Brooke Gladstone: A big challenge to student loan relief is coming before the high court.

Eleni Schirmer: An old unpaid debt is being used to stop debt relief for 43 million Americans and their families right now.

Brooke Gladstone: From WNYC in New York, this is On the Media. I'm Brooke Gladstone. The personal behavior of Supreme Court Justices does not generally generate headlines. Why? A veteran legal correspondent reflects.

Dahlia Lithwick: I didn't think that part of my job was holding powerful people to account. It wasn't my job to follow the money. It wasn't my job to figure that out. Yes, I have regrets.

Brooke Gladstone: Plus how copyright law kept iconic '80s and '90s hip-hop off the internet.

Dan Charnas: The copyright owners, the record labels can charge anything they want for any piece of music that's being sampled.

Brooke Gladstone: It's all coming up after this.

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Brooke Gladstone: From WNYC in New York, this is On the Media. I'm Brooke Gladstone.

News clip: Tonight, a long-awaited deal to lift the nation's debt ceiling reached.

News clip 6: One major concession from the White House, the restart of payments on federal student loans later this summer. Payments that have been paused since the start of the pandemic.

News clip: It's September one, the clock is starting. You're going to repay your loans.

Brooke Gladstone: On Wednesday, the White House used the student loan payment pause as a bargaining chip in its grueling horse trading with House Speaker Kevin McCarthy. The argument long simmering over student debt flared up last August when Biden announced--

Joe Biden: We will forgive $10,000 in outstanding federal student loans. In addition, students who come from low-income families, which allow them to qualify to receive a Pell Grant, will have their debt reduced by $20,000.

Brooke Gladstone: Since then, the president's plan has been simply battered. Numerous lawsuits have been filed against the administration and just last week--

News clip: Delivering a blow to President Biden's student loan policies, the House, Wednesday, voted to overturn the administration's controversial student debt relief program sending the measure to the Senate.

Brooke Gladstone: On Thursday the Senate voted to block it. Among the toughest challenges to the plan to date is one that has mostly evaded the media's glare.

News clip: Nebraska's Attorney General is joining the fight against President Biden's student loan cancellation program.

News clip: Millions of student loan borrowers now turning their eyes to the Supreme Court as it gears up to hear arguments over President Joe Biden's student debt relief plan.

Brooke Gladstone: The lawsuit, Biden v. Nebraska, was first filed last September in the eastern Missouri US District Court by six states, Nebraska, Arkansas, Iowa, Kansas, Missouri, and South Carolina. While five of the state's cases have been struck down--

Eleni Schirmer: One remains, and that's Missouri

Brooke Gladstone: Eleni Schirmer is the co-author of a recent piece in the New York Times called The Case Against Student Debt Relief Barely Even Pretends to Make Sense.

Eleni Schirmer: The hangup right now is around Missouri's claim that student debt cancellation cannot go through because it will harm a Missouri-based loan servicing company called MOHELA.

Brooke Gladstone: Right. The states are arguing that this Missouri Higher Educational Loan Authority, MOHELA, which is a quasi-independent loan servicing company, would lose millions of dollars per year if Biden's policy were to pass. Let's just start with that assertion that you and your group spent so long fact-checking.

Eleni Schirmer: The claim is basically about an unpaid debt that MOHELA owes the state of Missouri. Nearly forgotten debt from 2008 is being used to stop debt relief for 43 million Americans and their families. The basic argument is that should debt cancellation go through, MOHELA would lose accounts that it services and therefore would have less revenue to be able to pay back this debt from 2008.

Brooke Gladstone: 105 million owed to Missouri, which Missouri hasn't tried to collect in 15 years.

Eleni Schirmer: That's right.

Brooke Gladstone: It was never touched, never litigated, but now the state of Missouri is saying that student debt shouldn't be canceled because MOHELA would now be too poor to pay the loan that Missouri has never shown any desire to collect. Tell me about your fact-checking and whether this holds any water at all.

