Legal Foundation Makes Big Move to Block Biden's 'Flagrantly Illegal' Student Loan Cancellation


The Pacific Legal Foundation has filed the first lawsuit against the Biden administration for what it calls a “flagrantly illegal” cancellation of student debts by President Joe Biden and the Department of Education that the foundation estimates could cost more than $500 billion.

According to a news release from the foundation, the suit was filed on behalf of Americans who will be directly harmed by the tax consequences of the “ill thought out” program.

Pacific Legal Foundation attorney Frank Garrison is the named plaintiff in the case.

According to the release, Garrison is repaying his student loans through the Public Service Loan Forgiveness program, which allows student loan recipients who forego jobs in more lucrative private businesses for public service work through the government or a non-profit organization to have their student loans forgiven after they make 10 years of regular payments.

“Frank lives in Indiana, which taxes the upcoming cancellation as income but does not tax his future PSLF loan forgiveness,” the news release states. “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.”

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In the release, the foundation made its view of Biden’s action, and its motivations, clear.

“Now the president is changing the rules in what is, by all appearances, a political move in advance of an election. But whatever the administration’s motives, the loan cancellation program has been rushed, is ill thought out, and will have significant unintended consequences for borrowers, students, colleges, and the economy in general,” the PLF wrote.

According to the lawsuit, Garrison is seeking an injunction “prohibiting Defendants from enacting loan cancellation,” and a declaratory judgment of the court “holding unlawful and setting aside any action by Defendants to enact loan cancellation.”

The suit, filed in the U.S. District Court of Southern Indiana, names the U.S. Department of Education and Secretary of Education Miguel Cardona as defendants.

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In the news release, the foundation stated that the Biden administration lacked “legislative authority to carry out the president’s wishes,” but elected to use the Department of Education under the guise of the 2003 HEROES Act — Higher Education Relief Opportunities for Students — to assert authority to blanket “cancel” $10,000 or $20,000 in student loan debt that is currently held by approximately 40 million borrowers.

In the release, Caleb Kruckenberg, one of the Pacific Legal Foundation attorneys who filed the suit, said Biden had no power to take the action he did.

“Congress did not authorize the executive branch to unilaterally cancel student debt,” he said.  “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 new regulations.”

The other PLF attorney who filed the suit, attorney Michael Poon, told Fox News in an interview on Tuesday that Congress makes the law, not the White House.

“You can’t have the executive modifying or waiving the law,” he said. “That is just unconstitutional.

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“The law says you have to repay student loans. Biden is ignoring those laws, and he can’t do that.”

According to Fox, White House spokesman Abdullah Hasan argued that Garrison’s claim is “baseless for a simple reason.”

“No one will be forced to get debt relief,” Hasan told Fox News. “Anyone who does not want debt relief can choose to opt out.”

He added:

“Why would this group bring this baseless claim? Because opponents of the debt relief plan are trying anything they can to stop this program that will provide needed relief to working families.”

According to the PLF release, student loan borrowers “in at least six states—Indiana, Wisconsin, North Carolina, Minnesota, Mississippi, and Arkansas — will be stuck in a similar situation as Frank.”

CNBC reported along those lines on Sept. 8, noting that residents in Indiana and at least Mississippi and North Carolina, and possibly Arkansas, California, Minnesota and Wisconsin, would have a tax liability for the Biden administration’s student loan cancellation.

County-level taxes may even be assessed in some jurisdictions, CNBC reported.

The Pacific Legal Foundation also argued that the justification of the loan cancellation under the HEROES Act is “flimsy,” writing, “The Education Department issued a memo insisting the military-focused HEROES Act granted the agency student debt-cancelling powers to combat the financial harms caused by the pandemic. But President Biden himself recently declared that the pandemic ‘is over.’ So The HEROES Act is a flimsy pretext for a major policy change that Congress has declined to enact.”

The reference to the Biden quote was from Biden’s interview broadcast by “60 Minutes” on Sept. 18. Asked about the pandemic by correspondent Scott Pelley, Biden said, “We still have a problem with COVID. We’re still doing a lotta work on it. It’s — but the pandemic is over.”

White House Deputy Communications Director Kate Berner told CBS, “we are confident that the president’s plan can withstand legal challenge.”

Like Hasan, she stated that student loan borrowers will be able to opt out of the student loan cancellation, but did not specify how.

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