Find Out Which States Oppose Student Loan Forgiveness

Following the 2025 termination of the Saving on a Valuable Education (SAVE) plan, a result of the legal challenges led by eighteen states, millions of borrowers are now navigating a more restrictive repayment landscape. While these states successfully argued that the SAVE plan was an overreach of executive authority, their victory comes at a steep price for their own residents.

The states that led this charge claimed to be protecting the “sanctity of debt,” yet a closer look at their own financial policies reveals a startling level of contradiction, if not hypocrisy.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on February 11, 2025.

Key Points:

• Biden-Harris Student Loan Relief: By the end of the Biden-Harris term in 2025, the administration had approved approximately $190 billion in student loan relief for over 5.5 million borrowers, a historic level of discharge that far exceeded any previous administration.
• The Legal Conflict: 18 Republican-led states successfully sued to halt the SAVE plan, arguing it lacked Congressional authorization. This litigation ultimately led to the program’s termination in late 2025 under the Trump administration.
• The Economic Reality: From a common-sense financial perspective, states actually lose when they block debt relief. Every dollar forgiven is “unlocked” disposable income that flows directly into local economies through car purchases, home down payments, and retail sales tax.
• The Double Standard: Opposition to student debt relief often ignores the “big business” reality of our legal system. Large corporations frequently use bankruptcy and federal subsidies to wipe out massive debts, yet individual student borrowers are held to a much more punitive standard.

Which States Oppose the SAVE Plan?

The legal challenge began when Kansas Attorney General Kris Kobach filed the initial lawsuit. Shortly after, other states joined the fray:

Alabama	Idaho	Nebraska
Alaska	Iowa	North Dakota
Arkansas	Louisiana	Ohio
Florida	Missouri	Oklahoma
Georgia	Montana	South Carolina
Texas	Utah	West Virginia

The Irony of the “Alaska Exception”

I find Alaska’s participation particularly hypocritical. Alaska pays its residents an annual dividend through the Alaska Permanent Fund. Last year, every resident, including children, received $1,312 just for living there.

Alaska has no state income tax and no sales tax, yet they give away “free money” while simultaneously suing to stop the federal government from forgiving student debt.

The Missouri Connection: Follow the Money

Missouri’s Attorney General, Andrew Bailey, filed a separate lawsuit that makes sense logically, if not legally. MOHELA, one of the nation’s largest student loan servicers, is based in Missouri.

If loans are forgiven, MOHELA earns fewer servicing fees. This lawsuit isn’t about the Constitution; it’s about protecting a state-linked revenue stream at the expense of the borrower. But from a legal perspective, I tend to agree that Missouri has standing.

Professor’s Note: Professor’s Note: “Standing” means a connection to the legal issue. In this case, MOHELA has standing because of the financial losses it could incur, but I disagree that the state can join the case as a plaintiff; we’ll leave that discussion for a law school essay exam.

Why These States Are Economically Wrong

This is a political move that ignores basic common sense. As a professor of business law, I look at the disposable income factor.

Delays Life: If you owe $100,000 in student loans, you aren’t buying a home, a new car, or starting a family.

Tax Revenue: When a borrower is freed from a $500 monthly payment, that money is spent locally. They buy goods (sales tax) and houses (property tax).

The $27,500 Stimulus: According to the Department of Education, the average borrower in these 18 states owes $27,500. Eliminating that debt is effectively a $27,500 injection into the state’s own economy.

Of course, if you disagree, remember Alaska’s economic policy. Besides, this isn’t a new concept, as wiping out $40,000 in student loans is what residents of Illinois benefit from with the Smart Buy Program.

It’s Not the State’s Money

The argument that student loan forgiveness “hurts” the states is absurd. These are federal tax dollars.

Imagine the federal government decided to abolish federal income tax tomorrow. Would these same eighteen states sue to force their residents to pay the IRS? Of course not. Yet, by opposing the SAVE plan, they are essentially demanding their residents remain indebted to a federal creditor.

The “Invisible Income” Trap

States like Indiana, North Carolina, and Mississippi plan to tax forgiven student loans as income. This mirrors a frustration I see constantly in bankruptcy law: the idea that discharged debt equals taxable income.

If you lose your home in a foreclosure and still owe a $50,000 deficiency, the IRS calls that $50,000 “income.” You can’t buy a car with that “income,” yet you’re expected to pay taxes on it.

Prof. Hernandez’s Note: Creditor-debtor law almost always favors the creditor. Why? Because creditors have better lobbyists than you do.

The Corporate Double Standard

In my classes, I often discuss the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. The title alone is a misnomer. It was designed to “protect” consumers from “abusing” the system, yet there was zero evidence of widespread abuse.

Contrast this with how we treat large corporations:

• Small Business: If your business fails, the bankruptcy trustee will watch you like a hawk.
• Big Tech/Global Corps: A CEO can run a company into the ground, lay off 5,000 people, and walk away with a $20 million “retention bonus” because the Bankruptcy Code doesn’t treat those bonuses the same way it treats your $500 student loan payment.

The Professor’s Conclusion: The Brain Drain Means Money Lost

If these eighteen states continue to oppose relief and insist on taxing forgiven debt, they will face a “brain drain.”

A borrower who saves $6,000 a year in student loan payments can afford to take a job in a friendlier state for $6,000 less pay and still come out ahead. These states aren’t just political policies; they are fighting their own economic future at their own loss.

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Updated initially on February 11, 2025.