Libertarian group files amended complaint against Biden's debt cancellation plan

INDIANAPOLIS — A California Libertarian group suing over President Joe Biden's plan for student debt cancellation has submitted an amended complaint after a federal judge rejected its initial legal challenge.

The amended complaint filed Monday on behalf Frank Garrison, an Indiana resident and attorney for Pacific Legal Foundation, states that Biden's plan would "cause Mr. Garrison to incur a financial obligation that he would not otherwise have faced" since Indiana plans to tax loan forgiveness as income.

It argues that Garrison would face a state income tax liability of more than $1,000 for 2022 and that he wouldn't incur that liability if not for the automatic cancellation of student debt.

As part of the complaint, Garrison has requested a temporary restraining order to prevent the U.S. Department of Education from enacting loan cancellation.

Garrison is also joined in the lawsuit by plaintiff Noel Johnson, an Indiana resident who is also qualified for student loan forgiveness.

Originally, U.S. District Court Judge Richard L. Young of the Southern District of Indiana denied Garrison's request to temporarily block the plan, saying Garrison "cannot be irreparably harmed" by it.

Last month, Pacific Legal Foundation, a legal advocacy group filed a lawsuit against the U.S. Department of Education and U.S. Secretary of Education Miguel Cardona alleging that the plan would create a tax liability for those eligible for automatic debt cancellation.

Indiana is one of seven states that plans to tax any debt forgiven in Biden's plan, so Garrison would owe more than $1,000 in state and local taxes.

Biden's plan promises to cancel $10,000 in federal student debt for borrowers with incomes of less than $125,000 per year or households making less than $250,000. Those who received federal Pell Grants to attend college would get an additional $10,000 erased.

An estimated eight million people won't have to apply for student loan forgiveness because they're on Income-Driven-Repayment plans. The government knows how much they make and if they'd qualify. Garrison is one of those people, which is why his legal team thinks he has a case, according to the AP.

Any student debt forgiven under Biden's plan is also considered taxable income in Arkansas, California, Minnesota, Mississippi, North Carolina and Wisconsin. That is, unless the laws in those states are changed, according to the AP.