The First Lawsuit Challenging Biden’s Student Loan Forgiveness Plan

Frank Garrison from Pacific Legal Foundation filed today’s first lawsuit in support of President Biden’s loan forgiveness program. The Congressional Budget Office estimated that it would cost around $400 billion. Garrison is represented by PLF (a libertarian-leaning, public interest company that also happens to be my employer).

Biden Administration Office for Legal Counsel argues the loan forgiveness program is authorized under a provision in the 2003 HEROESAct, which allows the Secretary of Education to “waive” or modify federally-funded student debt obligations. This gives the Secretary the authority to cancel or waive the obligation of borrowers whose ability or financial situation has been affected by a national emergency or war (in this instance, the Covid-19 pandemic). For reasons  I outlined in a previous post, the Biden plan goes far beyond what the statute authorizes, and is also at odds with the “major questions” doctrine and nondelegation constraints on executive power. It is similar to Donald Trump’s attempts to take control of Congress’ spending power and divert funds from military projects to build his wall at border. PLF’s just-filed complaint on behalf of Garrison  advances the statutory authorization, major questions, and nondelegation arguments.

Garrison’s unique strategy to get around the issue of standing is most interesting. Experts consider this the greatest obstacle to successful legal challenges to the loan forgiveness program. The Supreme Court has a precedent that requires federal plaintiffs to establish “standing” in federal court cases. This includes showing they have or are likely to sustain an injury due to the law or policy being challenged. It is important to note that the injury can’t be solely based on the status of plaintiff as taxpayer, who will need to pay the financial costs associated with the new government program. It is the Washington PostThis description explains how Garrison could fulfill that requirement.

Argument [made by PLF]While this is compatible with Biden’s other objections, the foundation might have one thing that legal professionals said was required to prove a case legitimately: a client with standing to sue.

Garrison stated that he He has worked to have his federal student loan cancelled through a program that forgives public servants’ debts after 10 years of service and payments. Participants in the Public Service Loan Forgiveness Program do not need to pay any federal or state taxes. Biden’s plan is not. could This can lead to borrowers in many states including Indiana [where Garrison lives]Being required to pay local taxes.

For borrowers earning less than $125,000 a year or for couples with children, the plan could cancel $10,000 of federal student loan debt. Pell Grant recipients, which is federal aid for students with lower incomes, may be eligible to receive up to $20,000 of forgiveness.

Biden’s plan will be implemented. Take effect before Garrison’s debt is discharged through the public-service program Garrison stated For the $20,000 forgiven, he anticipates paying more than $1,000 in State Income Taxes.

Garrison, along with other beneficiaries of the Public Service Loan Forgiveness Program, is eligible to be considered standing. The administration’s plan will cause Garrison and others to lose their money. This loss applies to Garrison and other federal taxpayers, not only.

I find this strategy to be sound. Although it may sound absurd that plaintiffs can be granted standing on small losses like these, taxpayers collectively aren’t allowed to do so based upon the much greater fiscal responsibility Biden’s plan places them with. This kind of absurdity is found in the Supreme Court’s precedents. They allow standing on any small, individualized harm. As little as $1.It is possible to deny standing for large fiscal effects imposed upon taxpayers. This is absurd, and I can agree with you! The entire doctrine of standing I think is highly questionable and should be scrapped by the Supreme Court. This is not likely, however.

According to the current standing doctrine it doesn’t matter if Garrison and PLF were genuinely trying to prevent him financial losses. Commonly, public interest groups and other litigants bring cases with the primary goal of setting a precedent for others rather than to limit damages to a client. Standing doctrine is irrelevant to plaintiffs’ motivations, provided they have the correct type of “injury”.

The PLF/Garrison lawsuit will prevail. There is likely to be legal arguments about how wide the resulting injunction should go. This could include a blanket injunction to stop the entire program from being cancelled (as Garrison requests), a limited injunction to just Garrison or an injunction to only Garrison. I believe that nationwide injunctions can be justified when the law is being challenged in this case. But many people—including some conservative judges and legal scholars—disagree.

It is likely that this lawsuit won’t be the last against the loan forgiveness programs. An earlier post described the three possible categories of litigants that could challenge the loan forgiveness program. There might be other lawsuits that are similar to Garrison’s.

The 2003 HEROES Act was used as an authorization to cancel loans. However, the Biden administration could use a provision from the 1965 Higher Education Act. This theory was criticized by me here.

Today’s filing may only be the start of a long legal fight over Biden’s large loan forgiveness plan.

NOTE: As indicated above, the Pacific Legal Foundation—the public interest firm litigating this case—is my wife’s employer, as well as Garrison’s. However, she is not part of the litigation in this particular case. My role was minor and unpaid in pushing PLF to address this matter, as well as sharing my thoughts about the case. Garrison used a novel approach to gaining standing. It is notHowever, my idea.

If you think I only care about this case due to narrow self-interest, then I should also mention that I was actively opposed to Donald Trump’s abuse of power in his border wall funding diverting policy. I, as an university professor, stand to profit if Biden’s policy is implemented. For fairly obvious reasons, universities—and their faculty—are likely beneficiaries of loan forgiveness policies that essentially subsidize the consumption of our services.