Eleni Schirmer: During the oral arguments in front of the Supreme Court, the attorney representing the plaintiffs used the phrase, "It stands to reason that about half of MOHELAs operating revenue will be cut." When we went and looked at the documents that the attorney had filed in support of this, they were void of numbers that would back up this claim. The documents that had been submitted for this proof was a transcript of a press conference that Biden held when he announced the cancellation policies and some pretty generic financial statements of MOHELA. There was no information about the amount of accounts that MOHELA holds that would be affected by the cancellation policy. There was no information about MOHELA's own projections of how cancellation would impact them so we started poking around to answer these questions for ourselves.

Our starting premise is how many borrowers does MOHELA service right now. How many accounts do they hold? How many of these accounts are under $10,000 and $20,000? The White House thinks that 95% of all borrowers will be eligible for this relief. Biden imposed an application on relief, so not every student debtor will get $10,000 to $20,000 canceled. What we found suggests that MOHELA projects that even after cancellation, it'll still make $97 million from servicing loans remaining, which is way more than it made the year before cancellation. Our estimate actually increases that to more like $175 million after the loan cancellation.

Brooke Gladstone: Wow.

Eleni Schirmer: We think there's reason to believe that MOHELA will get a certain fee when it closes out accounts.

Brooke Gladstone: Last July you noted the Department of Education gave a contract to the agency to service a huge number of new accounts related to a different program, and that overall, and this really just struck me, MOHELA's direct loan borrowers have more than tripled from 2.5 million in 2020 to 7.7 million as of April this year.

Eleni Schirmer: That's right.

Brooke Gladstone: They're not in any distress and they could certainly pay off that $100-plus million loan to Missouri at any point if it felt like it, but it doesn't seem like Missouri really cares. Now I want to go back to why Missouri is taking the peculiar position of suing on behalf of MOHELA. Missouri says it has standing as a secondhand injured party, but you say you can't sue on behalf of somebody else.

Eleni Schirmer: If my friend owes me $20 and my friend works at Amazon, but Amazon decides to lay off my friend and I have reason to believe that my friend may no longer be able to pay me back my $20, well, under this precedent, I would have the right to sue Amazon for laying off my friend because it potentially damaged my ability to get paid back the $20. What this case is essentially claiming is that we can only have as much social welfare policy insofar as it's profitable to corporations. If there's a program that potentially damages a company's bottom line, then perhaps we need to reconsider that social policy.

Potentially this case would set a precedent such that if Biden were to decide to stop sending arms overseas to Ukraine, Lockheed Martin could sue to say, "You have to keep the war going because we were depending on selling the federal government weapons and if you change that policy, then that's damaging the bottom lines of Lockheed Martin." Regardless of whether you even think that student debt should be canceled or not, the idea that social welfare policies should be based on if and how it's profitable to corporations, to government contractors, I think is very worrisome

Brooke Gladstone: From all the facts you've laid out, the debt relief plan would barely hurt MOHELA so the claim to injury isn't supported by the evidence, and if MOHELA wouldn't suffer, Missouri wouldn't suffer in any way. Missouri has no grounds to sue. Is this really about Missouri and the other five GOP-run states that were originally in this suit simply opposing a Biden initiative? Is this about politics?

Eleni Schirmer: It's hard to see this other than a group of Republican states who didn't like this policy and really cast around for their best shot to take it down. In the hearing, at one point, one of the justices said, "Well, if the harm is being brought to MOHELA, why isn't MOHELA here?" [chuckles] The fact of the matter is that MOHELA cannot sue. In early 2022, the Department of Education made a contract modification with all of the loan servicers, including MOHELA, saying that the loan servicers do not have the right to protest or contest any of the Department of Education's account allocations. The Department of Education has the right to giveth loan servicers contracts, and it has the right to taketh them away.

Brooke Gladstone: This case was initially dismissed by a district judge in the Eastern Missouri US District Court, which claimed that the states had no grounds to sue, but the states appealed. The US Eighth Circuit Court of Appeals granted an injunction and that's when the Supreme Court picked it up. Now this was a critical decision. When the Supreme Court steps in this early, the plaintiffs are relieved of the chore of testing or proving their assertions in Lower Court. Why did the Supreme Court say that it would skip the Lower Court process and pick it up?

