Biden’s biggest and most contentious domestic policy programs

The fate of President Joe Biden’s multibillion-dollar student debt relief plan could hinge on an obscure financial services company just outside of St. Louis.

The Missouri Higher Education Loan Authority, a state-created loan company known as MOHELA, is at the center of a legal challenge from six Republican states trying to stop Biden’s plan to forgive student loan debt for more than 40 million Americans.

The student loan company being used to attack Biden's debt relief plan

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The lawsuit, which is set to go before the Supreme Court next year, will decide the future of one of Biden’s biggest and most contentious domestic policy programs. But it’s also shining a spotlight on MOHELA, which has quietly emerged as one of the nation’s largest student loan servicers while deepening its ties to the Education Department over the past decade.

MOHELA now manages the accounts of nearly 7 million federal student loan borrowers, more than double what it had two years ago. Last yea,r it brought in more than $130 million in revenue, the bulk of which came from its federal contract to service student loans.

MOHELA, like the Education Department’s other loan servicers, had been moving ahead with implementing the Biden administration’s debt relief until it was halted by the courts in November. The company had gone so far as to finalize a letter — co-branded with both MOHELA and federal logos — notifying borrowers that their debt relief request had been completed, according to documents obtained by POLITICO under a public records request.

But, at the same time, MOHELA has been drawn into the fight against student debt relief by Missouri Attorney General Eric Schmitt, one of the lead plaintiffs in the multi-state lawsuit, even though the company is not a party to the case.

The other states pursuing the legal challenge include Nebraska, Iowa, South Carolina, Kansas and Arkansas. They claim Biden’s debt relief plan will harm them in a range of ways, such as lowering tax revenue or diminishing the value of investments tied to student loans.

But it’s Missouri’s portion of the case, asserting financial harm to MOHELA, that has occupied much of the attention from legal observers and lower courts.

Missouri argues that MOHELA will lose money under Biden’s relief plan because it’ll have fewer accounts to manage. Less revenue for the company, Missouri says, will make it more difficult for MOHELA to make required payments to a state fund that helps its public colleges and universities.

Seizing on the harm to loan servicers that work for the Education Department, like MOHELA, was “the best opportunity to bring a successful lawsuit,” said Phil Kerpen, a conservative political organizer who leads American Commitment and was an early proponent of the strategy and circulated the idea in conservative circles.

All of the loan servicers hired by the Education Department decided against suing over the debt relief plan. MOHELA presented a different situation, Kerpen noted, because of the company’s relationship to a state with a Republican attorney general who could take action on its behalf.

When Biden first announced his plan to forgive student debt in August, Republicans and conservative groups vowed to bring legal challenges to the policy. But finding a plaintiff who would have a concrete injury that allows them to bring a lawsuit was a major challenge.

MOHELA’s role in the case has brought fresh criticism from some Democrats and consumer advocacy groups.

Rep. Cori Bush, the progressive Democrat whose district neighbors the company’s Chesterfield, Mo. headquarters, for instance, blasted MOHELA for what she called an “unconscionable” effort to stop debt relief. MOHELA, she added in a statement to POLITICO, is “a proxy for the six conservative attorneys general” to challenge the administration’s debt relief program and “would profit off this challenge’s success.”

MOHELA responded to Bush’s criticism last month by appearing to distance itself from the lawsuit. The company explained in a letter to Bush that its “executives were not involved” with the Missouri attorney general’s decision to file a lawsuit.

With much at stake for the company’s federal loan servicing business, MOHELA officials from the company have also sought to reassure Democratic congressional aides and Biden administration officials that they were not involved in the Missouri attorney general’s lawsuit seeking to block debt relief, according to people familiar with the conversations.

MOHELA did not respond to a request for comment for this story. Company executives haven’t detailed publicly — in court or otherwise — how they expect Biden’s debt relief would affect the company. Some of their competitors in the industry have forecast some type of financial hit if the plan moves ahead.

Progressives object to the idea that the interests of any Education Department contractor would be used to overturn an administration’s student loan policy.

