A major student-loan company is once again at the center of a lawsuit blocking debt cancellation for millions of borrowers

• A federal judge temporarily blocked Biden's second try at broader student-loan forgiveness.
• Student-loan company MOHELA played a central role in the GOP-led states' argument to block the relief.
• The states argued that MOHELA — and therefore the state of Missouri — would suffer revenue loss should the debt cancellation go through.

tweaked 3rd bullet to include missouri

Larry, 60, has been hopeful for student-loan forgiveness .

After graduating with bachelor's and master's degrees in the late 1980s, Larry — who requested his last name be withheld for privacy — worked in education. However, due to limited income from the profession, Larry said there were periods of time when he was unable to afford his monthly payments , and his balance now stands at just over $194,000, according to documents reviewed by Business Insider.

Even with the financial burden his student debt has brought him, Larry said he has tried to remain optimistic about the prospect of debt relief , given President Joe Biden and Vice President Kamala Harris' actions during their term .

"Over the past four years, I've watched them do what they could," Larry told BI. "I know that they've been having to fight every step of the way, but I know that some people have gotten some relief, and I'm always hopeful that I'll be part of it, but that just has not happened up to this point."

Larry and millions of other student-loan borrowers will have to keep waiting. On September 3, seven GOP state attorneys general filed a lawsuit in Georgia's southern district to block Biden's second try at broader student-loan forgiveness under the Higher Education Act of 1965. Just two days later, the court granted the states' request by placing a temporary restraining order on the relief , meaning Biden cannot carry forth with implementation pending a final legal decision.

Notably, one of the key reasons the court said it granted the temporary restraining order is due to the states' argument that Biden's relief plan would harm MOHELA , a student-loan company based in Missouri, one of the states that filed the case. The ruling said that due to the loss of revenue MOHELA could suffer as a result of the relief, it was necessary to temporarily block the plan.

It's the same argument a different group of GOP states used that led the Supreme Court to strike down Biden's first attempt at broad debt relief last summer. Luke Herrine, an assistant law professor at the University of Alabama, told BI that this time around, the GOP-led states seeking to block Biden's second relief attempt "want to say the Supreme Court has already said that Missouri is automatically a good plaintiff to challenge anything that the Department of Education does because MOHELA's revenues might be threatened."

"They basically just want to say, 'Look, the Supreme Court dealt with that already,'" Herrine said.

Inside the latest lawsuit

Seven GOP state attorneys general from Missouri, Georgia, Alabama, Arkansas, Florida, North Dakota, and Ohio argued in their lawsuit that the Education Department is attempting to "unlawfully" cancel student debt and has "quietly instructed federal contractors to 'immediately' begin cancellation" in early September.

Their arguments are based on internal documents the states obtained from the Education Department to federal student-loan servicers regarding preparation to implement its second try at broader debt relief. According to the documents, the Education Department sent a memo to MOHELA saying, "In September of 2024, the Biden-Harris Administration will launch the Federal Student Loan Debt Initiative."

It's unclear from the documents which specific elements of the relief plan would have been implemented in September. An Education Department spokesperson previously told BI that "the Department has been following the negotiated rulemaking process to draft the rules that would provide this relief, and they will not be implemented until after they are finalized."

Still, the states argued the Biden administration was violating the regulatory process by making plans to implement relief, despite the Education Department stating it would not begin getting relief to borrowers until October.

Some Republican lawmakers also supported the states. Sen. Bill Cassidy, the top Republican on the Senate education committee, wrote on X: "The admin knows they lack the legal authority for this, but this is their attempt to buy votes."

However, Herrine said that it's reasonable for the department to begin plans to cancel debt, given the operational burden carrying out the plan would have on servicers.

"What seems to be happening is that the department knows that this is going to be challenged, and they have to act quickly," Herrine said. "And second of all, that this is gonna be difficult to implement, and that servicers have been, not just in addition to the difficulty of implementation, have been actively resistant to implementation, and that they want to prepare."

Additionally, the states argued Biden's second try at broader student-loan forgiveness should be blocked because MOHELA would stand to lose revenue from any forgiven loans. This is the same argument that led the Supreme Court to strike down Biden's first try at broad debt relief — both lawsuits argued that MOHELA would suffer from servicing a smaller loan portfolio. With MOHELA being an instrumentality of Missouri, the states are saying that harm to MOHELA would harm Missouri's finances, as well.

MOHELA denied involvement in the first lawsuit last summer, and it did not immediately respond to a request for comment from BI on this latest legal challenge.

The lawsuit to block the broader student-loan forgiveness plan is not the only one in the works — the SAVE income-driven repayment plan is blocked pending a final legal decision following a legal challenge from another group of GOP state attorneys general.

Larry said he's still hoping the administration will succeed in court, but he's disappointed millions of borrowers are in this situation in the first place.

"It's just very frustrating watching how the administration is trying to provide some help, and then you have all of these anti-student loan forgiveness entities fighting against it," he said. "And so it's like they are not concerned with the people in this situation."

Do you have concerns with the latest legal challenges to student-loan forgiveness? Are you making any changes to your finances? Share your story with this reporter at asheffey@businessinsider.com .