A US federal appeals court has blocked President Joe Biden’s administration from implementing its student debt relief plan.
The Court of Appeals for the Eighth Circuit suspended the remaining portions of the Saving on a Valuable Education (SAVE) plan, which aimed to reduce monthly payments for student loan borrowers.
Education Secretary Miguel Cardona expressed concern over the ruling, stating:
“Today’s ruling from the 8th Circuit blocking President Biden’s SAVE plan could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect.”
Last month, federal judges in Kansas and Missouri temporarily halted parts of the SAVE plan following arguments from Republican lawmakers that the Education Department had overstepped its authority.
This move followed the US Supreme Court’s decision in June 2023, which blocked the Biden administration’s broader student loan forgiveness plan.
Missouri Attorney General Andrew Bailey commented on the decision, saying:
“We can’t let Joe Biden saddle working Missouri families with Ivy League debt. That’s why we’ve got to keep pushing this suit forward. We’re excited to fight to protect from this illegal redistribution of wealth.”
Details of the SAVE Plan
The SAVE program was designed to provide significant relief to student loan borrowers by raising the floor of discretionary income and decreasing monthly payments.
For loans with original balances of $12,000 or less, the plan limits the repayment window to 10 years of qualifying payments, down from 20 or 25 years. The SAVE program aimed to approve over $116 billion in targeted relief for 3.4 million borrowers, including:
- $39 billion for 804,000 borrowers through correcting historical inaccuracies in past payment count systems.
- $45.7 billion for 662,000 public servants.
- $10.5 billion for 491,000 borrowers with a total and permanent disability.
Government Response and Next Steps
Solicitor General Elizabeth Preloger responded to the court’s decision, highlighting the potential confusion for borrowers:
“Many have already received bills that reflect the decrease in monthly payments to 5% of their discretionary income. Many would experience intense confusion when they are told that their payments must be recalculated and that they must be placed in forbearance—which would delay any eventual loan forgiveness.”
Federal student loan repayments and interest, which have been on hold since March 2020, are set to restart on September 1.
According to a December 2022 congressional report, the US has approximately 43 million federal student loan borrowers, collectively owing more than $1.6 trillion.
The ruling adds uncertainty for millions of borrowers who were anticipating relief under the SAVE plan.
The Biden administration continues to advocate for measures to ease the financial burden on these individuals, despite the legal challenges.
