The Supreme Court has dealt another blow to President Biden’s student loan forgiveness plans, leaving millions of borrowers in limbo.
At a Glance
- Supreme Court declines to reinstate Biden’s SAVE plan for student debt cancellation
- The plan is blocked nationwide by a sweeping appeals court order
- Education Department pauses loan payments for enrolled borrowers due to legal proceedings
- GOP-led states have filed multiple legal challenges against the plan
- Cost estimates for the SAVE plan range from $156 billion to $475 billion over a decade
Supreme Court’s Decision and Its Impact
The Supreme Court has opted not to revive President Biden’s student loan forgiveness plan, effectively putting it on hold amid ongoing legal battles. This decision prevents the Biden administration from enacting measures meant to provide significant debt reduction to student borrowers until further legal or legislative clarity is achieved. As a result, millions who were counting on this financial relief to alleviate their student debt burden will have to wait longer, as the initiative remains entangled in judicial review.
The SAVE (Saving on a Valuable Education) plan, an income-driven repayment plan designed to lower monthly payments to 5% of discretionary income above 225% of the federal poverty line, has been blocked by a sweeping order from the U.S. Court of Appeals for the 8th Circuit. This decision conflicts with the 10th Circuit’s order that kept the plan intact, creating a complex legal landscape.
Crushing student debt has delayed or denied millions of people’s big milestones like buying a house or having kids. President Biden’s plan helped relieve this burden especially for those most in need. This is devastating but we’ll keep fighting to address the student debt crisis. https://t.co/3qzLHC73N5
— Congresswoman Sara Jacobs (@RepSaraJacobs) June 30, 2023
Legal Challenges and Administration’s Response
The Biden administration’s student debt relief efforts have faced significant opposition, primarily from Republican-led states. More than a dozen GOP-led states have filed legal challenges, with seven states filing a federal lawsuit in Missouri and three states suing in federal court in Kansas. These legal actions have resulted in conflicting court decisions, leading to the current impasse.
In response to these legal challenges, the Education Department has paused loan payments for borrowers enrolled in the program. The Biden administration has criticized the 8th Circuit’s ruling, arguing that it causes confusion and harm to borrowers. Despite these setbacks, the administration has managed to forgive $168 billion in debt for more than 4.7 million Americans, with one in ten federal borrowers approved for some relief.
The SAVE Plan: Details and Controversy
The SAVE plan, at the center of this legal battle, aims to provide more affordable repayment options for student loan borrowers. Under this plan, borrowers earning less than 225% of the federal poverty line ($32,800 a year for a single person) would not be required to make payments. The plan also offers shorter repayment periods and earlier loan forgiveness for borrowers with smaller starting balances.
However, the plan’s cost has been a point of contention. The Education Department estimates the SAVE plan will cost nearly $156 billion over a decade, but critics argue the actual cost could be as high as $475 billion. This discrepancy in cost estimates has fueled opposition to the plan and contributed to the legal challenges it faces.
Looking Ahead
As the legal battles continue, the Supreme Court has indicated that it expects the appeals court to issue a fuller decision on the plan promptly. In the meantime, most of the SAVE plan remains in effect, with around 8 million borrowers already signed up. The Biden administration has successfully appealed one of the injunctions against SAVE, allowing borrowers to benefit from reduced monthly bills and government-covered unpaid interest.
The ongoing legal challenges to President Biden’s student loan forgiveness efforts highlight the complex and contentious nature of this issue. As the courts continue to deliberate, millions of student loan borrowers are left waiting for clarity on their financial futures.
Sources:
1. Supreme Court declines to revive Biden student debt relief plan. Here’s what borrowers should know.
2. US Supreme Court declines to revive Biden’s student debt relief plan
