Lawsuit Filed To Stop $10,000 Student Loan Forgiveness

By Bill Galluccio

September 27, 2022

Loan Forgiveness
Photo: Getty Images

The Pacific Legal Foundation has filed a lawsuit against the Biden administration, seeking to block the student loan forgiveness plan. The lawsuit, led by plaintiff Frank Garrison, argues that the forgiveness plan is an abuse of executive power.

"Congress did not authorize the executive branch to unilaterally cancel student debt. It's flagrantly illegal for the executive branch to create a $500 billion program by press release, and without statutory authority or even the basic notice and comment procedure for regulations," the Pacific Legal Foundation said in a press release.

The law firm has asked the court to grant a temporary restraining order to block the government from forgiving the loans.

"The whole idea that an administrative agency can just say we are going to enact this kind of what they call transformational policy without any oversight whatsoever is ludicrous," Caleb Kruckenberg, an attorney at Pacific Legal Foundation, told USA Today reporter Ingrid Jacques.

The lawsuit also claims that the forgiveness program can result in higher tax bills for people in certain states. For example, Indiana, where Garrison lives, considers the loan forgiveness taxable income.

"Frank lives in Indiana, which taxes the upcoming cancellation as income but does not tax his future [Public Service Loan Forgiveness program] loan forgiveness. Frank will be stuck with a tax bill that makes him financially worse off than continuing with his repayment program under PSLF. He did not ask for cancellation, doesn't want it, and has no way to opt out of it," the PLF said.

"Hundreds of thousands of public interest workers and public servants in at least six states—Indiana, Wisconsin, North Carolina, Minnesota, Mississippi, and Arkansas—will be stuck in a similar situation as Frank, according to the White House's fact sheet."

The Biden administration has not commented on the lawsuit.

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