US Education Department sued over Biden’s student loan cancellation plan

CONSERVATIVE group Pacific Legal Foundation filed a federal lawsuit on Tuesday (Sep 27) against the US Department of Education with the intent of stopping President Joe Biden’s student loan cancellation plan.

The lawsuit, which was filed in the US District Court for the South District of Indiana, comes a day after the Congressional Budget Office (CBO) said that Biden’s plan to cancel some student loan debt will cost US$400 billion.

“Congress did not authorise the executive branch to unilaterally cancel student debt,” said Caleb Kruckenberg, an attorney at Pacific Legal Foundation. “It’s flagrantly illegal for the executive branch to create a US$500 billion programme by press release, and without statutory authority or even the basic notice and comment procedure for new regulations.”

Biden said in August the US government will forgive US$10,000 in student loans for millions of debt-saddled former college students, keeping a pledge he made in the 2020 campaign for the White House.

Critics of the plan raised concerns over its inflationary impact while the White House said the plan was fiscally justified because the federal deficit was on track for a US$1.7 trillion reduction for fiscal 2022 compared with the prior year. The smaller deficit is largely due to the end of many Covid-19 aid programmes and unexpectedly higher revenues.

The Education Department did not immediately respond to a request for comment.

As of Jun 30, 43 million borrowers held US$1.6 trillion in federal student loans. About US$430 billion of that debt will be cancelled, the CBO estimated. The CBO previously projected that some of the funds cancelled by Biden’s action would eventually have been forgiven anyway.

Reuters reported in August that nongovernment budget analysts projected the programme’s total 10-year cost at US$500 billion to US$600 billion, including extending a repayment pause on all federal student loans through Dec 31 and reducing future payments based on income.

“It (Biden’s plan) will only lead to more calls for government intervention in education at taxpayers’ expense,” said Steve Simpson, another attorney at Pacific Legal Foundation. REUTERS