Supreme Court refuses to allow Biden's student loan repayment plan—for now
President Joe Biden speaks at Culver City Julian Dixon Library in Culver City, Calif., Wednesday, Feb. 21, 2024. (AP Photo/Manuel Balce Ceneta)
The Supreme Court on Wednesday refused to immediately clear the way for the Biden administration’s new student loan relief and repayment plan, adding to uncertainty about the future of a program that would affect millions of borrowers and has become part of the sharp political debate over who is responsible for hefty tuition debt.
Biden introduced the program, Saving on a Valuable Education, last fall as millions of Americans resumed student loan payments after a hiatus of more than three years because of the pandemic.
The plan, commonly known as Save, offered lower monthly payments and a faster path to loan cancellation. It launched months after the justices divided along ideological lines to invalidate a separate, $400 billion Biden administration program to forgive student loan debt.
More than 8 million people are enrolled in the new program, with debts already cleared for more than 400,000 borrowers.
But like its predecessor, it was quickly challenged by Republican state officials, who accused Biden of exceeding his legal authority and decried any effort to use taxpayer money to help college graduates with their debt. The Congressional Budget Office estimates Save will cost some $230 billion over the next decade, but the Biden administration says the figure is closer to $156 billion.
Republican-led states filed two separate lawsuits to challenge Save.
The justices on Wednesday left in place a sweeping order from the U.S. Court of Appeals for the 8th Circuit that halts the program—and affects several older student-loan-forgiveness programs—while that court weighs the merits of one suit, brought by Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma.
As is typical in such orders, the justices did not include an explanation for their action. There were no noted dissents.
The court said it expects the 8th Circuit will render its decision “with appropriate dispatch.” If the appeals court rules quickly, the case could then be appealed to the Supreme Court this fall, putting the issue of student loan debt back before the justices amid a competitive presidential campaign between Vice President Kamala Harris and former president Donald Trump.
White House spokesperson Angelo Fernández Hernández said the administration would continue to defend its plan: “We won’t stop fighting against Republican elected officials’ efforts to raise costs on millions of their own constituents’ student loan payments.”
In a social media post, Missouri Attorney General Andrew Bailey (R) called the court’s order “a HUGE victory for the working Americans who won’t have to foot the bill for the Biden-Harris Ivy League bailout.”
Kristin McGuire, executive director at the student advocacy group Young Invincibles, called the Supreme Court’s decision “a grave and unjust mistake.”
“Keeping the SAVE program on hold will only continue to exacerbate the confusion and uncertainty felt by borrowers as they try to navigate repayment and decode competing narratives about their student loans,” McGuire said in a statement. “Rather than providing guidance or a pathway to repayment, borrowers are left in limbo, again.”
Biden’s pandemic-era loan forgiveness plan was based on the Higher Education Relief Opportunities for Students Act of 2003, which allows the education secretary to waive or modify loan provisions in response to a national emergency. The Supreme Court ruled in 2023 that the government could not use that authority to cancel $430 billion of student loan principal.
Save, in contrast, relies on the Higher Education Act, specifically a statute known as income-contingent repayment. It is the newest of a suite of income-driven loan-repayment plans that date back to the 1990s.
The plans peg borrowers’ monthly payments to a percentage of their income and promise to eventually forgive the balance of the debt. Save stands out from the other plans because it shields more of a borrower’s earnings from the calculation of payments and offers a shorter path to forgiveness. Enrollees who borrowed $12,000 or less for college or graduate school can achieve loan forgiveness after a decade of payments, instead of for 20 or 25 years.
In challenging the program, states have argued that Congress never envisioned such generous terms. The 8th Circuit agreed with that characterization of the statute and said the Education Department could not forgive any debt connected with any of the income-driven plans.
The broad order is making it difficult for borrowers to enroll in any of the plans and for loan servicers to process applications.
Education Secretary Miguel Cardona said the 8th Circuit’s ruling would force millions of borrowers to pay hundreds of dollars more each month. The injunction, he said in a statement, “rejects a practice of providing loan forgiveness that goes back 30 years.”
Cardona said the department would place all borrowers enrolled in Save in an interest-free forbearance, postponing their payments while the Biden administration continues to defend the program.
In challenging Save, Bailey said the Missouri Higher Education Loan Authority, a quasi-state agency that services federal student loans and funds state scholarships, would lose revenue when the loans are canceled.
In a separate case filed by Alaska, South Carolina and Texas, U.S. District Judge Daniel D. Crabtree of Kansas ruled in June against the student loan plan and issued an order blocking the government from recalculating and capping monthly payments for borrowers at 5 percent of their discretionary income.
But the U.S. Court of Appeals for the 10th Circuit put Crabtree’s order on hold, allowing the Education Department to move forward with cutting monthly bills. The attorneys general of those three states then asked the Supreme Court to reinstate the order while litigation continues and said Biden’s latest plan is essentially defying the high court’s 2023 student loan ruling.
“This current attempt to unilaterally cancel debt is every bit as unlawful as the first,” the attorneys general told the court in their filing, adding that the Education Department “cannot cancel hundreds of billions of dollars’ worth of student loans without clear authorization from Congress.”
Solicitor General Elizabeth B. Prelogar, who is defending the program, told the justices that clearing the way for Crabtree’s sweeping order would create “intense confusion” for millions of borrowers if their payments must be recalculated and new bills issued, in addition to upending the work of the department.
After the 8th Circuit broadly blocked the plan, the states involved in the 10th Circuit case told the Supreme Court it did not need to immediately intervene.
Tyler Pager and Justin Jouvenal contributed to this report.
