Judges leave SAVE shutdown in place | The Arkansas Democrat-Gazette

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 became part of the heated political debate over who it is. responsible for the considerable tuition debt.

Biden introduced the program, Saving a Value Education, last fall as millions of Americans resumed student loan payments after a more than three-year hiatus due to the pandemic.

The plan, known as SAVE, offered lower monthly payments and a faster path to loan cancellation. It came months after justices split 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 compensated for more than 400,000 debtors.

But like his predecessor, it was quickly challenged by Republican state officials, who accused Biden of overstepping his legal authority and condemned any effort to use taxpayer money to help college graduates graduate. do the duty

Cost estimates of the new SAVE plan vary. Republican-led states that challenge the plan peg the cost at $475 billion over 10 years. The administration cites a Congressional Budget Office estimate of $276 billion.

Republican-led states filed two separate lawsuits to challenge SAVE.

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 is weighing the merits of a lawsuit filed 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. No dissents were observed.

The court said it expected the 8th Circuit to rule “with appropriate discretion.” 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 spokesman Angelo Fernández Hernández said the administration would continue to defend its plan: “We will not stop fighting elected Republicans’ efforts to raise the cost of student loan payments for millions of our own constituents.”

In a social media post, Missouri Attorney General Andrew Bailey, a Republican, called the court order “a huge victory for working Americans who won’t have to foot the bill to save the Biden-Harris Ivy League.”

Arkansas Attorney General Tim Griffin, a Republican, issued a statement after the announcement, saying, “No matter how many times or ways they try, the Biden-Harris administration cannot circumvent the law and unilaterally cancel student loans. For the federal government to take such action, Congress would have to vote.

“This is another win in the lawsuit we filed against Missouri Attorney General Andrew Bailey,” Griffin said.

Kristin McGuire, executive director of student advocacy group Young Invincibles, called the Supreme Court’s decision “a grave and unfair mistake.”

“Keeping the SAVE program on hold will only continue to exacerbate the confusion and uncertainty experienced by borrowers as they try to navigate repayment and decode the competing narratives about their student loans,” McGuire said in a statement. “Instead of providing guidance or a path to repayment, borrowers are once again left in limbo.”

Sheng Li, litigation counsel at the New Alliance for Civil Liberties, a legal group funded by conservative donors, applauded the order. “There was no basis for lifting the order because the Department of Education’s newest loan cancellation program is just as illegal as the one struck down by the Court a year ago,” he said in a statement.

LOAN FORGIVENESS PLANS

Biden’s pandemic-era loan forgiveness plan was based on the Higher Education Assistance for Students Act of 2003, which allows the secretary of education to waive or modify loan provisions in response to a national emergency. The Supreme Court ruled in 2023 that the government cannot use that authority to write off $430 billion in student loan principal.

SAVE, on the other hand, relies on the Higher Education Act, specifically a statute known as income-based reimbursement. It’s the latest in a suite of income-based loan repayment plans dating back to the 1990s.

The plans set borrowers’ monthly payments at a percentage of their income and promise to eventually forgive the balance of the debt. SAVE stands out from other plans because it shields more of a borrower’s earnings from calculating payments and offers a shorter path to forgiveness. Enrollees who borrowed $12,000 or less for college or graduate school can get loan forgiveness after a decade of payments instead of 20 or 25 years.

The plan also would not require borrowers to make payments if they earn less than 225 percent of the federal poverty line — $32,800 a year for a single person.

Challenging the program, states argued that Congress never envisioned such generous terms. The 8th Circuit agreed with this characterization of the statute and said the Department of Education cannot forgive any debt related to any of the income-based plans.

The broad order makes it difficult for borrowers to enroll in either plan and for loan servicers to process applications.

Education Secretary Miguel Cardona said the 8th Circuit ruling will force millions of borrowers to pay hundreds of dollars more each month. The ordinance, he said in a statement, “rejects a loan forgiveness practice that goes back 30 years.”

Cardona said the department will place all borrowers enrolled in SAVE into interest-free forbearance, delaying their payments while the Biden administration continues to defend the program.

“This is a recipe for chaos in the student loan system,” said Mike Pierce, executive director of the Student Borrower Protection Center, an advocacy group.

“No court has ruled on the merits here, but despite all of that, the debtors are left in this state of limbo where their rights don’t exist for them,” Pierce said.

Eight million people were already enrolled in the SAVE program when it was struck down by the lower court, and more than 10 million people are looking for ways to afford monthly payments, he said.

In challenging SAVE, Bailey said the Missouri Higher Education Loan Authority, a quasi-state agency that provides federal student loans and funds state scholarships, would lose revenue when the loans are written off.

In a separate case filed by Alaska, South Carolina and Texas, U.S. District Judge Daniel Crabtree of Kansas ruled in June against the student loan plan and issued an order blocking the government from recalculating and capping borrowers’ monthly payments at 5% of their discretionary income. .

But the U.S. Court of Appeals for the 10th Circuit stayed Crabtree’s order, allowing the Department of Education to move forward with reducing 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 essentially defies the high court’s 2023 student loan ruling.

“This current attempt to unilaterally cancel the debt is as illegal as the first,” the attorneys general said in their filing, adding that the Department of Education “cannot cancel hundreds of billions of dollars worth of student loans without clear authorization from Congress.”

Attorney General Elizabeth Prelogar, who is defending the program, told the justices that paving the way for Crabtree’s blanket order would create “intense confusion” for millions of borrowers if their payments had to be recalculated and new bills issued, in addition to the department’s cancellation of business.

After the 8th Circuit largely blocked the plan, the states involved in the 10th Circuit case told the Supreme Court it didn’t need to intervene immediately.

Information for this article was provided by Ann E. Marimow, Danielle Douglas-Gabriel, Tyler Pager and Justin Jouvenal of The Washington Post and writers for the Associated Press and Arkansas Democrat-Gazette.