Lawsuit Seeks to Block Biden Loan Forgiveness Plan

Plaintiff argues that he'll be forced to pay state income tax on forgiven debt
By Rob Quinn,  Newser Staff
Posted Sep 27, 2022 5:55 PM CDT
Lawsuit Seeks to Block Biden Loan Forgiveness Plan
President Biden speaks about student loan debt forgiveness in the Roosevelt Room of the White House, Aug. 24, 2022, in Washington.   (AP Photo/Evan Vucci, File)

President Biden's student loan debt forgiveness plan is being challenged by a lawsuit seeking to block it just before it can take effect. In the lawsuit filed in the US District Court for the Southern District of Indiana Tuesday, public interest lawyer Frank Garrison argues that he will be forced to pay $1,000 in state income taxes on $20,000 in forgiven debt, the Washington Post reports. The lawsuit is being supported by his employer, Pacific Legal Foundation, a libertarian law firm based in California. Garrison says he has been working toward having his student loans erased through a separate federal program for public servants, under which he would not be taxed on the forgiven debt.

"Frank is not only somebody who is harmed by this, but he’s also somebody who believes the cancellation plan is deeply wrong," says attorney Steve Simpson at Pacific Legal Foundation. The lawsuit argues that Garrison and millions of others in six states that plan to tax the forgiven debt "will receive no additional benefit from the cancellation—just a one-time additional penalty," the AP reports. Caleb Kruckenberg, another attorney at the foundation, says "Congress did not authorize the executive branch to unilaterally cancel student debt" and it was illegal to bring in the policy "by press release, and without statutory authority."

The White House says that if Garrison doesn't want to have his debt forgiven under the plan, he can always opt out. "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," spokesman Abdullah Hasan said in a statement, per CNN. Harvard University law professor Laurence Tribe tells the Post that the case appears weak because the policy has a "pretty solid" legal foundation—a 2003 law that gives the president the right to cancel student debt in connection with a national emergency, which in this case is the COVID pandemic. (The Congressional Budget Office released its estimate of the plan's cost Monday.)

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