According to the White House, the president’s income-driven repayment could help more than 20 million borrowers.
According to a US appeals court order, President Joe Biden’s administration can proceed with executing a significant portion of a new student debt relief program that aims to reduce monthly payments for millions of Americans.
Republican-led states urged the 10th US Circuit Court of Appeals in Denver, Colorado, to put on hold an injunction issued by a judge in Kansas last week claiming the US Department of Education’s debt relief plan was unlawful.
The three-judge 10th circuit panel did not provide an explanation for its decision to issue the stay that the Democratic president’s administration had requested.
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The SAVE Plan offers more flexible terms than the previous income-based repayment plans, such as lowering monthly payments for eligible borrowers and granting debt forgiveness to those with original principal balances of $12,000 or less after ten years.
On June 24, Wichita, Kansas, US District Judge Daniel Crabtree concluded that the Higher Education Act of 1965 did not expressly authorize the type of “unprecedented and dramatic expansion” of income-based repayment plans that was envisioned.
State attorneys’ generals from South Carolina, Texas, and Alaska had challenged the plan. Crabtree limited the scope of his ruling to enjoining only aspects of the SAVE Plan that were not already in place.
The administration briefed the 10th Circuit that Crabtree’s decision was only “technically prospective” and that, in reality, complicated software would need to be reprogrammed by the Education Department and loan servicers to compute borrowers’ new monthly payments, create bill notices, and handle payments.
The US Department of Justice argued on behalf of the administration that this effort would take months. In the meantime, many borrowers enrolled in the SAVE Plan would need to be placed in forbearance until their loans could be serviced with an accurate assessment of payment due.
Last Monday, the Education Department announced that about 3 million borrowers who were eligible for SAVE would have their monthly payments reduced and put into forbearance. During that period, no interest would be charged to those borrowers.
According to the White House, more than 20 million borrowers could benefit from the SAVE Plan. According to the administration’s May report, 8 million people have already enrolled in the SAVE Plan, including 4.6 million whose monthly payments have been reduced to $0.
Although the administration requested a stay of Crabtree’s ruling, it did not request a corresponding pause of a different injunction issued by the federal judge in Missouri, which prohibited it from providing more loan forgiveness to SAVE Plan participants.
