Education Department to pause student loan payments for millions amid legal battle
The U.S Department of Education says it will pause millions of student loan borrowers payments while it defends its SAVE repayment plan against legal challenges
The U.S. Department of Education says it will pause millions of student loan borrowers' payments while it defends its relief plan against legal challenges.
Borrowers enrolled in the Biden administration's new repayment plan, known as SAVE, will be placed "in an interest-free forbearance," according to a statement from U.S. Secretary of Education Miguel Cardona.
A federal appeals court issued a ruling on Thursday blocking the entire plan, which the White House says roughly 8 million people are enrolled in.
Lawsuits by Republican-led states, including Arkansas, Florida and Missouri, argue that the Biden administration overstepped its authority with SAVE and essentially was trying to find a roundabout way to forgive student debt after the Supreme Court blocked its sweeping plan in June 2023.
Missouri Attorney General Andrew Bailey, a Republican, wrote on X Thursday that the ruling against SAVE was a "HUGE win for every American who still believes in paying their own way."
"The Court granted our emergency motion to BLOCK Joe Biden's entire illegal student loan plan, which would have saddled working Americans with half-a-trillion dollars in Ivy League debt," Bailey wrote.
Just 0.3% of federal student borrowers attended Ivy League colleges, according to an estimate by higher education expert Mark Kantrowitz.
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SAVE comes with two key provisions that legal challenges have targeted: It has lower monthly payments than any other federal student loan repayment plan, and it leads to quicker debt erasure for those with small balances.
"It's shameful that politically motivated lawsuits waged by Republican elected officials are once again standing in the way of lower payments for millions of borrowers," Cardona said.
Before the legal challenges, the Education Department had already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE Plan.
Legal challenges expected to continue
The lawsuits added urgency to the need for the Biden administration to deliver on sweeping loan forgiveness, said Aissa Canchola Bañez, the political director for Protect Borrowers Action.
"Borrowers shouldn't be expected to live court judgment by court judgement," Canchola Bañez said.
However, President Joe Biden's do-over plan for wide-scale debt cancellation is almost certain to face the same legal challenges as SAVE, experts say. The Biden administration is expected to start trying to deliver that relief weeks before the election.
This story originally appeared on: CNBC - Author:Annie Nova
