Libertarian legal group sues Biden administration over student loan forgiveness plan

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Dive Brief:

  • The Biden administration faces its first significant legal challenge to its plan to forgive broad amounts of student loan debt after a libertarian group sued Tuesday, arguing officials overstepped their authority and flouted the Constitution. 
  • The plaintiff is Frank Garrison, a lawyer for the Pacific Legal Foundation, which is backing him in the case. Garrison alleges the White House’s actions will harm him and other borrowers who are from a handful of states — like Indiana, Garrison’s home — that will tax debt cancellation. 
  • Garrison argues he otherwise would have had his debt wiped away without penalty under the Public Service Loan Forgiveness program, which cancels the debt of borrowers who make a decade of monthly loan payments while in jobs like nonprofit and government work. White House Press Secretary Karine Jean-Pierre addressed the lawsuit in a briefing Tuesday. She said borrowers can opt out of forgiveness and “no one who does not want debt relief will have to get that debt relief.”


Dive Insight:

The Biden administration in August announced plans to forgive up to $10,000 in debt for individuals earning up to $125,000 a year. Borrowers who had federal Pell Grants in college, a proxy for low- and moderate-income status, can have up to $20,000 forgiven.

But the administration’s plans were widely expected to be challenged in court. 

The administration justified loan forgiveness by citing the 2003 Higher Education Relief Opportunities for Students, or HEROES, Act. It gives the secretary of education power to change or waive the federal financial aid program “in connection with a war or other military operation or national emergency.”

The coronavirus pandemic was such an emergency, Biden officials said. 

However, conservatives argued the president’s moves were financially reckless and unfair to those who never attended college or paid off their loans. They have also said the plan is illegal because it infringes Congress’ authority.

The nonpartisan Congressional Budget Office recently estimated loan forgiveness will cost about $400 billion over three decades. 

The Pacific Legal Foundation’s lawsuit echoes many of those complaints. Court filings say the administration acted “with breathtaking informality and opacity” by not pursuing a formal regulatory process for loan forgiveness. 

This violated the Administrative Procedure Act, which governs the way the federal government must implement regulations, the lawsuit says.

“To the extent the statute can arguably justify the cancellation, the major questions doctrine requires a clear authorization by Congress of such an economically and politically significant action, which is lacking here,” the lawsuit says. 

Further, the Biden administration breached the Constitution by wresting away legislative powers from Congress, the lawsuit alleges. 

The libertarian group is seeking a jury trial and to have the Biden administration’s plan blocked and declared illegal. It is asking for court fees and other relief the court deems appropriate.

“Cancelling student debt is unjust to those who have paid their loans or never took any. It will only lead to more calls for government intervention in education at taxpayers’ expense,” Steve Simpson, senior attorney at Pacific Legal Foundation, said in a statement. “Loan cancellation will make Americans more divided, as those who paid their loans — or never went to college — will have good reason to think that we no longer have a government of, by, and for the people.”

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