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During certain periods of American history, the opposition’s response to the adoption of a policy by the ruling party consisted largely of rhetoric and a focus on the upcoming election. In contemporary society, however, the de facto response is a wave of lawsuits.
Joe Biden’s new student loan forgiveness program is no exception. The plan as originally designed would have forgiven $10,000 of student loan debt for the vast majority of borrowers with an outstanding balance, except for earners with particularly high incomes. Some of the neediest borrowers are on the verge of double the standard amount of loan forgiveness, at $20,000.
A mere $10,000 per person doesn’t seem like a lot to some proponents of student debt forgiveness. Graduates of some programs – like law students, for example – come out of school with average student loan balances approaching $200,000.
Still, $10,000 per borrower is a significant amount that would impact household budgets. Collectively, the plan would cost around $400 billion over the next 30 years, according to the Congressional Budget Office. That would take a sizable chunk of the $1.6 trillion outstanding federal student loan debt currently owed by some 43 million borrowers, and put the United States on a somewhat more competitive footing with the approximately two dozen countries around the world that already offer completely free or almost free university-level education to their citizens.
Yet this student debt cancellation plan may not have the maximum impact it was meant to have. The Biden administration is facing its first wave of lawsuits over the sweeping $10,000 student debt cancellation plan, and the program has already contracted as a result.
In one of the most dishonest trials in appearance, Indiana attorney Frank Garrison says he doesn’t want $20,000 student loan forgiveness because that would result in an Indiana state tax bill of about $1,000. The U.S. Department of Education quickly responded, saying it would agree to Garrison’s apparent request to opt out of the program and retain a $20,000 debt, thus appearing to effectively eradicate his ability to pursue the lawsuit.
Myself, went to law school on a full scholarship and had tax consequences for the state as a result. While having to pay taxes at the state level isn’t exactly pleasant, just about anyone in the real world recognizes that minor tax consequences are far preferable to paying the sticker price for education. higher, in which case you would add an extra digit or two for whatever tax bill.
The premise of Garrison’s trial may seem silly, but the result is not. Previously, it was unclear whether individuals could opt out of the automatic student loan forgiveness program. Now that we know they can, this lawsuit may have created a political cudgel for future elections in that anyone totally opposed to student loan forgiveness would have been better off not personally benefiting from this program.
In another narrowing of the debt cancellation plan, the Ministry of Education announced that many borrowers whose loans are held by private entities will no longer be eligible for debt relief. Already facing a flurry of lawsuits, the idea here seemed to be to keep the powerful private lending industry out of the legal fray surrounding Biden’s student loan debt forgiveness plan. Most borrowers’ student loans are held by the government rather than private lenders, although the change will affect a substantial minority of borrowers.
Other various legal challenges are piling up for the debt relief plan. More than half a dozen conservative states have already filed suit prevent the Ministry of Education from paying borrowers’ debts. Private entities are also turning to the courts to try to block the rollout of debt relief – the latest lawsuit from a conservative law firm in Wisconsin complains about the use of taxpayers’ money for a program supposedly “created with racial motivations”.
Historically, lawsuits like these have not been very successful in permanently eliminating entire national programs like Biden’s student debt relief plan. Even so, in response to legal threats, the Ministry of Education has already scaled back the program in a way that will affect hundreds of thousands of borrowers. It seems like you don’t even have to win to get real results by taking every conceivable complaint to the court system.
Jonathan Wolf is a civil litigator and author of Your debt-free JD (affiliate link). He taught legal writing, wrote for a wide variety of publications, and made both financial and scientific knowledge his business and pleasure. Any opinions he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization he is affiliated with. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.
