Biden's $400 billion student loan forgiveness plan faces FIRST lawsuit: Indiana case says President's ploy to wipe $10,000 in debt is 'flagrantly illegal' and will leave some worse off because of taxes 

• Pacific Legal Foundation filed the lawsuit in federal court in Indiana on Tuesday
• Comes a day after Congressional Budget Office (CBO) said plan will cost $400B
• Lawsuit claims it is 'flagrantly illegal' to create a huge program via press release 
• The lead plaintiff, Frank Garrison, claims the plan actually makes him worse off 
• He will receive no benefit from the plan just a 'penalty' in the form of taxes, the lawsuit argues 
• Critics say the White House scheme will lead to more inflationary pressure 
• The administration insists costs will be covered my deficit reduction  

President Biden's plan to forgive billions in student debt for millions of Americans is 'flagrantly illegal', violates the Constitution and will make some worse off because of taxes, the first lawsuit against the ploy states.

Conservative group Pacific Legal Foundation filed a federal lawsuit Tuesday against the Department of Education with the intent of stopping Biden's student loan cancellation plan he announced last month.

The lawsuit, which was filed in the U.S. District Court for the South District of Indiana, comes a day after the Congressional Budget Office (CBO) said that Biden's plan to cancel some student loan debt will cost $400 billion.

'Congress did not authorize the executive branch to unilaterally cancel student debt,' said Caleb Kruckenberg, an attorney at Pacific Legal Foundation. 'It's flagrantly illegal for the executive branch to create a $500 billion program by press release, and without statutory authority or even the basic notice and comment procedure for new regulations.'

The lawsuit continues: 'The administration has created new problems for borrowers in at least six states that tax loan cancellation as income. 

'People like Plaintiff Frank Garrison will actually be worse off because of the cancellation. Indeed, Mr. Garrison will face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt.

'These taxes would not be owed for debt forgiveness under the Congressionally authorized program rewarding public service. 

'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.'

Biden said in August the U.S. government will forgive $10,000 in student loans for millions of debt-saddled former college students, keeping a pledge he made in the 2020 campaign for the White House.

Garrison, the lead plaintiff in the case, is an attorney who claims Biden's cancelation plan will not benefit him, and actually penalize him financially because of a state tax.

Biden's massive relief plan is taxed income in Indiana - where Garrison lives - as well as Wisconsin, North Carolina, Minnesota, Mississippi and Arkansas. 

Critics of the plan raised concerns over its inflationary impact while the White House said the plan was fiscally justified because the federal deficit was on track for a $1.7 trillion reduction for fiscal 2022 compared with the prior year. 

The smaller deficit is largely due to the end of many COVID-19 aid programs and unexpectedly higher revenues.

The Education Department did not immediately respond to a request for comment.

As of June 30, 43 million borrowers held $1.6 trillion in federal student loans. About $430 billion of that debt will be canceled, the CBO estimated. 

The CBO previously projected that some of the funds canceled by Biden's action would eventually have been forgiven anyway.

Reuters reported in August that nongovernment budget analysts projected the program's total 10-year cost at $500 billion to $600 billion, including extending a repayment pause on all federal student loans through Dec. 31 and reducing future payments based on income.

'It (Biden's plan) will only lead to more calls for government intervention in education at taxpayers´ expense,' said Steve Simpson, another attorney at Pacific Legal Foundation.