A pair of federal judges on Monday blocked key parts of the Biden administration’s new student loan repayment plan that provides faster loan forgiveness and lower monthly payments for millions of borrowers.
The rulings from federal judges in Kansas and Missouri are directed at the Department of Education’s Saving on a Valuable Education, or SAVE, loan repayment plan, which was launched last summer and has roughly 8 million enrollees.
A group of Republican-led states sued to stop the plan, which has an estimated 10-year cost of between $156 billion and $475 billion, charging that the Biden administration exceeded its authority in approving new standards and procedures for loan forgiveness. Many of the same states also sued to overturn the Biden administration’s previous attempt to forgive student loans for millions of borrowers, an effort estimated to cost roughly $400 billion that was rejected by the Supreme Court a year ago.
The SAVE program was scheduled to take full effect on July 1, but now some components are on hold. A rule that would have reduced required monthly loan payments from 10% of a borrower’s income to 5% is suspended as a result of the Kansas decision, as is a plan to reduce the repayment time for borrowers with loans exceeding $12,000. The Missouri ruling effectively prevents the Department of Education from approving any new loan forgiveness for program enrollees.
Still, parts of the SAVE program will remain in effect, and the roughly 400,000 borrowers who have already received $5.5 billion of loan forgiveness through the plan are not affected by the court decisions.
Missouri Attorney General Andrew Bailey, who led a coalition of seven states in their suit against the government, said the rulings are in line with the Constitution. “Only Congress has the power of the purse, not the president,” he said in a statement. “Today's ruling was a huge win for the rule of law, and for every American who Joe Biden was about to force to pay off someone else's debt.”
In a statement, Secretary of Education Miguel Cardona said the Biden administration would “vigorously defend” the SAVE program. “We strongly disagree with the Kansas and Missouri District Court rulings, which block components of the SAVE Plan that help student loan borrowers have affordable monthly payments and stay out of default,” he said. “President Biden, Vice President Harris, and I remain committed to our work to fix a broken student loan system and make college more affordable for more Americans. ... We will continue to provide this long-overdue relief, no matter how many times Republican elected officials and their allies try to stop us.”
The bottom line: Parts of the Biden administration’s student loan forgiveness plan are now on hold and will remain so until the litigation is resolved. The program will likely remain in limbo until after the election this fall.
