Massive new federal program could cost taxpayers more than $1 Trillion, violating constitutional separation of powers
The News: The Wisconsin Institute for Law & Liberty (WILL) filed a federal lawsuit against the Biden Administration today on behalf of the Brown County Taxpayers Association (BCTA), challenging the new federal student debt forgiveness program. The “One-Time Student Loan Debt Relief Plan,” announced by President Biden on August 24, 2022, promises to cancel debts owed to the U.S. Treasury by tens of millions of borrowers, all without authorization of such a program by Congress or federal law. The U.S. Department of Education is expected to begin canceling debts in the coming days, potentially costing U.S. taxpayers more than $1 Trillion.
The lawsuit alleges that the federal student loan forgiveness program violates the constitutional separation of powers- as it was unilaterally created by the executive branch without authority- as well as the constitutional guarantee of equal protection under the law, due to official documents that outline the program’s preference toward specific races. WILL is also asking the court to enter a temporary restraining order to prevent President Biden and federal officials from canceling any debt before a decision is reached in the lawsuit. The lawsuit is part of a national initiative launched by WILL, the Equality Under the Law Project, which fights to protect against racial discrimination and violations of constitutional liberties. The lawsuit was filed in the United States District Court for the Eastern District of Wisconsin in Green Bay.
WILL Quote: WILL President and General Counsel, Rick Esenberg, said, “The President has no authority to order a wholesale forgiveness of student loans, costing taxpayers over a trillion dollars. Whether this plan is good for America is for Congress to decide. We understand the procedural challenges, but we cannot 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.”
Client Quote: BCTA President, Rich Heidel, said, “Student Loan Debt Relief takes from one group of people and arbitrarily distributes the spoils to another group. 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.”
Background: The U.S. Department of Education, through various federal laws, holds a portfolio of student loans amounting to approximately $1,617,300,000,000 ($1.6 Trillion). This portfolio includes Direct Loans, Federal Family Education Loans, and Perkins loans with outstanding balances, and defaulted loans under a variety of programs.
Under the “One-Time Student Loan Debt Relief Plan,” Defendants will forgive up to $20,000 to federal Pell Grant recipients and up to $10,000 in debt relief to non-Pell Grant recipients. Borrowers with loans held by the Department of Education are eligible if their individual income is less than $125,000 or $250,000 for households. The plan will benefit “up to 43 million borrowers, including canceling the full remaining balance for roughly 20 million borrowers.” This program is also racially motivated, as the Student Debt Relief Plan is “more likely” to help students and borrowers of color.
The Biden Administration, U.S. Department of Education, and Office of Federal Student Aid alleges that this new tuition loan forgiveness program is authorized under the 9/11-era HEROES Act. But this was a law designed to help the men and women of the Armed Services, allowing the President to make specific changes to student loan programs when “necessary in connection with a war or other military operation or national emergency” (20 U.S.C. § 1098bb(b)(1)). The President is abusing this law by claiming that all Americans are in a state of emergency because of COVID-19, even though he recently declared that the pandemic was over. And as confirmed by the two preceding administrations, the HEROES Act does not allow the President to unilaterally forgive student loans.
The Lawsuit: The United States Constitution grants Congress the power to tax and spend. The President may only act through laws passed by Congress, and all federal spending must be through appropriations. President Biden’s plan short circuits this critical check and allows the Executive Branch to appropriate perhaps over $1 Trillion without Congressional input. That violates our separation of powers. What’s more, the Constitution forbids the government from engaging in race discrimination. Here, President Biden announced an explicit racial motivation in creating this program. According to the White House, the Student Debt Relief Plan is motivated by a desire to “advance racial equity” and “narrow the racial wealth gap.” To achieve equity, the plan, according to the White House, is “more likely” to help “Black students,” “Black borrowers,” and “other borrowers of color.” The White House favorably cited the Urban Institute, which claims that Defendants’ chosen student loan forgiveness plan will “disproportionately benefit Black borrowers” and would be “far more racially progressive than broad forgiveness.” This is unconstitutional race discrimination.
The Brown County Taxpayer Association is an unincorporated association organized under the laws of the State of Wisconsin. BCTA’s mission is to promote individual freedom and citizen responsibility; limited government that is fiscally responsible, transparent, and accountable to the people; and economic policy that encourages free markets, promotes entrepreneurism, respects property rights, and expands opportunity for the people of Brown County to prosper and live free, productive lives. BCTA, as taxpayers, will hence pay more in taxes— courtesy of this unlawful program.
The lawsuit urges the court to enter a temporary restraining order and preliminary injunction, prohibiting Defendants from forgiving and/ or canceling federal student loan debt under the One-Time Student Debt Relief Plan. The suit argues that the court should enter a declaratory judgment, in that the Defendants created this program with an unconstitutional racial motive, and award attorneys’ fees.
The lawsuit is part of WILL’s Equality Under the Law Project. Launched in 2021, the Equality Under the Law Project has represented 42 clients in 17 states and successfully sued the Biden Administration twice for race discrimination in the Farmer Loan Forgiveness Program and the Restaurant Revitalization Fund. The Project also forced the removal of race-based preferences in the Homeowner Assistance Fund, another program under the American Rescue Plan Act of 2021. The Project also filed a lawsuit against a program under the Bipartisan Infrastructure Law, which contains billions more in racial preferences. More information about this project can be found at DefendEquality.org.
President and General Counsel
Equality Under The Law Project Lawsuits