New Lawsuit Challenges Legality of Biden's Student Loan Forgiveness Plan
S E E D E D C O N T E N T
President Joe Biden's plan to forgive hundreds of billions of dollars in student loan debt violates both federal law and the Constitution, according to a just-filed lawsuit from the Pacific Legal Foundation (PLF), a libertarian law firm.
"This isn't how laws are supposed to be made," Caleb Kruckenberg, an attorney for PLF, tells Reason. "Only Congress has the power to pass laws and spend money under the Constitution. The administration's actions here are flagrantly illegal."
This is the first serious challenge to Biden's student loan forgiveness plan, which he announced last month. The lawsuit's plaintiff is Frank Garrison, who's also an attorney at PLF. Garrison borrowed federal student loans to pay for law school, but according to him, Biden's debt forgiveness plan will actually subject him to a financial penalty in the form of a state tax. This gives him standing to sue the U.S. Education Department, his lawsuit argues.
"Despite the staggering scope of this regulatory action, it was taken with breathtaking informality and opacity," the lawsuit claims. "In the rush, the administration has created new problems for borrowers in at least six states that tax loan cancellation as income."
According to Garrison, he is already receiving debt relief under Public Service Loan Forgiveness (PSLF), a federal program for borrowers who work in public service at nonprofit organizations. Qualifying borrowers who make a certain number of payments and meet maximum income requirements can have the rest of their debts forgiven by PSLF. Garrison expects to qualify in about four years.
Importantly, debt relief under PSLF is not subject to state taxes. Biden's broad forgiveness plan, however, will be taxed as income in Indiana—where Garrison resides—as well as Wisconsin, North Carolina, Minnesota, Mississippi, and Arkansas. Garrison will be "stuck with a tax bill that makes him financially worse off than continuing with his repayment program under PSLF," according to the lawsuit. "He did not ask for cancellation, doesn't want it, and has no way to opt out of it."
"The administration's slapdash, lawmaking-by-press-release approach to student debt cancellation threatens to leave tens of thousands of borrowers stuck with a tax bill on money they'll never see in states like Indiana, where it will be taxed as income," says Kruckenberg.
While the Pacific Legal Foundation's theory is that this gives Garrison standing to sue the Education Department, the lawsuit's case against the Biden forgiveness plan is more straightforward: PLF is arguing that Biden has violated both the Constitution and the Administrative Procedure Act, which give Congress rather than the president the power to make new regulations.
Biden's new plan will forgive up to $20,000 worth of debt for many borrowers. The plan could cost U.S. taxpayers anywhere between $300 billion and a trillion dollars. A low estimate of the cost per individual taxpayer is $2,100.
The administration has claimed that it has the power to unilaterally forgive student loan debts without consulting Congress. As justification, Biden has cited 2003's Higher Education Relief Opportunities for Students, or HEROES Act. This law gave the president some authority to cancel or delay student loan repayments during national emergencies, with the clear intention of offering relief to borrowers who were serving in combat operations during the war on terror. Biden's view is that the COVID-19 pandemic counts as a national emergency, even though he has now declared it definitively "over."
PLF's lawsuit takes issue with the pandemic justification for debt relief, noting that the harms purportedly ameliorated with debt forgiveness are not a "direct result" of the "national emergency," as required by the HEROES Act.
"To the extent the statute can arguably justify the cancellation, the major questions doctrine requires a clear authorization by Congress of such an economically and politically significant action, which is lacking here," the lawsuit argues.
Loan forgiveness is set to kick in sometime next month.
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This lawless idea that Obama had about a pen and a phone finally faces a challenge.
While I don't agree with how Biden set up this student loan forgiveness program, will the courts agree that this person has standing to file suit? I thought in order to get the loan forgiveness that Biden set up a person had to file paperwork to request it. If this person doesn't sign up for the program then he would still be under PSLF and would not owe taxes on the money forgiven?
That is my question here.
I'm nearly certain that only the House will have standing and they won't until the Reps take charge in Jan and they may be too late.
That is a very lawyer type question. Always try and get a lawsuit dismissed on some technicality.
When it was first announced, I thought the only way that the plan for forgiveness could be stopped would be by Congressional action. I suspect the court action is to slow down the process until January when the Republicans believe they will be in control and can actually do something to stop this. Anything they would try right now would be prevented by the Democrats. And of course the Administration will vigorously defend this in court. So at best I think this court filing is just a delaying action.
I think you have it right. Despite the lawsuit and what Republicans want to do, this move by Biden is a loser. He will lose more votes than he will gain for the stunt. Everyone can see that the working poor end up paying for the educated class.
Minnesota is working to change their law in the next legislation session. I think it has a chance to pass. WI Dems will offer a bill and the partisan Republican majority will kill it before the ink dries. I don't follow the other states.
The CBO is at $400B.
It depends on what is included in the cost estimate.
As it should be across the nation. That "loan" is now income. Honestly, it should reflect as a "default" on credit reports as well.
Seems like a very clever way of obtaining standing. That seems to be the only issue. On the merits, its flagrantly unconstitutional
This was the first thing I thought of when I saw that there was a suit. You have to have standing to sue. Even with the explanation here, I’m not sure I see how this plaintiff has standing. That requires an injury in fact, causality, and redressibility.
The first hurdle is arguing that he has an injury-in-fact from this. The PSLF already forgives loans and while the IRS doesn’t consider that income either, states are free to tax what they like. Does his state not tax one kind of forgiveness, but does tax another? This new forgiveness doesn’t really seem different, but I’m no tax expert.
Next, is his state tax law really the business of the federal government? If he genuinely is worse off, is that the federal government’s fault? His state’s decision to tax this or that wouldn’t seem to be the fed’s responsibility. Maybe he should be suing the state.
He’ll get a chance to argue it in court, but this suit seems more about politics than an actual loss.
I can see possible standing for someone to sue one of the 6 states, but not the PSLF or the Biden Admin.
Yup.
You would know better than I do, but the entire idea seems preposterous.
I'm still trying to figure out in what universe he would genuinely be worse off.
Courts don’t love finding that an individual standing has standing to sue the government - especially for doing a government thing. I don’t like the loan forgiveness, but suing over it is going to be tough.
Brandon isn't doing a government thing. He is usurping the power of the purse from Congress.
Republicans in Congress should be able to file a lawsuit whether or not they are in power. Even while in the minority Brandon is infringing on their power.
He might be. But that wouldn’t imply standing for a private citizen. By that logic, if Congress did the deed, the plaintiff could sue Congress.
State taxes are not the federal govt's fault. He should sue his state or just pay off his loan instead.
Thye ALL should pay their loans back, that is exactly what they agreed to do when obtaining them.
Hmmmm...I never heard a liberal say anything like that when they were fighting like hell to get the federal SALT cap increased! Then, it was all "The govt. is targeting me!"