In a significant legal setback for the Biden administration, the 8th U.S. Circuit Court of Appeals in St. Louis has temporarily halted the implementation of President Joe Biden's student debt relief plan. The court's decision, which came on Thursday, followed a plea from seven Republican-led states seeking to invalidate the program. This ruling marks another chapter in the ongoing legal battles surrounding the administration's efforts to alleviate student loan burdens for millions of Americans.
The appeals court's ruling granted an administrative stay, effectively suspending parts of the U.S. Department of Education's debt relief initiative that had not been previously blocked by lower courts. This decision coincided with the administration's announcement of an additional $1.2 billion in student loan forgiveness for approximately 35,000 borrowers eligible under the Public Service Loan Forgiveness (PSLF) program.
Missouri Attorney General Andrew Bailey, who spearheaded the petition, celebrated the court's decision, calling it a "huge win for every American who still believes in paying their own way." He criticized the plan for potentially imposing a significant financial burden on working Americans.
The Biden administration's debt relief efforts, encapsulated in the Saving on a Valuable Education (SAVE) Plan, have faced persistent legal challenges since their inception. Introduced in 2022 as part of a broader $430 billion initiative, the plan aimed to fulfill Biden's campaign promise to cancel up to $20,000 in debt for 43 million Americans. However, the Supreme Court blocked the broader debt cancellation proposal in June 2023.
The SAVE Plan, which was intended to be fully operational by July 1, offers more favorable terms than previous income-based repayment schemes. It reduces monthly payments for eligible borrowers and forgives remaining debt after 10 years for those with original balances of $12,000 or less. Despite these benefits, the plan has faced staunch opposition from Republican state attorneys general who argue that the cost to taxpayers could be as high as $475 billion over 10 years, far exceeding the administration's estimate of $156 billion.
The Biden administration has defended the SAVE Plan, emphasizing its potential to reduce financial strain on millions of borrowers. According to the White House, over 20 million borrowers could benefit from the plan, with 8 million already enrolled and 4.5 million having their monthly payments reduced to zero. As of Thursday, the Department of Education reported that $5.5 billion had been granted to 414,000 borrowers through the SAVE Plan.
Education Secretary Miguel Cardona condemned the court's ruling, stating, "Today's ruling from the 8th Circuit blocking President Biden's SAVE plan could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect." He criticized the lawsuits as politically motivated efforts by Republican officials to obstruct financial relief for borrowers.
In addition to the SAVE Plan, the Biden administration has been working to address long-standing issues with the PSLF program. Originally passed in 2007, the PSLF program provides debt relief for public servants such as teachers, nurses, and firefighters who make 120 qualifying monthly payments. The administration has adjusted some of the program's rules and retroactively credited many borrowers towards their required payments, aiming to alleviate the bureaucratic hurdles that have prevented many from receiving debt cancellation.
As the legal battles continue, borrowers enrolled in the SAVE Plan will be placed into interest-free forbearance while the case progresses through the courts. The Department of Education has stated that it will review the ruling and continue to defend the SAVE Plan vigorously.
