Biden administration faces first lawsuit over student loan forgiveness
The lawsuit was filed on behalf of plaintiff Frank Garrison, who is currently enrolled in the Public Service Loan Forgiveness program.
'Mr. Garrison will face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt.'
On Tuesday, Pacific Legal Foundation (PLF) filed the first lawsuit against the U.S. Department of Education regarding President Biden’s student loan forgiveness program.
The lawsuit was filed on behalf of plaintiff Frank Garrison, a public interest attorney with PLF. Garrison has student loans and is currently enrolled in the Public Service Loan Forgiveness program. In order to be eligible for the program, Garrison had to work in ”relatively lower-paying public service or non-profit organization positions” for a period of time after graduation.
Garrison lives in Indiana one of several states that consider loan forgiveness a taxable income.
Before Biden’s announcement, Garrison anticipated full student loan relief by enrollment in the PSLF. As a result of the administration’s new student loan plan, the lawsuit claims Garrison will face additional taxes that he would not have otherwise incurred.
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“Mr. Garrison will face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt,” the lawsuit states. “Mr. Garrison and millions of others similarly situated in the six relevant states will receive no additional benefit from the cancellation—just a one-time additional penalty.”
Mississippi, Minnesota, Wisconsin, Arkansas, and North Carolina have similar tax policies on student loan forgiveness that would require almost 40,000,000 recipients of President Biden’s student loan relief plan to include debt relief as taxable income.
PLF also criticized the use of the Higher Education Relief Opportunites for Students (HEROES) Act to justify the executive branch stepping over Congressional authority to make policy.
“The debt cancellation is not justified by the HEROES Act because, among other reasons, the cancellation is neither “necessary,” nor is it targeted at harms that are “a direct result of a . . . national emergency,” PLF argued. “[T]he major questions doctrine requires a clear authorization by Congress of such an economically and politically significant action, which is lacking here.”
PLF requested a permanent injunction and declaratory judgment that would declare the administration’s student debt plan as “unlawful” and halt the plan from going into effect.
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The Biden Administration announced the student loan forgiveness plan on Aug. 24 after initiating four payment pauses since President Biden took office in 2021.
Students with pell grants are eligible for up to $20,000 of loan forgiveness, and students without pell grants are eligible for up to $10,000, according to the statement released by the President.
In a budget memo on Sept. 26, the Congressional Budget Office revealed that the student loan relief plan would cost an estimated $400 billion over 30 years.
Campus Reform contacted PLF and the White House and will update this article accordingly.
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