As Promised- A Legal Challenge to Student Loan Forgiveness

As I noted in my post announcing the loan forgiveness, there would be a possible legal challenge. One has now been filed.

It involves an Indiana resident plaintiff who was a participant in the PSLF program ( Public Service Loan Forgiveness). As a member of this group, his monthly payment is capped. His debt is much higher than the amount of forgiveness (20K) so his monthly payment will continue at the same rate.

Indiana taxes loan forgiveness but does not tax PSLF exemptions after the service is completed. The executive order is general loan forgiveness - not based on completing the PSLF requirements. As a result, the plaintiff will owe almost 1K in Indiana taxes on this forgiveness yet there will be no change in the monthly amount he pays on his loans.

For any suit like this to be filed, one needs to have "standing" as someone who is harmed by the law. This plaintiff just might make it.

How will the courts rule? On one hand, they may look at the "accession of wealth" of the forgiven debt as a lopsided benefit but the focus is really whether a President has the power to forgive Federal debt by Executive Order. We shall see- in the meantime get out the popcorn for the show. :)

Please refer to my earlier post for a description of the Loan Forgiveness order