Federal Appeals Court Fully Blocks SAVE Repayment Plan
By Maria Carrasco, NASFAA Staff Reporter
Following multiple legal challenges, a federal appeals court on Thursday temporarily blocked the Department of Education (ED) from fully implementing its new income-driven repayment plan, the Saving on a Valuable Education (SAVE) plan.
On Thursday, the 8th Circuit Court of Appeals sided in favor of a lawsuit led by Missouri’s attorney general and five other Republican-led states, which argued the department lacks the authority to carry out the SAVE program. This decision from the 8th Circuit Court of Appeals fully blocks the SAVE program for an unclear length of time.
Initially, two groups of Republican-led states in April filed lawsuits that sought to prevent ED from fully implementing the SAVE. In June, a pair of federal judges in Missouri and Kansas issued separate injunctions against the SAVE program.
Specifically, in Kansas, a judge halted a provision of the program, which calculated monthly payments by using half the current percentage of discretionary income for undergraduate borrowers, lowering the rate from 10% to 5%. In Missouri’s separate ruling, a judge blocked a provision that would forgive some borrowers' loans after 10 years of repayments. Later, a federal appeals court ruled that the 5% discretionary income rate provision could carry on.
However, Thursday’s most recent ruling fully suspends the program.
In response, Education Secretary Miguel Cardona on Friday said in a statement that the 8 million borrowers enrolled in the SAVE plan will be placed in an interest-free forbearance. Cardona also noted that ED will provide “regular updates” to borrowers affected by these rulings in the coming days.
“Today’s ruling from the 8th Circuit blocking President Biden’s SAVE plan could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect,” Cardona said in a statement. “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.”
According to the department, the forbearance period will not bear credit towards other student loan repayment programs including Public Service Loan Forgiveness (PSLF) or other IDR based programs.
Republican lawmakers on Thursday responded to the 8th Circuit Appeals Court’s ruling applauding the decision. Rep. Virginia Foxx (R-N.C.), chairwoman of the House Committee on Education and the Workforce, called the SAVE repayment plan illegal and “the costliest regulation in the history of the U.S.”
“Mr. President, your actions are degrading the nation’s system of checks and balances,” Foxx said in a statement. “Your actions are hurting taxpayers who will face economic hardship, forced to pay a loan they never asked for or received.”
Sen. Bill Cassidy (R-La.), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, said Thursday’s ruling is “another rebuke to President Biden’s illegal student loan schemes.”
“He isn’t ‘forgiving’ debt,” Cassidy said. “He is taking the debt from those who willingly took it out to go to college and transferring it onto taxpayers who decided not to go to college or already paid off their loans. This is an abuse of power before an election in an attempt to buy votes at the expense of American taxpayers.”
Stay tuned to Today’s News for more coverage of developments concerning the SAVE program.
Publication Date: 7/22/2024
Jeff A | 7/22/2024 8:50:30 AM
ED could help students with reasonable actions, but they keep pushing everything to unreasonable extremes undermining the opportunity to make any lasting improvements. This just causes chaos for students and institutions.
Most of their new regs are likely to be reversed, with that already happening with BDR and Title IX. They don’t select and listen to reasonable negotiators making the neg reg process a meaningless facade. And what we all get is very frustrating ‘ping pong’ creating lots of work, now massive reporting, all to be vacated eventually.
ED needs to pay attention to their fundamental responsibilities and enact reasonable rules that well consider representation from a balanced lineup of experts. No wonder FA staff are so frustrated.
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