World & U.S. News

Biden’s Student Loan Forgiveness Isn’t Going Well

In a lawsuit filed last Tuesday, a public interest lawyer from Indiana described President Joe Biden’s student loan forgiveness plan as an “unacceptable abuse of executive authority.”

With support from his employer – a nonprofit libertarian law firm called the Pacific Legal Foundation – plaintiff Frank Garrison is suing the Department of Education over Biden’s debt forgiveness plan.

The 26-page lawsuit is among the first real challenges to the plan, which offers eligible, working-class Americans earning less than $125,000 per year up to $20,000 in debt relief. Borrowers will not be forced to pay federal income tax on the amount of debt forgiven, but Garrison claims he would still have to pay upwards of $1,000 in state taxes. 

Garrison is currently paying off his debt through the Public Service Loan Forgiveness program, which offers certain public sector workers complete debt forgiveness after they make 10 years of payments. The PSLF program caps payments based on income and does not ask participants to pay taxes on the amount canceled.

Because Garrison also qualifies for Biden’s plan, he would see $20,000 forgiven and thus fail to meet the 10-year requirement for the PSLF program – resulting in state taxes he would otherwise not be forced to pay.

Biden Administration officials assured Garrison that he and anyone else could avoid paying those extra taxes by opting out of the federal program. But the Department of Education has already stated that debt cancellation will occur automatically.

“[Garrison’s] claim is baseless for a simple reason: No one will be forced to get debt relief,” said White House spokesperson Abdullah Hasan. “Anyone who does not want debt relief can choose to opt out.”

Even if Hasan is correct, this doesn’t change the fact that the program itself is unconstitutional.

“Nothing about loan cancellation is lawful or appropriate,” reads the suit. “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 debt forgiveness plan was announced in August and is scheduled to take effect starting in mid-October. It is expected to cost the federal government up to $400 billion. White House officials claim the program is legal based on the 2003 Higher Education Relief Opportunities for Students Act, which gives the Secretary of Education the power to “waive or modify” student aid programs when “necessary in connection with a war” or “national emergency.”

In this case, COVID-19 is the qualifying national emergency. 

As many have argued, however, the economic results of the program could exacerbate inflation, force the Fed to increase interest rates, and produce higher mortgage rates – not to mention the fact that the Biden Administration has put forth zero effort to prove its debt forgiveness plan is somehow linked to the pandemic.

The plan is also nauseatingly unfair to Americans who paid off their loans or did not attend college. 

Author’s Note:

Republicans have been searching for a way to challenge Biden’s debt forgiveness plan and get it to the courts for a ruling. Garrison’s suit is unlikely to succeed, but may spur others to challenge the program. Arizona Attorney General Mark Brnovich (R) and others are already working on lawsuits that could push the issue to the Supreme Court – where it would almost certainly be found unconstitutional.

World & U.S. News