A federal judge in Kansas on Friday ruled that only three of 11 Republican-led states that filed a lawsuit in his court challenging a major Biden administration student loan forgiveness and repayment plan could proceed with their case.
U.S. District Judge Daniel Crabtree in Wichita ruled that the states of South Carolina, Texas and Alaska "just barely" alleged enough facts to find they had legal standing to challenge the Biden administration's plan in court.
Crabtree, an appointee of Democratic former President Barack Obama, said those states had established the plan likely would reduce revenue for public instrumentalities in the state that assist with education funding and own student loans.
But he rejected arguments that eight other states led by Kansas had standing to challenge the Biden administration's Saving on a Valuable Education (SAVE) Plan because it would reduce their income tax revenues or, alternatively, would harm their ability to recruit state employees.
"No court has ever bought into this theory, and this court declines to become the first," Crabtree wrote. "These plaintiffs simply have no skin in the game."
The ruling was a mixed victory for the Biden administration, which is defending the debt relief program against both the case before Crabtree and a second lawsuit by seven other states led by Missouri.
That other case is pending before U.S. District Judge John Ross, an Obama appointee in St. Louis, who heard arguments on Monday on whether to block the plan and has indicated he plans to rule within a couple weeks.
A spokesperson for Republican Kansas Attorney General Kris Kobach, whose office was leading Friday's case, said his office was "reviewing the judge’s decision and consulting with the other states in our coalition."
The U.S. Department of Education did not immediately respond to a request for comment.
Biden announced the SAVE Plan in 2022, alongside a separate, broader plan that would have fulfilled a campaign promise by cancelling up to $20,000 in debt for up to 43 million Americans. That plan would have canceled about $430 billion in debt.
The SAVE Plan provides more generous terms than past income-based repayment plans, lowering monthly payments for eligible borrowers and allowing those whose original principal balances were $12,000 or less to have their debt forgiven after 10 years.
The White House has said that over 20 million borrowers could benefit from the SAVE plan. The administration in May said that 8 million are already enrolled, including 4.6 million whose monthly payments are now $0.
The Republican-led states argue the rule that created the program was unlawful and the Education Department lacked authority to create the SAVE Plan.
Most of the states involved in the litigation peg their definition of taxable income to the federal definition of income. While student debt forgiveness is generally taxable income, the federal American Rescue Plan Act of 2021 enacted at the start of Biden's presidency during the COVID-19 pandemic exempted it from counting as taxable income until 2026.
As a result, the states had argued that they would miss out on taxable income because the SAVE Plan accelerates debt forgiveness.
But Crabtree said that was an "incidental effect of the SAVE Plan, traceable to plaintiffs’ own decisions about how to tax revenue."
The case is State of Kansas v. Biden, U.S. District Court for the District of Kansas, No. 24-cv-01057.
For Kansas: Abhishek Kambli and Erin Gaide of the Office of the Kansas Attorney General
For the Biden administration: Stephen Pezzi and Simon Jerome of the U.S. Department of Justice
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