A federal appeals court on Tuesday blocked the Biden administration’s $475 billion student loan relief plan known as SAVE. Judge L. Steven Grasz determined that Education Secretary Miguel Cardona exceeded his authority in creating the Saving on a Valuable Education (SAVE) income-driven repayment plan.
The 8th U.S. Circuit Court of Appeals sided with the seven Republican-led states that filed a lawsuit against the U.S. Department of Education’s SAVE plan.
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The seven GOP-led states – Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota and Ohio – had argued that former President Joe Biden lacked the authority to establish the student loan relief plan – and he essentially was trying to find a roundabout way to forgive student debt after the Supreme Court blocked his sweeping $430 billion debt cancellation plan in June 2023.
Following that ruling, Biden sought to continue providing student debt relief through cancellations for specific groups, such as those with permanent disabilities or those who attended schools that defrauded students, announcing by the time he left office $183.6 billion in student loan forgiveness for more than 5 million borrowers.
Related: Biden’s final student loan forgiveness? 150,000 borrowers get $4.2B in debt cancelled
The lawsuit argued the plan it illegal and exceeds the administration's authority by trying to use a Higher Education Act provision that allows for income-based loan repayment plans to adopt debt forgiveness and instead should be addressed through legislation in Congress.In addition, taxpayers should not be asked to subsidize the loan payments of those who have benefited from a higher education.
The Biden administration argued that its authority for loan forgiveness came from laws designed for veterans, but the court ruled it had overstepped its bounds. Judge Grasz’ opinion was joined by two fellow Republican-appointed judges, said the Biden administration had "gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid."
James Bergeron, who was recently named acting under secretary at the Education Department under Trump, said the ruling "affirmed what we've known all along: the Biden administration misled students into believing their debt would simply disappear, despite the law being clear that a taxpayer-funded bailout is blatant executive overreach."
The SAVE plan, which would have provided partial or full forgiveness to more than 27 million borrowers, was proposed last April after two previous student debt forgiveness plan had been blocked by courts.
“As with the previous attempts at loan forgiveness, the major questions doctrine informs our analysis,” Judge Grasz wrote. “We assume Congress would have provided clear signs if it authorized such significant power to the Secretary. It did not.”
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
