On Wednesday, the Supreme Court rejected a request from the Justice Department to reinstate the Biden administration’s latest student debt cancellation plan, leaving millions of borrowers in uncertainty as the legal appeals process continues.
The Court declined to lift an injunction from the 8th Circuit Court of Appeals that had blocked the SAVE plan, a new program introduced in July 2023.
This program, which adjusts loan payments based on income, has faced legal challenges from several GOP-led states.
The Supreme Court’s unsigned order indicated it expects the appeals court to act swiftly, but did not include any dissenting opinions.
As a result, the 8th Circuit’s injunction remains in effect, and the Education Department has paused loan payments for borrowers under the SAVE plan due to the ongoing legal issues.
Last year, the Supreme Court invalidated a previous, broader student loan forgiveness plan proposed by the Biden administration.
The SAVE plan is designed to reduce monthly payments to 5% of discretionary income above 225% of the federal poverty line and offers faster forgiveness for smaller loan balances.
The program is expected to cost about $156 billion over ten years, though critics argue the actual cost could be $475 billion, considering potential forgiveness from the earlier plan.
In April, several states filed lawsuits challenging the SAVE plan, leading to a federal appeals court blocking its implementation nationwide.
This decision contrasts with a ruling from a different appeals court that upheld the plan for a group of other states.
The Biden administration has criticized the 8th Circuit’s ruling and argued that it causes unnecessary confusion and harm to borrowers.
The states opposing the plan argue that it exceeds the authority granted under the Higher Education Act by effectively forgiving loans instead of requiring repayment.
The Department of Education estimates it has provided $168 billion in relief to over 4.7 million Americans, with about one in ten federal borrowers receiving some form of forgiveness.
