President Biden’s student loan forgiveness program is facing its toughest challenge so far from Republican-led states (Iowa, South Carolina, Kansas, Nebraska, Arkansas, and Missouri) which are attempting to block student loan forgiveness by asking a federal judge to issue a temporary injunction to halt forgiveness until a full case could be heard.

The judge, Henry Autrey, heard the request for two hours on Wednesday and brought up some interesting points. First, whether the states had standing in the suit and why Biden himself is a co-defendant, and second, if the states claim that Biden does not have the right to cancel debt, does he have the right to continue to pause student loan payments indefinitely? The states conceded that he did have the authority to pause the payments for as long as he wanted, but maintained that he could not cancel them.

The administration’s legal justification for their authority to cancel student debt relies on a post-9/11 law called the HEROES act which was originally designed to give student loan relief to military service members. It expands the authority of the Department of Education to respond during “a war or other military operation or national emergency.” The Biden administration is claiming that the COVID-19 pandemic qualifies as such an emergency.

A big part of the states’ complaints is the loss of tax revenue on student loan payments, an interesting point since several states are taxing the forgiveness as income, thereby earning just as much money as they would if the loans were paid out normally. So the Biden administration has pointed out that any lost tax revenue is related to how states decide to tax the relief.

So far Justice Henry Autrey has not indicated how he will rule.

A second suit, filed by the right wing legal group Wisconsin Institute for Law and Liberty (WILL) was dismissed last week because the judge denied that they had the standing to sue simply based on the fact that they paid federal taxes. They filed an appeal to the seventh circuit which also rejected their injunction.

Similarly, the libretarial legal outfit Pacific Legal Foundation (PLF) had its suit thrown out because it based the suit on the idea that an employee, Frank Garrison, would have a large tax burden in Indiana (one of the six states currently taxing loan forgiveness). It was a strange claim given the fact that loan forgiveness is voluntary on the borrower, and Garrison can simply opt not to take it. Since Indiana has a flat income tax rate of 3.23%, if Frank Garrison makes less than $125K, received a Pell Grant, and still has more than $20K outstanding, he would have to pay $646 on the forgiveness.

If it goes through, it seems unlikely he will opt out of it, just like the many Republican congresspeople who had PPP loans forgiven.

The disparity between the almost silent PPP loan forgiveness and the extensive scrutiny that the student loan forgiveness has received is telling. Research at the University of Texas claims that as many as 1.4 million loans showed signs of fraud, and there is still almost no oversight.

One of the main points that several of the states and legal firms opposing forgiveness seem to have grabbed onto is regarding race. The announcement for loan forgiveness indicated that some of the benefits would be to close the racial wealth gap, and that fact has become a sort of “reverse racism” rallying cry, causing several plaintiffs to claim that the forgiveness is “racially motivated”.

The application form for debt relief will likely debut in the next few days but has been promised by the end of the month.The Whitehouse has revealed a preview of the application in the tweet below.

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