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During some periods of American history, the opposition response to a policy enactment by the party in power consisted largely of rhetoric and a focus on the next 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 conceived would have forgiven $10,000 of student loan debt for the vast majority of borrowers with an outstanding balance, excepting those earners with particularly high incomes. Some of the neediest borrowers are poised to get double the standard amount of loan forgiveness, at $20,000.
A mere $10,000 per individual doesn’t seem like much to some proponents of student debt cancellation. Graduates of certain programs — like law students, for instance — are coming out of school with average student loan balances approaching $200,000.
Still, $10,000 per borrower is a meaningful amount that would be felt in household budgets. Collectively, the plan would cost about $400 billion over the next 30 years, according to the Congressional Budget Office. This would take a fairly substantial bite out of the $1.6 trillion in outstanding federal student loan debt currently owed by some 43 million borrowers, and would put the United States on a somewhat more competitive footing with the approximately two dozen countries around the world that already offer their citizens fully free or nearly free university-level education.
Yet, this student loan debt forgiveness plan might not achieve the maximum impact it was intended to have. The Biden administration is facing its first wave of lawsuits over the broad plan to forgive $10,000 worth of student debt, and the program has already contracted as a result.
In one of the most facially disingenuous lawsuits, Indiana attorney Frank Garrison claimed that he did not want $20,000 worth of student loan forgiveness because that would result in an Indiana state tax bill of approximately $1,000. The U.S. Department of Education swiftly responded by saying that they would grant Garrison’s apparent request to opt out of the program and retain $20,000 worth of debt, thereby seeming to effectively eradicate his standing to pursue the lawsuit further.
I, myself, went to law school on a full scholarship and did have some state tax consequences as a result. While having to pay state-level taxes isn’t exactly pleasant, just about anyone in the real world recognizes that minor tax consequences are much preferred to paying sticker price for higher education, in which case you will tack on one or two additional figures to whatever the tax bill is.
The premise of Garrison’s lawsuit may seem silly, but the result is not. It was previously unclear whether individuals could opt out of the automatic student loan forgiveness program. Now that we know they can, this lawsuit might have created a political cudgel for future elections in that anyone fully opposed to student loan forgiveness best not have benefited from this program personally.
In another narrowing of the debt forgiveness plan, the Department of Education announced that many borrowers whose loans are owned by private entities will no longer qualify for debt relief. Already facing a flurry of lawsuits, the idea here seemed to be keeping 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 by private lenders, although the change will affect a substantial minority of borrowers.
Other assorted legal challenges are stacking up for the debt relief plan. More than half a dozen conservative states have already filed suit to prevent the Department of Education from discharging borrowers’ debts. Private entities are also turning to the courts to attempt to block the debt relief rollout — the latest suit from a conservative law firm in Wisconsin complains about the use of tax dollars for a program supposedly “created with racial motivations.”
Historically, lawsuits like these have not seen a great level of success in permanently knocking out entire nationwide programs like Biden’s student debt relief plan. Even so, in response to legal threats, the Department of Education has already narrowed the scope of the program in ways that will affect hundreds of thousands of borrowers. It seems you don’t even have to win to get some real results by funneling every conceivable complaint into the legal system.
Jonathan Wolf is a civil litigator and author of Your Debt-Free JD (affiliate link). He has taught legal writing, written for a wide variety of publications, and made it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.
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