Attorney Generals of 23 States Challenge Federal Student Loan Debt

Returning to class action lawsuits against the United States Department of Education, Betsy DeVos, student loan processors, and colleges and universities, a multistate coalition of Attorney Generals calls for the complete cancellation of federal student loan debt. The coalition approached the United States House of Representatives and Senate to forgive $50,000 of student loan debt for each borrower stressing that the loans are predatory and harm low socio-economic status minority students. Attorney generals from 23 states believe canceling federal student loan debt will close the Black and Hispanic racial wealth gap.

Wisconsin Attorney General Kaul

Wisconsin Attorney General Kaul joined governors from Hawaii, Illinois, Minnesota, Nevada, and Oregon in support of Senate Resolution 46 and House Resolution 100 asking President Biden to cancel $50,000 of federal student loan debt for each borrower nationwide. Predatory for-profit colleges that do not prepare students for careers and false promises of loan forgiveness for government service or teaching in inner-city schools that only 2% of all borrowers received led the coalition of attorney generals to approach the United States House of Representatives and Senate for relief from repeated violations of consumer protection laws.

Tax Relief for Student Borrowers

Understated but present in the $1.9 trillion COVID-19 relief package is an amendment that removes taxes on cancelled student loan debt through 2025. Without the change in the federal tax law, the average college graduate would have to pay $10,000 in taxes on the cancelled loan balance. President Biden will be able to forgive student debt without burdening borrowers with federal income tax debt that they are unable to pay. All federal student loans, state loans for education, private student loans, and loans to parents of students are eligible for forgiveness or cancellation.

Student Loan Cancellation for Black Men and Women

Black men and women, now and historically, are denied wealth and are returning to college in increasing numbers in hope of a better future. On March 5, 2021, Bloomberg held that the median white family wealth is five times the average wealth of Black and Hispanic families. President Biden also supports the notion that giving wealthy Americans with high loan balances and advanced degrees a partially free ride is counterproductive.

Expectation of Student Loan Forgiveness

Black college graduates are more likely to work as teachers and doctors in underserved low socio-economic areas than others and expect to be rewarded by cancellation of their federal student loans which reduces the racial wealth gap. The best debt forgiveness policy benefits the people who need it most. Student loan forgiveness benefits those interested in closing the racial wealth gap.

Loan Processors Usurping Federal Stimulus Payments

Under the Coronavirus Aid, Relief, and Economic Security Act, loan processors did not have the right to usurp federal stimulus payment to cover delinquent student loan bills. The U.S. Department of Treasury, Secretary Steven Mnuchin, the U.S. Department of Education Secretary Betsy DeVos worked to stop the illegal federal tax offset program conversion of COVID-19 stimulus payments. On January 27, 2021, the class action lawsuit against the United States Department of the Treasury and the Department of Education was dismissed without prejudice because plaintiff's finally received their stimulus payments.

New York Attorney General on Cancellation of Student Loan Debt

New York Attorney General Letitia James co-leads attorney generals from Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Vermont, Virginia, Washington, Wisconsin, and the District of Columbia in suing the Trump Administration and Betsy DeVos Secretary of the United States Department of Education. The June 2020 lawsuit asserted that student loan debt compromised students’ ability to attain gainful employment after graduation from college. Attorney General James obtained $7.5 million for 900 former students at ITT Tech in New York after demonstrating that Student CU and Peaks Trust deceived students seeking advancement from their advertised educational opportunities.

Student Loan Debt Doubled During the Coronavirus Pandemic

Whether wide-scale debt relief benefits the United States economy remains to be seen, but the 1.7 trillion dollar student loan debt currently keeping graduates from reaching their true potential has come to the attention of Attorney Generals across the United States. The latest $1.9 tillion stimulus package made forgiven student loan debt tax-free paving the way for student loan debt cancellation. Attorney Generals from 23 states formed a coalition to tackle student loan debt and violations of consumer protection laws by colleges, universities, and loan processors from coast to coast.

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