Find Out Which States Oppose Student Loan Forgiveness

As President Biden’s Administration continues to offer student loan forgiveness and debt relief to hundreds of thousands of borrowers, eighteen states have filed lawsuits against President Biden’s administration opposing the Saving on a Valuable Education (SAVE) plan.  Keep reading to find out which states object to student loan forgiveness and why this is a mistake.

Updated on February 11, 2025.

Key Points:

• The Biden Administration has granted student loan forgiveness to over 150,000 borrowers.
• Republican-led states are suing the Biden administration, arguing that student loan debt relief is unconstitutional.
• States only stand to win from student loan forgiveness, regardless of the politics involved.
• The SAVE Plan is the most affordable plan every provided to student loan borrowers.

The Saving on a Valuable Education (SAVE) Plan was initiated by the Biden Administration in 2023. Since then, it has brought debt relief to more than 150,000 borrowers. However, eighteen states have filed a lawsuit in federal court against the Biden administration, claiming it’s unconstitutional.

Which States Oppose Student Loan Forgiveness and the SAVE Plan

Attorney General Kris Kobach of Kansas filed the first lawsuit. Soon after that, Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Iowa, Louisiana, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, Texas, and Utah joined the lawsuit. These are all Republican-led states.

I do enjoy Alaska’s hypocrisy in all this, considering that Alaska pays its residents a dividend every year through the Alaska Permanent Fund. Last year, each resident, including children, received $1,312 from Alaska’s Department of Revenue.

So Alaska, which doesn’t have a state income tax or even sales tax and loses revenue that way, turns around and gives their residents an average of $1,200 in the four-plus decades they have been paying oil royalties. But… they object to the federal government spending their own money to eliminate student loans. You can’t make this stuff up. Remember Seinfeld and “no soup for you?” Alaska says “no SAVE Plan for you! But here’s free money for just living here.”

By the way, here’s an interesting tidbit: the Public School Loan Forgiveness Program (PSLF) was signed into law in 2007 by then-President George W. Bush as part of the College Cost Reduction and Access Act of 2007. For the record, President Bush is a Republican.

But why stop there? Missouri’s Attorney General Andrew Bailey has filed a second lawsuit. This lawsuit makes sense logically, not legally. Let me explain.

MOHELA, the student loan servicer, is based in Missouri. Yes, the same MOHELA that is under fire from Congress for how they have been servicing student loans.

• Navient Student Loans Transfer to MOHELA: What You Need to Know

Why These Anti-Student Loan Forgiveness States Are Wrong

Here, I won’t bore you with statistics, just common sense, as this is clearly a political move, not a move considering the best financial interests of the student loan borrowers in that state.

Start first with the concept of debt. The more you owe, regardless of the type of debt, the less disposable income is available.

For example, if you owe $100,000 in student loans, that will delay purchasing a home, car, or even having a family. This is besides the fact that the costs of education have gotten ridiculous.

If your initial gut reaction is that a car, home, or family can wait, my question is, how long? You do realize that buying a new car or home is tax revenue for the state.

Children aren’t free, either. Every time money is spent on a child, taxes are somehow involved.

According to the Department of Education, the average student loan debt in those eighteen states is $27,500 per borrower. If that debt is eliminated, there is $27,500 per borrower from which the state can benefit in one form or another. Like taxes on purchasing a new car. Real estate taxes, etc.

It’s not the State’s Money

We have state taxes, and we have federal taxes. Student loan forgiveness is attached to federal tax dollars. State tax dollars aren’t being taken from the federal government.

Imagine the federal government saying that no one should have to pay federal income tax tomorrow. Then, we have eighteen states that file a lawsuit saying that’s unconstitutional, arguing that residents of their states should be forced to pay federal taxes. Sounds absurd, doesn’t it? Well, that’s what these eighteen states are doing.

Of course, why stop there? Or, like you hear with late night infomericials: “But wait, there’s more.”

Indiana, North Carolina, and Mississippi have stated they will levy a tax on student loan forgiveness because the IRS considers that taxable income. For the record, these are also Republican-led states.

