President Biden’s plan to write off billions in student loan debt encountered what is believed to be its first legal problem Tuesday with a lawsuit alleging the move is an illegal administration overreach that would increase the tax burdens of the State for some whose debt would be automatically cancelled.
The Pacific Legal Foundation, a public interest law firm in California, filed a lawsuit in federal court in Indiana on behalf of Frank Garrison, an Indiana-based public interest attorney and employee of the foundation.
Mr Garrison’s case is believed to be the first of many lawsuits expected in response to Mr Biden’s cancellation of student debt.
“Congress has not authorized the executive to unilaterally write off student debt,” said Caleb Kruckenberg, an attorney at the libertarian-leaning foundation. “It is patently illegal for the executive to create a $500 billion program by press release, and without legal authorization or even the basic notice and comment procedure for new regulations.”
The complaint names the Department of Education and Secretary of Education Miguel Cardona as defendants.
Mr. Garrison says he has been paying off his loans for six years under a federal program that forgives student loans for nonprofit and public service workers after 10 years of payments.
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He says he is among hundreds of thousands of public interest workers in several states who will be slapped with tax bills under the new debt cancellation plan, worsening their financial situation.
Mr Garrison says he chose to take a lower salary as a public interest lawyer, in part because of loan forgiveness under what is known as the loan forgiveness scheme the Civil Service, or PSLF, which had previously been authorized by Congress.
According to the Pacific Legal Foundation, borrowers in Wisconsin, North Carolina, Minnesota, Mississippi and Arkansas repaying their loans under the PSLF program could be hit with similar tax bills under the plan. President’s pardon.
Mr Biden unveiled his long-awaited plan last month, which includes canceling $10,000 of student debt for borrowers earning less than $125,000 a year and an additional $10,000 in debt for grant recipients Pel.
Mr. Biden’s plan calls for reducing monthly payments on ongoing undergraduate loans from 10% to 5% of discretionary income, and cancels loan balances after 10 years of payments, instead of 20 years for balances initial loans of $12,000 or less.
He also announced a “final” pause on federal student loan repayments brought on by the COVID-19 pandemic through December.
Foundation lawyers representing Mr Garrison say Mr Biden’s debt cancellation plan is a ‘political decision’ ahead of November’s midterm elections that ‘was rushed, poorly thought out and will have consequences’. significant unintended consequences for borrowers, students, colleges and the economy in general.
Beyond creating additional tax burdens for those repaying their loans under the PSLF, Mr. Biden’s plan “is unfair to those who have repaid their loans or have never had one,” Steve said. Simpson, senior attorney at the Pacific Legal Foundation.
“Loan cancellation will make Americans more divided, as those who have paid off their loans – or who never went to college – will have good reason to believe that we no longer have a government of the people, by and for the people,” he said.
The plan is being criticized by left and right and is likely to face significant legal scrutiny.
Some liberals have said Mr Biden is not doing enough. They wanted him to write off $50,000 or more per borrower. Republicans said the bailout, which would cost taxpayers up to $600 billion, would primarily benefit wealthy people with high-paying careers.
They also blamed it for being more out-of-control spending by Democrats. Republicans insist that increased government spending is a key driver of inflation.
The Congressional Budget Office estimates the plan will cost taxpayers $400 billion.
The CBO also estimates that the pause on federal student loan repayments through December, which Mr. Biden announced last month along with debt forgiveness, will cost an additional $20 billion.
The $420 billion total figure, which is in line with outside estimates, is yet another data point worrying budget hawks that Mr Biden’s debt cancellation plan will further drive up inflation and wipe out economies. progress of his administration in deficit reduction.
“This could be the costliest executive action in history,” said Maya MacGuineas, chair of the nonpartisan Committee for a Responsible Federal Budget. “It is unacceptable for the president to implement it without compensation and without congressional approval.”
“With inflation at a 40-year high and the national debt approaching record highs, we shouldn’t be adding to deficits — certainly not by executive decision,” she said.