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.”
