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Joe Biden stands at a podium in front of bookshelves and a green sign that says Canceling Student Debt

President Joe Biden touts his new income-driven repayment plan, known as a Saving on a Valuable Education, at a event in Los Angeles on Feb. 21, 2024. Parts of the plan were put on hold by two federal judges on Monday.  

Photo by Mario Tama/Getty Images

After forgiving $5.5 billion in student loans for 414,000 borrowers, the Biden administration won’t be able to wipe out the balances for any additional borrowers under its new income-driven repayment plan.

More than eight million borrowers are enrolled in the plan known as a Saving on a Valuable Education, or SAVE, which is designed to make payments more affordable and offer a quicker pathway to forgiveness for borrowers, depending how much they initially took out in loans to pay for their education.

Federal judges in Missouri and Kansas handed down orders Monday evening dealing dual setbacks to SAVE, which has become a centerpiece of the president’s efforts to overhaul the student loan system. The Missouri judge blocked the administration from doling out any additional debt relief under SAVE, while the Kansas judge’s order prevents the department from implementing the other parts of the program set to take effect July 1.

In a nutshell, both judges found that the plaintiffs were likely to succeed in their lawsuits because the department lacked the authority to make such significant changes to the income-driven repayment plan. The injunctions are temporary and maintain the status quo while the courts consider the lawsuits. (Note: This paragraph has been updated to more accurately describe the rulings.)

Neither order rolls back the relief already provided. But undergraduate borrowers won’t see their monthly payments cut in half unless the Kansas court order is reversed on appeal. Borrowers who are not a part of SAVE won’t be affected, as the lawsuits only challenged that plan.

Consumer protection and debt-relief advocates decried the rulings and called the orders a “recipe for chaos.”

“Millions of borrowers are now in limbo as they struggle to make sense of their rights under the law and the information being provided by the government and their student loan companies,” said Mike Pierce, president of the Student Borrower Protection Center. “Are borrowers’ bills accurate? Are interest charges correct? Will the amount due today be the same due tomorrow? Will borrowers promised cancellation still receive critical relief? These basic, essential questions have no answers.”

Pierce called for the Education Department to shut down the student loan system until “borrowers have access to the rights they were promised under the law.”

While the administration likely won’t heed that call, it’s expected to appeal the injunctions to try to rescue a plan that’s a key talking point for Biden in his re-election campaign.

“This plan is the most generous repayment program ever, and today we’re doing it even faster and quicker than ever before,” Biden said in February, taking credit for fixing the income-driven repayment plan and making it the “most affordable repayment plan ever.” But following the Monday’s rulings, it’s unclear if that will remain the case.

The rulings come nearly a year after the Supreme Court struck down Biden’s ambitious effort to forgive up to $20,000 in loans for more than 40 million Americans. The administration finalized SAVE last summer after the court’s decision and shortly before payments restarted following a three-year pause due to the pandemic. While the broad-based plan would’ve provided one-time relief, SAVE was intended to provide more permanent assistance to borrowers.

The Biden administration confidently said last summer that its authority to carry out SAVE was “crystal clear” and that it didn’t expect legal challenges.

U.S. senator Dr. Bill Cassidy, a Louisiana Republican and the ranking member of the Senate Health, Education, Labor and Pensions Committee, applauded the rulings in a statement Monday.

“Just like Biden’s other student loan schemes, this IDR policy does not ‘forgive’ debt. It transfers the burden of $559 billion in debt from those who willingly took it on to Americans who chose to not go to college or already sacrificed to pay off their loans,” Cassidy said. “These unfair, irresponsible policies from President Biden are nothing more than a cynical attempt to buy votes before the next election.”

The income-driven repayment plan, more generous than its predecessors, set monthly payments to as low as $0 for low-income individuals and offered forgiveness after 10 years for those who initially borrowed $12,000 or less, among other terms. Other new income-driven plans would offer forgiveness after 20 or 25 years. Experts had said that the plan, if fully implemented, could reshape how higher education is financed in America by encouraging students to pay for their education with federal student loans, though its reach would depend on how many borrowers take advantage of it.

The SAVE program was part of a three-pronged plan announced after the court’s decision and has been a frequent target of conservative criticism. Republicans in Congress balked at the price—$276 billion over 10 years, according to the Congressional Budget Office—and the use of executive power. They tried to block it in Congress, but to no avail.

Several Republican-led states sued earlier this spring to block the full implementation of SAVE, seemingly sparked by the rollout of the pathway for quicker forgiveness in February. Although the department started implementing SAVE early, not all of the plan’s changes have taken effect. In addition to the lower payments for undergraduate borrowers, the Kansas judge’s order blocks a provision that would’ve allowed the department to automatically enroll borrowers who are in default.

Alaska, South Carolina and Texas sought to block the SAVE plan in its entirety, but U.S. District Judge Daniel Crabtree said the plaintiffs failed to account for the reality that parts of the plan are already in effect. (Initially, 11 states sued, but Crabtree ruled earlier this month that only three had standing.)

“And so plaintiffs have failed to present the court with any meaningful direction—i.e., what a preliminary injunction undoing the already-active parts of the SAVE Plan would look like,” Crabtree said. “This presents a formidable problem for the court.”

That’s partly why Crabtree ultimately declined to block the entire rule, though he ruled that the department lacked the clear authorization to create SAVE. Crabtree’s injunction won’t take effect until June 30, allowing the Biden administration some time to appeal to the U.S. Court of Appeals for the 10th Circuit.

“The court emphasizes one more thing about its decision,” Crabtree wrote. “This order does not decide whether student loan forgiveness is good policy or bad policy. The popularly elected branches of our government—the President and the Congress—properly control that decision. Thus, no one should read this order to take a position on that question because our Constitution doesn’t assign any part of it to the federal courts.”

The Biden administration sought to dismiss the other lawsuit brought by Missouri and six other states, but the judge denied that motion while granting the preliminary injunction. As with the lawsuit challenging the plan for broad-based debt relief that prevailed before the Supreme Court, the Missouri Higher Education Loan Authority, or MOHELA, a state-created entity and federal loan servicer, proved key to allowing the SAVE lawsuit to move forward. The district judge found that Missouri had standing to sue because of how SAVE could potentially harm MOHELA.

Ultimately, U.S. District John Ross from the Eastern District of Missouri found that only the provisions of SAVE allowing for faster loan forgiveness exceeded the department’s authority. The Education Department has “significant” and “clear congressional authority” to issue the “vast majority of the provisions of the final rule.” The Missouri injunction is nationwide and takes effect immediately. The Biden administration can appeal it to the U.S. Court of Appeals for the Eighth Circuit.

Missouri attorney general Andrew Bailey, a Republican who led the lawsuit, called the court’s ruling “a huge win for the Constitution.”

“Congress never gave Biden the authority to saddle working Americans with half-a-trillion dollars in other people’s debt,” he wrote on social media.

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