Biden Administration’s Student Debt Plan Faces Federal Lawsuit

student debtChallenge says Congress did not authorize blanket student debt cancellation while Department of Education responds that claims are “baseless.” The plaintiff seeks to prevent the student debt cancellation from going into effect and a decision by Oct. 1.

09/28/2022 2:30 P.M.

3 minute read

A nonprofit legal group, the Pacific Legal Foundation, has taken the first federal action challenging the U.S. Department of Education’s (DOE) student loan forgiveness plan.

The lawsuit, filed in the U.S. District Court for the Southern District of Indiana, seeks to block the DOE’s plans to cancel more than $500 billion in student loan debt, according to a news release from the Pacific Legal Foundation.

In August 2022, President Joe Biden announced his plan to cancel up to $20,000 in student loan debt per person for more than 40 million Americans.

“The Department of Education’s justification relies on an inapplicable, 20-year-old law: The HEROES Act, which was intended as aid to veterans and their families [and] allows government to modify student loans during times of war or national emergency,” the news release states.

While this is the first federal legal action, a recent lawsuit in an Oregon District Court is also challenging the DOE and Secretary of Education Miguel Cardona’s authority to discharge or forgive student loan debt on a mass basis under the Higher Education Relief Opportunities for Students (HEREOS) Act of 2003, ACA International previously reported.

Federal Case

The Pacific Law Foundation argues congressional approval is needed for such mass student debt relief by the Biden administration.

“Congress did not authorize the executive branch to unilaterally cancel student debt,” said Caleb Kruckenberg, an attorney at Pacific Legal Foundation, in the news release. “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.”

The plaintiff in the case, Garrison v. U.S. Department of Education, Frank Garrison —a public interest attorney now at Pacific Legal Foundation—says the existing, congressionally authorized Public Service Loan Forgiveness (PSLF) program will provide him with debt forgiveness after making 10 years of payments on his loans.

The program, challenged in the lawsuit, will instead lead to a new state tax bill that Garrison would not have under his existing PSLF program, according to the news release.

Indiana is one of several states that has said it plans to enact a state tax on the amount of loan forgiveness, Politico reports. Most other states, and the federal government, will not classify Biden’s loan forgiveness as taxable income, according to the article.

The Pacific Legal Foundation has filed a temporary restraining order to prevent the loan cancellation from going into effect and asked for a decision from the judge by Oct. 1.

“Nothing about loan cancellation is lawful or appropriate,” according to the lawsuit. “In an end-run around Congress, the administration threatens to enact a profound and transformational policy that will have untold economic impacts. The administration’s lawless action should be stopped immediately.”

A DOE spokesperson told The Hill the lawsuit is “baseless” and “opponents of the debt relief plan are trying anything they can to stop this program that will provide needed relief to working families.”

They added that borrowers who do not want the debt relief under the DOE’s plan can opt out.

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