The 8th U.S. Circuit Court of Appeals recently blocked President Joe Biden’s student debt relief plan, leaving millions of borrowers in a state of uncertainty.
President Biden’s student debt relief plan, announced in 2022, aimed to fulfill a campaign promise by offering significant debt relief to millions of Americans. The plan included provisions to cancel up to $20,000 in federal student loan debt for eligible borrowers, particularly those earning under $125,000 annually and recipients of Pell Grants. The plan was part of a broader $430 billion initiative intended to alleviate the financial burden on borrowers and stimulate the economy.
The ruling came the same day that the Biden administration announced another round of student loan forgiveness, this time totaling $1.2 billion in forgiveness for roughly 35,000 borrowers who are eligible for the Public Service Loan Forgiveness program.
The Biden administration adjusted some of the PSLF rules and retroactively gave many borrowers credits towards their required payments.
According to a statement by Education Secretary Miguel Cardona on Thursday, “While the case works its way through the legal system, borrowers who are enrolled in the SAVE plan, which was the subject of Thursday’s ruling, will be placed into interest-free forbearance.”
“Today’s ruling from the 8th Circuit blocking President Biden’s SAVE plan could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect,” Cardona said in a statement. “It’s shameful that politically motivated lawsuits waged by Republican elected officials are once again standing in the way of lower payments for millions of borrowers.”
On Thursday, the 8th US Circuit Court of Appeals granted a request by seven Republican-led states to block the implementation of the remaining parts of the debt relief plan. This decision follows a previous ruling by U.S. District Judge John Ross in St. Louis, which had already halted certain aspects of the plan. The appeals court’s one-page order effectively pauses the administration’s efforts to reduce monthly payments for millions of borrowers.
How does this affect borrowers?
The immediate impact of the court’s decision is a halt in the benefits that were to be provided under the Saving on a Valuable Education (SAVE) Plan. This plan was designed to offer more generous terms than previous income-based repayment plans, potentially lowering monthly payments and forgiving debt for those with original principal balances of $12,000 or less after ten years of payments.
Borrowers who were counting on reduced monthly payments will now face continued financial strain. For many, the expectation of debt forgiveness after ten years of payments is now uncertain, leading to potential difficulties in managing their finances. Borrowers who are enrolled in the SAVE plan, which was the subject of Thursday’s ruling, will be placed into interest-free forbearance while the case works its way through the legal system, according to Education Secretary Miguel Cardona.
