Federal Judges Block Biden Administration’s Student Loan Repayment Plan

Two federal judges in Kansas and Missouri temporarily blocked pieces of the Biden administration’s new student loan repayment plan on Monday in rulings that will have implications for millions of federal borrowers. Borrowers enrolled in the income-driven repayment plan, known as SAVE, are expected to continue to make payments.

Temporary Halt of Payment Reduction for Borrowers

Those with undergraduate debt will no longer see their payments cut in half starting on July 1, a huge disappointment for borrowers who may have been counting on that relief. The separate preliminary injunctions on Monday are tied to lawsuits filed this year by two groups of Republican-led states seeking to upend the SAVE program, a centerpiece of President Biden’s agenda to provide relief to student borrowers.

Legal Challenges and Impacts on Borrowers

Many of the program’s challengers are the same ones that filed suit against Mr. Biden’s $400 million debt-cancellation plan, which the Supreme Court struck down last June. The legal battles have created uncertainty for borrowers, leaving them in a challenging situation amid rising costs and financial struggles.

Quote from Abby Shafroth, co-director of advocacy at the National Consumer Law Center: “All of this is an absolute mess for borrowers, and it’s pretty shocking that state public officials asked the courts to prevent the Biden administration from offering more affordable loan payments to their residents at a time when so many Americans are struggling with high prices.”

The SAVE program, which has enrolled eight million borrowers since it opened in August, isn’t a new idea. It’s based on a roughly 30-year-old design that ties monthly payments to a borrower’s income and household size. But SAVE has more generous terms than previous plans and a heftier price tag. More than four million borrowers qualify for a $0 monthly payment.