Appeals court blocks rest of Biden’s student loan forgiveness plan, creating uncertainty for borrowers
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President Joe Biden Saving on a valuable education plan was temporarily blocked by a federal appeals court on Thursday, a move that leaves millions of borrowers enrolled in SAVE in limbo about what happens next.
The decision is the latest in a series of head-scratching rulings on the Biden-Harris administration’s latest student loan repayment plan. In June, two federal judges filed injunctions against key parts of the SAVE plan in response to Republican-led lawsuits in Kansas and Missouri. The rulings temporarily prevented the Department of Education from reducing payments for SAVE borrowers and blocked new attempts at forgiveness under the income-driven repayment program.
On June 30, the 10th U.S. Court of Appeals decided to allow the Department of Education to continue reducing borrowers’ payments to 5% of their discretionary income. However, Thursday’s ruling by the 8th U.S. Circuit Court of Appeals temporarily halted all elements of the administration’s SAVE plan that had not already been blocked.
“We now have two conflicting rulings from two different circuit courts that can only be resolved by the U.S. Supreme Court,” said financial aid expert Mark Kantrowitz and CNET Money Member of the Expert Assessment Committee“The U.S. Department of Education may have the ability to choose which court ruling to follow until the U.S. Supreme Court issues a ruling.”
Payments for borrowers in the SAVE plan have been suspended while the government works to recalculate their monthly student loan payments. Following Thursday’s ruling, the Department of Education issued a statement saying that borrowers enrolled in SAVE will be placed in an interest-free forbearance period until further notice. This means that SAVE borrowers will not have to make monthly payments on their student loans until this matter is resolved by the court.
Kantrowitz said borrowers should look for new guidance from the Department of Education for the time being. He also pointed out that these rulings are temporary and not permanent.
