Two federal judges in Kansas and Missouri on Monday temporarily blocked parts of the Biden administration’s new student loan repayment plan, which could have implications for millions of federal borrowers.
Borrowers enrolled in an income-driven repayment plan called SAVE are expected to continue making payments. But those with undergrad loans won’t see their payments cut in half starting July 1, much to the chagrin of borrowers who rely on that relief.
Separate preliminary injunctions on Monday are tied to lawsuits filed this year by two groups of Republican-led states seeking to improve the SAVE program, a centerpiece of President Biden’s agenda to provide relief to student loan borrowers. Many of those who opposed the plan were Mr. They’re the same people who sued Biden’s $400 million debt-cancellation plan, which the Supreme Court struck down last June.
“All of this is a complete mess for borrowers, and it’s shocking that state public officials are asking 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 prices,” he said. Abby Shafroth, attorney associate director at the National Consumer Law Center. “It’s a pretty cynical tactic in an election year when the current president can’t lower prices for working and middle-class Americans.”
Preliminary injunctions freeze parts of the SAVE program until the cases are decided.
In a statement, White House spokeswoman Karine Jean-Pierre said the Biden administration strongly disagreed with the court rulings. “Today’s rulings will not prevent our administration from using every tool available to provide students and borrowers with the relief they need,” he said.
Eleven states led by Kansas Save filed a lawsuit challenging the plan in late March in the U.S. District Court for the District of Kansas. next month, Missouri and six other states He sued in the U.S. District Court for the Eastern District of Missouri. Both lawsuits argued that the administration had once again overstepped its authority and that the repayment plan was a backward attempt to wipe out the debts.
The SAVE program, which has helped eight million borrowers since it opened in August, is not a new idea. It is based on a nearly 30-year-old design that links monthly payments to the borrower’s income and household size. But SAVE has more generous terms and higher prices than previous schemes. More than four million borrowers qualify for $0 monthly payments.
A federal judge in Kansas, Daniel D. Crabtree said earlier this month that only three states — South Carolina, Texas and Alaska — have the legal standing to move forward with their challenge, adding that “but rarely” the SAVE program “is not very likely,” and that all three have shown that it would hurt public institutions that hold student loans in those states. He said.
Judge Crabtree refused to remove pieces of the program already in place — after all, he wrote, the plaintiffs brought their lawsuits after the program went into effect, “so the court doesn’t see how the plaintiffs can complain of irreparable harm from them . . .”
Similarly, in St. Louis, Judge John A. Tens of thousands of borrowers in Rose, Missouri, have already applied for forgiveness through the SAVE program, so the court could not immediately freeze the process.
“These borrowers and the public have an interest in ensuring stability in loan repayment plans, and any preliminary injunction would harm expectations of such stability,” he wrote.
But Judge Rose sought to strike a balance with a partial injunction, allowing borrowers to continue taking advantage of benefits such as lower monthly payments and capped interest on savings. will be forgiven in the coming months.
In the written order, he agreed with Republican states’ attorneys general that the Department of Education may have overreached in allowing a fast track to loan forgiveness, which SAVE’s critics said would cost taxpayers significantly. But, he wrote, SAVE’s other generous elements, such as drastically reduced monthly payments, “still appear to be functioning adequately” even if the loan forgiveness element is suspended while the lawsuit continues.
The education department had no immediate comment.
Scott Buchanan, Managing Director Student Loan Servicing AllianceAn industry group said agencies that manage federal loans will operate under the department’s direction to implement court orders.
“These statutory headlines can create a lot of confusion for borrowers about what they mean, and once we receive timely guidance and resources from the department, we will do our best to respond to borrowers,” he said. Questions.”
After a 42-month pandemic-related moratorium last fall, millions of borrowers struggled to make repayments. Just as the student loan machines were coming back online, the Biden administration made a series of changes to overhaul the system while instituting fixes for various loan forgiveness programs. So far, the administration has wiped out $167 billion in debt for nearly five million borrowers.
Borrowers argue that blocking parts of the SAVE program that replaced the program, known as REPAYE, would add stress to an already overburdened system.
“Having two different restraining orders is confusing from a legal perspective,” said Persis Yu, deputy executive director of the Student Borrower Protection Center, an advocacy group. “How do you manage a system under this confusion?”
Some Republican lawmakers welcomed the temporary rulings. Senator Bill Cassidy of Louisiana said in a statement that the income-based repayment plan “does not forgive the debt” but shifts the burden onto taxpayers.
