Biden's student loan debt forgiveness plan hit with lawsuit over 'racial motive'

A conservative Wisconsin law firm on Tuesday sued to overturn President Joe Biden’s plan to cancel up to $20,000 in student debt for millions of borrowers, the latest in a flurry of lawsuits nationally that allege the move is unfair and unwise.

The Wisconsin Institute for Law and Liberty, also known as WILL, filed the lawsuit against Biden and the U.S. Education Department in U.S. District Court in Green Bay on behalf of the Brown County Taxpayers Association. The taxpayers association promotes limited government and includes more than 100 members who pay federal taxes and are "on the hook" to pay for Biden's plan.

“Student Loan Debt Relief takes from one group of people and arbitrarily distributes the spoils to another group," Brown County Taxpayers Association President Rich Heidel said in a statement. "The Plan amounts to nothing more than a modern-day version of King George III’s Stamp Act where there was massive taxing and spending without participation of the People’s representatives."

The White House plan would cancel up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 per year, or less than $250,000 for married couples, or up to $20,000 for those who received federal Pell Grants.

More: Legal challenges stack up for Biden's student debt forgiveness plan

An estimated 40 million borrowers nationally would be eligible for relief, including 685,100 borrowers in Wisconsin. More than 300,000 Wisconsin borrowers could see their entire balances go to zero under the plan, according to the Biden administration.

The application for borrowers to apply for loan forgiveness is expected to be rolled out sometime this month.

WILL has asked the court to immediately block that from happening while the legal battle unfolds “to prevent something quite irreversible and damaging."

Wisconsin Institute for Law and Liberty argues program has racial motivations

WILL alleges that Biden doesn't have unilateral power to forgive student loans without congressional approval and that the forgiveness program was created with racial motivations in violation of the "equal protection doctrine," which requires the government to treat an individual in the same manner as others in similar circumstances.

According to the lawsuit, the White House has explained the purpose of the program is to "narrow the racial wealth gap" and "advance racial equity."

"As such, Defendants have articulated an improper racial motive in creating and implementing the One-Time Student Loan Debt Relief Plan," the lawsuit continues.

Research shows that borrowers of color carry more debt and face higher risk of default.

White House and Education Department officials in calls with reporters over the past month have repeatedly said the administration has clear authority to forgive student loan debt during the pandemic, citing a law passed in the wake of the Sept. 11 attacks that gives the education secretary broad authority to overhaul student loan programs during a war, military operation or national emergency.

“Republican officials are standing with special interests to try to keep millions of borrowers under mountains of unmanageable student loan debt," a White House spokesperson told the Milwaukee Journal Sentinel. "The pandemic impacted individuals from all backgrounds and communities — from small towns, rural communities, big cities and everywhere in between. The administration’s actions will support those most at financial risk of default or delinquency when loan payments resume, with 90% of the benefits going to people earning less than $75,000 per year.”

WILL found the federal government's justification for the program "laughable."

“The President has no authority to order a wholesale forgiveness of student loan, costing taxpayers up to a trillion dollars," WILL president Rick Esenberg said in a statement. "Whether this plan is good for America is for Congress to decide. We understand the procedural challenges but we can’t stand idly by while the President shreds our separation of powers. This can’t become the new normal for Democrats or Republicans. We will fight for the rule of law and take this issue all the way to the United States Supreme Court if necessary.”

More: Is student loan forgiveness fair to those without college degrees? Americans remain divided over costs

University of Pennsylvania economists estimate the plan could cost more than $1 trillion. The Education Department's calculation was much lower, with officials last week saying it would cost taxpayers about $379 billion over the life of the program. The Congressional Budget Office estimated the plan would cost $400 billion.

Other legal efforts to block loan forgiveness

The group's lawsuit is the latest to seek to stop the program from taking effect. One of the biggest roadblocks for Republicans seeking to overturn it has been finding someone who can show they have “standing” before the court, or the grounds to sue.

An Indiana man sued on the basis that his debt cancellation would push up his state tax bill because Indiana plans to tax federal debt relief as a form of income. The White House responded by noting that anyone who does not want to get debt relief can opt out, and his lawsuit was dismissed a few days later.

Republican attorneys general in six states last week also sued. A loan service provider in one of the states argued it would suffer financial harm because the loan forgiveness would lead to a drop in revenue due to borrowers likely consolidating their loans under the Federal Family Education Loan (FFEL) program.

The Biden administration answered by saying it would exclude borrowers with federal student loans owned by entities other than the Education Department, including FFEL and Perkins Loans. The move could help in defending the program as a whole, but it could also mean some 770,000 borrowers initially included in the plan might not qualify for relief.

In yet another lawsuit, the Arizona attorney general argued that his office relies on other student debt forgiveness programs to hire employees and a national program would cut into his recruiting efforts.

Contact Kelly Meyerhofer at kmeyerhofer@gannett.com. Follow her on Twitter at @KellyMeyerhofer.

This article originally appeared on Milwaukee Journal Sentinel: Student loan debt relief lawsuit alleges 'racial motive'