The Pacific Legal Foundation says the plan violates federal law
Josh Christenson • September 27, 2022 10:25 a.m.
A conservative legal group is suing the Biden administration to block what it says is the president’s illegal and unconstitutional plan to write off hundreds of billions of dollars in student loan debt.
The Pacific Legal Foundation on Tuesday asked a federal court in Indiana to stop the Department of Education from canceling $500 billion in student debt starting in October. The group claims that President Joe Biden is abusing a 2003 law designed to cancel student loans for veterans or military personnel during times of war or “national emergency”. The Biden administration says the coronavirus pandemic constitutes a national emergency.
The lawsuit is the first challenge to Biden’s plan to forgive up to $20,000 in loans per student, which is expected to cost up to $1 trillion over the next decade. Former Obama economic adviser Jason Furman said the cancellation would be like “gasoline on the inflationary fire that is already burning.”
The Department of Education did not respond to a request for comment.
The Biden administration relied on a 2003 law, the Higher Education Support Opportunities for Students Act, to justify the “emergency” cancellation of the loan. The law requires that loan forgiveness does not put borrowers in a more difficult financial situation.
According to the Pacific Legal Foundation, Biden’s plan does just that. Borrowers who are part of federal student aid programs in six states will have their loan forgiveness taxed as income, threatening their financial stability.
Frank Garrison, the plaintiff in the case, is a public interest attorney with the Pacific Legal Foundation and is part of one such federal student aid program. He “will be stuck with a tax bill that will make him financially worse off than continuing with his repayment program” along with hundreds of thousands of similar aid recipients in Indiana, Wisconsin, North Carolina, Minnesota, Mississippi and Arkansas, the group said.
“Student debt forgiveness is unfair to those who have repaid their loans or never had one,” Steve Simpson, senior attorney at the Pacific Legal Foundation, said in a press release. “It will only lead to more calls for government intervention in education at taxpayers’ expense.”
Studies have confirmed the Pacific Legal Foundation’s assessment that loan forgiveness benefits those who are already financially stable. More than half of student debt is held by the top 40% of earners. Two-thirds of Americans oppose Biden’s student debt cancellation if it “primarily benefits high-income people,” according to a September Cato Institute poll.
The case, Garrison v. US Department of Educationwas filed in the U.S. District Court for the Southern District of Indiana.