President Joe Biden’s plan to forgive hundreds of billions of dollars in student loan debt is facing its first serious legal challenge alleging it violates federal law and the Constitution, according to a lawsuit filed by the Pacific Legal Foundation on Tuesday.
The PLF, a libertarian law firm, is asking a judge in the District Court for the Southern District of Indiana to place a temporary restraining order on the Biden administration’s plan, which seeks to cancel up to $20,000 in student loan debt per person for more than 40 million borrowers.
The law group claims to have identified a group of taxpayers who will be unfairly harmed by the loan forgiveness plan, including one named Frank Garrison, an employee of PLF and a resident of Indiana, which is one of at least six states that tax this type of debt cancellation as income.
Garrison is already part of the congressionally approved Public Service Loan Forgiveness program and would have his debt forgiven after 10 years of payments without any additional tax expenses. He is already six years into payments and said payments are capped based on his income, according to court records.
Because Garrison is a Pell Grant recipient, he is eligible for $20,000 in loan forgiveness. But removing the amount of his principal debt would alter nothing for his situation except for giving him a tax bill of more than $1,000, according to Caleb Kruckenberg, an attorney for PLF.
Through his participation in the public service program, the so-called “forgiveness” plan would actually make Garrison owe money as soon as October, PLF argues.
“Congress did not authorize the executive branch to unilaterally cancel student debt,” Kruckenberg wrote in a statement to the Washington Examiner. “It’s flagrantly illegal for the executive branch to create a $500 billion program by press release, and without statutory authority or even the basic notice and comment procedure for new regulations.”
In response to the lawsuit, White House assistant press secretary Abdullah Hasan tweeted that the PLF’s claims are “baseless” for the sole reason that “anyone who does not want debt relief can choose to opt out.” But the White House and the Department of Education have insisted that debt cancellation is “automatic” for up to 8 million borrowers, Kruckenberg told the Washington Examiner.
In a sudden shift Tuesday afternoon, Steven Simpson, a senior attorney at PLF representing Garrison, said that if it’s true that Garrison can opt out of the program, it would be “harder to argue that he’s harmed anymore,” he told the New York Times.
The monumental task of forgiving the debt of millions of student borrowers is estimated to cost as much as $400 billion, according to an estimate posted Monday by the Congressional Budget Office.
The CBO also estimated that the administration’s decision to extend the pause on loan repayment through the end of the year would cost the government $20 billion.
While the PLF’s lawsuit marks the first major organization to take legal action against Biden’s plan, murmurs of litigation threats have taken place in Republican circles since Biden first announced his plan in August.
And earlier this month, an Oregon man who once ran for Senate as a Republican filed a complaint in the District Court for the District of Oregon, arguing Biden improperly relied on the 2003 HEROES Act, which was intended to allow the government to modify student loans during times of war or a national emergency.
PLF’s lawsuit also contends Biden’s citation of the 2003 law is an abuse of power that has not been seen since former President Donald Trump imposed a nationwide eviction moratorium before the 2020 elections, according to a press statement.
Reporting from The Washington Examiner.
