A conservative Wisconsin law firm sued Tuesday to overturn President Joe Biden’s plan to write off up to $20,000 in student debt for millions of borrowers, the latest in a series of nationwide lawsuits who allege that the measure is unfair and imprudent.
The Wisconsin Institute for Law and Liberty, also known as WILL, filed the lawsuit against Biden and the US Department of Education in US District Court in Green Bay on behalf of the Brown County Taxpayers Association. The taxpayer association promotes limited government and includes more than 100 members who pay federal taxes and are “ready” to pay for Biden’s plan.
“Student loan debt relief takes from one group of people and arbitrarily distributes the spoils to another group,” Brown County Taxpayers Association President Rich Heidel said in a statement. “The Plan is nothing more than a modern version of King George III. Stamp Act where there were massive taxes and expenditures without the participation of the people’s representatives.”
The White House plan would write off up to $10,000 in federal student loan debt for borrowers earning less than $125,000 a year, or less than $250,000 for married couples, or up to $20,000 for those who receive federal Pell grants.
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An estimated 40 million borrowers nationwide would be eligible for the relief, including 685,100 borrowers in Wisconsin. According to the Biden administration, more than 300,000 Wisconsin borrowers could see their entire balances zeroed out under the plan.
The application for borrowers to apply for loan forgiveness is expected to be filed sometime this month.
WILL has asked the court to immediately stop this from happening while the legal battle plays out “to avoid something quite irreversible and damaging”.
The Wisconsin Institute for Law and Liberty argues that the program is racially motivated
WILL alleges that Biden lacks unilateral power to forgive student loans without congressional approval and that the forgiveness program was racially motivated in violation of the “equal protection doctrine,” which requires the government treat a person in the same way as others in similar circumstances.
According to the lawsuit, the White House has explained that the goal of the program is to “reduce the racial wealth gap” and “advance racial equity.”
“As such, Defendants have articulated an improper racial motive for creating and implementing the Single Student Loan Debt Relief Plan,” the lawsuit continues.
Research shows that borrowers of color have more debt and face a higher risk of default.
White House and Education Department officials in calls with reporters over the past month have repeatedly said the administration has clear authority to forgive student loan debt during the pandemic, citing a law passed in the wake of the attacks on on September 11, which gives the secretary of education ample space. authority to review student loan programs during a war, military operation, or national emergency.
“Republican officials are standing with special interests to try to keep millions of borrowers under mountains of unmanageable student loan debt,” a White House spokesman told the Milwaukee Journal Sentinel. “The pandemic affected people of all backgrounds and communities, from small towns to rural communities, big cities and everywhere else. The administration’s actions will support those most at financial risk of default or default when they resume loan payments, with 90% of the benefits going to people earning less than $75,000 a year.”
WILL found the federal government’s justification for the program “laughable.”
“The president has no authority to order wholesale student loan forgiveness, costing taxpayers up to a trillion dollars,” WILL President Rick Esenberg said in a statement. “Whether this plan is good for America is for Congress to decide. We understand the procedural challenges, but we cannot stand idly by while the president destroys our separation of powers. This cannot become the new normal for Democrat or Republican. We will fight for the rule of law and take this issue all the way to the United States Supreme Court if necessary.”
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Economists at the University of Pennsylvania estimate the plan could cost more than a trillion dollars. The Education Department’s estimate was much lower, and officials said last week that it would cost taxpayers about $379 billion over the life of the program. The Congressional Budget Office estimated the plan would cost $400 billion.
Other legal efforts to block loan forgiveness
The group’s lawsuit is the latest to block the program from going into effect. One of the biggest hurdles for Republicans seeking to overturn it has been finding someone who can show they have “standing” in court or grounds to sue.
An Indiana man sued on the grounds that his debt cancellation would increase his state tax bill because Indiana plans to tax federal debt relief as a form of revenue. The White House responded by pointing out that anyone who doesn’t want to get the debt relief can opt out, and their lawsuit was dismissed a few days later.
Republican attorneys general in six states also sued last week. A loan servicer in one of the states argued that it would suffer financial harm because loan forgiveness would result in a drop in income because borrowers would likely consolidate their loans under the Federal Family Education Loan (FFEL) program. .
The Biden administration responded by saying it would exclude borrowers with federal student loans owned by entities other than the Department of Education, including FFEL and Perkins loans. The move could help shore up the program as a whole, but it could also mean that some 770,000 borrowers initially included in the plan might not qualify for relief.
In another lawsuit, Arizona’s attorney general argued that his office relies on other student debt forgiveness programs to hire employees and a national program would reduce its recruiting efforts.
Contact Kelly Meyerhofer at kmeyerhofer@gannett.com. Follow her on Twitter at @KellyMeyerhofer.
