Two federal judges in Kansas and Missouri temporarily blocked parts of the Biden administration’s new student loan repayment plan on Monday in rulings that will affect millions of federal borrowers.
Borrowers enrolled in the income-based repayment program, known as SAVE, are expected to continue making payments. But those with undergraduate debt will no longer see their payments cut in half from July 1, a huge disappointment for borrowers who may be counting on that relief.
Monday’s separate preliminary filings are linked to lawsuits filed this year by two Republican-led groups of states seeking to overturn the SAVE program, a centerpiece of President Biden’s agenda to provide relief to student borrowers. Many of the program’s challengers are the same ones who filed suit against Mr. Biden’s $400 million debt relief plan, which the Supreme Court struck down last June.
“This is all an absolute mess for borrowers, and it’s very shocking that state public officials have asked the courts to stop the Biden administration from offering more affordable loan payments to their residents at a time when so many Americans are struggling with high rates,” he said. Abby Shafroth, co-director of advocacy at the National Consumer Law Center; “It’s a pretty cynical ploy in an election year to stop the current president from being able to lower prices for working and middle-class Americans.”
Eleven states led by Kansas filed a lawsuit challenging the SAVE program in late March in the U.S. District Court for the District of Kansas. The following month, Missouri and six other states sued in the U.S. District Court for the Eastern District of Missouri. Both lawsuits argued that the administration had again overstepped its authority and that the repayment plan was an after-the-fact effort to wipe out the debts.
The SAVE program, which has enrolled eight million borrowers since it opened in August, is not a new concept. It’s based on a roughly 30-year plan that ties monthly payments to the borrower’s income and household size. But SAVE has more generous terms than previous plans and a higher price. More than four million borrowers qualify for a $0 monthly payment.
A federal judge in Kansas, Daniel D. Crabtree, said earlier this month that only three of the states bringing the suit there — South Carolina, Texas and Alaska — had the legal standing to proceed with their challenge, “ but barely.” He said all three had shown that the SAVE program, “more likely than not,” would hurt public agencies in those states that have student loans.
Preliminary injunctions freeze portions of the SAVE plan until the case is decided. Judge Crabtree declined to unpack the parts of the plan that were already in place — after all, he wrote, the plaintiffs brought their suit long after the program began, “so the court does not see how the plaintiffs can complain of irreparable harm from them.”
Similarly, Judge John A. Ross in St. Louis wrote that since tens of thousands of borrowers in Missouri had already applied for forgiveness through the SAVE plan, the court could not easily unravel the process.
“These borrowers and the public have an interest in ensuring consistency in loan repayment schedules, and any preliminary injunction would harm their expectations of such consistency,” he wrote.
However, Judge Ross tried to strike a balance by ordering a partial injunction, allowing borrowers to continue to enjoy benefits such as lower monthly payments and limited accrued interest under SAVE, while temporarily blocking provisions of the plan that would have allowed borrowers to view their debts excused in the coming months.
In a written order, he agreed with Republican state attorneys general that the Department of Education may have gone too far in allowing a faster path to loan forgiveness, which SAVE’s critics said would come at a significant cost to taxpayers. But, he wrote, SAVE’s other generous elements, such as greatly reduced monthly payments, “still appear to be working adequately” even after the loan-forgiveness element has been halted while litigation continues.
The Ministry of Education had no immediate comment.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, an industry group, said entities that service federal loans will work under the department’s direction to comply with the court orders.
“These legal titles can create a lot of confusion for borrowers about what it means for them, and once we get timely guidance and resources from the department,” he said, “we’ll work as best we can to be ready to answer borrower questions.”
Getting millions of borrowers back into repayment last fall, after a 42-month pandemic-related hiatus, was challenging. Just as the student loan mechanism was coming back online, the Biden administration continued to make a series of changes to overhaul the system while installing fixes to various loan forgiveness programs. So far, the administration has eliminated $167 billion in debt for nearly five million borrowers.
Blocking parts of the SAVE program, which replaced a plan known as REPAYE, would add stress to an already overburdened system, borrower advocates said.
“Having two different mandates is legally chaotic,” said Persis Yu, deputy executive director of the Student Borrower Protection Center, an advocacy group. “How do you manage a system under all this chaos?”
Some Republican lawmakers welcomed the temporary rulings. Sen. Bill Cassidy of Louisiana said in a statement that the income-based repayment plan “does not ‘forgive’ the debt” but simply shifts the burden to taxpayers.
