Pair of District Court Rulings, Issued Minutes Apart, Throw Student Loan System into Chaos by Temporarily Blocking Major Sections of President Biden’s Income-Driven Repayment Plan
June 24, 2024 | WASHINGTON, D.C. — In nearly identically timed releases, federal judges in Kansas and Missouri issued a pair of injunctions blocking portions of the new Saving on a Valuable Education repayment plan (the SAVE plan). This new income-driven repayment plan has been available to borrowers since August 2023 and has already lowered monthly payments for millions of people and cancelled debts in full for hundreds of thousands.
In Kansas, a federal judge issued a preliminary injunction temporarily blocking the U.S. Department of Education from cutting student loan payments in half for more than 8 million people, effective July 1st. In Missouri, a different federal judge issued a preliminary injunction preventing the Department of Education from cancelling debts in full for any borrowers under this new plan. Together, this pair of injunctions leaves millions of borrowers in limbo as the student loan system continues to sputter back to life after a three and a half year pause on loan payments, interest, and debt collection expired in September.
In response, SBPC Executive Director Mike Pierce released the following statement:
“Today two different gangs of right-wing Attorneys General got exactly what they were looking for from federal judges in Kansas and Missouri: a recipe for chaos across the student loan system. Millions of borrowers are now in limbo as they struggle to make sense of their rights under the law and the information being provided by the government and their student loan companies. Are borrowers’ bills accurate? Are interest charges correct? Will the amount due today be the same due tomorrow? Will borrowers promised cancellation still receive critical relief? These basic, essential questions have no answers.
“Thanks to the precedents set by Donald Trump’s hand-picked Supreme Court majority, judges in two separate courts have issued overlapping injunctions that may render the largest portfolio of consumer credit in the world uncollectible. Secretary Cardona must look past this partisan lawfare and protect borrowers—that means shutting the student loan system down until borrowers have access to the rights they were promised under the law.”
In response, SBPC Deputy Executive Director Persis Yu released the following statement:
“Today’s shocking decision has halted critical access to President Biden’s most affordable repayment plan and denied critical relief to borrowers struggling in repayment for more than a decade. The goal of this lawsuit is to keep more borrowers in debt longer, and make it harder for millions of student loan borrowers to feed their families and keep a roof over their heads. The leaders of these states have served the business interests of a few nearly defunct lenders at the expense of millions of borrowers’ financial security. Make no mistake, this lawsuit is a shameful political maneuver designed to hurt President Biden at all costs, and borrowers are merely collateral damage. Unfortunately, today, the special interests prevailed, imperiling the financial security of millions and throwing the student loan system into an untenable chaos.”
Earlier this month, the same federal judge in Kansas dismissed claims by eight of the 11 states suing to block the SAVE plan for a lack of standing. The remaining states had standing due to alleged harm to the state related Federal Family Education Loan Program lenders, who claimed that they would be harmed as a result of borrowers consolidating their loans in order to take advantage of SAVE’s more preferential terms and repayment options.
A copy of the order in Missouri, captioned Missouri et. al. v. Biden, temporarily blocking further debt cancellation via SAVE is available here:
https://storage.courtlistener.com/recap/gov.uscourts.moed.211135/gov.uscourts.moed.211135.35.0.pdf
A copy of the order in Kansas, captioned Alaska et. al. v the U.S. Department of Education, is available here:
https://storage.courtlistener.com/recap/gov.uscourts.ksd.151881/gov.uscourts.ksd.151881.76.0.pdf
Background
On March 28, 2024, a coalition of 11 states led by Kansas Attorney General Kris Kobach sued in federal court to stop the SAVE plan. On April 9, 2024, a similar lawsuit was filed by another coalition of seven states led by the Missouri Attorney General. These collective states represent about one quarter of the borrowers who have already enrolled in the plan, with more than 2.5 million enrolled residents, but seek to invalidate the SAVE plan for the entire country.
About the SAVE plan
The SAVE plan is one of several options for repaying federal student loans. It sets borrowers’ monthly payments based on their income, resulting in low or even $0 payments for low-income borrowers. Most borrowers’ monthly payments will be halved under SAVE. Of the more than 8 million borrowers who have enrolled, 4.6 million have a $0 monthly payment. Additionally, after 20 or 25 years, borrowers enrolled in SAVE can have their remaining balance cancelled. For borrowers who initially borrowed up to $12,000, their remaining balance will be cancelled after 10 years.
The U.S. Department of Education has already identified nearly half a million borrowers who are eligible to have their debts cancelled under SAVE, totaling nearly $5.5 billion in cancelled debt that will be put back into local economies, used to start businesses or buy homes, or just help hardworking families cover their basic needs.
The SAVE plan is not a novel use of executive power. Congress gave the Department of Education the authority to make income-driven repayment plans in 1993 and the first income-driven plan was created in 1994. The SAVE plan is the fourth plan based on this authority in recent years and has been available since August 2023.
Further Reading
SBPC blog explaining the lawsuits by eighteen states to block SAVE: The Biden Administration’s Latest Effort to SAVE Borrowers and the States that are Hell-Bent to Stop It
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About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.