(CTN News) – Legal challenges to President Joe Biden’s student debt reduction attempts have resurfaced, and recent verdicts are negative for his new repayment plan.
On Monday evening, district courts in Kansas and Missouri blocked sections of the new SAVE income-driven repayment plan, which was established last summer to provide borrowers with more reasonable payments and a shorter deadline for loan forgiveness.
The first lawsuit was filed in March in Kansas by 11 GOP state attorneys general, while the second was filed in April in Missouri by seven GOP state attorneys general. In both cases, the plaintiffs asked the courts to prohibit the SAVE plan and the loan forgiveness that comes with it, claiming that the relief exceeds the administration’s power.
The district court opinions issued on Monday were different, but both dealt a blow to the SAVE plan. Kansas Judge Daniel Crabtree ordered that new SAVE measures, such as decreased monthly payments, cannot be adopted while the legal process moves forward.
Impact on Student Debt Borrowers
Missouri Judge John Ross found that the plan’s provision to eliminate student debt for students with original sums of $12,000 or fewer, who qualified within 10 years, is now also barred.
Education Secretary Miguel Cardona decried the rulings on Monday, stating that “the Department of Justice will continue to vigorously defend the SAVE Plan.”
“Republican elected officials and special interests sued to block their own constituents from being able to benefit from this plan – even though the Department has relied on the authority under the Higher Education Act three times over the last 30 years to implement income-driven repayment plans,” Cardona wrote.
“While we continue to review these rulings, the SAVE plan still means lower monthly payments for millions of borrowers – including more than 4 million borrowers who owe no payments at all, and protections for borrowers facing runaway interest when they are making their monthly payments,” said the attorney general.
Here’s what borrowers need to know about the verdicts.
Borrowers with student loans who have previously enrolled in SAVE can continue paying the payments outlined in the plan. However, the additional measures slated to take effect on July 1 — such as halving undergraduate borrowers’ payments and providing forgiveness credit for periods of deferment and forbearance — have been blocked.
Here’s why. Kansas’ Crabtree decided in favor of the attorneys general, citing the SAVE plan’s monthly payment cap and shorter forgiving period as “overreaching any generosity Congress has authorized before.”
However, Crabtree determined to keep SAVE components that had already gone into effect since the plaintiffs failed to demonstrate how they were harmed by parts of the plan that were already in existence.
For example, in June 2023, the Education Department disclosed its proposal to cap monthly payments and a shorter period for forgiveness, giving attorneys general time to fight the plan.
“All of this is to ask why: if these parts of the SAVE Plan promised an irreparable harm to plaintiffs, why didn’t they move to enjoin the SAVE Plan before they took effect?” Crabtree wrote.
However, with regard to the new SAVE measures slated to take effect on July 1, Crabtree decided that the plaintiffs succeeded in demonstrating injury because there was no delay in contesting the plan’s unimplemented elements, and any future remedies would be irreversible.
Rather than reversing or changing any SAVE provisions that have already been implemented, Crabtree chose to freeze any additional measures that have yet to be implemented until the court renders a final ruling.
While thousands of students have already received student loan forgiveness through the SAVE provision, which eliminates debt for borrowers with original sums of $12,000 or less, no new borrowers will be eligible for relief for the time being.
Missouri’s Ross issued a different ruling on SAVE. Missouri’s contention that the plan will hurt student-loan firm MOHELA due to reduced revenue has standing, considering the Supreme Court had rejected Biden’s first attempt at sweeping debt relief last summer.
Regarding the fate of SAVE, Ross concluded that while SAVE’s previously implemented components can continue, any future student loan forgiveness through the plan is prohibited.
He wrote that Congress did not account for the scope of loan forgiveness under SAVE, and as a result, the attorneys general have “a ‘fair chance’ of success on the merits on their claim that the Secretary has overstepped its authority by promulgating a loan forgiveness provision as part of the SAVE program.”
He also stated that even without student debt forgiveness, other elements such as lower payments and limited interest accrual will benefit borrowers. Because the attorneys general could not adequately show why the other clauses should be barred, Crabtree stated that he would only issue a preliminary injunction on debt cancellation.
Cardona announced on Tuesday that the Justice Department will appeal the rulings.
According to White House Press Secretary Karine Jean-Pierre, the Education Department will continue to enroll more Americans in SAVE. The plan offers benefits such as $0 payments for those earning $16 per hour or less, lower monthly payments for millions more borrowers, and protection from runaway interest for those making monthly payments.
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