A federal appeals court has blocked President Biden's Saving on Valuable Education (SAVE) plan, which aimed to lower monthly payments for millions of student loan borrowers. The ruling pauses payments for eight million borrowers while the administration defends the plan in court, creating uncertainty for those relying on the relief measures.
Key Takeaways
The 8th Circuit Court of Appeals blocked the SAVE plan, pausing payments for eight million borrowers.
The ruling affects provisions that would lower monthly payments and shorten the timeline to debt cancellation.
The Biden administration vows to continue defending the plan in court.
Background
The SAVE plan, introduced by President Biden, was designed to provide more generous terms for student loan borrowers. It aimed to lower monthly payments based on household income and size, and to forgive debt for those with original principal balances of $12,000 or less after ten years. The plan was set to fully take effect on July 1, 2024, but parts of it had already been implemented.
Legal Challenges
The 8th Circuit Court of Appeals granted a motion for an administrative stay filed by Republican-led states, blocking the SAVE plan in its entirety. This ruling follows earlier legal challenges, including separate rulings from federal judges in Kansas and Missouri that had already blocked parts of the plan. The Biden administration has announced that borrowers enrolled in the SAVE plan will be placed in interest-free forbearance while the case proceeds through the legal system.
Impact on Borrowers
The ruling has significant implications for the eight million borrowers enrolled in the SAVE plan. These borrowers will not have to make payments during the forbearance period, but this time will not count toward forgiveness progress on Public Service Loan Forgiveness or income-driven repayment plans. The Education Department has stated that it will provide regular updates to affected borrowers.
Political Reactions
The ruling has sparked a range of reactions. Missouri Attorney General Andrew Bailey hailed the decision as a victory for Americans who believe in paying their own way, arguing that the plan would have saddled working Americans with half-a-trillion dollars in debt. On the other hand, Education Secretary Miguel Cardona criticized the ruling, calling it a politically motivated lawsuit that stands in the way of lower payments for millions of borrowers.
Future Steps
The Biden administration has vowed to continue defending the SAVE plan in court. Alongside the SAVE plan, the Education Department plans to finalize a broader student-loan forgiveness plan in October, which is expected to benefit more than 30 million borrowers. The administration remains committed to providing relief to student loan borrowers despite the legal setbacks.
Sources
Millions of student loan payments paused after court halts Biden's plan, The Hill.
8 million student-loan borrowers on Biden's new repayment plan don't have to make payments after a federal court blocked the program in full, Business Insider.
Federal appeals court blocks remainder of Biden's student debt relief plan | AP News, AP News.
US appeals court blocks all of Biden student debt relief plan | Reuters, Reuters.
Federal appeals court blocks all of Biden's student loan debt handout plan | Fox Business, Fox Business.
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