U.S. Education Department sued over Biden's student loan cancellation plan

By Kanishka Singh

WASHINGTON, Sept 27 (Reuters) - Conservative group Pacific Legal Foundation filed a federal lawsuit Tuesday against the U.S. Department of Education with the intent of stopping President Joe Biden's student loan cancellation plan.

The lawsuit, which was filed in the U.S. 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 $400 billion.

"Congress did not authorize 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 $500 billion program by press release, and without statutory authority or even the basic notice and comment procedure for new regulations."

Biden said in August the U.S. government will forgive $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 $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 programs and unexpectedly higher revenues.

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

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

Reuters reported in August that nongovernment budget analysts projected the program's total 10-year cost at $500 billion to $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.

(Reporting by Kanishka Singh in Washington; editing by Jonathan Oatis)