(Source: MIRS.news, Published 08/07/2023) Two think tanks, including the Mackinac Center for Public Policy, filed suit Friday to block the Biden administration's scaled-back plan to cancel $39 billion in student loans.
The Mackinac Center and the libertarian think tank, the Cato Institute, allege the U.S. Department of Education overstepped its power when it announced the revised plan to cancel the debt owed to the Treasury by 804,000 student-loan borrowers – a plan that came after the U.S. Supreme Court struck down a broader plan.
The 26-page complaint filed in the U.S. District Court's Eastern District of Michigan said the "unlawful reduction" of the Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) programs "injures public service employers that rely on PSLF to recruit and retain college-educated employees."
The U.S. Department of Education (USDOE) first announced in April 2022 that it would offer a one-time adjustment to help address inaccuracies in payment counts for borrowers in income-driven repayment plans that allowed forgiveness after making a number of monthly payments.
After the Supreme Court decision, Biden announced he'd create a new plan under the 1965 Higher Education Act, which provides government-backed student loans and grants the USDOE the ability to "compromise, waive or release loans."
In July, the USDOE revealed the plan that 804,000 federal loan borrowers' student loans would be automatically discharged.
The Mackinac Center and Cato's lawsuit claims the USDOE did not properly promulgate the policy under the rulemaking process, rather it used a press release.
"The inescapable conclusion is that the One-Time Account Adjustment is substantively and procedurally unlawful," the complaint from Washington, D.C.-based attorney Sheng LI reads.
The cancellation as planned will cost taxpayers $175 billion, according to the lawsuit.
The Mackinac Center filed a separate lawsuit in April seeking to stop the USDOE's three-year pause on student loan payments that they alleged could cost taxpayers more than $150 billion from lost interest.
