First lawsuit filed to block Biden's student loan handout

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Forbes Media CEO Steve Forbes weighs in as the debate intensifies over President Biden's student loan handout program on 'Your World.'

A public interest attorney filed a lawsuit Tuesday morning against the Department of Education to block President Biden’s "illegal" move to cancel more than $500 billion in student loan debt.

Biden, last month, announced that he would cancel $10,000 of federal student loan debt for certain borrowers making less than $125,000 per year, and up to $20,000 for Pell Grant recipients.

Frank Garrison, an attorney at Pacific Legal Foundation, brought the suit against the Department of Education Tuesday in the U.S. District Court for the Southern District of Indiana.

BIDEN ANNOUNCES STUDENT LOAN HANDOUT AS NATIONAL DEBT SOARS

Garrison and his attorneys at the Pacific Legal Foundation filed a temporary restraining order to prevent the loan handout from going into effect.

Garrison qualifies for the congressionally authorized Public Service Loan Forgiveness program, meaning he will receive debt forgiveness after making 10 years of payments on his student loans.

Student loan borrowers stage a rally in front of The White House to celebrate President Biden cancelling student debt and to begin the fight to cancel any remaining debt on Aug. 25, 2022 in Washington, D.C. (Paul Morigi/Getty Images for We the 45m)

The Biden administration’s new handout would stick Garrison with a new state tax bill which he would not have under his existing PSLF program, as Indiana plans to tax the upcoming student loan cancelation as income.

His lawyers argue Garrison "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 cancelation, doesn’t want it, and has no way to opt out of it," the Pacific Legal Foundation said in a release Tuesday.

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Garrison and his attorneys are arguing that the Biden administration turning to the HEROES Act, which allows the government to modify loans to assist veterans and their families as needed during times of war or other national emergencies, is a "flimsy pretext for a major policy chance that Congress has declined to enact."

"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."

Attorney Michael Poon, in an interview with Fox News Digital on Tuesday, maintained that Congress makes the law and "you can’t have the executive modifying or waiving the law."

President Biden waves after returning to the White House in Washington, D.C., Wednesday to announce his student loan forgiveness plan.  (AP Photo/Susan Walsh)

"That is just unconstitutional," Poon told Fox News Digital. "The law says you have to repay student loans. Biden is ignoring those laws, and he can’t do that." 

When asked about the suit, White House press secretary Karine Jean-Pierre on Tuesday defended the president's move, saying that it will provide "relief for working families."

"The bottom line is this: no one who does not want debt relief will have to get that debt relief, so folks have an option to opt out," she said. "But again, this is going to help tens of millions of Americans--Americans who are now going to be able to put money down to maybe buy a house or start a family, and that matters."

White House spokesman Abdullah Hasan called Garrison's claim "baseless for a simple reason." 

"No one will be forced to get debt relief," Hasan told Fox News. "Anyone who does not want debt relief can choose to opt out." 

He added: "Why would this group bring this baseless claim?  Because opponents of the debt relief plan are trying anything they can to stop this program that will provide needed relief to working families."

The Department of Education did not immediately respond to Fox News Digital's request for comment. 

The nonpartisan Congressional Budget Office (CBO) this week announced that Biden’s move to cancel student loan debt will cost more than $400 billion.

BIDEN STUDENT LOAN HANDOUT TO COST MORE THAN $400 BILLION: CBO

"CBO estimates that the cost of student loans will increase by about an additional $400 billion in present value as a result of the action canceling up to $10,000 of debt issued on or before June 30, 2022, for borrowers with income below specified limits and an additional $10,000 for such borrowers who also received at least one Pell grant," the CBO said in a letter released Monday. 

The analysis also said Biden's suspension of payments for other borrowers until the end of the year — made as part of the same action — will hit taxpayers too. 

"The cost of outstanding student loans will increase by $20 billion because an action suspended payments, interest accrual, and involuntary collections from September 2022 to December 2022," the CBO wrote. 

A sign asking President Biden to cancel student debt. (Jemal Countess/Getty Images for We, The 45 Million)

Yearly costs from the student loan handout are likely to peak later this decade, according to the CBO analysis, and will continue to impact the deficit "over roughly the next 30 years."

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The CBO analysis comes after the White House earlier this year said the student loan handout would cost roughly $240 billion over 10 years. It tracks with some independent estimates, including the Committee for a Responsible Federal Budget, which estimated it would run taxpayers approximately $500 billion.

The White House argued earlier this year that argue that the handout was "fully paid for" by other reductions in the deficit in 2022 as compared to previous years. 

Fox News' Tyler Olson contributed to this report.