In the latest development, the U.S. Court of Appeals for the 8th Circuit sided with Missouri Attorney General Andrew Bailey and five other Republican-led states that requested the court stop the Biden administration from implementing Save amid its ongoing litigation. The states had scored a partial injunction from a lower court in June that blocked the Education Department from forgiving any loans through the program then successfully petitioned the appeals court to stop the plan altogether.
In a post on X, Bailey called the appeals court decision a “HUGE win for every American who still believes in paying their own way.” He said Save is an “illegal student loan plan, which would have saddled working Americans with half-a-trillion dollars in Ivy League debt.”
An Education Department spokesperson said the federal agency is assessing the impacts of the ruling and will contact borrowers shortly.
The Save plan provides lower monthly payments for millions of borrowers and a faster path to cancellation. It has already wiped clear the balances of 414,000 enrollees who originally borrowed less than $12,000 and had been paying for at least 10 years. More than 8 million people are enrolled in the repayment plan, which ties monthly payments to earnings and family size. The program is an amended version of an existing repayment plan known as Revised Pay as You Earn, or Repaye. All income-driven plans promise to forgive a borrower’s balance after 20 or 25 years of payments, but the Save plan shortens the timeline for people who took out small loans.
The six states had filed a lawsuit in April accusing Biden of overstepping his authority with the creation of Save. Missouri’s attorney general also argued that the Missouri Higher Education Loan Authority, a quasi-state agency that services federal student loans and funds state scholarships, would lose revenue when the loans are canceled. In June, U.S. District Judge John A. Ross halted any further loan forgiveness and questioned whether Congress had envisioned a loan repayment plan as far-reaching as Save, signaling the program could be overturned.
On the same day that Ross handed down his injunction in Missouri, U.S. District Judge Daniel D. Crabtree in Kansas blocked the Biden administration from cutting the monthly payments of Save enrollees starting in July.
In the rapid-fire back-and-forth over Save this month, the U.S. Court of Appeals for the 10th Circuit granted the administration’s request that the Kansas ruling be set aside, allowing the Education Department to move forward with lowering payments under Save.
Within days, the three Republican-led states involved in the lawsuit — Alaska, South Carolina and Texas — petitioned the Supreme Court to intervene.
The Biden administration argued that tabling Save amid ongoing litigation would cause widespread harm to borrowers and administrative chaos.
“To revert to the pre-Save plan approach, the Department and its servicers would have to reprogram their systems, retrain their staff, and recalculate monthly payments,” Solicitor General Elizabeth B. Prelogar wrote in a court filing Wednesday. “That process would take at least several months, during which the Department would have no choice but to place many borrowers into forbearance until servicers are able to bill them for the new amounts.”
That scenario could now play out in the wake of Thursday’s ruling.
Student advocates say the 8th Circuit ruling could upend the lives of millions of borrowers who have come to rely on the low monthly payments afforded through Save and place them at greater risk of falling behind on payments.
“This decision threatens the entire federal student loan system and will cause complete chaos and confusion,” said Eileen Connor, president and executive director of the Project on Predatory Student Lending. “The Save plan was created to allow low-income borrowers a fair path to repay their federal student loans and instead they will now have a greater risk of default and serious financial consequences.”
Connor and other advocates are calling on the Education Department to place all student loan borrowers back into forbearance until the legal dispute over Save is resolved.
#Appeals #court #blocks #Bidens #Save #plan #student #loan #repayment,
#Appeals #court #blocks #Bidens #Save #plan #student #loan #repayment