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Judges block some of Biden's student loan repayment plan

Millions of student loan borrowers were set to have their monthly payments cut in half next month.
Joe Biden
Posted at 5:57 AM, Jun 25, 2024

A pair of separate court decisions will at least temporarily stop the Biden administration from enacting additional parts of the president's student loan repayment plan, which has reduced or eliminated monthly payments for millions of federal student loan borrowers.

The rulings now put the SAVE Plan enacted by President Joe Biden in limbo, as borrowers' payments once again face uncertainty.

What is the SAVE Plan?

The SAVE Plan was created by executive order in 2023 after the administration failed in its efforts to forgive up to $20,000 of federal student loan debt per borrower.

The SAVE Plan provides some borrowers with lower income-driven repayments, while others forgive borrowers' loans outright.

The White House said that student loan borrowers enrolled in the SAVE Plan who have made payments for at least 10 years and originally took out up to $12,000 are eligible to have their loans automatically forgiven.

Additionally, the White House said for every $1,000 borrowed above $12,000, a borrower can receive forgiveness after an additional year of payments. That means someone enrolled in the SAVE Plan with an original debt of up to $21,000 would have their loans forgiven by the time they reach 20 years of payments.

For many borrowers who didn't have their loans forgiven, they have had lower monthly payments.

When the Biden administration first enacted the SAVE Plan last year, borrowers with only undergraduate loans began repaying loans at 10% of their discretionary income. What is considered discretionary income increased from 150% to 225% of the federal poverty level under Biden's order.

On July 1, the amount borrowers were expected to pay back was set to drop 5% of their discretionary income, meaning payments would have been even lower.

What did the courts rule

In one court case handed down on Monday, a federal judge in Missouri sided with a group of Republican attorneys general who claimed the administration did not have authority to enact the SAVE Plan.

While the case is ongoing, the ruling stipulates that the Biden administration cannot carry out additional forgiveness under the SAVE Plan.

In a case out of Kansas, a judge temporarily blocked the Biden administration from further cutting student loan payments from 10% of a borrower's discretionary income to 5% on July 1.

Republicans have argued that forgiving student loans comes at a cost to those who didn't attend college.

“Once again, the Biden administration has decided to steal from the poor and give to the rich," said Kansas Attorney General Kris Kobach. "He is forcing people who did not go to college, or who worked their way through college, to pay for the loans of those who ran up exorbitant student debt. This coalition of Republican attorneys general will stand in the gap and stop Biden."

The White House said in a statement late Monday that it would defend the SAVE Plan.

"Since day one, the President and his Administration have fought to fix a broken student loan system and make sure borrowers aren’t saddled with unmanageable student loan debt," said White House press secretary Karine Jean-Pierre. "Part of that effort includes creating the most affordable student loan repayment plan ever – the SAVE Plan – which for months has allowed 8 million Americans access to lower monthly payments and has already helped hundreds of thousands of borrowers get their remaining debt canceled more quickly."

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