Federal Appeals Court Ruling Could Put Other Student Loan Forgiveness at Risk
By Maria Carrasco, NASFAA Staff Reporter
There are now concerns that the Department of Education (ED) may be prohibited from carrying out other forms of student loan forgiveness due to perceived ambiguity in the language of the 8th Circuit Court of Appeals recent injunction, which fully blocked the department from implementing the Saving on a Valuable Education (SAVE) repayment plan.
The injunction is part of a lawsuit led by Missouri’s attorney general and five other Republican-led states, which argued ED lacked the authority to carry out the new SAVE repayment program. In August, the 8th U.S. Circuit Court of Appeals issued an injunction fully blocking the SAVE program.
However, some – including ED – have expressed concerns that the ruling from the federal appeals court could impact forgiveness borrowers would receive in other income-driven repayment (IDR) plans. In order to address these concerns the department sought clarity from the court and requested the court explain whether other forgiveness programs were also effectively prohibited while the legal challenge plays out.
The court, on Monday evening, declined to issue any clarification.
Last week, ED issued an updated statement noting that the injunction from the 8th Circuit Court of Appeals not only blocks the SAVE plan, but also other income-driven repayment (IDR) plans. ED said it is assessing the ruling and will provide updates on the Federal Student Aid website.
Currently, the Federal Student Aid (FSA) website noted that due to the court’s ruling, the online IDR and consolidation loan applications on StudentAid.gov are temporarily unavailable. ED will let borrowers know when the online IDR and consolidation applications become available.
However, the department noted that borrowers could apply for IDR plans and/or consolidate loans by submitting a PDF application to their servicer by uploading it to their servicer’s website or sending it to their servicer. But, servicers have temporarily paused processing of IDR applications “until we can ensure applications are processed correctly,” ED wrote. Additionally, ED wrote that borrowers are still permitted to apply for the SAVE plan even with the court order.
For now, borrowers that were enrolled in the SAVE plan were put into an interest-free temporary forbearance, which would not bear credit towards other student loan repayment programs, including Public Service Loan Forgiveness (PSLF) or other IDR based programs.
The Department of Justice last week also filed an emergency application with the U.S. Supreme Court to cancel the Eighth Circuit Court of Appeals’ injunction of the SAVE Plan. In a statement from Education Secretary Miguel Cardona, the injunction, if allowed to stand, would “harm borrowers who have dutifully repaid their loans for up to 25 years by denying forgiveness that has been available under law for three decades.”
Stay tuned to Today’s News for more updates on the future of the SAVE plan.
Publication Date: 8/21/2024
Daniel D | 8/26/2024 9:12:49 PM
Here is a silly question: Why was the lawsuit even allowed to proceed? What 'Standing' does the State AG's have in this? it doesn't affect them. They are not harmed. I may be missing something, but this should have been thrown out immediately upon filing. Oh, wait, lots of cases are being considered when 'Standing' is so flimsy it's not even laughable.
Matthew R | 8/21/2024 12:40:15 PM
Why are the comments above attacking the ED when they are the good guys here? It is the 8th Circuit Court of Appeals that is to blame for going along with the politically-driven moves by the Missouri AG and other state AGs to sue the ED. If we didn't currently have a corrupt Supreme Court then this injunction would be tossed immediately and then we would wait to hear a SCOTUS decision on the legality of any part of the SAVE Plan after a public hearing.
Darren C | 8/21/2024 10:19:16 AM
The charade continues. As these narratives frequently change student loan borrowers and schools scratch their heads wondering when these political games will stop. It’s clear that ED has no interest in taking accountability or doing what’s right for borrowers. The recent ED email, sent to millions of borrowers stating that new “potential” loan forgiveness is on the way is a clear sign of that. Not to mention the FAFSA debacle.
At this point, expect more deflection and confusing messaging as the election draws near. What an absolute disgrace.
Jeff A | 8/21/2024 8:22:44 AM
ED’s actions, including questioning the court over all IDR plans, is nothing more than political theatre. They know what they can go forward with and what they can’t. That is why the court declined to respond. They weren’t going to play that game.
ED knows when they crossed the line.
Sonya T | 8/21/2024 8:8:57 AM
I want to thank everyone involved for mudding the waters surrounding loan forgiveness. It would be careless to say that the Politicians did not forsee this. Bravo.
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