The White House on Tuesday responded to a legal challenge against President Joe Biden‘s $500 billion student loan forgiveness program, arguing that “folks have an option to opt out” of the program rather than incur a tax penalty.
Biden’s plan is facing its first serious legal scrutiny, with a lawsuit filed by the Pacific Legal Foundation alleging it violates federal law and the Constitution. Press secretary Karine Jean-Pierre was asked about the suit during her afternoon news briefing.
LAWSUITS MOUNT ON BIDEN’S EXPENSIVE STUDENT LOAN FORGIVENESS PLAN
“A plaintiff in Indiana has filed a lawsuit trying to block the president’s student loan forgiveness initiative, claiming his tax bill will go up and cost more than the student loan forgiveness would be,” a reporter said. “Any comment from the White House? And do you expect the program to move forward as planned this year?”
Jean-Pierre repeated a few administration talking points about the plan, such as how 90% of affected loans are owned by people making $75,000 or less, how it fulfills one of Biden’s campaign promises, and how it may help borrowers buy a house or start a family.
She then claimed that anyone who didn’t want to be part of the program could simply opt out.
“Opponents of the Biden-Harris administration’s student loan plan are trying to stop it because they know it will provide much-needed relief for working families,” she said. “Anyone who does not want to get that debt relief can choose to opt out. It is something they are able to do.”
Whether or not people can opt out is important, because the plaintiff is claiming his tax bill will increase due to the program and that he will be financially harmed.
The PLF, a libertarian law firm, is asking a judge in the District Court for the Southern District of Indiana to place a temporary restraining order on the plan, which seeks to cancel up to $20,000 in student loan debt per person for more than 40 million borrowers.
The law group claims to have identified a group of taxpayers who will be unfairly harmed by the loan forgiveness plan, including one named Frank Garrison, an employee of PLF and a resident of Indiana, which is one of at least six states that tax this type of debt cancellation as income.
Garrison is already part of the congressionally approved Public Service Loan Forgiveness program and would have his debt forgiven after 10 years of payments without any additional tax expenses. He is already six years into payments and said payments are capped based on his income, according to court records.
Because Garrison is a Pell Grant recipient, he is eligible for $20,000 in loan forgiveness. But removing the amount of his principal debt would alter nothing for his situation, aside from giving him a tax bill of more than $1,000, according to Caleb Kruckenberg, an attorney for PLF.
The suit argues that as an enrollee in the PSLF program, the forgiveness will happen automatically and leave him with a higher tax bill. Jean-Pierre insinuated that this is not the case.
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“The bottom line is this,” Jean-Pierre said. “No one who does not want debt relief will have to get that debt relief. So folks have an option to opt out.”
While the PLF’s lawsuit marks the first major organization to take legal action against Biden’s plan, murmurs of litigation threats have taken place since Biden first announced his plan in August.
