Bloomberg Law
Sept. 29, 2022, 8:45 AMUpdated: Sept. 29, 2022, 5:58 PM

Creative Biden Student Debt Relief Suit Still Might Fail (1)

Lydia Wheeler
Lydia Wheeler
Senior Reporter

Welcome back to Opening Argument, a reported column where I dig into interesting legal questions and controversies. Today: a look at the first lawsuit filed against President Joe Biden’s student loan debt relief plan and if it will survive in court.

There were doubts anybody would be able to claim the injury needed to bring a legal challenge against President Joe Biden’s plan to cancel federal student loan debt for some 40 million Americans, but the Pacific Legal Foundation thinks it found someone—their own attorney.

If Biden cancels the $20,000 of debt Frank Garrison qualifies for, the environment attorney at PLF says he’ll owe Indiana a one-time state income tax penalty of more than $1,000 he otherwise wouldn’t have to pay. While legal scholars give the public interest law firm’s lawsuit points for creativity, not everyone is sure it’ll work.

Robert Henneke, executive director and general counsel of the Texas Public Policy Foundation, said it’s a classic pocketbook injury that gives Garrison standing to sue. The consequence of the student loan cancellation program will immediately cause him to have a tax consequence under Indiana state law, he said.

Though a little more than a $1,000 fine seems like a piddly price to pay to have $20,000 in debt wiped away, Henneke said paying just a dollar in taxes would be enough of an injury.

“Even nominal damages are many times sufficient to sustain standing,” he said. “The courts look at whether there’s an injury that’s traceable and redressable by courts, not the severity of the injury.”

Garrison argues he’s already on track to have his debt forgiven in a way that wouldn’t trigger a tax penalty. Not only has he been making income-driven payments on his loans through a federal plan, his position at PLF qualifies him for the Public Service Loan Forgiveness program, another federal incentive. That program forgives the remaining debts of students who choose to work at non-profit organizations or relatively low-paying public service jobs after school.

Garrison, who makes less than $125,000 a year, says he expects to qualify for full forgiveness under that program based on his public service in a little over four years and that debt relief won’t be taxed in the state of Indiana as income.

Tara Grove, a University of Texas School of Law professor who specializes in federal courts and constitutional law, said it’s a clever and creative way to work around the standing issue.

You typically have to have suffered an injury that can be redressed by the court in order to sue. How the government treats someone else in terms of loans or taxes may bother you, but it isn’t a direct injury. That’s why, Grove said, people thought it would be hard to stop the Department of Education from canceling these debts.

The agency said some people will have to apply online for the debt relief. Others are expected to be eligible to receive the relief automatically in early October since the department already has their income information.

Garrison said he falls into the class of about 8 million people who will get their debt canceled automatically because he certified his income driven repayment eligibility with the Department of Education through his servicer and voluntarily disclosed his yearly tax information to support that certification last year.

PODCAST: Student Loan Forgiveness? It’s Taxable in Some States

Grove said Garrison is assuming he will automatically get the student loan forgiveness even if he doesn’t want it. “I don’t think we actually know that,” she said. “Do we know the federal government won’t let people opt out?”

The Department of Education directed requests for comment to a White House spokesperson, who didn’t respond. In a filing Wednesday, the government did its best to quash Garrison’s claim for standing.

Justice Department attorneys informed the court that the Education Department has updated its website to confirm that any borrower who qualifies for automatic debt relief will be given an opportunity to opt out and “has already taken steps to effectuate Plaintiff’s clearly stated desire to opt out of the program and not receive $20,000 in automatic cancellation of his federal student loan debt.”

Cassandra Burke Robertson, a Case Western Reserve University School of Law professor who specializes in litigation procedure and student debt relief, said offering an opt out easily moots the case.

Another potential problem with Garrison’s complaint is that his injury was caused by Indiana’s tax law, not the federal government’s student loan forgiveness plan.

“Because of those two things, I don’t know that this will prove to be an effective workaround to the typical standing rule that no you can’t actually complain about how the government treats money,” Grove said.

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(Updated to include new information from a government filing.)

To contact the reporter on this story: Lydia Wheeler in Washington at

To contact the editors responsible for this story: Seth Stern at; John Crawley at