Arkansas, five other states sue Biden administration to block student loan forgiveness plan

Arkansas on Thursday filed a lawsuit with five other states to block President Joe Biden’s student loan forgiveness plan.

The lawsuit announced Thursday morning by Arkansas Attorney General Leslie Rutledge argues the Biden administration skirted Congress last month when it took executive action on student loan relief, violating the principle of separation of powers in the U.S. Constitution.

Biden’s executive action would provide up to $20,000 in debt relief for eligible borrowers whose incomes are less than $125,000 ($250,000 for households).

Details of the program are still being finalized, but the administration expects relief to begin in the coming months. The application period will run through the end of 2023.

Rutledge and the group of Republican officials from Iowa, Kansas, Nebraska, Missouri and South Carolina argue the debt relief would overburden the federal budget and exacerbate inflation.

“President Biden’s unlawful political play puts the self-wrought college-loan debt on the backs of millions of hardworking Americans who are struggling to pay their utility bills and home loans in the midst of Biden’s inflation,” Rutledge said in a statement. “President Biden does not have the power to arbitrarily erase the college debt of adults who chose to take out those loans.”

The suit is the second significant legal challenge the debt-forgiveness plan must overcome. On Tuesday, an Indiana lawyer challenged the plan in federal court. That lawsuit argues the debt relief would negatively impact borrowers in states where debt forgiveness is taxable. A federal judge on Thursday denied requests for a temporary restraining order and preliminary injunction; the plaintiff will have until Oct. 10 to amend his complaint.

In Arkansas, tax officials expect the state Legislature to decide during its session early next year whether to levy income tax on forgiven student loan debt.

Thursday’s lawsuit asks a federal judge to cancel the debt-relief plan and declare it unconstitutional.

*CORRECTION: A previous version of this story cited incorrect reporting from another news outlet about the judge’s order in the Indiana case challenging the student loan debt forgiveness plan.