Washington, D.C. — The U.S. Supreme Court has declined to reinstate the Biden administration's recent student loan forgiveness initiative, leaving millions of borrowers in uncertainty as the legal battle continues.
The court refused to lift an appeals court order that halted the implementation of the SAVE (Saving on a Valuable Education) plan. This decision comes as more than a dozen Republican-led states have legally contested the program. The justices issued an unsigned order emphasizing the need for the Court of Appeals to resolve the matter promptly. No dissenting opinions were noted.
As a result, the injunction from the U.S. Court of Appeals for the 8th Circuit remains in effect, preventing further actions under the SAVE plan. The Department of Education had already paused loan payments for participants due to the ongoing legal disputes.
President Biden's efforts to provide relief for student loan borrowers have encountered significant obstacles. Last year, the Supreme Court struck down an earlier plan that aimed to cancel nearly $500 billion in student debt for over 40 million Americans.
What is the SAVE Plan?
The SAVE plan, introduced by the Biden administration in July 2023, is an income-driven repayment program. It adjusts monthly payments based on the borrower's income, reducing them to 5% of discretionary income above 225% of the federal poverty line. This is an increase from the previous threshold of 150%. The plan also includes provisions for shorter repayment periods and quicker loan forgiveness for those with smaller loan balances. For example, a borrower with a balance of $12,000 or less could have their debt forgiven after 10 years of payments.
The administration asserted its authority to make these changes under the Higher Education Act. Out of the 8 million borrowers enrolled in the SAVE Plan, an estimated 4.5 million have had their monthly payments reduced to $0. The Department of Education estimates the plan will cost approximately $156 billion over the next decade. However, critics argue the cost could be as high as $475 billion, considering the earlier, broader loan forgiveness proposal that was invalidated by the Supreme Court.
Legal Battles and Supreme Court's Involvement
The SAVE plan has faced multiple legal challenges. In April, seven states filed a lawsuit in Missouri, arguing that the Secretary of Education exceeded his authority by shortening the repayment period for certain borrowers. A separate group of three states also filed a lawsuit in Kansas. While the Missouri case led to a sweeping injunction from the 8th Circuit, the 10th Circuit in Kansas allowed the plan to continue during legal proceedings, creating a legal conflict.
The Biden administration has criticized the broad scope of the 8th Circuit's ruling, arguing it unfairly granted relief to states that were denied by another appeals court. Solicitor General Elizabeth Prelogar highlighted the confusion and harm caused to borrowers due to the injunction, noting that many are facing recalculated payments and delayed loan forgiveness.
The seven states challenging the plan, led by Missouri, accused the Biden administration of overstepping its authority, arguing that the Higher Education Act mandates repayment and does not authorize loan forgiveness. They contended that the administration's actions effectively forgave loans for millions of borrowers without proper legal authorization.
President Biden, who campaigned on providing student debt relief, has introduced several initiatives aimed at easing the financial burden on the 43 million Americans with a combined $1.7 trillion in student debt. The Department of Education estimates that it has already forgiven $168 billion in student loans for more than 4.7 million borrowers.
