Federal courts block Biden’s SAVE student loan repayment plan for 8M borrowers

Two  federal judges, in Missouri and Kansas, on Monday halted parts of President Joe Biden’s new Saving on a Valuable Education (SAVE) student loan repayment plan, which was launched in 2023 and set to begin July 1.

The two court rulings, in response to lawsuits filed by state attorneys in Republican-led states, prohibit the Education Department from moving ahead with major provisions of the SAVE program, which was scheduled to take effect on July 1. Republicans have argued that the program far exceeds the administration’s legal authority and that President Biden was overstepping his executive action without approval from Congress.

In the Missouri ruling, District Judge John Ross of the Eastern District blocked the Education Department from carrying out “ any further loan forgiveness for borrowers” under the SAVE program until he decides the full case. He agreed that the program illegally deprives state loan operators of revenue. SAVE would harm Missouri, he said, because it would reduce the fees that the Education Department pays to the Missouri Higher Education Assistance Agency, the same entity at the center of the Supreme Court’s case over Biden’s first student debt relief program.

In the Kansas ruling, District Judge Daniel Crabtree blocked the Education Department from implementing a part of the SAVE program that would lower some borrower’s monthly payments. However, he declined to block the entirety of the program, citing concerns about unwinding the parts of the program that have already been implemented.

Under the plan, borrowers who originally took out $12,000 or less in loans and have been in repayment for 10 years are eligible to have their remaining student loan debt canceled. More than 8 million borrowers are enrolled in the SAVE plan, and the Education Department was ready to cancel $5.5 billion of debt for 414,000 borrowers.

Related: Student loan bailouts: 17 states file 2 lawsuits to block Biden’s SAVE plan

Although President Biden has forgiven student debt for millions of borrowers, including public sector workers and those defrauded by for-profit schools, over the last year, the SAVE program was his most ambitious plan, which he put in place after the Supreme Court struck down his $10,000 student loan forgiveness plan a year ago.

The SAVE plan is an income-driven repayment plan that would cut borrower’s monthly payments in half, and is was expected to face legal attacks as it relies on the Higher Education Act, which governs financial assistance.