The Court of Appeals of the 8th Circuit of the United States blocked on Thursday of last week the student debt relief plan “Saving on a Valuable Education” (SAVE) of President Joe Biden, preventing the implementation of its main provisions, such as the reduction of monthly payments and a shorter term for debt cancellation.
This ruling is the latest episode in a series of legal challenges that borrowers have faced in recent months, and that has kept millions of student borrowers drowning in debt on edge.
A context of growing opposition has been noticed: Two groups of Republican politically inclined prosecutors filed lawsuits earlier this year to stop the SAVE plan. In late June, federal courts in Kansas and Missouri issued rulings blocking significant parts of the plan, limiting its ability to reduce income-based monthly payments from 10% to 5% of borrowers’ discretionary income.
The 10th Circuit subsequently allowed certain provisions to move forward, but the 8th Circuit’s recent ruling again halts the plan in its entirety.
Biden’s Student Loan Relief Plan Blocked Once Again: What’s Left for Borrowers?
Education Secretary Miguel Cardona expressed his vehement displeasure in a statement issued Thursday evening, stating that all borrowers enrolled in SAVE “will be placed on an interest-free suspension while our Administration continues to vigorously defend the SAVE Plan in court.” In addition, he assured that “the Department will provide regular updates to borrowers affected by these resolutions in the coming days.”
The Department for Education confirmed that this forbearance period will not count towards public service loan forgiveness progress or income-based repayment plans. He also indicated that borrowers enrolled in the SAVE Plan who have received an invoice corresponding to the month of August are in an interest-free moratorium; no payments are required during this period. For those who have not received an invoice yet, they will also be in moratorium and will not receive invoices.
What Does the Lawsuit and the Ruling Against the SAVE Plan Say, and How Did Biden Respond?
The 8th Circuit’s ruling was in response to a lawsuit led by the Missouri attorney general. Another similar lawsuit, led by Kansas, is now in the Supreme Court. Attorney General Elizabeth Prelogar warned that blocking the plan could cause “intense confusion” for borrowers. The Department of Education revealed that 8 million borrowers are enrolled in the SAVE plan, including 4.5 million who qualify for zero-dollar monthly payments.
In contrast to the blocking of the SAVE plan, the Biden administration announced on the same day a new round of student loan forgiveness, totaling $1.2 billion for approximately 35,000 eligible borrowers through the Public Servants Loan Forgiveness (PSLF) Program. This program, created in 2007, has faced criticism for its strict rules and administrative errors that prevented many borrowers from canceling their debts. The administration has adjusted some of the rules and granted retroactive credits for the required payments.
Some Republican lawmakers celebrated the 8th Circuit’s ruling. Senator Bill Cassidy, the ranking Republican on the Senate education committee, declared that the ruling “is another rebuke to President Biden’s illegal student loan schemes.” He added that “this is an abuse of power before an election in an attempt to buy votes at the expense of American taxpayers.”
Despite these obstacles, the Biden administration has vowed to continue its efforts to provide relief to borrowers. Along with the SAVE plan, the Department of Education plans to finalize a broader student loan forgiveness program in October, which is expected to benefit more than 30 million borrowers.
