Appeals court blocks Biden's student loan repayment plan, in latest legal blow to administration

An appeals court on Thursday temporarily blocked the Biden administration's new student loan repayment plan, leaving millions of borrowers uncertain about the monthly payments they owe.

The move will increase pressure on the Education Department to halt student loan payments while the legal fight plays out.

Student debt relief has been a key plank of President Joe Biden's education agenda and is seen as crucial to solidifying support among young voters in this year's presidential contest.

Key context: Much of the program, known as SAVE, took effect last year. But some provisions, such as lower monthly payments, were set to start in July.

Federal district judges in Kansas and Missouri blocked key provisions of the plan in June. But a federal appeals court put that decision on hold in July and allowed the Biden administration to move ahead with its lower monthly payments.

Thursday's ruling, from the 8th Circuit Court of Appeals, completely blocks the program for an unclear length of time.

Back up: Missouri Attorney General Andrew Bailey filed an emergency motion last week asking a circuit court judge to block the Biden administration from “continuing to unlawfully forgive student loans.”

Bailey alleged that the Education Department is evading the injunction by still implementing certain parts of the plan, such as allowing borrowers of a certain income level to have $0 payments, as well as a provision that forgives loans after 10 to 25 years of payments, depending on the borrower’s degree program and amount borrowed.

However, some student loan experts believe Thursday's ruling was far more sweeping than the states intended.

“This seems to be further than what the states where asking for," Mike Pierce, the executive director and co-founder of the Student Borrower Protection Center, said. "When you look at the rhetoric Republicans used, they are not calling for this kind of mass chaos, but they are playing with fire.”

What's next: The legal challenges will continue to work their way through the courts. Critics say the plan overreaches and unfairly burdens taxpayers. The states suing the Education Department — South Carolina, Alaska and Texas — are asking the Supreme Court to take up the Kansas case.

The Education Department said in a statement that it is assessing the impact of the ruling and will be in touch directly with borrowers with any impacts that affect them.

"Our Administration will continue to aggressively defend the SAVE Plan — which has been helping over 8 million borrowers access lower monthly payments, including 4.5 million borrowers who have had a zero dollar payment each month," an Education Department spokesperson said. "And, we won’t stop fighting against Republican elected officials’ efforts to raise costs on millions of their own constituents’ student loan payments.”

The department sent out an email to millions of borrowers last week assuring them the administration would continue to implement the student income-driven repayment program "to the fullest extent possible."

Sen. Bill Cassidy , the ranking member of the Senate HELP committee, applauded the courts decision, saying the Biden Administration's program was an abuse of power.

"He isn’t ‘forgiving’ debt. He is taking the debt from those who willingly took it out to go to college and transferring it onto taxpayers who decided not to go to college or already paid off their loans,” Cassidy said of the president in a statement.

Pierce said he believes the administration should pause student loan payments while the case is sorted out in the courts, noting that the Education Department has made similar moves before .

“It seems to me like there aren't very many options left at the table," he said. "In response to a much more limited court order, they were prepared to do that with up to 3 million people two weeks ago."