Federal judges in Kansas and Missouri on Monday temporarily blocked pieces of President Joe Biden’s student loan repayment plan, leaving in doubt the future of the plan aimed at erasing debt for millions of borrowers.
The rulings mean that borrowers who enrolled in the SAVE plan expecting their payments to be cut in half beginning next week will not see those savings for the time being.
The Saving on a Valuable Education plan was announced last fall. SAVE cuts the payments for undergraduate borrowers by up to 50 percent and reduces the payments for millions of others, provides a subsidy that periodically eliminates interest accrual if it exceeds a borrower’s monthly payment and offers loan forgiveness in half the time other plans take.
The plan ties monthly payments to a borrower’s income and household size. Under the SAVE plan, more than four million borrowers qualify for a $0 monthly payment.
The plan has been rolled out in stages, and more than eight million borrowers have enrolled in it since the program was rolled out last fall.
As with other Biden administration student loan forgiveness plans, lawsuits were filed.
What are the lawsuits about?
Eleven states led by Kansas filed a lawsuit challenging the SAVE program in late March in U.S. District Court. In April, Missouri and six other states sued in U.S. District Court for the Eastern District of Missouri.
The coalitions of states suing Biden in both cases say the administration has overstepped the bounds of what Congress had originally authorized.
In the suit led by Missouri, the judge did not suspend the program entirely, but, instead, ordered a stop to any additional student loan forgiveness under a feature of the SAVE program. The judge did allow the remainder of the SAVE plan — including the repayment plan formula and interest subsidy — to continue, at least for now, Forbes reported.
“Because Plaintiffs have shown that Missouri faces impending harm from any additional loan forgiveness under the Final Rule, the Court finds it necessary to enjoin Defendants from any further implementation of the Final Rule’s loan forgiveness provisions until this matter can be fully litigated,” wrote Judge John Ross. “All other aspects of the Final Rule were promulgated properly.”
In the Kansas ruling, Judge Daniel Crabtree allowed certain aspects of SAVE that already are in force to proceed, ruling that the states waited too long to bring their challenge to the entire plan.
“The equities of this case simply don’t favor unwinding the parts of the SAVE Plan that defendants already have implemented,” wrote the judge. “Plaintiffs waited until defendants already had done so to bring suit. And, because of this delay, plaintiffs have failed to show an irreparable injury from the parts of the SAVE Plan already in effect.”
The judge did suspend the remaining elements of SAVE that were set to go into effect on July 1.
The injunctions are temporary, freezing parts of the SAVE plan until the cases are decided.
Supporters of the plan struck out at the rulings
Those who support the SAVE plan call the rulings “cynical ploys,” and an effort to “keep borrowers in debt longer.”
“Today’s shocking decision has halted critical access to President Biden’s most affordable repayment plan and denied critical relief to borrowers struggling in repayment for more than a decade,” said Student Borrower Protection Center Deputy Executive Director Persis Yu in a statement on Monday. “The goal of this lawsuit is to keep more borrowers in debt longer, and make it harder for millions of student loan borrowers to feed their families and keep a roof over their heads.”
Abby Shafroth, co-director of advocacy at the National Consumer Law Center, said the lawsuits were politically motivated.
“All of this is an absolute mess for borrowers, and it’s pretty shocking that state public officials asked the courts to prevent the Biden administration from offering more affordable loan payments to their residents at a time when so many Americans are struggling with high prices,” Shafroth told The New York Times.
“It’s a pretty cynical ploy in an election year to stop the current president from being able to lower prices for working and middle-class Americans.”
The administration has tried several plans to erase debt since the Supreme Court in June rejected Biden’s student loan forgiveness program, which would have canceled as much as $20,000 in student loan debt for individual borrowers, totaling $430 billion.
Since then, several plans have been introduced to help ease or erase the burden of $1.6 trillion in outstanding federally backed student debt.
White House Press Secretary Karine Jean-Pierre said the Biden administration strongly disagreed with the court decisions. “Today’s rulings won’t stop our administration from using every tool available to give students and borrowers the relief they need,” she said.
Republican Sen. Bill Cassidy of Louisiana said in a statement about the rulings that the income-driven repayment plan “does not ‘forgive’ debt” but simply transfers the burden onto taxpayers.
© 2024 Cox Media Group
/cloudfront-us-east-1.images.arcpublishing.com/cmg/XCUXZC2XYZHCRGNNGKFEX6U3LQ.png)
