The Biden administration has warned that federal student loan forgiveness, repayment, and consolidation programs are facing major disruptions due to ongoing litigation. Nearly 20 Republican-led states filed lawsuits last spring to try to stop President Biden’s SAVE plan, a new income-driven repayment plan that reduces payments and offers loan forgiveness. More than eight million borrowers had enrolled in SAVE before the legal challenges began, but conflicting court orders have thrown the program into disarray.
The two lawsuits challenging SAVE are in the early stages of litigation, with federal courts in Kansas and Missouri issuing conflicting preliminary injunctions. The Kansas court blocked reduced payments under SAVE for undergraduate loans, while the Missouri court allowed the Education Department to implement the lower payments but blocked loan forgiveness. The Biden administration has appealed both rulings, securing a temporary victory at the 10th Circuit Court of Appeals, which stayed the Kansas court’s ruling. However, the Republican-led states have appealed to the Supreme Court to block lower student loan payments under the SAVE plan.
The Biden administration argues that the SAVE plan is legal and authorized under the Higher Education Act, warning that reversing the plan would cause massive disruptions to the entire student loan system. An order from the 8th Circuit Court of Appeals temporarily blocked the entire SAVE program, impacting millions of borrowers enrolled in SAVE and others applying for IDR plans and Direct loan consolidation. The Education Department placed borrowers in SAVE into an administrative forbearance to comply with the court order, further complicating the situation for borrowers.
The disruptions caused by the court orders are affecting borrowers pursuing loan forgiveness through PSLF, as they are unable to make progress while in administrative forbearance. The spillover effects of the legal battle are likely to continue, with ongoing appeals and uncertainty surrounding the future of the SAVE plan. Education Secretary Miguel Cardona criticized the politically motivated lawsuits and pledged to defend the SAVE plan in court. The Biden administration warns of significant and irreparable harm to student loan borrowers if the legal challenges continue to impede progress on repayment and forgiveness programs.
