Biden Student Debt Plan to Stay Frozen, Appeals Court Says

A federal plan first put in place by former president Joe Biden to lower monthly student debt payments to as low as zero and forgive some borrowers’ balances likely exceeds the Education Department’s authority and should stay blocked, a federal appeals court said Tuesday.

The district court properly paused the “SAVE” plan in June 2024 because Missouri and other states are likely to prevail in their suit against the program, Judge L. Steven Grasz, of the US Court of Appeals for the Eighth Circuit, said.

The ruling casts uncertainty over the loan repayment plan. President Donald Trump has criticized the former administration’s campaign to forgive student debt.

“Rather than implying by omission or other ambiguities, Congress has spoken clearly when creating a repayment plan with loan forgiveness or otherwise authorizing it — explicitly stating the Secretary should cancel, discharge, repay, or assume the remaining unpaid balance,” Grasz wrote, pointing to other statutory language. “The statutory text enabling the creation of” the Biden SAVE plan “provides no comparable language.”

The challenged US Education Department rule creating the program allows borrowers to enroll in income-driven repayment plans that lower their monthly federal student loan bills. The rule also cancels loans after 10 years of payments for those who borrowed $12,000 or less, increasing by 1 year for every additional $1,000 of the borrower’s original balance.

Some 7.5 million borrowers have signed up for the SAVE, or “Saving on a Valuable Education,” program, and $1.2 billion has been forgiven, according to the Biden Education Department.

A federal court in Missouri partly sided with the coalition of Republican-led states suing Biden over the plan by issuing a partial preliminary injunction blocking the forgiveness aspects from taking effect. The state coalition, led by Missouri, has argued the plan is an executive branch overreach without congressional authority.

The Education Department appealed to the Missouri-based Eighth Circuit, arguing the lower court’s partial preliminary injunction should be reversed, while the Missouri-led state coalition argued that the Eighth Circuit should expand the preliminary injunction to also block the income-driven repayment aspects of SAVE.

“As with the previous attempt at loan forgiveness, the major questions doctrine informs our analysis,” Grasz wrote. “We assume Congress would have provided clear signs if it authorized such significant power to the Secretary. It did not.”

The US Supreme Court in 2023 threw out a Biden plan to make a one-time cut to the debt of more than 40 million people, saying Congress hadn’t authorized such a step, also invoking the major questions doctrine—the principle that the executive branch needs clear authorization from Congress before undertaking actions with sweeping political or economic impact.

The Eighth Circuit said all four factors — likelihood of success on the merits, irreparable harm, the balance of the equities, and the public interest — favored the preliminary injunction.

The appeals court also said that the entire regulation should be enjoined, instead of just the forgiveness provision as the lower court had ordered.

And, provisions of an earlier plan that had remained in force once the SAVE plan’s forgiveness provision was enjoined should also be enjoined, the appeals court said.

“We find this case presents such special circumstances, namely the portion of the old rule the federal officials seek to revive suffers from the same legal errors as the one challenged here — the Secretary lacks the power to authorize loan forgiveness,” Grasz wrote.

The Eighth Circuit affirmed the lower court’s grant of a partial preliminary injunction, and remanded the case with instructions to enjoin the entire regulation creating the SAVE plan as well as the hybrid scheme the government had sought to implement.

Judges Raymond W. Gruender and Ralph R. Erickson joined the opinion.

The case is Missouri v. Trump, 8th Cir., No. 24-2332, 2/18/25.