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Student Loans

The First Significant Lawsuit Challenging Biden's Student Loan Forgiveness Plan [Updated]

It was filed by Pacific Legal Foundation public interest lawyer Frank Garrison, and includes a novel strategy for getting around the problem of standing.


Earlier today, Pacific Legal Foundation (PLF) public interest lawyer Frank Garrison filed the first meaningful lawsuit challenging President Biden's loan forgiveness plan, which the Congressional Budget Office estimates would cost some $400 billion. PLF, a libertarian-leaning public interest firm that is also my wife's employer, is representing Garrison.

The Biden Administration Office of Legal Counsel argues that the loan forgiveness plan is authorized by a provision of the 2003 HEROES Act, which gives the Secretary of Education the power to "waive or modify" federally funded student debt obligations of borrowers whose ability to pay off the debt has been undermined by a war or national emergency (in this case, 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. The situation is similar to Donald Trump's attempt to use emergency powers to usurp Congress' spending power to divert military funds to build his border wall (which, for the record, I opposed at the time; see here, here, and here). PLF's just-filed complaint on behalf of Garrison  advances the statutory authorization, major questions, and nondelegation arguments.

Most interestingly, Garrison has a novel strategy for getting around the problem of standing, which many experts see as the biggest potential obstacle to a successful legal challenge to the loan forgiveness program. As I explained in an earlier post on this issue, current Supreme Court precedent requires plaintiffs in federal cases to prove "standing," which includes demonstrating that they have suffered or are likely to suffer an "injury" because of the law or policy they are challenging. Importantly, that injury cannot be based merely on the plaintiff's status as a taxpayer who will have to bear the fiscal costs of the new government program. The Washington Post has a helpful description of how Garrison can fulfill this requirement:

The argument [made by PLF] is in line with other objections to Biden's plan, but the foundation may have the one thing legal experts said was needed to make a legitimate case: a client with the standing to sue.

Garrison said he has been working toward having his federal student loans canceled through a program that erases the debt of public servants after 10 years of payments and service. Participants in that Public Service Loan Forgiveness program do not have to pay federal or state taxes. However, Biden's plan could result in borrowers in several states, including Indiana [where Garrison lives], being required to pay local tax bills.

The plan would cancel up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 per year, or less than $250,000 for married couples. Those who received Pell Grants, federal aid for lower-income students, could see up to $20,000 in forgiveness.

Since Biden's plan would take effect before Garrison's debt is forgiven through the public service program, Garrison said he expects to pay more than $1,000 in state income taxes for the $20,000 of forgiven debt.

In sum, Garrison qualifies for standing because he (and at least some other participants in the Public Service Loan Forgiveness program) actually stand to lose money as a result of the administration's plan. And that loss is specific to their situation, and not just a result of their general status as federal taxpayers.

This strategy strikes me as sound. It may seem silly that a plaintiff can get standing based on a relatively small financial loss like this one, but taxpayers as a class are not allowed to get it based on the vastly greater fiscal liability Biden's plan saddles them with, collectively. But that kind of silliness is built into the Supreme Court's standing precedents, which allow standing based on even a very small individualized material harm (as little as $1 will suffice!), but deny it even for very large fiscal impacts imposed on taxpayers as a class. If you think this is ridiculous, I agree! In my view, the entire doctrine of standing is extremely dubious, and the Supreme Court should abolish it. But that isn't likely to happen anytime soon.

Under current standing doctrine, it also does not matter if forestalling the relatively small financial loss he stands to suffer is not Garrison and PLF's true motive for bringing the case. Public interest firms and other litigants routinely bring cases whose primary purpose is to set a more general precedent rather than to mitigate the damages suffered by a specific client. When it comes to standing doctrine, the plaintiffs' motives for filing a lawsuit are irrelevant, so long as they do in fact have an "injury" of the right type.

Should the PLF/Garrison lawsuit prevail on the merits, there is likely to be a legal battle over how broad the resulting injunction should be, whether it should be a nationwide injunction against the entire loan cancellation program (as the complaint requests), an injunction limited to a particular geographic area or category of loan recipients (such as people in the same situation as Garrison), or one narrowly focused on Garrison as an individual. In my view, nationwide injunctions are justified in cases like this, where the program being challenged is illegal for reasons that are uniform across the country. But many people—including some conservative judges and legal scholars—disagree.

I expect this will not be the only lawsuit filed against the loan forgiveness program. In an earlier post, I described three other categories of litigants who could get standing to challenge it. We might also see lawsuits by others in the same situation as Garrison.

In addition to citing the 2003 HEROES Act as authorization for the loan cancellation policy, the Biden Administration could also potentially rely on a provision of the 1965 Higher Education Act. I criticized that theory here.

Today's filing is probably just the beginning of what is likely to be a prolonged legal battle over the legality of Biden's massive 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. She, however, is not involved in litigating this specific case. I myself have played a minor, unpaid role in urging PLF to take on this issue, and sharing my ideas about the case with them. Garrison's novel strategy for gaining standing was not my idea, however.

Those inclined to claim that I am only interested in this case because of narrow self-interest should note that I also was an active opponent of Donald Trump's similar abuse of power in the border wall funding diversion policy and that, as a university professor, I actually stand to benefit if Biden's policy goes forward. For fairly obvious reasons, universities—and their faculty—are likely beneficiaries of loan forgiveness policies that essentially subsidize the consumption of our services.

UPDATE: It may be worth noting that, as the complaint explains (see pg. 7), Garrison is part of a group of 8 million borrowers for whom loan forgiveness under the administration plan will be automatic. So he cannot avoid it merely by choosing not to apply for it.

UPDATE 2: It turns out there was an earlier lawsuit challenging the loan forgiveness program, filed by an Oregon resident. This lawsuit has little or no chance of getting to merits, because, among other things, the plaintiff has no chance of getting standing. Nonetheless, it did come earlier than the PLF case, and I have adjusted the title of this post accordingly.

UPDATE 3: Since I wrote the above post, the White House has said there will be an opt out from loan forgiveness for any otherwise eligible borrowers who want it. However, the administration has not actually put forward any opt-out plan for the 8 million , or explained how it will work. When and if the administration puts out an actual opt out plan, we will know more about whether it can defeat standing in this case, or not.

UPDATE 4 (September 30, 2022): I have addressed more recent developments in this case in a follow-up post here. Since I wrote the above, another important lawsuit challenging the loan forgiveness policy was filed by six state governments. Their lawsuit has a stronger basis for standing than that filed by PLF. I discuss the state lawsuit here.

UPDATE 5: Oliver Dunford of the Pacific Legal Foundation reminds me that PLF filed an amicus brief supporting one of the lawsuits challenging Trump's border wall diversion, and thus—to their credit—has taken a consistent position on these sorts of issues, regardless of the partisan valence of the particular program in question.