2 federal courts just blocked student-loan forgiveness and cheaper monthly payments under Biden's new repayment plan

2 federal courts just blocked student-loan forgiveness and cheaper monthly payments under Biden's new repayment plan
  • Two federal judges in Kansas and Missouri blocked student-loan forgiveness and cheaper payments through the SAVE plan.

  • A range of SAVE provisions set to go into effect July 1 are now halted.

  • Borrowers can still remain on the SAVE plan as the legal process continues.

President Joe Biden's new student-loan repayment plan just got dealt two blows by federal courts.

On Monday, judges in Kansas and Missouri district courts handed down their rulings on two separate lawsuits filed by GOP state attorneys general seeking to block the SAVE income-driven repayment plan, introduced last summer to lower borrowers' monthly payments.

Earlier this year, the Education Department started implementing a SAVE provision ahead of schedule that canceled student debt for borrowers with original balances of $12,000 or less who made as few as 10 years of qualifying payments. The attorneys general argued that relief was unconstitutional, among other things, and requested that the relief — and the plan overall — be blocked.

The Missouri court ruled on one of the lawsuits led by Missouri Attorney General Andrew Bailey that the Education Department can no longer carry out student-loan forgiveness via SAVE as the legal process continues. The ruling still preserves borrowers' abilities to enroll and make payments through the plan.

"These borrowers have already made payments under the program, have already had those payments calculated under the early implementation of certain provisions of the Final Rule, and some borrowers anticipate imminent forgiveness," the ruling says. "These borrowers and the public have an interest in ensuring consistency in loan repayment programs, and any preliminary injunction would harm their expectations of such consistency."

The Department of Education didn't immediately respond to a request for comment from Business Insider.

The Kansas court meanwhile ruled that it would preserve actions the Education Department had already implemented through the SAVE plan but that it would halt the new provisions set to go into effect on July 1, including cutting payments for undergraduate borrowers in half.

Kansas' ruling is set to go into effect on June 30.

Both of the rulings are preliminary, and while student-loan forgiveness is blocked for the time being, courts have yet to hand down their final rulings.

Mike Pierce, the executive director of the advocacy group Student Borrower Protection Center, said in a statement that "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."

"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," he said.

Judge Daniel Crabtree, who delivered the Kansas ruling, was previously skeptical of the GOP attorneys general's case and ruled on June 7 that just three of the original eleven states had standing to challenge the plan.

Still, these two rulings are setbacks for borrowers who were hoping to benefit from the SAVE plan that the Education Department has been touting for the past year. While the department continues to carry out separate relief for borrowers through one-time account adjustments, its broader plan for debt cancellation — expected to benefit more than 30 million borrowers — is highly likely to encounter legal challenges this fall as well.

Kansas and Missouri's attorneys general celebrated the rulings. Kansas Attorney General Kris Kobach wrote on X: "Kansas's victory today is a victory for the entire country. As the court correctly held, whether to forgive billions of dollars of student debt is a major question that only Congress can answer. Biden's administration is attempting to usurp Congress's authority."

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