{"id":81207,"date":"2022-10-14T13:24:00","date_gmt":"2022-10-14T17:24:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=81207"},"modified":"2022-10-17T10:21:51","modified_gmt":"2022-10-17T14:21:51","slug":"national-debt-relief-lawsuit","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/national-debt-relief-lawsuit\/","title":{"rendered":"The National Debt Relief Lawsuit: Is the Plan Illegal?"},"content":{"rendered":"\n<p>Why is there a national debt relief lawsuit? Why do some opponents call Biden&#8217;s plan illegal or unfair?<\/p>\n\n\n\n<p>Millions are cheering President Biden\u2019s plan to forgive hundreds of billions of dollars in student debt, with about 40 million people eligible to benefit from the plan. However, others are calling the plan unfair, inadequate, and even illegal.<\/p>\n\n\n\n<p>Read on to learn about the national debt relief lawsuit and why Biden&#8217;s plan has fallen under criticism. <\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-overview-of-biden-s-debt-relief-plan\">Overview of Biden&#8217;s Debt Relief Plan<\/h2>\n\n\n\n<p>President Joe Biden recently announced a <a href=\"https:\/\/www.whitehouse.gov\/briefing-room\/statements-releases\/2022\/08\/24\/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most\/\">plan to forgive hundreds of billions of dollars of student debt<\/a>. At the same time, he also extended a pause on student debt repayment and shrunk the size of borrowers\u2019 monthly payments to a smaller percentage of their income. However, Biden&#8217;s plan has led to a national debt relief lawsuit fueled by opponents that argue the plan is an abuse of power.<\/p>\n\n\n\n<p>Roughly 40 million people stand to benefit from the national debt relief plan\u2014and about half of them could have their debts eliminated entirely.&nbsp;At this point, most eligible borrowers can enjoy the perks of <a href=\"https:\/\/www.shortform.com\/blog\/save-program\/\">loan forgiveness<\/a> with no downside.&nbsp;<\/p>\n\n\n\n<p>However, <a href=\"https:\/\/www.npr.org\/2022\/09\/09\/1121717824\/biden-student-loans-debt-cancellation-taxpayer-impact\"><strong>seven states have laws that <em>will<\/em> or <em>might<\/em> tax forgiven debt<\/strong><\/a><strong> as income.<\/strong> Unless these states change their laws, borrowers in North Carolina, Indiana, Mississippi, Arkansas, Minnesota, Wisconsin, and California could face <strong>higher taxes or smaller tax returns<\/strong>. That could range from <a href=\"https:\/\/www.nytimes.com\/2022\/08\/24\/business\/biden-student-loan-forgiveness.html\">$300 to $1,100 in taxes for $10,000 of debt relief<\/a>, according to the Tax Foundation.&nbsp;<\/p>\n\n\n\n<p>Additionally, borrowers who want to apply for loan forgiveness should act fast, as a handful of national debt relief lawsuits threaten to put an injunction on Biden\u2019s plan.&nbsp;<\/p>\n\n\n\n<p>When Biden first announced the plan in August, it applied to all federal student loans\u2014including Perkins loans and Federal Family Education Loans (FFEL), which are federally backed and managed by private banks. The Education Department\u2019s website instructed borrowers to consolidate their Perkins and FFEL loans into Direct Loans to qualify for loan forgiveness. <\/p>\n\n\n\n<p>However, on Sept. 29, the eligibility requirements changed to <em>exclude<\/em> Perkins and FFEL loans. <strong>Legal experts speculate that the exclusion could prevent the private lenders that manage these loans from suing on the basis that the loan forgiveness cuts into their profits from managing those debts.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Why Is There a Lawsuit?<\/h3>\n\n\n\n<p><a href=\"https:\/\/www.npr.org\/2022\/09\/29\/1125923528\/biden-student-loans-debt-cancellation-ffel-perkins\">Six state attorneys general are mounting a lawsuit<\/a> against the national debt relief plan on behalf of the private banks that manage FFEL and Perkins loans, though the recent change to make those loans ineligible for debt relief may stem that charge.&nbsp;<\/p>\n\n\n\n<p><strong>Other (mostly conservative) <\/strong><a href=\"https:\/\/www.npr.org\/2022\/09\/30\/1126083883\/bidens-plan-to-cancel-some-student-debt-turns-into-a-legal-fight\"><strong>politicians have vowed to sue<\/strong><\/a><strong>, though it\u2019s unclear whether they have legal <em>standing<\/em><\/strong>, or proof that they\u2019d be directly harmed by Biden\u2019s plan. In the meantime, some conservative legal groups are likely still strategizing to develop a strong suit\u2014and if they succeed, the case could go all the way to the Supreme Court.&nbsp;<\/p>\n\n\n\n<p>With an <a href=\"https:\/\/www.cbo.gov\/publication\/58494\">estimated price tag of $400 billion<\/a>, the national debt relief plan has drawn plenty of ire in addition to the mounting lawsuits.&nbsp;<\/p>\n\n\n\n<p>One group of <strong>opponents calls the plan \u201cillegal\u201d and an abuse of power because it never went through Congress<\/strong>, which has exclusive constitutional power to authorize spending. Others argue that <a href=\"https:\/\/www.wsj.com\/articles\/student-loans-and-the-national-debt-higher-education-graduates-college-university-reform-government-biden-relief-cancellation-11662061187\">the plan is too expensive<\/a>, adding hundreds of billions of dollars to a titanic national debt and jeopardizing critical safety-net programs.&nbsp;<\/p>\n\n\n\n<p>Aside from those proposing lawsuits, another category of <strong>critics calls the national debt relief plan unfair: They ask why these 40 million current and former college students deserve this relief, while millions of others worked their tails off <\/strong>to pay down their student debts or pay their way through school. Opponents also point to people who didn\u2019t go to college because they couldn\u2019t afford it\u2014whose tax dollars will now help pay for the tuition of people whose college degrees likely give them higher earning power. To these points, the White House estimates that 90% of the debt relief will benefit people who earn less than $75,000 per year.<\/p>\n\n\n\n<p>A third group of <strong><a href=\"https:\/\/www.shortform.com\/blog\/people-who-dont-support-you\/\">detractors<\/a> says that <\/strong><a href=\"https:\/\/www.npr.org\/2022\/08\/28\/1119687223\/student-loans-debt-forgiveness-pell-grants-biden-inflation\"><strong>loan forgiveness masks the root problem: steadily skyrocketing tuition<\/strong><\/a><strong> <\/strong>and fees. Colleges face no risk if students default on their loans, so they have no <a href=\"https:\/\/www.shortform.com\/blog\/what-is-incentive-meaning-and-definition-economics\/\">incentive<\/a> to cap rising tuition. Furthermore, Biden\u2019s debt relief plan could indirectly encourage students to take out even larger loans\u2014and schools to charge higher prices.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Why is there a national debt relief lawsuit? Why do some opponents call Biden&#8217;s plan illegal or unfair? Millions are cheering President Biden\u2019s plan to forgive hundreds of billions of dollars in student debt, with about 40 million people eligible to benefit from the plan. However, others are calling the plan unfair, inadequate, and even illegal. Read on to learn about the national debt relief lawsuit and why Biden&#8217;s plan has fallen under criticism.<\/p>\n","protected":false},"author":19,"featured_media":81240,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,275,24],"tags":[727],"class_list":["post-81207","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money","category-politics","category-society","tag-articles","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The National Debt Relief Lawsuit: Is the Plan Illegal? - Shortform Books<\/title>\n<meta name=\"description\" content=\"Why is there a national debt relief lawsuit? 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