercise that “discretion” to

cancel nearly $500 billion here—is obviously of “vast economic and

political significance,” triggering the major questions doctrine.

E.g.,

Alabama Assn. of Realtors v. Dept. of Health and Human Services, 594

U.S. 758, 764 (2021). Defendants do not and cannot dispute that the

Final Rule has the same “vast economic and political significance” as

their first attempt at mass cancellation, as the district court correctly

concluded. See R. Doc. 35, at 46 (App.440).

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So Defendants must identify “exceedingly clear language”

authorizing their actions. Alabama Assn. of Realtors, 594 U.S. at 764.

They cannot. As they have been forced to admit, the statute does not

include express forgiveness authority at all. It forbids forgiveness. It

requires “repayment of such loan, including principal and interest,” and

says the “balance due” from each ICR borrower “shall equal the unpaid

principal amount of the loan, any accrued interest, and any fees.”

§ 1087e(d)(1)(D), (e)(5) (emphasis added). Defendants have argued (1)

that this language is “(at least) equally consistent” with authority to

forgive and (2) that authority to forgive is implicit because the statute

calls for plans “not to exceed 25 years.” R. Doc. 22 at 43, 50 (App.263,

270). But “equally consistent” and “implicit” authority is not “exceedingly

clear” authority. Alabama Assn. of Realtors, 594 U.S. at 764.

Defendants’ forgiveness actions exceed statutory

authority.

What the major questions doctrine makes evident, the plain text

reinforces.

Defendants lack ICR authority to forgive principal and

interest.

Principal. As just explained, the ICR text affirmatively requires

“repayment,” including “principal and interest.” Against this plain text,

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Defendants have relied on the text that says repayment plans are “not to

exceed 25 years.” Defendants assume this means the Secretary can set

monthly payment amounts below what is necessary for a borrower to

repay a loan and then can forgive any unpaid balance after 25 years. But

in fact, that text limits the Secretary, requiring that he promulgate

payment amounts high enough for borrowers to repay within 25 years.

The “not to exceed” language cannot implicitly authorize

forgiveness because the same exact text is used in four other repayment

plans,

including

the

10-year

standard

repayment

plan,

see

§ 1078(b)(9)(A), and the Secretary has acknowledged he has no authority

to forgive under those plans. E.g., R. Doc. 22 at 43 (App.263) (admitting

the “standard plan” requires payments that “total the entire principal

and interest” despite having the same “not to exceed” language). When

Congress “transplanted” that “not to exceed” language from other parts

of the HEA into the ICR section, it brought “the old soil with it.” Taggart

v. Lorenzen, 587 U.S. 554, 560 (2019).

And in stark contrast to the ICR text, other provisions in the HEA

(passed both before and after the ICR amendments) expressly authorize

forgiveness.

For example, amendments passed in 1986 authorize

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forgiveness for teachers, military service members, and Peace Corps

volunteers.

20 U.S.C. § 1087ee.

And the IBR program and PSLF

programs, created in 2007, expressly permits forgiveness.

E.g.,

§ 1098e(b)(7). In fact, the IBR program says ICR borrowers can obtain

forgiveness after switching to IBR.

§ 1098e(b)(7)(A), (b)(7)(B)(iv)

(authorizing forgiveness for borrowers who have “made payments under

an income-contingent repayment plan” but requiring them to shift to the

IBR program first). “When Congress includes particular language in one

section of a statute but omits it from a neighbor,” as Congress did with

forgiveness in the HEA, “we normally understand that difference in

language to convey a difference in meaning.” Bittner v. United States,

598 U.S. 85, 94 (2023). That all these other provisions in the HEA

expressly permit forgiveness, yet the ICR provision does not,

“underscores the implausibility of the Government’s interpretation.” Van

Buren v. United States, 593 U.S. 374, 394 (2021).

After considering the above, the district court correctly concluded

that “the plain text of the statute does not support” forgiveness. R. Doc.

35 at 44 (App.438). Simply put, “Congress has made it clear under what

Appellate Case: 24-2332

Page: 24

Date Filed: 07/12/2024 Entry ID: 5412901

A-85

circumsta

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