“It’s not just that this could derail debt cancellation, but it sets up a dynamic where the legal status of these contractors creates veto points in the student loan system that allows it to become even more partisan and more dysfunctional,” said Mike Pierce, the executive director of the Student Borrower Protection Center. “Ultimately borrowers are going to pay the price for that.”

For decades after it was created by Missouri lawmakers in 1981, MOHELA made student loans that were guaranteed by the federal government. That changed when President Barack Obama in 2010 signed legislation to scrap the program, which Democrats viewed as a wasteful giveaway to lenders. In response to concerns state entities like MOHELA would go out of business, Congress required the Education Department to set aside new loan servicing contracts for those companies.

“I think no one thought through the politics of that, and here we are 12 years later and the cost of that patronage may kill debt cancellation for tens of millions of people,” Pierce said.

MOHELA has drastically expanded its loan-servicing business since it received an initial Education Department contract in 2011 to service about 100,000 federal student loans, winning additional contracts and new business from the agency. As of August, MOHELA managed the accounts of 6.7 million borrowers on behalf of the Education Department. It also services the accounts of an additional 330,000 borrowers of private loans.

Pittsburgh bridge to reopen less than one year after collapse with help from Biden’s infrastructure law

A bridge in Pittsburgh that collapsed in January, hours before President Joe Biden was scheduled to visit the city to tout his landmark infrastructure funding law, is expected to reopen by the end of December.

The Fern Hollow Bridge may reopen to traffic before Christmas if installation of railings, lighting and line painting can be completed this week, the Pennsylvania Department of Transportation said.

The 447-foot-long, four-lane bridge fell about 100 feet into a park below early on a snowy Friday morning due to a “structural failure,” according to the National Transportation Safety Board.

A bus and four passenger vehicles were on the bridge when it collapsed, according to the federal safety board’s latest report. At least four people sustained injuries. The incident remains under investigation.

State officials, including Democratic Gov. Tom Wolf, said that the federal bipartisan infrastructure law that passed last year is one of the reasons repair of the Fern Hollow Bridge is able to be completed in just 11 months after it collapsed.

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The $1.2 trillion federal infrastructure package was signed into law in November 2021 after receiving bipartisan support in Congress.

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“Thanks to new funds from the Bipartisan Infrastructure Law, $25.3 million in federal funds were made available for the project and the project was able to proceed quickly without affecting funding for other critical projects in the region,” Alexis Campbell, press secretary for the Pennsylvania Department of Transportation, said in a statement sent to CNN on Thursday.

Following the collapse of the bridge, the governor and mayor issued a disaster emergency declaration to speed up the repair process. This allowed the Pennsylvania Department of Transportation to manage the design and construction. Once the project is completed, the city of Pittsburgh will assume jurisdiction over and maintenance responsibility of the bridge.

Some work will continue after the bridge reopens and is expected to last through the winter and spring.

Infrastructure law has funded repairs to 2,400 bridges thus far It will take years to see the full impact of the infrastructure law, which provides funding for everything from bridges and roads to the nation’s public transit, broadband, water and energy systems.

The money isn’t released all at once. The law will provide roughly $550 billion of new federal investments over the next five years. Plus, major infrastructure projects – like building a new highway, adding a berth to a port or constructing a new airport terminal – take time.

But the fact that states and cities know the money is coming can allow them to move faster than usual, said Adie Tomer, a senior fellow at the Brookings Institution who leads a team focused on infrastructure policies.

The Fern Hollow Bridge is just one example. The law has already supported repairs on more than 2,400 bridges, according to the US Department of Transportation.

“Without the new BIL funds, we would have been scrambling to find the money to quickly replace the Fern Hollow Bridge, and other important projects would have been impacted,” said Wolf in a statement released in October when Biden returned to Pittsburgh to see the bridge repair progress.

Dyana Hansen Blog

Dyana Hansen Blog

Biden’s biggest and most contentious domestic policy programs

Biden’s biggest and most contentious domestic policy programs