The Supreme Court’s Decision on Biden’s Student Debt Forgiveness Plan
In a recent ruling, the Supreme Court declined to reinstate the Biden administration’s latest plan to cancel student debt for millions of borrowers. This decision has left many borrowers in limbo as the appeals process continues to unfold.
The Justice Department had requested the Supreme Court to lift a sweeping appeals court order that had blocked the program, known as the SAVE plan. This program has faced legal challenges from more than a dozen GOP-led states in recent months. The Supreme Court, in an unsigned order, stated that it expects the Court of Appeals to render its decision promptly. There were no noted dissents in this decision.
As a result of the Supreme Court’s order, the injunction from the U.S. Court of Appeals for the 8th Circuit remains in place for now. The Education Department had paused loan payments for borrowers enrolled in the program earlier this month due to the ongoing legal proceedings.
This is not the first time President Biden’s attempts to provide relief to student loan borrowers have faced challenges in the Supreme Court. Last year, the Supreme Court struck down an earlier plan that would have benefited more than 40 million Americans and forgiven nearly half a trillion dollars in student loans.
The latest program, known as the SAVE plan, is an income-driven repayment plan where monthly payments are based on the borrower’s income. Rolled out by the Biden administration in July 2023, the SAVE plan lowers monthly undergraduate loan payments to 5% of a borrower’s discretionary income above 225% of the federal poverty line. It also provides for shorter repayment periods and earlier loan forgiveness for borrowers with smaller starting balances. For example, a borrower who owed $12,000 or less would have their debt wiped away after making 10 years of payments.
The Biden administration argued that it had the authority to make these changes under the Higher Education Act. They estimated that out of the 8 million borrowers enrolled in the SAVE Plan, 4.5 million have monthly payments of $0. The Education Department estimates that the SAVE plan will cost nearly $156 billion over a decade. However, critics argue that the actual cost is closer to $475 billion, as the administration did not account for $430 billion in debt expected to be forgiven by the president’s earlier, broader loan forgiveness proposal.
Several states filed lawsuits challenging the provisions of the SAVE plan, seeking to block its implementation and enforcement. The Supreme Court rejected the states’ request to lift the appeals court’s stay, noting that the states stated they did not require relief from the Supreme Court as long as the 8th Circuit’s order remained in place.
In the ongoing legal battle, a federal district court found that Missouri had the legal standing to sue and that the state had a fair chance of succeeding on its claim that the secretary of education exceeded his authority by shortening the repayment period for borrowers with original balances of $12,000 or less. While the court found that the states were unlikely to succeed on their remaining claims, it blocked any new loan forgiveness under the SAVE plan.
The Biden administration appealed this decision but stopped canceling loans for borrowers eligible for relief through the shortened repayment period. A three-judge panel for the U.S. Court of Appeals for the 8th Circuit issued a sweeping injunction blocking the SAVE plan and a provision of forgiveness after 20 or 25 years of repayment.
The 8th Circuit’s decision blocks the program’s implementation nationwide and conflicts with the U.S. Court of Appeals for the 10th Circuit, which kept the SAVE plan intact during legal proceedings. The Biden administration has criticized the reach of the 8th Circuit’s ruling, arguing that it granted relief to certain states that were denied by the appeals court covering their region.
The Supreme Court was asked to lift the 8th Circuit’s injunction, with the Solicitor General arguing that it was causing harm to millions of Americans and creating confusion around loan payments. The seven states, led by Missouri, accused the Biden administration of making flawed arguments and omitting crucial context in their request to lift the injunction.
President Biden campaigned on providing student debt relief and has rolled out several initiatives aimed at easing the financial burden of student loan debt, which affects roughly 43 million Americans. The Department of Education estimates that it has forgiven $168 billion in debt for more than 4.7 million Americans, providing relief to one in ten federal borrowers.
In conclusion, the Supreme Court’s decision on Biden’s student debt forgiveness plan has left many borrowers in uncertainty as the legal battle continues. The conflicting rulings from different circuit courts highlight the complexity and challenges of implementing such a program at a national level. The future of student debt forgiveness remains uncertain, as borrowers and policymakers await further developments in this ongoing legal saga.
