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A federal appeals court is once again preventing the Education Department from carrying out parts of its new income-driven repayment plan, which lowers payments for low-income borrowers and provides quicker pathways to loan forgiveness.
The injunction, handed down Friday, will remain in effect “until further order of this court or the Supreme Court of the United States,” per the ruling. The order replaces an administrative stay issued last month as part of a lawsuit from seven Republican-led states challenging the plan known as Saving on a Valuable Education, or SAVE. The Biden administration is intending to fight the order.
The states argued that SAVE exceeds the Education Department’s authority and amounts to just another version of the broad-based debt-relief plan that the Supreme Court struck down last summer.
The three-judge panel from the U.S. Court of Appeals for the Eighth Circuit wrote in the 12-page opinion that previous iterations of income-based repayment plans, which were authorized by Congress in 1992, “were relatively uncontroversial.”
“The new SAVE plan, by contrast, is an order of magnitude broader than anything that has come before,” the judges wrote. They enjoined the department from forgiving any loans or interest for borrowers enrolled in SAVE. The department also can’t waive accrued interest or further carry out provisions to lower payments.
Under SAVE, the department has already forgiven $5.5 billion for 414,000 borrowers. The judges wrote that the states “cannot turn back the clock on any loans that have already been forgiven.”
Millions of borrowers have signed up for SAVE since the department rolled out the plan last summer. After the administrative stay, the Education Department placed all borrowers enrolled in SAVE in an interest-free forbearance, which essentially pauses their payments. They will remain in that forbearance following the court order, Education Secretary Miguel Cardona said in a statement Friday.
“The administration strongly disagrees with the Eighth Circuit’s decision blocking the Biden Administration’s SAVE plan,” Cardona said. “If allowed to stand, this ruling would force millions of borrowers to pay hundreds of dollars more each month. And the decision’s reasoning could/would also deny loan forgiveness to individuals who were expecting it after up to 25 years of faithful repayments. The ruling rejects a practice of providing loan forgiveness that goes back 30 years.”
