A public interest law firm based in California has filed a lawsuit against President Joe Biden over his plan to forgive hundreds of billions of dollars in student loan debt, which the firm contends is unconstitutional.
The Pacific Legal Foundation, a libertarian public interest law firm, filed suit last week. One of its employees, public interest attorney Frank Garrison of Indiana, is the plaintiff, The Daily Caller reported.
PRESS RELEASE:
Today, Pacific Legal Foundation filed suit against the U.S. Department of Education to block its illegal move to cancel more than $500 billion in student loan debt.https://t.co/ZyGRQfWj7l
— Pacific Legal 🗡⚖️ (@PacificLegal) September 27, 2022
The lawsuit claims that Biden’s executive order directing the student loan forgiveness was implemented in an illegal manner while also penalizing student loan borrowers like Garrison due to state tax implications.
“Despite the staggering scope of this regulatory action, it was taken with breathtaking informality and opacity. The Department [of Education] did not undertake the notice-and-comment process required for rulemaking, much less solicit any public input,” the suit reads.
“It did not even issue a formal order or directive setting out its cancellation program. Instead, it issued a press release on August 12th along with two legal memoranda providing its justifications, and, later, a hastily created a FAQ section on its website,” the suit continues.
At the time, The Associated Press reported, “If it survives legal challenges that are almost certain to come, Biden’s plan could offer a windfall to a swath of the nation in the run-up to this fall’s midterm elections. More than 43 million owe a combined $1.6 trillion in federal student debt, with almost a third owing less than $10,000 according to federal data.”
A tweet from the Pacific Legal Foundation noted further: “The program is estimated to cost over $500 billion. About 8 million Americans will have their loans forgiven automatically, without opting in—and some, like our plaintiff, will face immediate tax liability. And the administration did it with a press release.”
“In an end-run around Congress, the administration threatens to enact a profound and transformational policy that will have untold economic impacts,” says the complaint. “The administration’s lawless action should be stopped immediately.”
“In an end-run around Congress, the administration threatens to enact a profound and transformational policy that will have untold economic impacts,” our complaint says. “The administration’s lawless action should be stopped immediately.”
Read more here: https://t.co/zQXPLIvduM
— Pacific Legal 🗡⚖️ (@PacificLegal) September 27, 2022
“In the rush, the administration has created new problems for borrowers in at least six states that tax loan cancellation as income. People like Plaintiff Frank Garrison will actually be worse off because of the cancellation. Indeed, Mr. Garrison will face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt,” the complaint adds, noting that Garrison and other relief recipients will be taxed on their ‘gift.’
That’s a huge issue for Garrison because as a public servant, his debts are already being taken care of.
“He’s already part of the congressionally approved Public Service Loan Forgiveness program, and would have had his debt forgiven after 10 years of payments – without any additional tax burden. He’s already six years into payments, and those payments are capped based on his income,” according to USA Today.
Under Biden’s student loan forgiveness, Garrison would be stuck with a $1,000 tax bill because, as a Pell Grant recipient, he is eligible for $20,000 in relief under Biden’s order.
“These taxes would not be owed for debt forgiveness under the Congressionally authorized program rewarding public service. 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,” the suit contends.
