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A conservative legal organization filed the first major lawsuit against student loan relief this week.
The lawsuit claims that one borrower will be stuck with a burdensome tax bill on automatic relief.
But the Department of Justice reaffirmed that borrowers can opt out of automatic relief.
The first major lawsuit against President Joe Biden's student loan relief is already facing a challenge from the Department of Justice.
Pacific Legal Foundation, a conservative legal organization, brought forward a suit earlier this week that claimed automatic student loan relief would stick their plaintiff with unwanted and burdensome tax bill from his home state of Indiana. However, on Wednesday night, the Department of Justice said that borrowers can opt out of automatic student loan relief, meaning that the person at the heart of the lawsuit may not actually face the harm he claims.
Plaintiff Frank Garrison, who is also an attorney at PLF, is currently repaying his student loan debt and qualifies for the Public Service Loan Forgiveness (PSFL) program. He expects to finish his payments towards that program in the next four years, at which point his whole debt will be forgiven without a tax bill. But since he received a Pell grant and therefore qualifies for $20,000 in automatic relief under Biden's plan, the lawsuit said he will now potentially face a tax liability in Indiana of over $1,000 on that relief.
But in the latest filing, the Department of Justice clarifies what the White House said earlier this week: Any borrower who qualifies for automatic relief can opt out. They noted that the Department of Education has updated its website to indicate the ability to opt out.
In fact, upon reviewing the lawsuit, "the Department has already taken steps to effectuate Plaintiff's clearly stated desire to opt out of the program and not receive $20,000 in automatic cancellation of his federal student loan debt" — meaning they've already begun the process of opting Garrison out from relief.
"We are considering the government's response and will address it and other matters in court," Larry Salzman, director of litigation at Pacific Legal Foundation, said in a comment to Insider.
The ability to opt out of relief has been a potential hurdle for the viability of the case, legal experts previously told Insider. Luke Herrine, an assistant professor of law at the University of Alabama who focuses on the legality of debt cancellation, said that the Garrison "likely does not have standing to sue" because the tax bill hasn't happened and may never happen.
"The big problem with his whole claim that cuts to the heart of it is the federal government is gonna have an opt out process — so that no one who wants to leave their student debt in place will have to have it canceled," Abby Shafroth, a staff attorney at the National Consumer Law Center, previously told Insider.
That's why the claim is "baseless," Abdullah Hasan, White House assistant press secretary, previously told Insider in a statement.
"Anyone who does not want debt relief can choose to opt out," Hasan said. "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."
Read the original article on Business Insider