US judges block parts of Biden's student loan relief plan

[June 25, 2024]  By Nate Raymond

(Reuters) -Two federal judges in Kansas and Missouri on Monday at the urging of several Republican-led states blocked President Joe Biden's administration from further implementing a new student debt relief plan that lowers payments.

U.S. District Judge Daniel Crabtree in Wichita, Kansas, blocked the U.S. Department of Education from implementing parts of a student loan repayment plan not already in effect that cuts borrowers' monthly payments and provides a faster path to have debts forgiven.

He ruled shortly before U.S. District Judge John Ross in St. Louis, Missouri, issued a preliminary injunction barring the department from granting further loan forgiveness under the administration's Saving on a Valuable Education (SAVE) Plan.

The SAVE plan provides more generous terms than past income-based repayment plans, lowering monthly payments for eligible borrowers and allowing those whose original principal balances were $12,000 or less to have their debt forgiven after 10 years.

Missouri Attorney General Andrew Bailey, a Republican who helped lead the litigation, hailed Ross' decision. "Congress never gave Biden the authority to saddle working Americans with half-a-trillion dollars in other people's debt," he wrote on social media platform X.

The White House said it strongly disagreed with the rulings and criticized Republican elected officials who have fought against student debt forgiveness.

"Today's rulings won't stop our administration from using every tool available to give students and borrowers the relief they need," White House Press Secretary Karine Jean-Pierre said in a statement.

Biden, a Democrat, announced the SAVE Plan in 2022, alongside a broader $430 billion program that would have fulfilled a campaign promise by cancelling up to $20,000 in debt for up to 43 million Americans. It was ultimately blocked by the conservative- majority U.S. Supreme Court in June 2023.

The SAVE Plan was slated to fully take effect on July 1, though parts of it already been implemented, with 414,000 borrowers by mid-May having been granted $5.5 billion in debt relief, according to the Education Department.

A sign calling for student loan debt relief is seen in front of the Supreme Court as the justices are scheduled to hear oral arguments in two cases involving President Joe Biden's bid to reinstate his plan to cancel billions of dollars in student debt in Washington, U.S., February 28, 2023. REUTERS/Nathan Howard/File Photo

The White House has said that over 20 million borrowers could benefit from the SAVE Plan. The administration in May said that 8 million are already enrolled, including 4.6 million whose monthly payments have been reduced to $0.

Eleven states challenged the plan in a lawsuit in Kansas. Crabtree had recently dismissed eight of the states' claims, but allowed South Carolina, Texas and Alaska to push forward. Seven other states sued in Missouri.

Neither judge on Monday ordered any debt relief already granted unwound. Crabtree said the Republican-led states waited too long to sue to claim they were being irreparably harmed by the in-effect aspects of the SAVE Plan.

But Crabtree, who like Ross was appointed by Democratic former President Barack Obama, said the Higher Education Act of 1965 did not clearly authorize the type of "unprecedented and dramatic expansion" of income-based repayment plans envisioned.

He cited an estimate by lawyers for the Republican-led states of South Carolina, Texas and Alaska that the SAVE Plan would carry a price tag of $475 billion over 10 years.

Ross, ruling in favor of seven states led by Missouri, reached a similar conclusion in finding the department "overstepped its authority by promulgating a loan forgiveness provision as part of the SAVE program."

(Reporting by Nate Raymond in Boston; Editing by Leslie Adler and David Gregorio and Miral Fahmy)

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