Courts grant injunctions against Biden’s student loan repayment plan

The future of President Biden’s new student loan repayment plan is in doubt after a pair of federal judges issued separate injunctions Monday preventing the government from fully implementing and forgiving any more loans through the program while they consider lawsuits to end the policy.

The dual rulings leave myriad questions about whether borrowers can still enroll in the plan or receive promised loan cancellation. Millions of Americans could be affected.

In Kansas, U.S. District Judge Daniel D. Crabtree blocked the Biden administration from launching the final component of the Saving on a Valuable Education program, commonly known as Save. Borrowers with undergraduate debt were set to see their payments cut in half in July — from 10% to 5% of income above 225% of the federal poverty line. Borrowers who also have graduate loans would have had their payments lowered by the weighted average between 5% and 10%.

That feature of the plan, which launched in October, will be shelved while a lawsuit is litigated.

Crabtree, who was appointed by President Barack Obama, wrote that the Education Department failed to clearly show that Congress authorized the repayment plan created by the Biden administration in 2023. He said the economic impact of the program, which the Congressional Budget Office estimates will cost some $230 billion over the next decade, would require congressional input.

The ruling arrives weeks after Crabtree said eight of the 11 states challenging the repayment plan failed to adequately show how they would be harmed by the policy. He concluded that only Alaska, Texas and South Carolina made a strong enough case that the plan’s debt-relief component could harm their tax revenue and dismissed the arguments made by Kansas, Idaho, Alabama, Louisiana, Montana, Utah, Nebraska and Idaho.

The coalition of 11 Republican-led states, headed by Kansas Attorney General Kris Kobach, alleged in their lawsuit that the president overstepped his authority in creating the repayment program — claims that mirror the case that last year toppled Biden’s initial effort to forgive up to $20,000 in federal student loans. The states say Biden’s new repayment plan is an attempt to sidestep a Supreme Court ruling that struck down his debt forgiveness program.

In the separate ruling in Missouri, U.S. District Judge John A. Ross enjoined the Education Department from forgiving any more loans through the Save plan. The decision is a win for Missouri Attorney General Andrew Bailey, who led a group of six states in filing a lawsuit in April seeking to overturn the program.

Bailey argued that the Missouri Higher Education Loan Authority, a quasi-state agency that services federal student loans and funds state scholarships, loses revenue from servicing direct loans — those made and owned by the federal government — when the loans are wiped away. The argument mirrors the claims in the lawsuit that brought down Biden’s debt relief plan and proved strong enough to advance this lawsuit and bolster the case for halting further debt relief under the program.

Ross, another Obama appointee, also questioned whether Congress envisioned a loan repayment plan as far-reaching as what the Biden administration created in 2023, signaling that the Save plan could be in jeopardy of being overturned.

On the social media platform X, Bailey called Ross’s ruling “a huge win for the constitution.”

“Congress never gave Biden the authority to saddle working Americans with half-a-trillion dollars in other people’s debt,” Bailey wrote.

The Education Department did not respond to a request for comment Monday evening.

The Save plan provides lower monthly payments for millions of borrowers and a faster path to cancellation. It has already wiped clear the balances of 414,000 enrollees, who originally borrowed less than $12,000 and had been paying for at least 10 years. More than 8 million people are enrolled in the repayment plan, which ties monthly payments to earnings and family size.

The program is an amended version of an existing repayment plan known as Revised Pay as You Earn, or Repaye. All income-driven plans promise to forgive a borrower’s balance after 20 or 25 years of payments, but the Save plan shortens the timeline for people who took out small loans.

“Today two different gangs of right-wing attorneys general got exactly what they were looking for from federal judges in Kansas and Missouri: a recipe for chaos across the student loan system,” said Mike Pierce, executive director of the Student Borrower Protection Center, an advocacy group. “Millions of borrowers are now in limbo as they struggle to make sense of their rights under the law and the information being provided by the government and their student loan companies.”

The Save plan was created using authority from the Higher Education Act that spawned income-driven repayment plans in 1993. The states in the Kansas case have argued that the law does not permit debt relief for anyone other than people who are permanently disabled, defrauded by their college, working in public service or bankrupt. They say that Save’s loan forgiveness component would deprive them of revenue by decreasing the amount of outstanding student loan debt.

Attorneys for the Biden administration say that argument is far too speculative to have merit. The Education Department has pointed out that Save represents the fourth time the Education Department has used the 1993 authority to expand income-driven options, giving the program solid legal footing.