Topeka, Kansas – Two court rulings on Monday dealt a blow to the Biden administration’s student loan repayment plan, casting uncertainty over the future for millions of borrowers. The rulings targeted the Saving on a Valuable Education (SAVE) plan, established by the Biden administration a year ago to address issues with the Department of Education’s previous income-driven repayment plans. With over 8 million enrollees, the SAVE plan has gained popularity among borrowers.
The challenges to the SAVE plan were led by Republican-led states who argued that the plan exceeded the administration’s authority and could result in financial losses due to quicker loan forgiveness compared to previous plans. Judges in Kansas and Missouri ruled partially in favor of these arguments, halting certain aspects of the SAVE plan and raising doubts about its effectiveness.
According to Persis Yu, deputy executive director of the Student Borrower Protection Center, the court injunctions have created chaos and uncertainty for borrowers. As borrowers await clarity on the future of the SAVE plan, there are many questions surrounding its implementation.
In Kansas, U.S. District Judge Daniel D. Crabtree placed an injunction on the next phase of the SAVE program, which was set to take effect on July 1. Meanwhile, in Missouri, U.S. District Judge John A. Ross blocked the SAVE plan from offering additional loan forgiveness, challenging the initiative’s relief options for borrowers.
Despite the legal setbacks, the Department of Education stated that borrowers could still enroll in the SAVE plan while they assess the situation. It remains uncertain if any forgiven student debt could be reversed, with experts indicating that cancellation decisions might remain intact.
As of July 1, borrowers were expected to see a reduction in their payments under the SAVE plan, with undergraduate loan repayments slated to be halved for many borrowers. However, with the court rulings, the implementation of these lower payments has been halted.
The Biden administration plans to appeal the court decisions and continues to defend the SAVE plan vigorously. Education Secretary Miguel Cardona emphasized the importance of income-driven repayment plans under the Higher Education Act, citing the administration’s reliance on this authority for decades.
Republican officials celebrated the legal victories, with Kansas Attorney General Kris Kobach calling the injunction a win for the country. Kobach emphasized the need for Congress to address major questions regarding student debt forgiveness, echoing concerns about equitable loan repayment.