WASHINGTON (NEXSTAR) — The Biden Administration’s plan to forgive billions of dollars in student loans has drawn a lot of criticism. Now it’s drawing a legal challenge.
The Pacific Legal Foundation filed the first lawsuit against the plan this week. Michael Poon is an attorney with the foundation.
“There is just nothing in the law that allows this sort of action to take place outside of Congress,” Poon said.
Their lawsuit claims that the plan hurts a man in Indiana named Frank Garrison because his state is one of several that plans to tax the forgiven loans.
“And that means he’s going to see a bill for $1,000 dollars come April,” Poon said.
There are a few potential roadblocks the lawsuit could run up against. George Washington University law professor Alan Morrison doesn’t think the legal team can prove that the harm from the taxes will outweigh the benefit of the forgiveness.
“Big $20,000 savings from the federal is going to be hardly offset at all by the small Indiana tax increase,” Morrison said.
But Garrison’s lawyers say their client is also eligible for Public Service Loan Forgiveness, which means after 10 years of payments his loan would have been forgiven tax-free.
“So what Frank is getting is there’s no benefit coming out of this,” Poon said.
The White House says anyone who wants to can opt-out.
“The bottom line is this: no one who does not want debt relief, will have to get that debt relief,” White House Secretary Karine Jean-Pierre said.
Poon is skeptical of that claim because the Biden Administration previously said some people would automatically have their loans forgiven, without needing to apply.
“Perhaps the White House is changing its tune now, but that just goes to [show] how sloppy this all is,” Poon said.
Even if the lawsuit is allowed to move forward, Morrison says it might not impact others.
“No court would stop the government from giving money to everybody else, at least until it got to the court of appeals and probably the supreme court,” Morrison said.
So he believes other borrowers don’t need to be that concerned.
“Your loan forgiveness looks like it’s still solid,” Morrison said.
Most eligible people will need to apply for loan forgiveness. The application to do that is expected to be out in early October.