President Joe Biden's plan to forgive countless vast amounts of dollars in education loan debt violates both federal law and the Constitution, based on a just-filed lawsuit from the Pacific Legal Foundation (PLF), a libertarian law firm.
\”This isn't how laws are meant to be produced,\” Caleb Kruckenberg, an attorney for PLF, tells Reason. \”Only Congress has the power to pass through laws and spend money under the Constitution. The administration's actions listed here are flagrantly illegal.\”
This may be the first serious challenge to Biden's education loan forgiveness plan, which he announced last month. The lawsuit's plaintiff is Frank Garrison, who's also a lawyer at PLF. Garrison borrowed federal student loans to pay for law school, but according to him, Biden's debt forgiveness plan will in fact subject him to some financial penalty in the form of a state tax. This provides him standing to sue the U.S. Education Department, his lawsuit argues.
\”Despite the staggering scope of the regulatory action, it had been taken with breathtaking informality and opacity,\” the lawsuit claims. \”In the rush, the administration has created new trouble for borrowers in at least six states that tax loan cancellation as income.\”
According to Garrison, he's 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 create a certain number of payments and meet maximum income requirements might have the rest of the money they owe forgiven by PSLF. Garrison expects to qualify in four years.
Importantly, debt relief under PSLF isn't subject to state taxes. Biden's broad forgiveness plan, however, will be taxed as income in Indiana-where Garrison resides-as along with Wisconsin, New york, Minnesota, Mississippi, and Arkansas. Garrison is going to be \”stuck with a tax bill which makes him financially worse off than continuing with his repayment program under PSLF,\” according to the lawsuit. \”He did not request cancellation, does not want it, and it has no way to opt from it.\”
\”The administration's slapdash, lawmaking-by-press-release method of student debt cancellation threatens to depart tens of thousands of borrowers tied to a goverment tax bill on money they'll never see in states like Indiana, where it will likely be taxed as income,\” says Kruckenberg.
While the Pacific Legal Foundation's theory is this fact gives Garrison standing to file a lawsuit the Education Department, the lawsuit's case from 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 ability to make new regulations.
Biden's new plan will forgive as much as $20,000 worth of debt for a lot of borrowers. The plan could cost U.S. taxpayers anywhere between $300 billion and a trillion dollars. A minimal estimate from the cost per individual taxpayer is $2,100.
The administration claimed it has the ability to unilaterally forgive education loan debts without conferring with 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, using the clear intention of offering relief to borrowers who have been serving in combat operations during the war on terror. Biden's view would be that the COVID-19 pandemic counts as a national emergency, despite the fact that he's now declared it definitively \”over.\”
PLF's lawsuit takes issue with the pandemic justification for debt relief, noting the harms purportedly ameliorated with debt forgiveness are not a \”direct result\” of the \”national emergency,\” as needed through the HEROES Act.
\”To the extent the statute can arguably justify the cancellation, the main questions doctrine requires a clear authorization by Congress of such a fiscally and politically significant action, which is lacking here,\” the lawsuit argues.
Loan forgiveness is set to kick in sometime the following month.
