If Joe Biden’s unconstitutional appropriation of hundreds of billions of dollars for his bailout of Academia ever gets to trial, it cannot stand. Standing, however, has been the big question. In order to challenge this, a plaintiff has to show real damages. Congress could easily challenge this, but Biden’s party controls both chambers and is far more interested in ceding authoritarian power than defending Congress’ institutional authority.
Pacific Legal Foundation thinks they have unlocked the key to standing, however. They filed a lawsuit this morning on behalf of one Frank Garrison, arguing that Biden’s student-loan debt forgiveness plan will create a new tax liability where none existed for him prior to Biden’s “flagrantly illegal” actions. And, PLF argues, Biden’s action leaves their client — also an employee of PLF — no way to opt out in such a way as to remove that liability:
Despite the staggering scope of this regulatory action, it was taken with breathtaking informality and opacity. The Department did not undertake the notice-and-comment process required for rulemaking, much less solicit any public input. It did not even issue a formal order or directive setting out its cancellation program. Instead, it issued a press release on August 12th along with two legal memoranda providing its justifications, and, later, a hastily created a FAQ section on its website.
In the rush, the administration has created new problems for borrowers in at least six states that tax loan cancellation as income. People like Plaintiff Frank Garrison will actually be worse off because of the cancellation. Indeed, Mr. Garrison will face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt. These taxes would not be owed for debt forgiveness under the Congressionally authorized program rewarding public service. Mr. Garrison and millions of others similarly situated in the six relevant states will receive no additional benefit from the cancellation—just a one-time additional penalty.
Nothing about loan cancellation is lawful or appropriate. In an end-run around Congress, the administration threatens to enact a profound and transformational policy that will have untold economic impacts. The administration’s lawless action should be stopped immediately.
It’s worth noting that the lawsuit explicitly cites the ever-popular Administrative Procedure Act (APA), otherwise known as the graveyard for executive orders. Previous challenges to Biden’s EOs on mask mandates and the eviction moratoria also fell afoul of the APA, although those cases were also decided on larger grounds of statutory authority. The APA challenge will likely be successful here as well, but that’s just a jab.
PLF is aiming for a constitutional knock-out on the HEROES Act itself, arguing that Congress illegally granted the executive its lawmaking authority. There are multiple arguments on the HEROES Act that can be made, but this could be a very interesting one:
94. The HEROES Act empowers an Executive official to “waive or modify any statutory . . . provision” as that official “deems necessary.” 20 U.S.C. § 1098bb(a)(1).
95. Such waiver or modification of a statute has a “legislative character,” as “confirmed by the character of the Congressional action it supplants”—legislative amendment. INS v. Chadha, 462 U.S. 919 (1983).
96. The statute permits the Secretary to suspend the law, to “modify” it with his own “terms and conditions,” 20 U.S.C. § 1098bb(a)(1), (b)(2), and to do so when and how “[he] deems necessary,” id. § 1098bb(a)(1).
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97. The statute thus bestows the Executive with lawmaking power in violation of Article I of the Constitution.
PLF and Garrison want an immediate injunction against Biden’s Academia bailout, followed by declaratory judgments against the Biden administration and striking down the relevant portions of the HEROES Act.
All of this seems fairly likely to happen — assuming that PLF can sell the court on standing for Garrison. In their press release this morning, PLF seems very confident that they can establish an immediate harm to their client from this program that will allow the court to intercede:
This includes Frank Garrison, a public interest attorney who holds federal student loan debt, including Pell Grants. He has paid his loans for the past six years as a part of a Public Service Loan Forgiveness program (PSLF). Congress created that program to incentivize nonprofit and public service by offering full loan forgiveness after 10 years of payments. Frank anticipates full forgiveness in approximately four years. Frank’s enrollment in PSLF means ED’s new $20,000 loan cancellation will automatically apply to his loans.
Frank lives in Indiana, which taxes the upcoming cancellation as income but does not tax his future PSLF loan forgiveness. Frank will be stuck with a tax bill that makes him financially worse off than continuing with his repayment program under PSLF. He did not ask for cancellation, doesn’t want it, and has no way to opt out of it.
Hundreds of thousands of public interest workers and public servants in at least six states—Indiana, Wisconsin, North Carolina, Minnesota, Mississippi, and Arkansas—will be stuck in a similar situation as Frank, according to the White House’s fact sheet.
By deciding to work in public interest—now at Pacific Legal Foundation—Frank chose to take a lower salary than he could have earned in private practice, incentivized in part by Congress’ authorized forgiveness program. Now the president is changing the rules in what is, by all appearances, a political move in advance of an election. But whatever the administration’s motives, the loan cancellation program has been rushed, is ill thought out, and will have significant unintended consequences for borrowers, students, colleges, and the economy in general.
Will it work? It’s a direct harm (unexpected tax liability), it’s irrevocable if the money goes out, and Garrison has no option to avoid it, thanks to the utter incompetence of Biden and his advisors who crafted this policy catastrophe. Furthermore, PLF will almost certainly establish that others are similarly situated; perhaps this may turn into a class-action suit at some point. My guess is that a federal judge will likely allow for plenty of room to get this clearly unconstitutional action under judicial scrutiny, and that Garrison will have at least enough standing for a judge to allow the case to proceed — and to issue that first injunction quickly.
Let’s hope that’s the case … literally.
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