Student-loan payments will be paused for 3 million borrowers after federal judges blocked debt cancellation and cheaper bills through Biden's new repayment plan

  • The Education Deparment is placing 3 million student-loan borrowers on administrative forbearance.

  • It's a result of recent court rulings that blocked key parts of the SAVE plan, including debt relief and lower bills.

  • The department will also be taking down online applications for income-driven repayment plans to avoid inaccurate information.

After federal courts blocked key parts of President Joe Biden's new repayment plan, the Education Department announced additional steps to help borrowers during this time.

On Monday, two separate rulings from federal judges in Kansas and Missouri placed preliminary injunctions on key provisions in the SAVE income-driven repayment plan. These included blocking a shorter timeline for student-loan forgiveness and new provisions set to go into effect on July 1, including lower monthly payments for undergraduate borrowers.

The Justice Department appealed both decisions and while courts have yet to make a final decision on the fate of the SAVE plan, relief is temporarily blocked. An Education Department spokesperson told Business Insider that as a result of the rulings, the department will place about 3 million borrowers with payment amounts greater than $0 on administrative forbearance, during which they will not owe any payments, and interest will not accrue.

Additionally, the department is taking down all online applications for income-driven repayment plans and loan consolidations to ensure borrowers do not receive inaccurate information during this time. These changes are expected to take about four to six weeks, and borrowers can continue to submit paper applications for income-driven repayment programs or SAVE, which servicers will continue to process.

"President Biden, Vice President Harris, and Secretary Cardona remain committed to fixing a broken student loan system and making college more affordable for more Americans," a department spokesperson said in a statement. "They will not stop vigorously defending the SAVE Plan, the most affordable repayment plan in history, and will continue to fight for this long-overdue relief, no matter how many times Republican elected officials and their allies try to stop them."

The department will directly communicate these changes to impacted borrowers in the coming days.

The lawsuits in question were filed earlier this year by a group of GOP state attorneys general who argued the relief through the SAVE plan was an overreach of Biden's authority and harmed their states' tax revenues.

Both judges ruled that elements of the SAVE plan that have already gone into effect can remain in place, but any forthcoming relief — like continued batches of borrowers qualifying for loan forgiveness — cannot be implemented as the legal process progresses.

Following the rulings, some advocates and Democratic lawmakers called on the Education Department to place impacted borrowers on forbearance or implement another form of relief, given the confusion that could result from the injunctions.

"This damning and harmful lawsuit will only throw struggling borrowers further into chaos, deny them the student debt cancellation they demand and deserve, and prevent them from purchasing homes, growing their families, and so much more," Rep. Ayanna Pressley said in a Tuesday statement.
"The Biden Administration must continue to take immediate action to ensure borrowers receive the student debt cancellation they were promised."

Read the original article on Business Insider