The Colorado Springs Gazette final

Suit: Debt relief plan will cause a tax hit

BY ERIK LARSON

WASHINGTON • The Biden administration was sued over claims that its sweeping new program to forgive some federal student loans will harm borrowers in at least six states, where laws require tax payments on canceled loans because they’re treated as income.

Pacific Legal Foundation, a California-based libertarian group, alleges in a suit filed Tuesday in Indiana that borrowers in the state and others with similar tax rules “will actually be worse off ” as a result of the cancellation. The lead plaintiff, Frank Garrison, is an attorney who works for the group.

“Mr. Garrison will face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt,” the federal lawsuit states. “Mr. Garrison and millions of others similarly situated in the six relevant states will receive no additional benefit from the cancellation — just a one-time additional penalty.”

The group is seeking a court order barring the U.S. Education Department from canceling debt under the program.

White House assistant press secretary Abdullah Hasan said the lawsuit is “baseless” because anyone who does not want debt relief “can choose to opt out.”

“Why would this group bring this baseless claim?” Hasan said in a statement. “Because opponents of the debt relief plan are trying anything they can to stop this program that will provide needed relief to working families.”

NATION & WORLD

en-us

2022-09-28T07:00:00.0000000Z

2022-09-28T07:00:00.0000000Z

https://daily.gazette.com/article/281732683361244

The Gazette, Colorado Springs