Breaking News: Federal Judges Partially Block Biden's Student Debt Plan

Author

Stanley Tate
June 24, 2024

Hey! We're reaching out with an important update on recent developments affecting student loan borrowers. On June 24, 2024, federal judges in Kansas and Missouri issued rulings that partially blocked key elements of President Biden's SAVE plan.

For those interested in reading the full court opinions:

I put all the critical information down below. But I know many of you are going to have a tough time sleeping tonight worried about what this means for you. So with that in mind, I'm hosting a free Live Zoom call tonight at 8:30pm EST to discuss these court rulings and how they impact you. A replay will be available. Join us to get your questions answered!

What's Been Blocked?

Two federal judges have issued preliminary injunctions that partially block the U.S. Department of Education from proceeding with aspects of the SAVE Plan:

  1. The Missouri ruling prevents any further loan forgiveness under the SAVE plan.

  2. The Kansas ruling blocks the implementation of any parts of the SAVE Plan set to take effect on July 1, 2024.

  3. Both rulings allow already-implemented parts of the SAVE Plan to remain in effect.

Both courts applied the Major Questions Doctrine, finding that:

  1. The SAVE Plan presents a 'major question' due to its vast economic and political significance.

  2. The Higher Education Act does not provide clear congressional authorization for the SAVE Plan as currently structured. This consensus between two federal courts strengthens the legal challenge to the SAVE Plan.

Impact on Current SAVE Plan Borrowers

  1. If you're already enrolled in the SAVE Plan, your current benefits and payment amounts should remain the same for now.

  2. But expected payment reductions and other benefits set to begin in July are now on hold.

  3. No more debt will be canceled under the SAVE plan while the litigation is ongoing, even if you've made the required number of payments.

Nationwide Effect

Both courts issued nationwide injunctions, meaning the Department of Education cannot implement the blocked aspects of the SAVE Plan in any state. This creates a uniform halt to the program across the entire United States.

Important Distinction: SAVE Plan vs. Other Forgiveness Programs

These rulings specifically affect the SAVE Plan. They do not impact other loan forgiveness programs, including:

  1. One-Time Account Adjustment

  2. Public Service Loan Forgiveness

  3. Borrower Defense to Repayment (e.g., Art Institutes, Sweet v. Cardona)

  4. Disability Discharges

These programs continue to operate as normal and are not affected by the recent court decisions.

SAVE Plan Progress to Date

  • Over 8 million borrowers are currently enrolled in the SAVE Plan.

  • 4.6 million of these enrollees have a $0 monthly payment.

  • The Department of Education has identified nearly half a million borrowers eligible for debt cancellation under SAVE, totaling nearly $5.5 billion.

These court decisions are part of an ongoing legal and political debate surrounding student debt relief. They come nearly a year after the Supreme Court blocked the Biden administration's broader plan to cancel up to $20,000 in student debt for many borrowers.

It's worth noting that income-driven repayment plans like SAVE are not new. Congress gave the Department of Education the authority to create such plans in 1993, with the first plan implemented in 1994. SAVE is the fourth plan based on this authority in recent years.

What's Next?

  1. The Biden administration is likely to appeal these rulings.

  2. The Department of Education may need to revise parts of the SAVE Plan to comply with the court orders.

  3. Congress may face pressure to provide explicit authorization for broader student loan reforms.

  4. The injunctions are set to take effect at 10:00 PM Central Daylight Time on June 30, 2024, allowing time for potential appeals.

  5. The cases will proceed to be fully litigated in court.

We'll continue to monitor this situation closely and provide updates as more information becomes available. If you have specific concerns about your student loans or how these rulings might affect you, we recommend reaching out to your loan servicer or a financial advisor.

Stay informed, and remember that your financial well-being is our priority.