Eleni Schirmer: In November of 22, Biden requested that the Supreme Court intervene and take a look at this case. I suspect it's because Biden believed the ridiculousness, the extravagant claims at this case would be more accurately identified for what they are by the Supreme Court Justices than by the lower courts. The Eighth Circuit and the Fifth Circuit are notoriously right-wing, highly partisan, Trump-appointed judges, and I suspect Biden didn't think that they would give it a fair hearing, which really says something when this particular Supreme Court is seen as the more judicious body than a lower court.

Brooke Gladstone: You wrote that the ease with which these convoluted arguments ascended to the Supreme Court, the complete lack of fact-checking casts the yawning power differential between lender and debtor in sharper relief.

Eleni Schirmer: The way that the plaintiffs were able to establish their claim by some hand waving and saying, "It stands to reason. We've got the documents in the file and in those documents, you'd see it's all spelled out." We opened them. It wasn't spelled out. That is the exact opposite of how debtors are treated. The paperwork to get this debt canceled is just absolutely onerous. Folks seeking the public service loan forgiveness relief have to get signatures from employers from a decade ago. Do they still have the same phone number? Do they remember who you are? Can you trust them to sign off on your form?

There's cases of people having their applications denied because they signed the paperwork using the wrong colored pen or they used the ink signature instead of an electronic signature or vice versa. Every single turn of the way, the debtors have to prove that they're deserving of relief. Meanwhile, these Republican attorney generals to strike down relief don't even have to back up their basic claim. They just say, "It stands to reason."

Brooke Gladstone: You call this the hierarchy of credibility, a term coined by the sociologist Howard Becker, and that in fact, this hierarchy is so deeply rooted, you even find it in Biden's own plan.

Eleni Schirmer: As Biden was putting together his plan for relief, numerous advocates warned Biden saying, "You cannot put an application on this. When debtors have to apply for relief, the process gets totally gummed up. It becomes a red tape bureaucratic nightmare."

Brooke Gladstone: What do you mean? You have to apply. How do they even know you need the relief?

Eleni Schirmer: We like to say that debt is the means test on itself. If you didn't have the cash to put up for college and you had to borrow, you probably need some relief. On Biden's plan, perhaps it was rooted in a well-meaning progressive space of like, "Well, we don't want the rich to benefit from this program." The truth is the rich don't have student debt.

Brooke Gladstone: Fraudsters rip off the government all the time, big and small.

Eleni Schirmer: There was a brief window when the student debt application was open. In those days, the application was alive and valid, we have some data on who actually applied. What the data suggests is that most people who applied for student debt relief on average live in areas that earn less than $35,000 per capita. These folks live in poor neighborhoods and they're predominantly Black and Brown. The danger is that by putting up red tape to try to rule out the fraudsters, there's just pages of social science research documenting that the risk is that people who actually need relief don't get it.

Brooke Gladstone: You wrote, "Should the justices affirm this claim deciding in favor of Missouri, they would effectively be confirming a fake plaintiff, false facts, and an unjust claim. Falsehoods about falsehoods would be a hard way to lose the debt relief the President promised to 43 million Americans and their families and a Supreme Court that doesn't scrutinize basic facts would be a further disgrace for a body already plagued by scandal." It's not the first time this court will have made a decision based on untested assertions and scare tactics. Why do you think we should be paying such close attention this time?

Eleni Schirmer: If the justices affirm the plaintiff's case that MOHELA's revenue should be held over and above debtors' need for relief, I think that's sending a very worrisome signal. It has the precedent to counterpose companies' bottom lines against the well-being of millions of people and probably the most plain is that I would like to have a Supreme Court that cares about facts.

Brooke Gladstone: Eleni, thank you very much.

Eleni Schirmer: Thank you very much. Appreciate it.

Brooke Gladstone: Eleni Schirmer is a writer postdoc at the Social Justice Center at Concordia University in Montreal, and an organizer with the Debt Collect. Coming up, how the legal press was primed to see pass the politicians in robes. This is On the Media.

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