A federal appeals court has blocked the implementation of the Biden administration’s year-old student debt relief plan, which would have lowered monthly payments for millions of borrowers.
The Thursday ruling impacts the Saving on a Valuable Education, or SAVE, plan, which currently has about 8 million enrollees. The 8th Circuit Court of Appeals granted a motion for an administrative stay filed by a group of Republican-led states seeking to invalidate the administration’s entire student loan forgiveness program.
The court’s order prohibits the administration from implementing the parts of the SAVE plan that were not already blocked by lower court rulings.
The SAVE plan was created a year ago by the Biden administration to address long-standing issues with the Department of Education’s previous income-driven repayment plans, or IDRs. These plans calculate a borrower’s repayments on a percentage of their disposable income, which can potentially shave down their monthly obligation.
But several Republican-led states had challenged the SAVE plan, arguing that it oversteps the Biden administration’s authority. They also claimed it could lead to financial harm due to lost revenue because it offers loan forgiveness in fewer years than earlier plans.
Last month, two courts blocked parts of the SAVE plan, raising questions about its implementation. But those injunctions did not affect debt that had already been forgiven.
However, Thursday’s order from the 8th circuit blocks all aspects of the SAVE plan.
In an email to CBS MoneyWatch, the Department of Education said it plans to “continue to aggressively defend the SAVE Plan.”
“We are assessing the impacts of this ruling and will be in touch directly with borrowers with any impacts that affect them,” a spokesperson said.
The ruling comes 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 (PSLF) program.
The PSLF program, which was created in 2007 and is distinct from the SAVE plan, is focused on providing debt forgiveness for teachers, nurses, firefighters and other public servants who make 120 qualifying monthly payments.
But for years, borrowers ran into strict rules and servicer errors that prevented them from having their debt cancelled. The Biden administration adjusted some of the programs rules and retroactively gave many borrowers credits towards their required payments.