Biden’s Student-Loan Relief Plan Is Facing Supreme Court Challenge — Again

Greg Stohr
·2 min read
6
  • Oops!
    Something went wrong.
    Please try again later.

(Bloomberg) -- Two Indiana borrowers asked the US Supreme Court to halt President Joe Biden’s student-loan relief plan, saying his administration is overstepping its authority and forcing them to pay higher state taxes.

Most Read from Bloomberg

The emergency filing, submitted to Justice Amy Coney Barrett, comes 12 days after she summarily rejected a similar bid by a Wisconsin taxpayers group. Barrett is assigned to handle emergency matters from the Chicago-based 7th US Circuit Court of Appeals, which refused to block the program last week.

The Biden plan, designed to take effect this month, would forgive as much as $20,000 in federal loans for certain borrowers making less than $125,000 per year or $250,000 for spouses. It could affect more than 40 million people.

“The administration is attempting to erase half a trillion dollars in debt without any legal basis,” said Caleb Kruckenberg, an attorney with the libertarian-leaning Pacific Legal Foundation, which represents the two borrowers. The filing asks the Supreme Court to block the program while the case is on appeal.

A different federal appeals court, the St. Louis-based 8th Circuit, paused the program last month while considering a challenge by six Republican-led states.

Opponents of the plan have encountered difficulty establishing standing to sue -- that is, showing they are being directly harmed by the policy. In the latest case, a federal district judge in Indiana said any harm suffered the two borrowers, Frank Garrison and Noel Johnson, was attributable to state tax policy, not the loan-forgiveness program.

The men say the program would cost them money because Indiana law would treat the forgiven loans as taxable income. They say they were expecting their debt to be forgiven under a different, pre-existing forgiveness program that wouldn’t result in any tax liability.

Garrison, who works as an attorney at the Pacific Legal Foundation, was originally the only named plaintiff in the proposed class action, but after the suit was filed the Education Department exempted him from automatic debt cancellation.

Johnson then joined the suit as an additional plaintiff, and the Education Department exempted him as well.

The case is Garrison v. Department of Education, 22A373.

--With assistance from Madlin Mekelburg.

(Updates to add case number at end of story.)

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.