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8th Circuit blocks Biden’s student loan relief plan while in effect
On July 18, the Eighth Circuit for the U.S. Court of Appeals granted the State of Missouri’s emergency motion for an administrative stay to prevent President Biden’s student loan relief plan from taking effect. The White House released a fact sheet in August 2023 on the President’s SAVE Plan. According to the complaint filed by Missouri and six other states, President Biden’s final rule implementing the SAVE Plan, which would have gone into effect on July 1, allegedly attempted to cancel millions of dollars of student loans improperly. The State of Missouri had taken issue with the President’s plan to “evade the limits Congress set out in [the Higher Education Act] for the [income-based repayment] program” by allegedly hiking the exempt-income threshold from 150 to 225 percent, slashing the payment obligation from 15 to 5 percent for undergraduates, and forgiving loans after as few as ten years instead of 25. The administrative stay will be in place until the 8th Circuit rules on the appellants’ motion for an injunction.
SAVE Plan partially blocked by 2 federal judges
Recently, two district court judges partially blocked President Biden’s student debt relief program, known as the Saving on a Valuable Education (SAVE) plan. The judges from Missouri and Kansas ruled that the program lacks clear authorization from Congress as required under the Higher Education Act. Judge John Ross of Missouri issued a preliminary injunction to prevent the Department of Education from forgiving loans under the program. Similarly, Judge Daniel Crabtree of Kansas prohibited the plan from fully launching on July 1. The judges’ decisions came after state attorneys general filed lawsuits, arguing that the SAVE Plan presents a “major question” of economic and political significance, which demands explicit congressional approval. Despite the government’s claim that the Higher Education Act authorizes the plan, both judges found the arguments insufficiently persuasive to demonstrate clear congressional authorization.
State AGs sue to block Biden's SAVE Plan for student loan forgiveness
On April 1, 10 state attorneys general filed a lawsuit in the U.S. District Court for the District of Kansas against President Biden, the Secretary of Education, and the Department of Education seeking to block the enactment of the SAVE Plan. As previously covered by InfoBytes, the SAVE Plan was an income-driven repayment plan, intended to calculate payments based on a borrower’s income and family size, rather than the loan balance, and forgave balances after several years since repayment. According to the complaint, the government released a rule for the new SAVE Plan intended to eliminate at least $156 billion in student debt as the second step in a three-part loan forgiveness initiative. The first step involved an attempt to cancel $430 billion in student loans under the HEROES Act, which the U.S. Supreme Court ruled unconstitutional in Biden v. Nebraska.
The SAVE Plan assumed $430 billion in loans would be forgiven beforehand, but after the Supreme Court's decision, the defendants allegedly did not revise the cost estimate in anticipation of overturning the case. This oversight led to a significant underestimation of the SAVE Plan's true cost; plaintiffs alleged.
Plaintiffs further claimed that the SAVE Plan was written before the Supreme Court's ruling in Biden v. Nebraska and thus included outdated statements of confidence in the defendants' authority to pursue debt relief. The rule would take effect on July 1, but defendants allegedly have already started forgiving loans for some individuals before this date. The complaint alleged that on February 21, the Department of Education forgave the debt of 153,000 borrowers, which the state attorneys general claimed violated Biden v. Nebraska.
Plaintiffs brought claims under the Administrative Procedure Act, contending that the Department of Education exceeded its authority under the Higher Education Act of 1965 by issuing the rule and that the rule would be arbitrary and capricious since defendants failed to account for the full cost of the rule.
White House launches SAVE Plan
On August 22, the White House announced the SAVE Plan, an income-driven repayment plan, intended to calculate payments based on a borrower’s income and family size rather than the loan balance and provide forgiveness for balances after a certain number of years since repayment. It is estimated that over 20 million borrowers could benefit from this plan and that it will have particular critical benefits for low- and middle-income borrowers, community college students, and borrowers who work in public service. In order to encourage participation by borrowers, the Department of Education is partnering with grassroots organizations on an outreach campaign. This plan builds on broader actions taken by the current administration to deliver relief to borrowers and make college more affordable.