Paying Income Tax on Income that Doesn’t Exist

I’ve said this before, and it is worth repeating. Where is the logic in saying debt discharged equals taxable income? Think about that one.

You lose your home to foreclosure. The house sells at auction for $100,000, but you owe $150,000 on the mortgage. That $50,000 difference is known as a deficiency judgment.

According to the IRS, that’s taxable income. You have $50,000 more in income now. Really? So I can buy a better car now? Bigger home with his invisible income? Of course not.

But, I say over and over in my bankruptcy law classes that creditor-debtor law favors creditors. Why?

Well, it’s simple. Creditors have better lobbyists than you. Did you spend millions of dollars last year to convince members of Congress to pass laws that favor borrowers and not creditors?

The Bankruptcy Abuse Prevention Consumer Protection Act of 2005

Don’t go any further than the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) of 2005, passed by Congress and signed into law by then-President George Bush.

Start with the title. What abuse and protecting consumers from what? Congress was arguing that consumers were abusing the bankruptcy system. I’ll make this short. No, they weren’t. Was any evidence provided? Of course not.

Now, the second part of the title. Assuming people are abusing the bankruptcy law system, how does that tie into protecting consumers? What does one person in Topeka, Kansas, who is abusing the bankruptcy law, have to do with me in Miami, Florida? I’ll make this one short as well: nothing!

To be clear, are there people who abuse the bankruptcy law system? Sure, a small percentage of people always take advantage of any scenario. But do you know who abuses the bankruptcy law system more? Corporations! Don’t believe me?

Your Business versus a Large Corporation

Just quickly search corporations that have filed for Chapter 11 bankruptcy protection, laid off hundreds of employees, and closed locations to save money but paid their CEOs millions of dollars in bonuses. It defies logic, doesn’t it?

If your business fails and you file for bankruptcy, you aren’t going to pay yourself anything. Assuming you did, chances are that income isn’t exempt or protected, so the bankruptcy trustee would require you to pay it back, or you get sued, or your bankruptcy isn’t approved.

But with big business, those at the bottom lose their job, and the CEOs get paid millions in bonuses in return because the bonuses aren’t covered under the Bankruptcy Code. I wonder why…

Put that into perspective. Isn’t the CEO supposed to make sure the company they work for profits? If the company fails to profit, the CEO should lose their job just like you would lose yours if you cost your employer money.

Instead, the CEO is rewarded for the business’s failure. Wouldn’t it be great if your employer lost money this year because of you and rewarded you with a bonus? Up is down, and down is up. Alice in Wonderland would be proud.

How Those Eighteen States Will Continue to Lose Money if They Oppose Student Loan Forgiveness

As I stated before, if residents of those eighteen states receive student loan debt relief, they have more money to spend, which benefits the businesses in those cities, towns, and states where they reside. But let’s go a step further.

If those states follow suit, like Indiana, North Carolina, and Mississippi, and tax their residents on forgiven debt as taxable income, guess what those residents will do? I don’t need to be psychic to know they will leave the state and go where student loan debt relief is accepted.

• Deadline to Consolidate Your Student Loans

If one person leaves the state, they take their tax dollars with them; those funds only get replaced if a new person relocates into that state. And guess what? The borrower that left town can get a job that pays less, and it would still be to their benefit. Let’s do simple math.

If you have to pay $500 monthly in student loans, that’s $6,000 per year. So now, a student loan borrower can afford to take a job that pays $6,000 less. Of course, the student loan borrower is also likely to choose a city and state with a lesser cost of living. Let’s pretend that amounts to $2,000 less per year.

Now that borrower can relocate, earn $8,000 less per year, and still be in the same or better position financially. Guess who is in a worse position? The state where the borrower used to live. Yet, somehow, the SAVE plan is the boogey man. Then again, the “talking point” is that student loan debt relief only helps those who got useless degrees. I think John Bender once mentioned a degree in “underwater basket weaving.” Those from the Eighties will know what I’m talking about.

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