Supreme Court To Decide Whether Student Loan Payments Will Double In Some States

The Biden administration is in the process of appealing two challenges brought forth by GOP-led states that would block his SAVE student loan payment relief.

The fate of student loan payments now lies in the hands of the Supreme Court.

After successfully deploying its Saving On A Valuable Education, or SAVE, plan, the Biden administration has been met with a new hurdle, due to Republican-led states aiming to halt programs created to provide relief for student loan borrowers. The latest move could result in student loan payments that are double the amount that student borrowers are currently paying.

Thanks to two legal challenges issued by two sets of GOP-led states, Missouri and Kansas, it is up to the Supreme Court to decide whether or not SAVE will continue for student loan borrowers or if the plan will be reversed, thus causing those already enrolled in the plan to see an increase in monthly payments. For those currently benefiting from SAVE’s program, which allows undergraduate borrowers to see half of their student loan payments cut in half, if the highest court sides with the challengers, the payments would double.

SAVE was first launched in the fall of 2023 and includes lower payments on student loan repayments, a subsidy ending runaway interest accrual, as well as multiple avenues to achieve student loan forgiveness. According to the Missouri and Kansas courts, blocking SAVE upholds the argument that “the program’s generous benefits far exceed what Congress originally authorized when it passed legislation establishing IDR plans.”

The Missouri legal challenge has led to a preliminary injunction, upheld by a federal judge, that suggests that the “generous debt cancellation features under the program may have exceeded what Congress had authorized.” Under a preliminary injunction, a federal program, policy, rule, or law is temporarily blocked while litigation is still underway. In previous cases, when a preliminary injunction is granted, the court likely believes the challenge has a strong possibility of succeeding.

The second legal challenge filed in Kansas allows SAVE to continue its student loan forgiveness avenues; however, the preliminary injunction in this case blocked reduced payments set to go into effect on July 1 thanks to the student loan repayment plan. As a result of this injunction, student borrowers who were looking forward to seeing a huge portion, and in some cases, their entire undergraduate student loans reduced by up to 50%, will no longer reap those benefits. Instead, millions of borrowers have been placed into forbearance since there was not enough time to recalculate borrowers’ payments given the significantly short amount of time they were given to comply with the new court order.

With the challenges in place, the Biden administration has promised to appeal both rulings and found temporary success in fighting against the Kansas injunction. According to the 10th Circuit Court of Appeals, an emergency stay was issued to the lower court’s injunction. What this means for borrowers is that SAVE’s implementation of lower payments can continue, despite the Kansas injunction.

The win, however, was quickly diminished when state courts in Alaska, Texas, and South Carolina appealed the 10th Circuit’s ruling on the claim that “the stay of the Kansas court’s injunction was improper.” Now, the Supreme Court will decide if it will take on the 10th Circuit’s challenge, determining if it will uphold or overturn the stay.

In the Missouri injunction, the Biden administration still plans to challenge the court ruling. However, they are first looking for clarity around if this means that all student loan forgiveness under SAVE is blocked or if this only applies to “early” student loan forgiveness. The latter is a feature of the program designed to wipe out a borrower’s student loan debt in just under ten years, significantly lower than the 20 or 25 years that most borrowers take to clear out student loan debt.

It is predicted that both injunction rulings will end up in the hands of the Supreme Court, especially since lawmakers anticipate the Missouri case will be appealed by the 8th Circuit Court of Appeals. While it is unclear when the highest court in the nation will release details surrounding the emergency appeal of the 10th Circuit’s stay, it is anticipated that it will take place before July ends. A responsive brief from the Biden administration will reportedly take place July 18.