Biden Administration Places SAVE Student Loan Repayment and Forgiveness Plan Enrolled Borrowers in Interest-free Forbearance After Appeals Court Blocks Program in Its Entirety
On July 18, U.S. Department of Education (ED) Secretary Miguel Cardona said ED will place all borrowers enrolled in the Saving on a Valuable Education (SAVE) plan in an interest-free forbearance while the Biden administration continues to defend the plan in court. The decision was prompted by a recent development in ongoing SAVE plan litigation.
In the latest development, the U.S. Court of Appeals for the 8th Circuit sided with Missouri Attorney General Andrew Bailey (R), who requested the Court stop the Biden administration from implementing SAVE amid its ongoing litigation. Missouri had already won a partial injunction from a lower court in June that blocked the U.S. Department of Education Department (ED) from forgiving any loans through the program. Not only did the 8th Circuit affirm the lower court’s injunction, it went further, issuing an injunction blocking the SAVE plan in its entirety.
On June 24, U.S. District Judge John A. Ross blocked
further loan forgiveness under the SAVE program, siding with Bailey in a lawsuit arguing financial losses from loan forgiveness. Judge Ross questioned whether Congress intended such broad authority for loan repayment plans as outlined in Biden’s program. It was this partial injunction that spurred the appeal to the 8th Circuit.
Meanwhile, another legal battle surrounding the SAVE plan continues. Earlier this month, South Carolina, Alaska and Texas urgently petitioned
the Supreme Court to block Biden’s student debt relief initiatives, filing an emergency application to halt the implementation of a plan aimed at reducing loan payments. The three states argue that the administration's actions under the SAVE plan exceed its authority and ignores prior judicial rulings. They contend that Biden's ED is attempting to cancel $475 billion in student debt unilaterally, bypassing both congressional approval and the Supreme Court's previous decisions.
In late June, U.S. District Judge Daniel D. Crabtree halted the implementation of a key component of the SAVE plan, which would have reduced payments for borrowers with undergraduate and graduate debt starting in July. Judge Crabtree ruled that the Biden administration did not sufficiently demonstrate that Congress authorized this specific repayment plan, which could cost approximately $230 billion over the next decade. The decision follows challenges from several states, with only Alaska, Texas, and South Carolina successfully arguing potential harm to their tax revenues.
After Judge Crabtree initially blocked reduced payments for borrowers under the SAVE program, the ED sought relief from the 10th Circuit Court of Appeals, which temporarily lifted the injunction. The temporary lifting of the injunction spurred the South Carolina, Alaska and Texas’ Supreme Court petition. The Supreme Court has not ruled on the petition.