Courts block part of Biden’s student loan repayment plan for millions

A pair of federal judges on Monday halted key parts of President Joe Biden’s new student loan repayment program, imperiling the administration’s plan to lower monthly payments and erase student debt for millions of Americans ahead of the November election.

The two court rulings, in response to lawsuits filed by Republican-led states, prohibit the Education Department from moving ahead with major provisions of Biden’s SAVE loan repayment program. The decisions prevent the Biden administration from further reducing the monthly payments of millions of borrowers as planned in July or canceling more debt under the program.

More than 8 million loan borrowers are enrolled in the SAVE plan, which the Biden administration launched last year, touting it as the most affordable option ever for federal student loan borrowers. The Education Department already invoked the loan forgiveness provisions of the plan to cancel $5.5 billion of debt for 414,000 borrowers, with more scheduled.

The SAVE program has been a cornerstone of the Biden administration’s efforts to provide student debt relief to borrowers even as the Covid-era payment pause expired last year and Biden’s bigger ambitions for mass loan forgiveness were blocked at the Supreme Court.

But Republicans have argued that the program is the latest in a string of Biden executive actions to ease or erase student debt that far exceed the administration’s legal authority. On Monday, a pair of Obama-appointed federal judges partially agreed with them, issuing separate preliminary injunctions against different parts of the SAVE program.

District Judge John A. Ross of the Eastern District of Missouri blocked the Education Department from carrying out “any further loan forgiveness for borrowers” under the SAVE program until he decides the full case.

Ross ruled that Missouri Attorney General Andrew Bailey and other GOP states who sued were likely to succeed on their claims that the Biden administration lacks the authority to forgive student debt under the SAVE program.

He agreed that the program’s loan forgiveness provisions would likely harm Missouri because it would reduce the fees that the Education Department pays to the Missouri Higher Education Assistance Agency. That’s the same state-created entity that was at the center of the Supreme Court case over Biden’s first mass student debt relief program.

Federal student loan borrowers typically must repay their debts for 20 or 25 years to have their remaining balances discharged under the Education Department’s income-driven repayment plans. But the SAVE plan had offered a new, shorter timeline for forgiveness, canceling debt after just 10 years for borrowers who initially took out less than $12,000.

Meanwhile in Kansas, District Judge Daniel Crabtree blocked the Education Department from implementing a part of the SAVE program that would further lower some borrowers’ monthly payments, in some cases cutting them in half.

The SAVE plan has already lowered monthly payments — or eliminated them entirely for low-income borrowers — for millions of borrowers. But a second phase of the program, which was set to take effect July 1, was supposed to recalculate borrowers’ monthly payments and cap them at 5 percent of their discretionary income, down from the current 10 percent.

Crabtree ruled that the Republican states were likely to succeed on their claims that the Education Department lacked clear authority from Congress to enact the SAVE plan.

But he declined to block the entirety of the program, citing concerns about the feasibility of unwinding the parts of the program that had already been implemented. He also wrote that the Republican states’ delay in filing the lawsuit months after the plan was announced undercut their arguments that there was an immediate need to block the entire program.

The Education Department did not immediately have a comment on the ruling.

The order from the Missouri-based judge blocking the loan forgiveness provisions takes effect immediately. The Kansas-based judge deferred his injunction blocking the lower monthly payments until June 30 to give the administration time to appeal the order.

Groups advocating for student debt relief slammed the ruling saying that borrowers are now in limbo.

Mike Pierce, the executive director of the Student Borrower Protection Center, blasted the courts for creating “chaos across the student loan system” and said the Biden administration should consider “shutting the student loan system down until borrowers have access to the rights they were promised under the law.”