A federal appeals court on Thursday temporarily blocked the Biden administration’s student loan forgiveness plan, which seeks to lower payments for more than 8 million borrowers.
President Joe Biden 's Saving on a Valuable Education Plan is the latest income-driven repayment program that intends to offer affordable payment plans and pathways to student loan forgiveness at taxpayers' expense. The Department of Education debuted the SAVE Plan last year in response to the Supreme Court's decision to strike down a previous plan to forgive up to $20,000 of debt for millions of borrowers.
On Thursday, the U.S. Court of Appeals for the 8th Circuit issued an emergency administrative stay, which blocks the Biden administration from implementing or acting on the plan until a ruling is made on an injunction pending appeal, according to court records.
The emergency stay came in response to a motion filed by Missouri and other Republican-led states. The states argue that the SAVE Plan is unconstitutional and requires immediate intervention by courts, including another review of the new plan by the Supreme Court.
"The Court granted our emergency motion to BLOCK Joe Biden’s entire illegal student loan plan, which would have saddled working Americans with half-a-trillion dollars in Ivy League debt," said Missouri Attorney General Andrew Bailey, adding it marked a "HUGE win for every American who still believes in paying their own way."
Meanwhile, a separate dispute against the SAVE Plan has made more progress down the legal pipeline. Earlier this month, the U.S. Court of Appeals for the 10th Circuit granted the Biden administration's request to pause an injunction against the plan by a Kansas federal court. That decision allowed the Education Department to move forward with lowering payments under the SAVE Plan, and three states — Alaska, Texas, and South Carolina — have appealed that ruling to the Supreme Court.
The Biden administration asked the Supreme Court on Wednesday to allow it to continue lowering monthly student loan payments for around 3 million borrowers enrolled in the student loan repayment plan.
Solicitor General Elizabeth Prelogar argued in her brief to the nine justices that "widespread harm" would occur to borrowers if the Supreme Court sides with the states challenging the program.
“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,” Prelogar wrote, arguing that the Education Department would also face harm.
Despite setbacks in court, Biden has aggressively pursued student debt transfers even without congressional support. His original plan would have written off at least $400 billion of debt. The Penn Wharton Budget Model estimated that SAVE could add $475 billion to the national debt over 10 years.
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Since the plan was launched last year, around 8 million people have enrolled and nearly 4.6 million of them have zero dollars in monthly payments.
Those enrolled in SAVE can still benefit while litigation continues, though the program is not accepting new enrollees at this time. Borrowers eligible for the plan's benefits must first make a certain number of payments, according to an information web page.
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