Sep 27, 2022 - Politics & Policy

Dept. of Education faces lawsuit over Biden's student loan plan

President Joe Biden delivers remarks regarding student loan debt forgiveness in the Roosevelt Room of the White House on Wednesday August 24, 2022

President Biden delivers remarks on student loan debt forgiveness on Aug. 24. Photo: Demetrius Freeman/The Washington Post via Getty Images

A public interest lawyer on Tuesday sued the Department of Education in an attempt to block President Biden's student loan forgiveness plan.

Why it matters: The federal lawsuit is the first known major legal challenge to Biden's plan, which has presented new political hurdles for the administration — and has drawn opposition from Republicans and some Democrats in battleground states.

Driving the news: The lawsuit is backed by the libertarian Pacific Legal Foundation and says that plaintiff Frank Garrison, an employee, "will face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt."

  • "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 Pacific Legal Foundation also argues that Biden lacks the legal authority to introduce the student loan plan, Reuters notes.

State of play: The lawsuit says that Garrison has been working on getting his loans canceled through the Public Service Loan Forgiveness program, which are not considered taxable, per the government.

  • Garrison argues that Biden's plan would subject him to local tax liability that he wouldn't otherwise owe under the PSLF program.
  • "These taxes would not be owed for debt forgiveness under the Congressionally authorized program rewarding public service," per the filing.

The other side: "The claim is baseless for a simple reason: No one will be forced to get debt relief. Anyone who does not want debt relief can choose to opt out," White House assistant press secretary Abdullah Hasan said in a statement.

  • "Why would this group bring this baseless claim? Because opponents of the debt relief plan are trying anything they can to stop this program that will provide needed relief to working families," Hasan added.

The big picture: The lawsuit comes the day after the nonpartisan Congressional Budget Office released figures showing that Biden's plan could cost about $400 billion.

Go deeper... Student loan forgiveness in hands of "understaffed and overcommitted" agency.

Editor's note: This story has been updated with a statement from the White House.

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