The Pacific Legal Foundation is suing to block the Biden administration’s debt-relief plan.
The lawsuit, filed Tuesday in a U.S. district court, alleges that the plan to forgive up to $20,000 in student loans for eligible Americans violates federal law as well as the U.S. Constitution’s separation of powers provisions. This is the first lawsuit to challenge the plan, though more challenges are expected.
“Nothing about loan cancellation is lawful or appropriate,” the lawsuit says. “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.”
The foundation also has filed a temporary restraining order to prevent the program from going into effect. The department is expected to open the application for debt relief in early October.
The nonprofit legal organization is representing Frank Garrison, one of its lawyers, in the suit. Because Garrison lives in Indiana, one of the states that’s taxing loan forgiveness, the lawsuit says he would face a tax penalty under the plan and that gives him standing to sue. Garrison is part of the Public Service Loan Forgiveness program, which wipes out existing debt after 10 years. That program is not taxed at the state or federal level. Currently, forgiven student loans will be taxed in seven states unless lawmakers change state law.
The U.S. Department of Education general counsel wrote in a legal memo that the Higher Education Relief Opportunities for Students Act of 2003 allowed for a targeted loan cancellation program “directed at addressing the financial harms of the COVID-19 pandemic.”
The 2003 law was passed after the Sept. 11 attacks and gives the secretary of education authority to forgive student loans during specific periods such as a war or national emergency.
The lawsuit argues that the cancellation plan isn’t necessary to mitigate the economic effects of the pandemic.
White House press secretary Karine Jean-Pierre told reporters Tuesday that borrowers are allowed to opt out of forgiveness.
“Opponents of the Biden-Harris administration student loan plan are trying to stop it because they know it will provide much-needed relief for working families,” Jean-Pierre said.