Washington — The Supreme Court on Wednesday declined to reinstate the Biden administration’s latest plan to cancel student debt for millions of borrowers, leaving them in limbo while the appeals process plays out.
The justices rejected a Justice Department request to lift an appeals court order blocking the program, known as the SAVE plan, which has faced legal challenges from more than a dozen Republican-led states in recent months. The court said in an unsigned order that it “expects the appeals court to issue its decision expeditiously.” There were no dissents.
His order keeps in effect for now the injunction from the U.S. Court of Appeals for the 8th Circuit. The Education Department suspended loan payments for borrowers enrolled in the program earlier this month because of the ongoing legal proceedings.
Mr. Biden’s attempts to provide relief to millions of Americans have not gone down well with the Supreme Court, which ruled last year cancelled an earlier plan This would have benefited more than 40 million Americans and would have wiped out nearly half a trillion dollars in loans.
Biden’s Plan to Cancel Student Loans
The last program is an income-based repayment plan in which monthly loan payments are based on the borrower’s income. Deployed The SAVE plan, enacted by the Biden administration in July 2023, lowers monthly undergraduate loan payments to 5% of a borrower’s discretionary income above 225% of the federal poverty level — up from 150% — and provides shorter repayment periods and earlier loan forgiveness for borrowers with lower original balances. A borrower who owes $12,000 or less, for example, would have their outstanding debt wiped out after making 10 years of payments.
The administration said it had the authority to make the changes under the Higher Education Act and estimated that of the 8 million borrowers enrolled in the SAVE plan, 4.5 million have monthly payments of $0. Some provisions of the plan went into effect in late July 2023, and others were implemented in January. Still others were scheduled to go into effect July 1.
The Education Department estimates that the SAVE plan will cost nearly $156 billion over a decade. But critics have argued that the real cost is $475 billion, because they said the Biden administration excluded from its analysis $430 billion in debt that it expected to be forgiven by the president’s broader loan forgiveness proposal. That plan, which built on the 2003 HEROES Act, was invalidated by the Supreme Court last year.
In April, several months after a rule detailing these changes was adopted, seven states filed a federal lawsuit in Missouri challenging its provisions and trying to block its implementation and enforcement. Another group of three states also filed a lawsuit against the SAVE plan in federal court in Kansas and sought its own emergency relief from the Supreme Court after a federal appeals court kept the plan in place for now.
In a brief, unsigned order, the court denied the states’ request to lift the appeals court’s stay, noting that the states said they did not need relief from the Supreme Court as long as the 8th Circuit’s order was in effect.
In the Missouri case, a federal district court first held that Missouri had the legal right to sue. It also determined that the state had a “good chance” of succeeding in its claim that the education secretary had exceeded his authority by shortening the repayment period for borrowers with original balances of $12,000 or less.
Although the court found that the states were unlikely to prevail on their remaining claims, it blocked any further loan forgiveness under the SAVE plan.
The Biden administration appealed but stopped short of canceling loans for borrowers who could have received relief under the shortened repayment period. A three-judge panel of the U.S. Court of Appeals for the 8th Circuit then issued a sweeping injunction blocking the SAVE plan and a preexisting provision for loan forgiveness after 20 or 25 years of repayment.
The 8th Circuit’s decision blocks implementation of the program for borrowers nationwide and conflicts with the order of the U.S. Court of Appeals for the 10th Circuit in the litigation involving the three other states, which kept the SAVE plan intact during the court proceedings.
The Biden administration criticized the scope of the 8th Circuit’s decision and said it effectively granted the trio of states in the other case — Alaska, South Carolina and Texas — relief they had been denied by the appeals court covering their region.
“This is not how the judicial process is supposed to work,” Solicitor General Elizabeth Prelogar told the justices in a filing.
In asking the Supreme Court to lift the 8th Circuit’s injunction, Prelogar argued that it “upends the status quo and inflicts grave harm on millions of Americans.”
She noted that over the past year, millions of borrowers have received and paid student loan bills that reflected some of the initiative’s provisions.
“However, because of the Eighth Circuit’s orders, many borrowers are now experiencing intense confusion when they are told that their payments must be recalculated and they are being placed in deferment — which will delay any potential loan forgiveness,” including under programs that have not been challenged by states, Prelogar said.
Borrowers, she continued, “would suffer additional harm if they ultimately receive higher bills and are informed that they can no longer count on the debt forgiveness they were promised at the end of their repayment period.”
But all seven states, led by Missouri, accused the Biden administration of making “flawed” arguments and omitting a “shocking amount of context.” Republican state leaders in Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma called the Justice Department’s request to lift the 8th Circuit’s order “aggressive.”
“From this banal term language that exists in many plans, the Secretary asserts his authority to cancel every penny of every student loan,” the GOP-led states wrote of the higher education law in a brief filed with the Supreme Court. “Indeed, under the final rule, nearly everyone gets cancellation.”
By citing the millions of borrowers who will have $0 monthly payments, states have argued that the Biden administration is effectively canceling their loans. Because the Higher Education Act requires repayment and does not allow cancellation, states have argued that the education secretary has gone too far.
Mr. Biden campaigned in the 2020 election on student debt relief and has deployed A number of initiatives aimed at easing a financial burden that affects about 43 million Americans, who have a combined $1.7 trillion in student debt.
The Education Department estimates it has canceled $168 billion in debt for more than 4.7 million Americans. It said one in 10 federal borrowers has received financial aid.
