Libertarian legal group sues Biden administration to forgive student loans

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Dive Card:

  • The Biden administration faces its first significant legal challenge to its plan to forgive large amounts of student loan debt after a libertarian group sued on Tuesdayarguing officials exceeded their authority and flouted the Constitution.
  • The plaintiff is Frank Garrison, an attorney with the Pacific Legal Foundation, which is supporting him in the case. Garrison argues that the White House’s action will hurt him and other borrowers from a handful of states — such as Indiana, Garrison’s home — that will tax debt relief.
  • Garrison claims he otherwise would have had his debt wiped out without penalty under the Public Service Loan Forgiveness program, which cancels the debt of borrowers who pay off a decade of monthly loans while working nonprofit and government jobs. White House Press Secretary Karine Jean-Pierre addressed the lawsuit in a briefing on Tuesday. She said borrowers can opt out of forgiveness and “nobody who doesn’t want debt relief will have to get that debt relief.”

Dive Insight:

The Biden administration in August announced the plans to forgive up to $10,000 in debt for individuals earning up to $125,000 per 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 appealed in court.

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

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

Conservatives, however, argued that the president’s actions were fiscally reckless and unfair to those who never went to college or paid off their loans. They have also said the plan is illegal because it violates the authority of Congress.

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

The Pacific Legal Foundation’s lawsuit echoes many of these 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 how the federal government must implement regulations, the lawsuit says.

“To the extent that the statute can be argued to justify nullification, the major issues doctrine requires clear congressional approval of such an economically and politically significant action, which is absent here,” the lawsuit states.

Further, the Biden administration violated the Constitution by removing 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 illegal. It seeks court fees and such other relief as the court deems appropriate.

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

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